Tape 114 - Political economics after the elections, assuming...

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-	Welcome once again as MIT professor Paul Samuelson	0:02
	discusses the current economic scene.	0:05
	This bi-weekly series is produced	0:07
	by Instructional Dynamics, Incorporated	0:08
	and was recorded November 3, 1972.	0:11
-	I'm speaking a few days before the election.	0:14
	You will be hearing this tape after the election.	0:18
	So, I have to put myself in the position	0:21
	of forecasting what's relevant for the future.	0:25
	Please keep that in mind in interpreting what I'm saying.	0:30
	Now, I think that I have no reason	0:33
	to second guess	0:37
	the polls.	0:39
	So I must proceed on the assumption	0:41
	that with very high probability	0:43
	Senator McGovern is gonna lose the election	0:45
	and that President Nixon is going to win.	0:49
	I must put this in probability terms	0:52
	because as we have seen in connection	0:54
	with the recent Canadian election,	0:57
	although the Gallup Poll showed Trudeau's Liberal Party	0:59
	as ahead, I believe it was ahead 4%,	1:03
	there is a margin of error in all polling.	1:08
	And that was of about the order of magnitude	1:12
	of 4%, I believe.	1:15
	And apparently, Mother Nature availed herself	1:18
	of the use of the full margin of error.	1:22
	Because at the last recount,	1:25
	we found the Trudeau government, a minority government,	1:28
	tied with 109 votes each	1:31
	with the leading opposition party	1:34
	and with the new left-wing party	1:37
	having 30 seats and swinging the balance.	1:40
	You may say that I should assume	1:44
	that the same imprecision is possible here.	1:47
	I don't think that would be a fair way of putting it.	1:50
	The lead of President Nixon,	1:55
	even if it may be narrowing a little bit,	1:59
	is of the order magnitude of let's say a 20%.	2:01
	That's five times 4%.	2:05
	But in terms of probability of the polls being wrong it's...	2:09
	If we could use conventional probability,	2:14
	now I'll warn that conventional probability	2:16
	isn't always minutely applicable.	2:18
	That's really like a million times.	2:21
	If you go two or three standard deviations,	2:24
	you aren't doubling or tripling relationships.	2:27
	In terms of probability you are reducing them	2:30
	by a million-fold, if not a trillion-fold.	2:32
	So, I'm going to proceed on the	2:35
	basis of the odds as the evidence shows it.	2:39
	And I do this with good conscience.	2:43
	Because if it should turn out	2:45
	that McGovern has some hidden strength	2:47
	which the polls haven't recorded,	2:50
	I will not feel that I sound foolish when you hear me.	2:53
	Because on the basis of the evidence available to me,	2:57
	I did, I think, make the rational judgment.	3:00
	This being the case, it seems to me	3:05
	a little soul searching is in order.	3:09
	What's going to happen in a second Nixon term?	3:14
	I cannot predict whether in any degree	3:20
	there is a coattails effect and whether my projection	3:24
	should be based also upon the assumption	3:27
	of some more than usual change in the composition	3:30
	of the two houses of the Congress.	3:34
	Even if technically there isn't a coattail effect.	3:40
	And I must say to you that, as an amateur,	3:43
	I believe there is more of a coattail effect	3:45
	than the professionals have been able to validate.	3:47
	It still is a case that the same causes	3:51
	produce the same effects.	3:54
	And some of those causes, which are producing apparently	3:56
	a strong vote for President Nixon,	4:02
	I think in marginal congressional districts	4:04
	are going to produce a strong vote	4:07
	for Republican opponents of Democratic candidates.	4:09
	So I believe that even if one thinks	4:14
	the coattail effect is weak,	4:18
	one should suppose that a little bit of a mandate	4:19
	has been given to the victor.	4:23
	Is it important who wins the election?	4:29
	If you are on the far right, if you are on the far left,	4:34
	you always say it isn't important.	4:37
	All Chinese look alike to occidentals.	4:40
	It's Tweedledum and Tweedledee	4:44
	between the Republican Party and Democratic Party.	4:46
	Conservatives, extreme Conservatives	4:51
	argue that President Nixon is winning his victory	4:54
	only by behaving like a Democrat.	4:58
	So what's the difference whether a man	5:00
	who calls himself a Republican,	5:02
	but who behaves like a Democrat, gets reelected	5:03
	that they provide the only real option.	5:06
	Similarly, a plague on both your houses is used by	5:10
	exponents of the left,	5:15
	the way out left, the far left.	5:17
	Indeed, I saw that Michael Harrington had resigned	5:20
	from the Socialist Party, because he felt	5:25
	they were undercutting McGovern.	5:28
	It's been noticed in political life,	5:30
	and you can see this in any university	5:33
	if there's a fight over an academic oath,	5:35
	that the sharpest intensity of emotional feelings	5:38
	is generated not between a person who is on the left	5:43
	against a colleague who is on the right.	5:48
	Each of them knows the other has been long since	5:53
	disillusioned with the other,	5:57
	and there are no new surprises, no novelties.	5:58
	The tension comes when you are just left of center	6:01
	and arguing with a dear friend who is	6:05
	just at the center,	6:10
	or not quite so far left of center as yourself.	6:11
	He's the man from whom you expect greater things.	6:14
	And when he turns out to disappoint you	6:17
	by not having your views, then a bitterness intervenes.	6:20
	And I have known professors	6:24
	at the University of California in Berkeley	6:25
	during the oath fight of some decade ago,	6:27
	who cease to be friends just because one of them	6:31
	signed the oath a week before the other.	6:34
	Same thing was true at the time of	6:39
	the Vecchi in France.	6:42
	Did you go over and support the collaborations	6:44
	government Vecchi 10 days before	6:47
	your neighbor down the block?	6:50
	And if you did, then there may be bad blood	6:52
	between you for a long long time to come.	6:54
	I believe I speak from the,	6:58
	not from the two extremes	7:02
	that there is a difference in the election.	7:04
	And to me the most important problem,	7:07
	and this is not a matter of political gossip,	7:10
	but it's a matter of basic importance for political economy.	7:13
	It's of importance for what the computers	7:18
	will be forecasting with respect to GNP tables	7:20
	is the identity crisis that I think	7:25
	the Democratic Party has	7:28
	developed.	7:32
	Let me expand on this.	7:34
	I'm full of the subject because at the same time	7:41
	that I'm talking here, I have to be preparing	7:43
	a brief 750 word column for Newsweek.	7:47
	Again, that column has to be written	7:52
	without a knowledge of the outcome of the election.	7:55
	And yet the readers of Newsweek,	7:58
	since the magazine's gonna be held up until	8:00
	after the election, are going to know the answer.	8:02
	And in that column I mentioned	8:07
	a congressional hearing	8:13
	that I witnessed and participated in.	8:16
	I testified before the joint economic committee	8:20
	of the Congress on the mid-year report	8:23
	of the state of the nation.	8:26
	Standard economics	8:31
	requirement to look at the GNP report	8:34
	on how things are doing.	8:37
	I suppose that every six months	8:39
	panels of economists, businessmen, trade groups do appear.	8:43
	I myself try ration my appearances in events of this sort	8:49
	because their time consuming.	8:55
	But on the average of about once every 18 months, I testify.	8:57
	It was my good fortune to be appearing this time,	9:03
	testifying before Senator Proxmire's committee	9:06
	with two very interesting co-panelists,	9:09
	Walter Heller, one, and John Kenneth Galbrath.	9:14
	I think actually I've mentioned on these tapes	9:18
	some of the differences in GNP estimates	9:21
	that developed from those testimony.	9:25
	But the colloquy that I'm now going to refer to	9:27
	had to do with a broader issue.	9:31
	Congressman Conable from New York	9:34
	at one point said to John Kenneth Galbraith...	9:38
	I should set the stage	9:42
	by saying that Galbraith	9:46
	had been arguing that the Republican Party	9:48
	is the party of the interests.	9:51
	And that if you think of them as having for their brief	9:53
	the self-interest of the large corporations,	9:58
	then you'd have to say that the Republican Party	10:00
	had been doing a pretty good job for their constituency.	10:02
	And by the same token, the Democratic Party what is it?	10:07
	It is the young Lochinvar.	10:10
	It is the Sir Galahad.	10:13
	It is the party of the	10:14
	legitimate masses.	10:18
	Now I'm caricaturing the elegant	10:20
	and profound analysis	10:27
	which Dr. Galbraith gave in his testimony.	10:29
	But at one point Congressman Conable interrupted him	10:33
	and said, "Professor Galbraith,	10:37
	"I know that you have a certain vision	10:41
	"of the Democratic Party.	10:43
	"You want the Democratic Party to be liberal	10:45
	"even if it is not successful."	10:48
	And although Congressman Conable didn't so much as say this	10:52
	in so many words, what was clear from the colloquy was,	10:57
	"And also Professor Galbraith I want you to know	11:02
	"that that's the kind of Democratic Party	11:04
	"that we Republicans want you to have."	11:07
	It's like that famous story from Finley Peter Dunne's	11:10
	Mr. Dooley about the attitude of businessmen towards unions.	11:15
	Mr. Hennessy, the bartender says,	11:21
	"But these open shop men say they're for unions."	11:25
	I'm omitting the Irish brogue.	11:28
	And Mr. Dooley replies, "Sure, unions if properly conducted,	11:30
	"no strikes, no rules, no contracts, no scales,	11:34
	"hardly any wages, and damn few members."	11:37
	Well, that's the kind of Democratic Party	11:40
	which naturally a Republican in competition	11:43
	would like to have.	11:47
	A Democratic Party, if it wishes to indulge itself	11:49
	with the conceits of fine spun ideals,	11:52
	let it.	11:56
	But let it also have a darn few members.	11:57
	Well now it may be that when the votes comes,	12:02
	and when we find how few	12:04
	of the Democratic...	12:08
	How few of the 50 states in the Union go Democratic that	12:10
	Dr. Galbraith has, indeed, received his wish	12:16
	from the good fairies,	12:20
	namely a Democratic Party in his image.	12:22
	After this colloquy took place,	12:26
	I could not detect any appreciable sign of discomfort	12:28
	on the part of Professor Galbraith.	12:32
	He's a man of great aplomb.	12:34
	I have now way of knowing whether	12:36
	the aimed shaft pierced his hide in any degree.	12:40
	But I can tell you that as a Democrat,	12:45
	as a supporter of McGovern,	12:47
	as I sat there the arrow hit me.	12:51
	I thought back to the time of Franklin Roosevelt	12:53
	who was able to weld together	12:58
	not only hardhats, but intellectuals	13:01
	in a winning coalition.	13:04
	And I thought back in a degree,	13:07
	to John F. Kennedy who could accomplish that same feat.	13:10
	And it seemed to me that the great political leaders	13:15
	are those who can bring together people of	13:18
	somewhat different political persuasions.	13:23
	And this caused me to go back and do my homework.	13:26
	I had read in 1970 a little book by Professor Galbraith	13:28
	on the Democratic Party.	13:34
	Who Needs the Democrats, that's the title.	13:35
	And the subtitle is And What It Takes to Be needed.	13:37
	Well I read this over.	13:40
	Professor Galbraith can be a very witty writer.	13:42
	And I must say that this is a very witty book.	13:45
	There are many chuckles to be found in it.	13:49
	Moreover, there are a couple of points	13:53
	on which it seems to me using the wisdom of hindsight,	13:55
	Professor Galbraith was undoubtedly correct.	13:58
	Or at least a strong case can be made for his point of view,	14:01
	and that point of view needed to be put forward in 1970.	14:05
	For one thing, Galbraith came out very strongly	14:09
	against the Vietnam War.	14:13
	And he emphasized the importance and necessity	14:14
	for the Democratic Party to shake the legacy	14:18
	of President Johnson in being associated with that war.	14:22
	Now, I think that's an important message.	14:28
	I think that on noneconomic grounds,	14:31
	but also think that has a relevance to the economic picture.	14:33
	However, for a liberal writer	14:41
	in 1970 to come out against the Vietnam War	14:44
	does not require any great novelty or even,	14:49
	if I may say so, any great deal of courage.	14:52
	The second point is therefore, more interesting.	14:56
	Professor Galbraith also stressed	15:00
	the need for an incomes policy.	15:03
	He's been associated with this view for a long time.	15:06
	And he emphasized that in a modern mixed economy	15:08
	there is a danger of stagflation,	15:12
	that you get stagnation and inflation at the same time.	15:15
	That in the short run, at least,	15:18
	Phillips Curves behave badly.	15:20
	And there is a trade off, if not a dilemma,	15:23
	between the choice of full employment	15:26
	or reasonable priced ability.	15:28
	And Professor Galbraith very forcefully	15:32
	advocates cutting the Gordian Knot,	15:36
	grasping the nettle, improving the Phillips Curve	15:41
	by mandatory	15:45
	price wage controls.	15:48
	I can say with good grace I can compliment him	15:53
	on this position, because I was one of those	15:56
	who was rather skeptical.	15:58
	I knew that such methods work in the short run.	16:00
	But I believed that they work with only limited success,	16:02
	and that as the short run becomes the intermediate run	16:06
	and longer run, that they cease to work.	16:10
	And they begin to have a cost benefit appraisal,	16:13
	more costs and benefits.	16:19
	One presumes that Professor Galbraith	16:23
	was directing this advice to his fellow Democrats.	16:26
	There's no particular evidence that we listened,	16:29
	that he was persuasive.	16:33
	But you might say quixotically,	16:35
	that a little bird did waft his message to the White House.	16:38
	Who knows, perhaps that little bird came from Texas.	16:43
	But in any case, it's now a matter of history	16:46
	that on August 15th in the wake	16:49
	of the international dollar crisis,	16:51
	President Nixon stole the thunder of the Democrats.	16:54
	Went perhaps even far beyond the Galbraith recommendation	16:59
	in introducing wave price controls.	17:04
	Of course he, for the first 90 days,	17:06
	introduced the freeze, complete freeze phase one.	17:08
	Then there's a phase two and a phase three.	17:12
	And I must say, and therefore I must give Galbraith	17:16
	some of the credit, that this program has worked out	17:20
	better than I had thought it would.	17:24
	Better than I had dared hope.	17:27
	I would never have believed that the GNP deflator	17:28
	could be brought down to 1.8% annual rate,	17:33
	as was true in the spring of this year.	17:37
	And it's not much above 2% now.	17:38
	To illustrate how much better it seems to have worked	17:42
	than one might have expected	17:45
	on the basis of previous experience,	17:48
	just consider the construction trades.	17:51
	The construction trade wages have been going up	17:54
	in the recent past on collective bargaining	17:56
	contracts at 18, 20%.	18:00
	And when Dr. John Dunlop of Harvard	18:03
	was put in charge of the operation	18:07
	to bring these rates down, we were all supposed	18:09
	to feel very grateful that in the first year	18:12
	of phase one and phase two they were brought down to 11%.	18:15
	And I suppose we were grateful.	18:20
	But I was talking to Dr. Dunlop just recently,	18:22
	and he showed me that in recent quarters	18:25
	they've been down to 6% and below.	18:29
	The rate of increases of wages in the construction trades	18:33
	are actually less than for the pay board generally.	18:36
	And this the more remarkable.	18:39
	Anyone who knows anything about construction,	18:41
	when you remember that about half the cases	18:42
	decided by the pay board are nonunion wage cases anyway.	18:45
	Well, I've given credit to Galbraith.	18:50
	Now I have to go to the other side.	18:53
	It seems to me, those two points aside,	18:55
	that the book is a prescription for disaster.	18:59
	What Galbraith is saying is that the	19:03
	Democratic Party should become homogenous.	19:08
	If you're a Southerner, typical a Southerner.	19:12
	If you're an old line pow, a city, a boss, a daily,	19:14
	this is my language not his.	19:20
	If you are a hard hat.	19:23
	If you are a union organizer, the old fashioned type.	19:25
	If you are a George Meany, an I.W. Able.	19:31
	Get lost.	19:33
	AppLy elsewhere.	19:35
	There's no room in the new Democratic Party for you.	19:36
	Well, who does this leave us with?	19:40
	I'm afraid this leaves us with blacks,	19:43
	because in any calculus the blacks must feel	19:49
	that the Democratic Party is gonna do better by them.	19:54
	And the only reason to deviate from this	19:56
	is that you don't want the Democratic Party	19:59
	to be to sure of you and have you in the bag.	20:00
	And also some local reasons for deviating.	20:05
	Furthermore, if you are a liberal of academic type.	20:10
	I'm not thinking of a person exactly like myself.	20:14
	I'm not thinking of a person who shares	20:16
	the precise views of Professor Galbraith.	20:18
	But the sort of person that you'll meet	20:21
	in any one of our 50 states	20:22
	if you go to the faculty club for lunch,	20:24
	then you'll be in the Democratic Party.	20:27
	I would love to have a successful party	20:30
	made up with such platforms,	20:33
	and with such constituents, and with such attitudes.	20:35
	But I remember so vividly of what Ike did to Adlai,	20:39
	what Eisenhower was able to do repeatedly	20:44
	at the poles to Adlai Stevenson.	20:47
	Stevenson was my ideal of a candidate.	20:50
	He was, one presumes, Professor Galbraith's ideal.	20:55
	But I realize by the same token, that I admired him so much.	20:59
	Our cleaning woman, who had never deviated	21:04
	from voting for the Democratic Party,	21:06
	didn't wander off in voting for Eisenhower.	21:10
	The great leaders, it seems to me, of the past,	21:18
	Roosevelt, in lesser degree John F. Kennedy,	21:22
	were able to put people of different viewpoints together.	21:26
	They were able to gradually change the viewpoints.	21:31
	I think I probably have mentioned on this tape	21:35
	the pictures shown to me by a Canadian broadcasting crew	21:38
	who went to Gary, Indiana at the time	21:43
	that Robert Kennedy was, just before his assassination,	21:45
	was campaigning for the nomination.	21:50
	And they showed me pictures of black hands and white hands	21:53
	reaching up to Robert Kennedy.	21:56
	My point isn't that the mob should adulate the leader.	22:00
	My point is that those were in wards and precincts	22:04
	which on the white side George Wallace had carried	22:08
	which had been polarized apart.	22:12
	The candidates were able to bring these people together.	22:14
	And here's Galbraith saying that the Democratic Party	22:16
	has no room for the traditional people	22:21
	who have given the Democrats the majority.	22:25
	It seems to me, and this is important from the standpoint	22:27
	of political economy, that for Galbraith,	22:30
	now I'm giving more importance to him	22:34
	than he personally deserves, but it's the viewpoint	22:37
	that needs to be brought out in a caricature.	22:40
	To turn over to President Nixon the great middle ground	22:42
	is a tragedy in terms of the forward looking legislation	22:47
	that I think is important	22:54
	for this country in the period ahead.	22:56
	If all the signs are correct	23:01
	and if President Nixon comes in with something of a mandate,	23:03
	then I think you must consider the odds	23:08
	a little bit changed on the trends for worse or for better,	23:10
	depending upon your viewpoint.	23:15
	We'll have plenty to look for in the new Congress.	23:18
-	If you have any comments or questions	23:23
	for Professor Samuelson,	23:24
	address them to Instructional Dynamics, Incorporated	23:26
	166 East Superior Street	23:29
	Chicago, Illinois 60611.	23:31

Item Info

Title:

Tape 114 - Political economics after the elections, assuming...

Date:

1972

Contributor:

Samuelson, Paul A. (Paul Anthony), 1915-2009

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Paul A. Samuelson papers, 1933-2010 and undated

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Paul A. Samuelson papers, 1933-2010

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Economics Cassette Series: Paul Samuelson

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Tape 114 - Political economics after the elections, assuming...

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