Attitudes and recession
Healing. It was an unusual word for a secretary of the treasury to use in relation to an impersonal financial matter. Yet, when Secretary Miller said this week that the "healing" of the stricken bond market had begun, he was offering a concept that should be no more unusual in the sickroom of the economy than in any other realm of human need. And, for all the expert ministrations that are called for, there remains the fundamental role of individual and institutional attitudes in hampering or hastening the rate of recovery.
What attitudes will America and Americans bring to the accumulation of inflationary and recessionary symptoms aggravating their economic condition just in the past few days? Inflation stays so strong that the President's pay advisory panel recommends higher ceilings on wage and price guidelines. Recession looms in the nation's biggest industry, construction, with mortgage money so short, housing starts so far down, that a trade association economist says, "I've never seen it so bad." And in the vast automotive industry new layoffs bring the total to some 200,000, a quarter of the workers. Union head Douglas Fraser warns of the worst economic situation since the depression.
It is not enough for Americans to place their problems in perspective in a world where so many hundreds of millions linger in abject poverty -- though gratitude for one's own benefits and compassion for another's plight are valuable healing attitudes. Americans have to deal with things within the relative standards of their own country, where any acceptance that decline must inevitably come is categorically the wrong attitude.
On the inflation front the most urgent problem, as a Midwestern economist puts it, is not the current inflation rate -- which is primarily a reflection of the past. Today's battle is with "inflationary psychology," the entrenched attitude of expecting inflation, planning for more of it, borrowing excessively to try to second-guess it -- and thus helping to kick the rate up.
Now the federally induced rise in interest rates clashes with such an outlook , weeds out those who cannot meet those rates or perhaps find money to borrow at any price. A slight dip in some banks' prime lending rate appears to respond to the problem, to signal relief, but in the array of opinion by specialists there are doubts about the development of a consistent trend.
As for recession, some say only a severe shock will reverse the inflationary psychology and squeeze out inflation. Others see that prudent measures can gradually bring inflation down, while restoring investment and productive industry. Past experience has shown that recession can come without necessarily reducing inflation very much until productivity returns.
It becomes as crucial for Americans to resist recessionary psychology as to resist inflationary psychology. This is important for their leaders, too, who would find the problems of coping with recession and its massive unemployment no more palatable than the problems of the inflation to which it might have administered a "shock."
For healing, the attitudinal stance must be to step back from the ailment, be as objective as possible about all the circumstances, and consult one's basic motives for a cure. Are they totally self-centered, preserving one's own piece of the pie? Or are they in the healing realm of wanting what is best for all? It may not be in the ledger books. But this is the bottom line.