If Walt Rostow Were Alive Today, Here Is What He Might Tell Congress
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Date Published: May 31, 2025
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A Walt Rostow Economic's Presentation That Is Relevant Today
- What Could Congress Learn from Walt Rostow—the Economist?
- The Stagflation of the ‘70s Was Not Good for Anyone
- Walt Rostow’s Few Minutes on Stage: A Lifetime Remembrance
- The Experience of a Chief Executive Officer and Federal Reserve President
- A Message to Our Political Leadership
What Could Congress Learn from Walt Rostow—the Economist?
Some university professors make lasting impressions on students over the course of a semester. Walt Rostow made his mark on me in less than fifteen minutes as he kicked off my Economics 101 class at the University of Texas in Austin.
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What he expressed opening this class—as a guest speaker, has been with me ever since … I have carried it for almost fifty years. I am sure it carries the blur of five decades of retelling and story-telling exaggerations, but the core thought he conveyed is still here.
I wish he could deliver the same message to a joint session of Congress that he delivered this day to a bunch of supposedly eager, sometimes energized, and occasionally enthusiastic college kids. Then again, maybe he can. Through me. |
Picture of Walt Rostow from 1968.
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The Stagflation of the ‘70s Was Not Good for Anyone
In 1974, I left the U. S. Army in Europe and crawled on a plane heading home— “back to ‘the world’ ” as we called it. I did this despite the awful news that was blaring out at me over the Armed Forces Network about the economic conditions back in the states—and my home state of Texas.
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I soon learned that the economy was as bad as they said … and getting worse.
From 1974 to 1980, inflation—the Consumer Price Index, went from a yearly 9.6% to 14.6%, while in direct contradiction to the economic theory of the day—something economists at the time thought was impossible: unemployment rose simultaneously, more than doubling from 5% in 1974 to almost 11% in 1982; finally, yearly mortgage rates went from 9% as I stepped onto the tarmac in my home town of Amarillo, Texas to a peak seven years later at more than 18%. [See chart] |
Federal Reserve graph showing 30-year fixed mortgage rates by month
1970 through 2024 with a peak in 1982. |
This period in the 70s was what economists today refer to as a period of stagflation.
During this time, I married, started classes at the University of Texas, became the proud father of a daughter and a few years later a son. As one of the jobs, I worked hourly at a local Burger King franchise because, for a few years, they offered to cover one of the hardest single expenses there is in a working student’s life: the lump sum of money needed every semester to pay for tuition and books. Stagflation took that benefit away.
In non-economist terms, stagflation meant that when I initially sought work or had to change jobs, I had to look harder, drive further, constantly lower my expectations, and accept with more desperation a less appealing work situation—with ever-lower, take-home pay. For almost a decade, each paycheck put visibly less food of lower quality on the table and more of it went to just keeping a roof over the heads of my expanding family. “Saving” was something someone else could afford, not me.
It was a period when every time I bought something I reduced it down to one question: “How many hours did I work for that item?” I remember thinking, “I worked more than a day and a half for that pair of Levi’s Men’s Jeans!” Every purchase was translated into its hourly cost according to my minimum-wage, hourly paychecks.
This made what I heard from Walt Rostow on stage in front of my economics class all the more compelling. For the first time, I understood what “a dollar” really represented—how we got into the mess we were in; and yes, that the dollar represented more than just my stored-up, hourly labor reflected in an article of clothing.
Walt Rostow convinced me that the dollar also represents something I had never considered before:
It represents the financial successes or failures of my government!
In non-economist terms, stagflation meant that when I initially sought work or had to change jobs, I had to look harder, drive further, constantly lower my expectations, and accept with more desperation a less appealing work situation—with ever-lower, take-home pay. For almost a decade, each paycheck put visibly less food of lower quality on the table and more of it went to just keeping a roof over the heads of my expanding family. “Saving” was something someone else could afford, not me.
It was a period when every time I bought something I reduced it down to one question: “How many hours did I work for that item?” I remember thinking, “I worked more than a day and a half for that pair of Levi’s Men’s Jeans!” Every purchase was translated into its hourly cost according to my minimum-wage, hourly paychecks.
This made what I heard from Walt Rostow on stage in front of my economics class all the more compelling. For the first time, I understood what “a dollar” really represented—how we got into the mess we were in; and yes, that the dollar represented more than just my stored-up, hourly labor reflected in an article of clothing.
Walt Rostow convinced me that the dollar also represents something I had never considered before:
It represents the financial successes or failures of my government!
Walt Rostow’s Few Minutes on Stage: A Lifetime Remembrance
Being a veteran of the Vietnam-era who never served in country but served alongside those who did, I understood the effects of war on individuals. I can’t say I was enthusiastic about Walt Rostow kicking off my economics class because he had served as a national security advisor to President Johnson who had entangled us in the mess. But this was a class on the science of economics not a political science class. In the military, I had learned to discern each individual’s weaknesses and strengths and then separate the two to focus on a person’s strengths. Politically, I did not like what I felt he had gotten us into, but economically I would hear him out and then decide.
As he walked on stage, he pulled out his wallet and withdrew from it a piece of paper with ink on it. He said, “I have a single dollar bill here.” He snapped the bill between his fingers. There was dead silence in the room filled with several hundred students. Unusual to say the least!
Unsure of what was going to happen, I looked around wondering where this was going: note-taking time, boring time, or sleepy time—last night had been a hard evening at work anyway.
It turned out to be a fifteen minute, once-in-a-lifetime, memorable event.
He started: “We are here today to determine how much this dollar bill is worth and why.
“First, how much is it worth? Anyone care to guess?”
Obviously it was a trick question. It was met with absolute silence.
“Come on, now! How much is someone willing to give me for this dollar bill?
“Any bidders?”
Suddenly from down in front someone yelled, “One cent!” and laughter erupted in the room.
“One cent?” the guest speaker asked with all due alarm and fear.
“Do I have other bids or do I have to give this dollar away for one cent?”
Someone yelled, “I have a nickel.”
Laughter and snickers across the room again.
Someone else held up a coin and yelled, “I have a dime.”
Mr. Rostow said, “Now we are getting somewhere. So this dollar is now worth ten cents.”
He moved toward the student holding up the dime saying, “Here you go.”
Suddenly, when everyone realized he was serious, yells went up all over the room: “A quarter,” “thirty cents,” “fifty cents,” “fifty-one cents,” “fifty-two cents,” until finally, after a period of silence someone said, “jeez, ninety-nine cents.”
The guest speaker walked out, gave the dollar bill to the person bidding ninety-nine cents, whispered something to him, and came back up on stage.
Then he commented:
“Unfortunately, with the inflation rate being around 10% today, you know that you need to spend that dollar pretty quickly, or it won’t be worth the ninety-nine cents, right?
“Excellent, now let me make the point I want to make on ‘why a dollar has value.’
“The only intrinsic value that a dollar bill has is the value of the paper and the ink that is printed on it. From an intrinsic value standpoint, the value of the metal in the penny, the nickel, the dime and the quarter make them more valuable. From an intrinsic value standpoint all of you would have made a bad bargain.
"That piece of paper has value because it is a recognized and respected medium for exchange. It is a substitute for the barter and trade system most of the world used to go through exchanging wheat, barley, hay and corn for clothing or pots and pans."
He pulled out a second dollar bill.
As he walked on stage, he pulled out his wallet and withdrew from it a piece of paper with ink on it. He said, “I have a single dollar bill here.” He snapped the bill between his fingers. There was dead silence in the room filled with several hundred students. Unusual to say the least!
Unsure of what was going to happen, I looked around wondering where this was going: note-taking time, boring time, or sleepy time—last night had been a hard evening at work anyway.
It turned out to be a fifteen minute, once-in-a-lifetime, memorable event.
He started: “We are here today to determine how much this dollar bill is worth and why.
“First, how much is it worth? Anyone care to guess?”
Obviously it was a trick question. It was met with absolute silence.
“Come on, now! How much is someone willing to give me for this dollar bill?
“Any bidders?”
Suddenly from down in front someone yelled, “One cent!” and laughter erupted in the room.
“One cent?” the guest speaker asked with all due alarm and fear.
“Do I have other bids or do I have to give this dollar away for one cent?”
Someone yelled, “I have a nickel.”
Laughter and snickers across the room again.
Someone else held up a coin and yelled, “I have a dime.”
Mr. Rostow said, “Now we are getting somewhere. So this dollar is now worth ten cents.”
He moved toward the student holding up the dime saying, “Here you go.”
Suddenly, when everyone realized he was serious, yells went up all over the room: “A quarter,” “thirty cents,” “fifty cents,” “fifty-one cents,” “fifty-two cents,” until finally, after a period of silence someone said, “jeez, ninety-nine cents.”
The guest speaker walked out, gave the dollar bill to the person bidding ninety-nine cents, whispered something to him, and came back up on stage.
Then he commented:
“Unfortunately, with the inflation rate being around 10% today, you know that you need to spend that dollar pretty quickly, or it won’t be worth the ninety-nine cents, right?
“Excellent, now let me make the point I want to make on ‘why a dollar has value.’
“The only intrinsic value that a dollar bill has is the value of the paper and the ink that is printed on it. From an intrinsic value standpoint, the value of the metal in the penny, the nickel, the dime and the quarter make them more valuable. From an intrinsic value standpoint all of you would have made a bad bargain.
"That piece of paper has value because it is a recognized and respected medium for exchange. It is a substitute for the barter and trade system most of the world used to go through exchanging wheat, barley, hay and corn for clothing or pots and pans."
He pulled out a second dollar bill.
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“This piece of paper only has true, stable value when we, in this room and the societies in this state, country, and world at large, trust in this piece of paper as a medium of exchange. ‘You!’ who just got that dollar bill would not have bid ninety-nine cents if the value of the dollar were in doubt.
“The value of the dollar is an expression of the confidence we in the United States … and the world … have in our country’s economic leadership. “Without that confidence, this is nothing more than a piece of paper with ink on it. . . ." He opened a lighter and ignited the dollar, letting the burn fragments drop onto the stage. “It is worthless! “Your economics class has officially started.” |
A color image of the United States overlaid with a dollar bill showing an image of George Washington ablaze.
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The Experience of a Chief Executive Officer and Federal Reserve President
Decades later, I was reading Ida M. Tarbell’s biography of Owen D. Young [Owen D. Young: A New Type of Industrial Leader] who served as General Electric’s Chief Executive Officer from 1922 to 1939 and also served on the Board of Directors of Federal Reserve Bank of New York from 1923 to 1940. For the last two years, he was the Chairman of the Federal Reserve Bank.
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After World War I, Owen D. Young went to Europe in an attempt to try and stabilize their economies, make the war reparation payments more digestible, and, probably as importantly, learn through observation. This was an individual who observed, studied, thought, and, when necessary, modified what he believed based on first-hand observations, not hearsay.
What he saw overseas was a complete loss of confidence in one country’s currency: “When I was in Germany in February of 1924, the currency of Germany was depreciating so rapidly that the industries paid their wages daily, and sometimes twice a day. "Standing with the lines of employees were parallel lines of wives and mothers waiting for distribution of the German Marks—the paper equivalent to the United States’ dollar. |
An inflation queue of wives, mothers and their children in front of a local grocery store in Berlin, Germany in the 1940s: https://commons.wikimedia.org/w/index.php?curid=5482650
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"The wife [or mother] would grab the paper Marks from her husband’s hand and rush to the nearest provision store to spend it quickly before the rapid depreciation—a single day’s depreciation, had cut its purchasing power in half.”
One country trade leader told him:
“You must give us a stable currency. … It has been impossible for a wage earner in Germany to perform any of his moral obligations: knowing that a child is coming to the family at a certain time, there is no way by which the husband, through effort, sacrifice or saving can guarantee his wife a doctor and a nurse when that event arrives; knowing that his mother is stricken with a fatal disease, he cannot by any extra effort, sacrifice or saving be in a position to ensure her a decent burial on her death. Give us a stable currency and thereby insure to the worker that his wages will have the same purchasing power when he wants to spend them as they had when he earned them!”
After seeing the economic conditions first hand, Mr. Young remarked:
“I had always thought of money, currency, and credit as a mechanism of finance--impersonal in its operations.”
After his observations above, he learned that financial decisions “bristle with moral problems.”
One country trade leader told him:
“You must give us a stable currency. … It has been impossible for a wage earner in Germany to perform any of his moral obligations: knowing that a child is coming to the family at a certain time, there is no way by which the husband, through effort, sacrifice or saving can guarantee his wife a doctor and a nurse when that event arrives; knowing that his mother is stricken with a fatal disease, he cannot by any extra effort, sacrifice or saving be in a position to ensure her a decent burial on her death. Give us a stable currency and thereby insure to the worker that his wages will have the same purchasing power when he wants to spend them as they had when he earned them!”
After seeing the economic conditions first hand, Mr. Young remarked:
“I had always thought of money, currency, and credit as a mechanism of finance--impersonal in its operations.”
After his observations above, he learned that financial decisions “bristle with moral problems.”
A Message to Our Political Leadership
The United States budget to many of our political representatives may be nothing more than an impersonal financial operation, but if they kick our country’s financial accountability down the road for another political set of representatives to fight—and then, only because they are forced to, the dollar that represents “stored up labor so that our children and grandchildren may, one day, stop laboring and retire” will again be threatened. If the confidence of the societies around the world do not believe in the dollar’s long-term stability and value, we will find ourselves in the same financial trouble we found ourselves in the ‘70s when we conducted an extended war on borrowed funds.
Congress, do your job and ensure that the constituency that puts you in your job knows that their dollars will have the same “purchasing power tomorrow, the day after, and the day after that, as they do today,” or those who put you in office should remove you from office. Federal Reserve, you must keep being the balancing force and, at times, make some very, very difficult calls; but please continue to ignore the politicized, emotional screams of those looking for instant solutions.
I have experienced what happens economically when one political leadership in its day fails in its job or ignores all the safeguards put in place by our forefathers.
This is an issue of humanity … beyond partisan politics.
Work together to get it together
- Peter E.
Congress, do your job and ensure that the constituency that puts you in your job knows that their dollars will have the same “purchasing power tomorrow, the day after, and the day after that, as they do today,” or those who put you in office should remove you from office. Federal Reserve, you must keep being the balancing force and, at times, make some very, very difficult calls; but please continue to ignore the politicized, emotional screams of those looking for instant solutions.
I have experienced what happens economically when one political leadership in its day fails in its job or ignores all the safeguards put in place by our forefathers.
This is an issue of humanity … beyond partisan politics.
Work together to get it together
- Peter E.