Jimmy Carter's Economy: Policy in an Age of Limits.

Jimmy Carter's Economy: Policy in an Age of Limits. By W. Carl Biven. The Luther Hartwell Hodges Series on Business, Society, and the State. (Chapel Hill and London: University of North Carolina Press, c. 2002. Pp. xvi, 346. $45.00, ISBN 0-8078-2738-X.)

Jimmy Carter entered the White House during an era of unprecedented turmoil in American economic life. For more than a generation, Americans had enjoyed rapid economic growth, impressive gains in wages and productivity, and low levels of unemployment and inflation. The nation had anchored a remarkably stable international economic regime, and whenever trouble loomed, Keynesian fiscal policies offered what seemed like a reliable set of tools to repair problems and restore a smoothly humming economy. During the 1970s, all that changed. Economic growth and productivity advances slowed. A new phenomenon appeared--stagflation--signaling a virtually inconceivable combination of runaway inflation with anemic growth and tenacious unemployment. At the same time, oil shocks, currency fluctuations, and trade imbalances undermined the nation's position as the world's preeminent economic power.

Worse yet, the standard economic policy prescriptions lost their potency. The Phillips curve--and the assumptions it embodied about the trade-offs between inflation and employment--no longer described reality. Within the economics profession and the policy-making community, assumptions that had long undergirded macroeconomic thinking and fiscal policy aroused suspicion and debate. Over the course of the Carter administration, the White House shifted gradually away from neo-Keynesianism toward monetarist and supply-side thinking, from an emphasis on growth and unemployment to an all-out attack on inflation.

W. Carl Biven offers a deeply researched, fine-grained history of policymaking in the Carter administration, reconstructing the views of key actors and the rivalries among them, the problems Carter faced, and the options he weighed. Author of an earlier volume on conflicts in economic policy-making, Who Killed John Maynard Keynes? Conflicts in the Evolution of Economic Policy (Homewood, Ill., 1989), Biven also analyzes the ways the views of economists from Paul Samuelson and Robert Solow to Milton Friedman and Robert Lucas influenced (or failed to influence) policy-making. Biven concludes that "The Great Inflation dominated Carter's years in office" and considers the ways inflation shaped the president's dealings with unions, Congress, and international economic actors (p. 253). What inflation actually meant for the U.S. economy--how it transformed the lives of citizens, their economic behavior, and their political preferences--falls mainly outside the boundaries of his study.

In the end, Biven portrays Jimmy Carter as the first New Democrat, determined like his fellow southerner Bill Clinton to nudge the Democratic Party toward the political center. In economic policy, Carter championed fiscal responsibility, weaning the party from the expansive spending programs, support for organized labor, aggressive program of regulation, and faith in Keynesian demand management that had become Democratic orthodoxy in the 1960s. Instead, Carter and key officials like domestic policy advisor Stuart Eizenstat, Office of Management and Budget director James McIntyre, and Council of Economic Affairs chairman Charles Schulze favored budgetary restraint, supply-side incentives for investment, regulatory relief for business, and greater reliance on market solutions to economic problems. "'[N]either a typical southern conservative nor a Kennedy liberal,"' Carter pointed the nation and the economy in the right direction but lacked the political support to achieve his objectives (p. 259). "He was continually torn," in Schulze's words, "between his own basically correct, substantive instincts and the need to satisfy the coalition that elected him" (p. 260). During the 1990s, with liberal constituencies chastened by being out of power for twelve years and by the policy successes of Ronald Reagan, Bill Clinton could essentially pursue Carter's strategy in a much more favorable political landscape.

Jimmy Carter's Economy makes a valuable contribution to the history of public policy and economic thought in this crucial period. While Biven's careful, balanced conclusions offer little in the way of novel arguments, his book puts important evidentiary flesh on what had remained a skeletal interpretation of the Carter administration as a transitional presidency.

Boston University

BRUCE J. SCHULMAN