Hi Anatole,



I agree with much of what you say, but since you ascribed the stagflation of the 1970's to "extortionate taxes" as part of the rationale for your argument, I couldn't let it go uncontested.



"...just as the extortionate taxes of the 1950s and 1960s lost their legitimacy in the stagflation of the 1970s." -- Anatole Kaletsky



So that's a pretty fundamental misunderstanding of why stagflation occurred in the 1970's, IMHO.



If we went all through the 1950's, 1960's and into the 1970's with high personal and corporate taxes, and the vast majority of those years were boom years -- how is it that by the mid-1970's stagflation suddenly appeared out of nowhere?



The truth of it is that we had three major convergences occur in the early 1970's and those three things are what caused stagflation:



1) The Arab Oil Embargo, which caused a massive shift in the North American economy (also in Europe, but with less force) by making fuel for everyone from the military and the government, to the corporate world, to consumers, much, much, more expensive -- and for a time, almost impossible to get any. It caused a massive shockwave throughout the economy.



The Arabs were happy, because it was the first time they had ever gotten paid more for their oil, than the cost of production! (Yes, that's true. As part of the Arabs contribution to the Cold War effort, they were informed early that they would sell their oil at cost of production, or slightly less -- and then they were 'allowed' to speculate on oil in the markets, just like anyone else. All that changed in 1974)



By raising the cost of fuel throughout the economy over a very short timeframe (to more than the cost of production) America's economy stalled-out until everyone could make the adjustment.



2) One of those adjustments was that millions of Americans suddenly decided to begin buying the cheaper, and much-cheaper-to-operate Japanese cars, which had a better reliability record than their European and American counterparts. The fact that billions of dollars per year were now flowing out of a stalled-out U.S. economy, in tandem with much higher fuel prices, meant that real growth was non-existent, demand for American goods were very low, and high job losses were occurring among the Big Three Detroit automakers.



Not to mention the sudden surge of Japanese home and industrial electronics that flooded the market, everyday since the mid-1970's.



The transfer of wealth from the West to Japan and the oil kingdoms was, and remains one of the largest transfers of wealth in history.



This cannot be underestimated.



In 2016, more than 55% of all new car registrations in the United States are Japanese brands. By 2020, it will surpass 60%.



That is a long way down from 1971's new car registrations where 95% of all new cars registered in the U.S. were American brands.



Home electronics and commercial electronics aren't registered as cars and trucks are, but a similar and parallel trend happened there too.



3) The Baby Boom and Bust Cycle was in full swing during the early 1970's, which had a huge influence on purchases. Gone were the days of automatic sales of cars, white goods, homes, home electronics, and ever-larger production facilities and almost instant job-offers upon leaving high school or college.



Growth is linked to population growth and the consumer demands of certain age groups. (Retired people have much different spending patterns than young children, or 20-somethings, etc)



When population growth levelled-off, so did demand.



____



And everyone wonders why we had stagflation in the early 1970's ??



For those of us who were there, it was pretty obvious all 'round us what was going on.



Much of what you assert in your essay is valid, Anatole, however, it is a fundamental error to ascribe stagflation to high taxation rates from 1945-1970.



If your assertion were correct, we would've had stagflation all along that timeline, and then getting worse with the confluence of the Oil Embargo, the huge transfer of wealth from the West to Japan and the oil kingdoms, and the topping-out of the Boomer demographic.



As for the Capitalism 4.1 search, I heartily endorse your assertion.



But why look any farther than already successful models that exist right in the middle of all of this economic tribulation?



Norway, Taiwan, Switzerland, Denmark, Germany, Leichtenstein, Sweden, the UAE, and others, are thriving in the midst of all of it. And their citizens rank their nations very highly on the UN's Happiness Index and the Social Progress Imperative's SPI (index) which have causality with their high productivity stats.



Happy Swedish workers work only 6 hours per day, yet produce more than Greek workers that work an average of 12 hours per day -- and many other examples.



Swedes blow past other longer-working nations such as the U.S. and Canada, producing more in 6 hours, than is produced by North Americans in their average 10 hour workday.



North America and the rest of Europe need to emulate the success story nations among us, not re-invent the wheel.



Thank you for posting your fine essays here at ProSyn!



As always, very best regards, JBS