Oh, hey, look, the U.S. post war gold bullion standard did not prevent inflation. It just meant that gold and the currency inflated together at the fixed rate. In fact, it was in part the high inflation of the late 1960s and early 1970s that forced the U.S. off the gold standard in 1971.
“Inflation’s Stubborn Resistance,” Time, Vol. 96, No. 24, 14 December 1970, pp. 102-112.
Via Neil Irwin, The Alchemists: Three Central Bankers and a World on Fire (New York: Penguin Press, 2013), p. 65.
The standard narrative of the stagflation of the 1970s is the one that the right has advanced. The left has no countervailing narrative. In that of the right, the economic doldrums of the ’70s can be squarely hung round the neck of liberals: in the simplified version, because of the welfare state, no further explanation required; in the more complicated one, the inability to choose between the guns of Vietnam or the butter of the Great Society, of Keynesian fine tuning and oil shocks resulting from liberal pussyfooting around in foreign policy. The hero of this narrative is Ronald Reagan who unwound twenty years of leftist regulation and redistribution, unleashing the U.S. economy to do what it does best.
As a liberal, this is the narrative against which I must justify my policy preferences, but more basically, I think it just simplifies a much more complex story. As an example, when Reason, a right-of-center libertarian publication, decides to hold a colloquium on the renewed threat of stagflation, which president do they put on the cover as the personification of the memory of the inflation of the 1970s? Gerald R. Ford:
Poor Gerald Ford: an honorable man whose best association is Chevy Chase spoofs from Saturday Night Live of him tumbling down the airstairs.
It should be recalled that Reagan’s first run for the presidency consisted of his failed challenge to incumbent Ford for the 1976 Republican nomination, and that the real bête-noire of the Ford-Kissinger foreign policy was not the Democrats or the left, but the anti-détente, anti-arms control neoconservatives and elements of the right who found their political figurehead after Barry Goldwater in Ronald Reagan. It should also be recalled that the policy maker credited with the defeat of the inflation of the 1970s is then Federal Reserve Chairman Paul Volcker, a Carter appointee, rather dishonorably shown the door for his efforts by President Reagan in favor of Alan Greenspan.