Fifty Years After Car-Free Sundays

Some events from your youth stick with you. For me, one such memorable event occurred 50 years ago, on November 4, 1973, when the Dutch government responded to the OPEC oil embargo that arose from the Yom Kippur war by banning driving one day a week. As I write in An Extraordinary Time, “University students spread blankets on the motorway and picnicked to the sounds of a flute. Young children raced through stoplights on their roller skates. From Eindhoven in the south to Groningen in the north, the streets of the Netherlands were nearly free of cars — aside from those of German tourists and of clergy who, by special dispensation, were allowed to drive to church.” Car-free Sundays soon spread across Europe. Sporting events were cancelled. Indoor swimming pools were closed. It was the start of a bleak era.

In 1973, no one realized just how bleak that era would be. The general diagnosis was that taming inflation or stabilizing exchange rates would make the world economy boom again. Policies involving generous social spending and heavy government intervention in the economy, which had been employed around the world since the 1940s, no longer assured full employment and higher living standards. A backlash drove politics to the right, where leaders like Margaret Thatcher and Ronald Reagan promised that smaller government, deregulation, and a clampdown on inflation would get economies moving. But that didn’t work out so well either.

The reason? An economy’s long-run growth depends mainly on higher productivity, and this isn’t something politicians can simply order up. Productivity growth relies heavily on innovation and business investment, but investment in the wealthy economies slumped for two decades after 1973, while innovations such as microprocessors had little economic impact until the internet age began in the 1990s. Workers’ productivity improved less than half as fast after 1973 as in the decades before, which is why families in much of the world no longer sensed that their lives were getting better.

Half a century after the year of car-free Sundays, the world seems to be mired in a productivity slump once again. The stagnation of living standards plays out in anger and unrest in many places. Perhaps stagnation will drag on — but then again, perhaps innovations such as clean energy and artificial intelligence will bring prosperity anew. Golden ages usually end unexpectedly, but they often arise unexpectedly as well.

Tags: inflation, productivity