Johnnie Ellington II January 2, 2015 at 8:23pm · Outlook for the Future For 25 years after World War II the mixture of Keynesian ideas with traditional forms of capitalism proved extraordinarily successful. Western capitalist countries, including the defeated nations of World War II, enjoyed nearly uninterrupted growth, low rates of inflation, and rising living standards. Beginning in the late 1960s, however, inflation erupted nearly everywhere, and unemployment rose. In most capitalist countries the Keynesian formulas apparently no longer worked. Critical shortages and rising costs of energy, especially petroleum, played a major role in this change. New demands imposed on the economic system included ending environmental pollution, extending equal opportunities and rewards to women and minorities, and coping w ith the social costs of unsafe products and working conditions. At the same time, social-welfare spending by governments continued to grow; in the U.S., these expenditures (along with those for defense) account for the overwhelming proportion of all federal spending. The current situation needs to be seen in the perspective of the long history of capitalism, particularly its extraordinary versatility and flexibility. The events of this century, especially since the Great Depression, show that modified “mixed” or “welfare” capitalism has succeeded in building a floor under the economy. It has so far been able to prevent economic downturns from gaining enough momentum to bring about a collapse of the magnitude of the 1930s. This is no small accomplishment, and it has been achieved without the surrender of personal liberty or political democracy. The inflation of the 1970s came to an end in the early 1980s, mainly because of two developments. First, restrictive monetary and fiscal policies led in 1981-82 to a deep recession, both in the U.S. and in Western Europe. As unemployment rose, inflation slowed. Second, energy prices dropped as worldwide oil consumption moderated. In the mid- 1980s most Western economies recovered from the recession, but then the stock market crashes of 1987 introduced a new period of financial instability. Economic growth slowed, and many nations—in particular the U.S., where the national, corporate, and personal debt had reached record levels—dropped into recession, with rising unemployment, in the early 1990s. The elusive goal for capitalist nations is to secure, simultaneously, high employment and stable prices. This is a formidable task, but given the historical flexibility of capitalism, the goal is both reasonable and attainable