An anxious superpower is confounded by a troubled economy. For a generation, its growth has been envied; now that growth is decelerating sharply. For decades, it has shaped and guided its economy via tight control of its banks; now that lever is malfunctioning. For years, it has carefully managed its exchange rate and limited the flow of capital across its borders; now the dam is cracking. To anyone who keeps up with the news, the superpower would seem easy to identify: China. But for those with a long memory, it could just as well be the United States of the Nixon era.
Like China today, the United States of the 1970s experienced an abrupt economic slowdown. Its economy had expanded by 4.4 percent a year, on average, during the go-go ’50s and ’60s, but growth slowed by about one-quarter during the following decade, to 3.2 percent a year. Even though growth of more than 3 percent may sound robust by today’s standards, at the time it felt ghastly. Time magazine lamented in 1974 that “middle-class people are being pushed into such demeaning economies as buying clothes at rummage sales”; a year or so later, its cover asked, “Can Capitalism Survive?” In September 1975, after President Gerald Ford survived two attempts on his life in quick succession, an adviser named Alan Greenspan responded with a memo about the “nihilism, radicalism, and violence” that seemed to grip some Americans. When New York City flirted with bankruptcy, its plight was taken as a symbol of broader moral and cultural decay.