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If democratic leaders choose the correct policies and explain them forthrightly—a distressingly big if—the prospects are not all bleak. Enough remains of Adam Smith's self-adjusting market to give the policymakers some assistance. If, as seems likely, the recent recession has broken the force of inflation, the slowing of price rises will probably encourage consumers later this year to begin buying many more cars, appliances and other goods. Then businessmen who have been zealously cutting inventories might find themselves with too little stock to maintain sales and would be forced to step up production.
For the longer term, however, fiscal and monetary policies must be supplemented by other measures to contain inflation and ease recession. The two most hotly disputed issues are whether the U.S. should adopt some form of wage and price restraints and whether it should move to some form of economic planning. Economists and other experts are sharply divided on these huge questions, but there is widespread agreement that Washington should adopt at least two other strategies:
1) Repeal a complex of laws, regulations and practices that prop up prices for the benefit of special interests. Economists at President Ford's September summit meetings spotlighted 32 such rigidities. Among them: the Davis-Bacon Act, which compels contractors to pay inflationary wages on federally assisted construction projects; the Jones Act, which forbids shippers to use low-cost foreign vessels to move goods from one U.S. port to another; misnamed fair-trade laws that permit manufacturers to prevent retailers from cutting prices on brand-name products; agricultural "marketing orders" that restrict the supply of oranges, tomatoes and other products; and freight, regulations that force many trucks to return empty from long-distance trips, although they could carry cargo on the backhauls.
2) Enhance the skills and mobility of labor. This combats both inflation and unemployment. The U.S. should revive and expand the manpower-training programs started under the Johnson Administration but curtailed by President Nixon. Though the programs were sloppily run, some of them—notably those under which private businessmen, with federal financing, hired and trained the so-called hard-core unemployed—showed great promise of teaching skills to otherwise "unemployable" people. The Labor Department also should set up the long-discussed computerized "job bank" that would list employment opportunities throughout the nation, and subsidize needy workers who want to move to take distant jobs. In Sweden, the government offers more than 300 courses to retrain the jobless, pays the expenses of an unemployed Swede who travels to look for work, and underwrites his moving bills once he finds a job. The cost is high: more than 5% of the Swedish budget. But the payoff is impressive: Swedish unemployment has consistently been well below that of the U.S.
If another Smith—or Keynes—came along today, the tremendous intellectual challenge facing him