At Last, the Year of Real Recovery

At Last, the Year of Real Recovery

A YEAR from now, most Americans will be earning more than they are today and enjoying the first real gain in buying power since 1968. The outlook for the economy in 1972 can be summed up simply: growth. Old-fashioned rapid, sustained growth. Best of all, real growth in incomes, jobs, profits, sales and production, rather than the illusory rise in dollar totals that comes from inflation.

1972. Good times. Good times.

Internationally, the world financial system was shaken by the determined U.S. campaign to cheapen the dollar against foreign money. The campaign climaxed three weeks ago in a sweeping realignment of currency values that cuts the dollar down to size and makes U.S. products less costly—and more competitive—in world markets. The new deal creates the opportunity for crafting a new, more realistic and more flexible system to finance global trade and investment.

Yet in terms of the numbers that mean most to businessmen, workers, consumers and investors, 1971 was a distinctly disappointing year. Real gross national product—the value of output minus the cost of inflation —rose by an anemic 3%, about half the rise that is normal for the first year of recovery from a recession. The rate of price increases declined only slowly before the freeze, averaging around 4% for the year v. 5.5% in 1970. Unemployment climbed to a peak of 6.2% in May, and hung stubbornly close to that level for most of the year. The combination of unemployment and inflation frightened consumers into a particularly wary mood, and the deficit budget that Nixon unfurled early in the year—in another philosophical defiance of G.O.P. tradition—proved insufficient to spur the spending necessary for prosperity.

The stagflation party might just be getting started.