Review: The Crisis of Vision in Modern Economic Thought, by Robert Heilbroner and William Milberg

New York: Cambridge University Press, 1995, pp. 131.

In The Crisis of Vision in Modern Economic Thought Robert Heilbroner and William Milberg take as their principal concern the intellectual history of the economics profession since the 1970s.

Key to their understanding of that history is Joseph Schumpeter's concept of a "classical situation"--which is to say, a period of broad consensus among economists on the issue of theory that also enjoyed wide credence among noneconomists, extending to their confidence in its guidance in "the redress of specific economic problems" (94). The authors identify four such situations in the history of economics in the English-speaking world, which have been founded on the work of David Ricardo, John Stuart Mill, Alfred Marshall and John Maynard Keynes, respectively.

Given their concern with the recent past, their main concern is with the Keynesian moment emergent in the 1930s, and they devote considerable attention to the ways in which it represented a break with earlier thinking. For them the crucial difference was the movement from the Marshallian emphasis on utility-maximizing rational actors, to the Keynesian emphasis on the propensities of individuals (like the "propensity to consume," or the role of "animal spirits" in investment decisions).

This shift in emphasis had two major consequences on the level of theory. One was that the move away from "rational-choice microfoundations" diminished the deterministic, "scientific," natural law-like quality to which many economists aspired in favor of a greater stress on uncertainty (and irrationality) in the behavior of economic actors.

The second was its impact on the way in which we perceive an economy as a whole. The Marshallian view of utility-maximizing actors lent itself to a "summative" view of the economy as simply the sum of all the markets contained inside it. However, the Keynesian emphasis on propensity meant attention to "interactions that take place in a market system but not in any individual market"--what we might term today a recognition of the economy as a complex system that is more than the sum of its parts. The result was that a great many things that simply did not exist in a Marshallian world, like the "underemployment equilibria, liquidity traps, multipliers and the like," along "with their cumulative or transmarket repercussions" (38), were not just apparent to Keynesians, but appeared central issues.

These theoretical changes, in their turn, had significant practical consequences. The natural law-like image of the older, Marshallian economics gave economists' pronouncements the authority of Science, while making the economic process seem "depoliticized" and above social constructs, rather than an arrangement grounded "in the contingent historical and political requirements of the prevailing social order" (105). And the summative view of the economy left little room for improvement on market outcomes, whatever one made of them. However, the understanding of the economy as a complex system, one which did not always perform optimally when left to its own devices (with the result that a market could be in equilibrium under conditions of excess capacity and unemployment) offered an intellectually rigorous basis for a much more interventionist policy. This new understanding was certainly not welcomed by all, but under the circumstances of the Great Depression it did succeed in laying the foundations for a new consensus, and the policies that followed from it.

Of course, the consensus was tottering by the 1970s. The theory's loss of its sway, the authors acknowledge, was a reflection of its demonstrated weaknesses at the time--particularly its treatment of money and inflation, its failure to anticipate the phenomenon of "stagflation," and the disparities between its micro- and macroeconomics. Nonetheless, it was possible to see Keynesianism as a theory that held up well in unanticipated circumstances (as Alan Blinder argued was the case with the Phillips Curve), and which could and should be refined and adapted in light of the new information.1

Instead what happened was a rush to dispense with Keynesianism--because, above all else, of "the resurgence of natural law conceptions of economic inquiry" (104) of the sort that had gone out with the Marshallian moment, with all its sociopolitical implications (e.g. that market outcomes could not be improved upon, and government should play a minimal role). Moreover, this turn in the field was not disconnected with the world of practical politics, the broader rightward movement in society enabling neoclassical economics and affiliated theories to come to widespread attention, while marginalizing economic thought coming from the left that offered an alternative.2

This connection between our broader intellectual context, and the conventional wisdom of the economics profession, is the problem to which the book's title refers--the "pre-analytical vision" that thinkers bring to the subject decisive, but generally unacknowledged. Capitalism, Heilbroner and Milberg note, is the foundation of that vision--indeed, so much so that economics as we know it would be inconceivable outside of a capitalist society.3 However, capitalism as such is virtually unmentioned within mainstream economics.4 This is problematic not only in its biasing economic thinking in particular ways (e.g. toward excessive faith in the market), but its impoverishing the field intellectually, the reversion to the outmoded "natural law" vision of economic life, and associated failure

to recognize the insistent presence of this underlying social order, with its class structure, its socially determined imperatives, its technologies and organizations, and its privileges and rights . . . [leaving it] devoid of all the elements that connect economic life to a social matrix . . . [and] generate the resonances necessary for a fruitful vision (113).

The resulting sterility is demonstrated by the failure of the would-be successors to Keynesianism to create a new classical moment, none of them winning wide adherence among economists, let alone the general public.5

In short, the revival of the Classical/Neoclassical idea of economics as scientific (through its building theory on the basis of rational micro-choice foundations) and apolitical (accomplished only by taking capitalism for granted) led not just to the abandonment of Keynesianism, but an inability to put anything up in its place. Since this failure, arguably manifest by the '80s, the field has turned inward, becoming preoccupied with debates that, in their irrelevance to real economic life, invite comparison with Medieval Scholasticism, while the profession fails in its duty to a global society in need of its advice as it struggles with problems ranging from ecology to automation to the implications of corporate power.

Heilbroner and Milberg contend that the field's rehabilitation requires its abandonment of the natural law conception of economic life--and the embrace of a "vision" which recognizes the sociopolitical character of economic arrangements. In other words, economics would have to set aside the "physics envy," the pretense to the apoliticism of economics and the market, and the hostility to the public sector generally part of the package, recognizing that the public sector does have an essential role in guiding society (120). Indeed, the authors of this book suggest "Political Economics" as a name for this successor to today's Economics.6

The case Heilbroner and Milberg make for the role of pre-analytic vision in the intellectual history of economics is compelling, as are many of their specific insights about that history. Particularly impressive is their discussion of the way in which deep-rooted intellectual differences about the proper character of the field (e.g. whether or not one sees it as a physics-like subject built on rational micro-choice foundations) translate to vast differences of educated opinion on practical issues like the performance of markets and the desirability of government intervention. They are also quite persuasive in connecting these differences with the collapse of Keynesianism, and at the same time, the failure of other theories to gain wider credence than they have. Yet, it also seemed to me that they spent less time than they could have explaining the connection between those views, and the broader trend of politics in society.

What, for instance, was the connection between the rightward turn of the '70s, and that resurgence in the natural law outlook? Was the latter simply a convenient instrument of the former, or was it the other way around, the conservative turn instead giving the natural law outlook its chance? Additionally, the authors do not have much to say about the reasons for either the broad political turn, or the intellectual shift within the field, which can seem oddly timed. During the '70s, Heilbroner had certainly predicted a movement away from markets, toward a more active and accepted public sphere in response to the problems so clearly apparent at the moment (and which have only worsened since). Why did he, and the others who thought as he did, turn out to be wrong about that? Additionally, the claims for economics-as-science ran counter to the postmodern tendency in philosophy and the increased doubts about social science and expertise in general during these years.7 Why did economics buck the trend? Such questions are not even addressed, let alone answered.

None of this invalidates what Heilbroner and Milberg argue, but it does make clear that they present only part of the story, and that there is much still in need of explanation. Additionally what they do not account for points to the other area where one might regard this book as falling short--its consideration of the prospects for a redress of the situation. The note on which the study concludes, particularly the call for greater respect for the role the public sector has to play, put me in mind of John Kenneth Galbraith's The Affluent Society. Of course, they are rather less optimistic than Galbraith was about significant change in the course of policy at the time of that book's writing, conceding that "such a radical reorientation of our discipline is obviously unlikely today" (128). They are certainly less optimistic about the prospects of change coming from what Galbraith termed the "educational and scientific estate," which here seems to be part of the problem rather than the solution, especially when one considers the "rigid, hierarchical" organization of the economics profession.8

Nonetheless, they did hold out hope for tomorrow. Eighteen years on those hopes would not seem to have been validated, either at the level of the profession, or of political debate more broadly. Heilbroner and Milberg characterize capitalism in their time as "on the defensive before forces of its own making, but not under its immediate control" (128). In the view of many, it remains so today--but the mood of mid-century reformism that gave Galbraith some hope that the system would adapt seems the very inverse of the tone now prevailing.

1. The Phillips curve concerns the relationship between unemployment and inflation, with the decrease of the latter driving up the former. While the curve's usefulness was increasingly questioned in the '70s, Blinder wrote in his 1987 article "Keynes, Lucas and Scientific Progress" that contrary to the claims of anti-Keynesian Robert Lucas, "once modified to allow for supply shocks" the Phillips curve "has been one of the best-behaved empirical regularities in macroeconomics." Blinder, "Keynes, Lucas and Scientific Progess," The American Economic Review 77.2 (May 1987), p. 133. Heilbroner and Milberg do not take a side in this debate, but do reference Gregory Mankiw's interesting analogy with astronomy, noting that "Five centuries ago . . . a navigator who steered by the Ptolemaic system would have guided his ship more successfully than one who followed the still poorly understood Copernican one" (68)--with Keynesianism, of course, in the place of the Copernican system.
2. Indeed, in discussing the limited influence of Marxism, the authors note its close identification with the Soviet Union, and the hostility of most Western thinkers to Marxist analysis (99). However, they do note the role of other factors, such as the divisions among Marxist thinkers themselves, and the propensity of institutional economics to offer critique rather than positive statements.
3. According to Heilbroner and Milberg's definition, capitalism has three key characteristics, which are, respectively, sociopolitical organizational and administrative--namely the process of capital accumulation as the driving force of the system, the allocation of income by the market, and the existence of dual private/public realms permitting capitalist actors wide latitude to act. Interestingly, Heilbroner offered a slightly different standard in his earlier Business Civilization in Decline.
4. The exceptions have been most prominent on the left, but the authors also note that they have been conspicuous among the Austrian economists--von Mises, von Hayek and Schumpeter, and their adherents.
5. This is in many cases due to theoretical failings, but also their irreconcilability with the prevailing fashions. "Black-boxed" monetarism lacks the rational-choice microfoundations dear to the hearts of those who view economics in natural law terms. Rational expectations is not only tautological, but denies human agency. New Classical economics suffers the self-contradiction of using the "Robinson Crusoe concept of the individual as a basis for a social inquiry" (83), while like rational expectations, treating government as impotent--and therefore being of little policy use. And New Keynesianism is a "response to the New Classicals, not a research effort aimed at putting forth a new economic vision" (90).
6. This, of course, harkens back to the evolution of Political Economy (which was premised on class divisions) into Economics (which focuses on individuals rather than social classes).
7. One interesting possibility is that economists recast their field in this more "scientific" mold in the hopes of regaining their prestige and credibility with the broader public--ultimately, unsuccessfully.
8. As they note, position-holders at a handful of elite universities "carry a disproportionate amount of power over hiring, publishing and the granting of research funds," while these professors are themselves trained in "only a few select graduate programs," limiting the possibilities for change (100) from this avenue.

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Two Books: Dangerous Currents, by Lester Thurow, and The Crisis of Vision in Modern Economic Thought, by Robert Heilbroner and William Milberg

One of the clichès of that brief moment of critical reflection that followed the financial crisis of 2008 was criticism of the economics profession--for its adherence to questionable ideas like the "Efficient Markets Hypothesis" (EMH), and the passing off of dubious financial products as safe through superficially rigorous but actually quite meaningless exercises in econometrics.

Another clichè was that "no one" knew better.

The latter was patently false, as I am regularly reminding looking at older works. Certainly this was the case when I read Lester Thurow's 1983 Dangerous Currents: The State of Economics, and Robert Heilbroner and William Milberg's 1995 The Crisis of Vision in Modern Economic Thought. It was not the case that economists, even well-known, respected economists capable of reaching a broader audience did not cry that the "emperor has no clothes." Rather it was that the mainstream of their profession was determined to ignore those cries, which is ultimately unsurprising--for reasons these authors themselves explain.

Each of these books looks at the demise of the Keynesian consensus (in large part, due to their apparent failure to anticipate, and inability to cope with, '70s-era stagflation). They also look at the assorted schools of economic thought which endeavored to become the base of a new consensus, particularly monetarism and rational expectations theory, and the failings which prevented their doing so.1 Each is also highly critical of the situation that followed, characterizing it as an intellectual crisis which has left policy without effective guidance in a period of economic crisis--these authors not cheerleaders for the course of the American or world economies in the 1980s and later.

As one might expect, there are substantive differences between these works. The most important of these is that Thurow criticizes the prevailing wisdom within the field--its fundamental methodology, its major schools of thought (particularly monetarism, supply-side economics and rational expectations)--principally from his perspective as an economist. Heilbroner and Milberg devote much more of their attention to the broader intellectual context shaping that field, what economists bring to their subject matter from outside it, contending that the "pre-analytical vision" is crucial (e.g. their views about the extent to which the field is scientific or political), and that this has been deeply problematic for the field in key ways. However, in their differing emphases I found their books complementary rather than clashing (indeed, Thurow's endorsement of Heilbroner and Milberg's book as "essential reading" appears on the back cover of my edition), and while each book will strike the general reader as demanding, remains hugely relevant to our situation today.

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Review: Dangerous Currents: The State of Economics, by Lester Thurow

New York: Random House, 1983, pp. 247.

The title of Lester Thurow's Dangerous Currents refers to the intellectual situation of the economics profession as he saw it at the time of writing in the 1980s. By that point, the Keynesian consensus that had emerged in the United States and Britain in the 1930s and 1940s was in a state of collapse, done in by the increasing doubt about the ability of policymakers to manage the economy in the late 1960s, and the experience of stagflation in the 1970s. However, no new consensus had replaced it, or seemed likely to replace it.

Thurow spends much of the book explaining why this is the case, devoting several chapters to the failings of Keynesianism's would-be successors--monetarism, supply-side economics, and rational expectations theory--debunking them on common sense and theoretical grounds.

Monetarism, which is generally opposed to government intervention in the marketplace, views government's principal function as exercising control over the money supply to keep inflation in check. Thurow argues that the theory's disregard of interest rates is a significant liability, and that the factors the theory does treat, it treats inadequately. He notes the economics profession's weak understanding of the velocity of money (as rendered in attempts to model it); that the mechanism through which the tightening of the money supply is supposed to reduce inflation is "black-boxed"; and that the theory is unclear on the length and severity of the application required to achieve its object--that is to say, how much and for how long the money supply would have to be tightened (and the side effects of this process, like economic recession, suffered) to bring inflation rates down.

Supply-side theory, like monetarism, favors minimal government (specifically emphasizing cuts in taxes, spending and regulation) and a tight monetary policy. Where it really differs is its comparative lack of theoretical rigor--its assumption that simply "getting government out of the way" will make an economy work as well as it possibly can. The result is that where monetarism might arguably be judged underdeveloped, supply-side theory looks like little more than an ideological statement (and was indeed a creation of right-wing political operatives like Arthur Laffer and Jude Wanniski, rather than conservative economists).

Rational expectations theory holds that economic actors' collective expectations, through their determination of those actors' behavior, do not merely create market outcomes, but accurately predict them. In the process they negate the effects of government intervention (actors' anticipation of this making them act in offsetting ways--for instance, altering their portfolios to avoid paying more in taxes in response to announced changes in the tax code), so that where monetarism and supply-side theories tend to see government action as pernicious, rational expectations holds it to simply be irrelevant. However, as Thurow notes, this reasoning assumes an accurate and unfailing rationality on the part of economic actors, taking no account of the role of habit in human behavior, or the tendency toward systematic mistake as human behavior adapts.

The intellectual limitations of these various theories aside, Thurow notes, the application of monetarism and supply-side theory in Britain and the U.S. in the late 1970s and early 1980s signally failed to achieve the promised results. Meanwhile, "rational expectations" flies in the face of the reality that governments can and do affect their economies--as the monetarist policies of the '80s cited above demonstrated by leading to recession, just as other economic theories predict.

Ultimately, however, Thurow contends that the problem is bigger than any one (or three) theories, pointing to the prevailing bias against macroeconomics, and complacency about the received microeconomics. He specifically holds that the problems of macroeconomics are actually an outgrowth of the flaws in our microeconomics--particularly the overly simplistic nature of the "equilibrium price-auction" view of human beings and society; and a disregard for anything not demonstrable through mathematical modeling and its "empirical analogue" econometrics (which has fallen far short of the hopes once held for it).

This leads Thurow to a wide-ranging examination of the methodological failings of contemporary economics. These problems range from its vagueness about many of its most basic terms (like "equilibrium"), to its silences on key issues (like what periods of disequilibrium in which markets adjust entail), to its disinterest in the findings of other social sciences (psychology, sociology) and the applicability of its models to the real world (like whether markets such as orthodox economics describes really exist, or actually clear in the manner it assumes), while the evidence economists generate tend to be "fuzzy" in nature, letting anyone "prove" anything.1 Moreover, he notes, the methodological problems have resulted in practical failure in the form of theories that fly in the face of the facts, as in their presumption of a "world of fixed tastes and static technology where the basic economic problem is one of exchange" (22), and their denial of the existence of genuine "involuntary" unemployment.

Thurow also goes some way to demonstrating an alternative approach, presenting elements of an alternative theory of the labor market in Chapter Seven, rooted in a recognition of the ways in which labor is not simply another "factor" of production. Unlike machinery, for instance, labor's performance is not "technically determined" (preference and motivation matters in a way it does not with a machine), and is not separable from its owner. As a practical matter this means that employers are highly reliant on the voluntary cooperation of employees (and therefore, their preferences and motivation), while human capital assets are illiquid and "risky" in a way that other assets are not. Moreover, the reality of on-the-job training means that potential employers do not bid on an independent supply of skills, but create those skills within their firm to an important degree (while job applicants are pursuing training opportunities as much as they are work); and the highly organized reality of modern economic life places the accent on team rather than individual productivity, and therefore the motivation of the team (among which interdependent preferences operate). All of this creates a labor market emphasizing team rather than individual output, and greatly reducing that wage flexibility that the equilibrium price-auction vision of the labor market so takes for granted.

Taken together all of this comprises an impressive round-up of the field's weaknesses, arguably validated in the years since by the failure of the economics profession to develop a new consensus--and indeed, the increasing divorce of the conservative economic policies that have continued to prevail from anything like a solid intellectual basis (as James K. Galbraith and Jonathan Chait have contended). Additionally, while Thurow's book falls short of presenting an alternative "school" of economic thought that would fill Keynesianism's old place (never a stated goal of his book, nor essential to validating his argument), he does demonstrate that there are other ways of approaching the field's questions with rigor--while, not incidentally, offering some intriguing arguments regarding the economics of the labor market.

However, Thurow's critique does have its limitations, the biggest of them its failure to satisfactorily address the issue of why Keynesianism's proponents failed to adapt their theory to the challenges of the '70s, and for that matter, why the ideas in the ascendant at this time all came from the political right.2 From the standpoint of three decades later, it offers little clue as to why these ideas have retained their influence through the economic doldrums of the 1980s, 1990s and 2000s, and even the crisis of 2008, which has seen laissez-faire remain the default mode of thinking in America, and right-wing prescriptions become even more aggressive in much of the world. For serious attempts at an explanation one has to turn elsewhere, to those economists most willing to venture beyond the narrow boundaries the orthodoxy imposes on the field, like John Galbraith and Robert Heilbroner, and writers from outside the world of economics, like Kevin Phillips, Thomas Frank and Chris Hedges.

1. Does the term "equilibrium" mean a situation in which one can make abnormal profits, or the existence of a situation in which a "non-equilibrium flow of factors . . . will alter the course of the economy" (14)?
2. Thurow notes that just as the U.S. went right politically, France went left with the election of Francois Mitterand, but does not develop this intriguing comparison.

Review: Business Civilization in Decline, by Robert Heilbroner

New York: Norton, 1976, pp. 127.

As has been the case with most large, loaded terms in our political vocabulary, "capitalism" has eluded tidy definition. In Business Civilization in Decline Robert Heilbroner offered as a minimum the existence of private ownership of economic assets; the use of market competition as the primary method of income distribution; and the "structure of privilege" that permits widely differing gains at the top.1

Robert Heilbroner expected that in the half century after the time at which he was writing (the mid-1970s), that system, and the "business civilization" founded upon it, would come to an end. This was not, however, a Cold War-era prediction of Soviet triumph in the realm of power politics such as some anticipated at the time. Nor was it a Marxist-style prediction about the radicalization of the working class. (Heilbroner contended instead that as workers increasingly became white collar, they also became bourgeois in attitude, even when they lacked bourgeois privileges.)

Rather his position was that efforts to save capitalism from its vulnerabilities, rather than destroy or replace it, would bring about its end. Three such vulnerabilities seemed crucial to him, namely the capitalist system's tendency toward developing generalized disorders (like depression and inflation); the threat to the system as a whole from localized disorders, such as the failure of a large bank (increasing as the "economic mechanism became more tightly knit"); and the looming collision between the expansionary tendency of capitalism, and ecological constraints.2

All of this would make the sustenance of economic growth not only more difficult, but put an end to growth itself. This would, he argued, eliminate a crucial safety valve for the social tensions capitalism generated. Heilbroner pointed, too, to the "hollowness" of commercial culture, in the attitudes it fosters toward such matters as work and consumption, and the cynicism-inducing character of advertising, which he linked with the problem of continuing dissatisfaction in a world of rising affluence, and which make business civilization that much more vulnerable to challenge. At the same time, "social fatalism" - the traditional passive acceptance of misery - was becoming a thing of the past, a change "characterized by the assertion of political mastery," while political institutions and imperatives were gaining ascendancy over private economic interests, the long-running trend an extension of "public responsibility for the working of the system."3

Heilbroner predicted that these stresses would be exacerbated in the "middle range" of twenty-five to fifty years by still other problems, like the increasing difficulty of procuring labor for certain tasks ("jobs people just won't do") in conditions of rising affluence; the struggle between the owners of capital and the "technostructures" controlling the dominant firms, and the problem of private bureaucratization more broadly; and the regulatory challenges emerging out of new developments in science and technology (like genetic engineering and new possibilities of behavioral control).

All of these things taken individually, and certainly taken together, suggested increasing public planning of the economy, which he predicted would extend beyond prices and wages to incomes and profits, though he also predicted broader and deeper cultural changes. He specifically anticipated a more "statist" culture, more "religious" in the sense of its "elevation of the collective and communal destiny of man to the forefront of public consciousness, and the absolute subordination of private interests to public requirements." Heilbroner also thought it plausible that the private prerogatives regarding property and enterprise would come to "appear as archaic as the claims of royalty or nobility in the face of a democratic revolution," and that business would thus be transformed into "the civil service of the nation-state."4

This was, of course, a bold prediction at the time, and today it seems downright astonishing that such a noted economist could possibly have made it within the last half-century. This was, after all, exactly the moment at which economic thought and practice started a dramatic rightward shift - with private profit and the claims of property and privilege ascendant over claims about the public good, and government's hands increasingly perceived as tied by footloose business.

How did Heilbroner get things so wrong? One reason, it seems, is that he overestimated the extent to which government acted independently of business's influence, and the extent to which it would maintain its credibility to do so. Certainly he did not anticipate the extent to which the Keynesian consensus of the middle part of the century would be displaced by conservative ideas, despite their failure to establish a new consensus (a situation Heilbroner himself analyzed in his later The Crisis of Vision in Modern Economic Thought). Nor did he anticipate other events that reinforced the process, like the collapse of the Soviet Union, the stagnation of Japan, and the disappointing economic performance of major European states like France and Germany in the 1990s and 2000s, which appeared to discredit statist economic approaches. He also underestimated the intensity of neoliberal globalization.5

Nonetheless, as the combination of recession/depression, ecologically-driven shocks to the prices of food and energy, and financial instability seen in the last several years demonstrates, there has been little progress toward ameliorating the problems central to his thesis, which continue to plague us today. The response Heilbroner anticipated from society to those problems may be far from ideal, or even unattractive (Heilbroner himself was ambivalent about it, worrying about the fate of individual freedom in such a world), but the sort of boldness and imagination he brought to these issues is a reminder of just how much poorer this dialogue has become since his time.

1. This definition, notably, does not require the kind of business environment seen in the "classical" capitalism of the early nineteenth century, in which the prevalent form of organization was the small, owner-managed firm powerless over the larger market; and certainly does not exclude a substantial role for government inside a capitalist economy, which as he points out has historically been substantial in even the United States, from the country's earliest beginnings.
2. Heilbroner was writing in the wake of the publication of The Limits to Growth, which is discussed here.
3. In the earliest phase of U.S. history, government acted as a stimulus to growth (as with Federal investments in infrastructure, like canal-building); to regulating markets in the Progressive Era (when anti-trust action appeared on the agenda); to the use of Federal powers to achieve acceptable levels of growth, employment and welfare (as happened with the New Deal). Moreover, Heilbroner is quite clear on the point that this expansion of government's role was motivated by the support of business, rather than social reform, citing Gabriel Kolko's The Triumph of Conservatism (discussed here) - though he does take the position that government has functioned as an independent force rather than the mere servant of business.
4. Of course, the increasing profile and power of multinational corporations was a hot topic at the time, raising concerns that found pop cultural expression in films like Rollerball and novels like The Matarese Circle. However, Heilbroner pointedly dismissed this as an "ancient condition" unlikely to change the essential direction. Heilbroner was equally unpersuaded by claims that a "post-industrial" outlook would present obstacles to this vision. Given its connection with that "end of social fatalism," he thought it might actually be a contributing factor to the transformation he described.
5. Heilbroner did, however, expect that many of the changes he described would pose problems for Soviet-style socialist states, these being issues of industrial society rather than just capitalist society (as with ecological "limits to growth"). He also suggested that Western capitalist and Eastern socialist states would bring different combinations of strength and weakness to those challenges, with the West having the benefit of greater economic development, and the socialist states already further along the road to that "assertion of political mastery" over economic life.

Looking Back at the FS-X

Reading about Japan's fifth-generation fighter program I found myself thinking of the country's last effort to build an indigenous fighter plane, the FS-X.

The United States, variously described as concerned at the prospect of losing a major customer and gaining a competitor in the fighter market (with all that spelled for the trade balance); hostile reactions from Korea and China; and even Japan's diminishing its capacity to act as an ally (by sinking its limited defense funds in a costly and unnecessary project, and diminishing the interoperability of American and Japanese forces); responded negatively.1 In fact, it pressed Japan to settle for cooperative development of a modified F-16 instead. The resulting negotiations, and the agreement to which they led, were highly publicized and deeply controversial on both sides of the Pacific, many in each country claiming that their nation got the worst of the deal. Shintaro Ishihara fulminated quite a bit about the arrangement in The Japan That Can Say No (discussed here), while many in the United States saw the program as a technological giveaway to the country's chief economic rival.

Of course, interest in the whole issue subsided along with American anxieties about Japanese competition, with the entry into service of ninety-four F-2 fighters in 2007 barely noticed in the press. And nothing like the old controversy has arisen in response to the announcement of Japan's "F-3" program.

I suppose this reflects, in part, the unsatisfactory nature of the compromise. While Ishihara was angry that Japan was getting a modified F-16 instead of its own aircraft, a RAND Corporation study of the affair--Mark Lorell's Troubled Partnership--made the case that the F-2 actually ended up much more than a mere variant of the American plane, and indeed, a "virtually all-new world-class fighter aircraft developed largely by the Japanese."2 Additionally, at least as far as the writers of Troubled Partnership were concerned, the U.S. got the worse end of the technology sharing aspect of the deal. (In fact, one of the main lessons that Lorell draws from the affair is that codevelopment should be genuinely voluntary.)

However, this also reflects the changed relations between the two countries. The U.S. is much less anxious about Japanese competition--and far more interested in containing China, to which end a cooperative Japan is indispensable. And with China, Russia--and even South Korea--building fifth-generation fighters, and the U.S. clearly not exporting the F-22, it can hardly expect the country to not pursue such a program. Still another factor may be the program's schedule: Japan's fifth-generation fighter is not expected to enter service until the 2030s. The U.S. Air Force has its sights set on a sixth-generation fighter by then.

1. Mark Lorell, Troubled Partnership: An Assessment of U.S.-Japan Collaboration on the FS-X Fighter (Santa Monica, CA: RAND, 1995), p. 2.
2. Lorell, p. 2. Lorell points to the F-2's being a longer and heavier aircraft than the F-16, with substantially enlarged wings of a new design and a larger tail; an enlarged radome housing a phased array radar, while the aircraft also contains numerous other, Japanese-built avionics (like the inertial navigation system, mission computer and electronic warfare suite); the incorporation of stealth technology; and its configuration to launch ASM-1 and ASM-2 anti-ship missiles (actually the plane's primary mission). Lorell, p. 2.

Reassessing 1972's The Limits to Growth

Over four decades ago the Club of Rome authorized a team of scientists headed by Dennis and Donella Meadows and Jorgen Randers to revisit the old problem pointed out by Thomas Malthus in his classic Essay on the Principle of Population: the interaction between exponential growth and finite resources. Using the then-new techniques of systems dynamics theory and computer modeling, they examined long-run trends in the growth of the world's population and material production and consumption (e.g. industrialization, pollution, food production, resource depletion), and published their findings in 1972's famous The Limits to Growth.

Last year of course marked the fortieth anniversary of that study's publication, and saw the release of an update, which did get some attention in the press – much of it negative (like Timothy Worstall's assessment in Forbes), just as was the case with most of the attention the original study received.1 As Ugo Bardi has noted,

In the 1980s and 1990s, the study was attacked, demonized, and ridiculed in all possible ways. With the apparent end of the oil crisis, in the late 1980s, the ensuing general wave of optimism consigned the Limits study to the dustbin of "wrong" scientific ideas; together with the dinosaurs of Venus and the evolution of the giraffes' necks according to Lamarck. Urban legends on the "mistakes" of the Limits study are still common today, despite being just that: legends.

Those legends all remain alive and well, and not only in online forum debates between the ill-informed, but the pages of prestigious mainstream publications (including many which offered comment on the 40 year update). Indeed, it is hard to think of a book of recent decades that has suffered more intense or prolonged attack based on sheer misinformation or disinformation than 1972's The Limits to Growth.

The authors of the first edition of Limits are quite clear in their book about its not being "intended as a piece of futurology," but "an analysis of current trends" and the implications of their continuation.2 In keeping with this assertion the authors not only avoid actual forecasting (a fact that has not stopped apparently erroneous forecasts from being attributed to them), but repeatedly express a leeriness about the idea, instead discussing multiple projections (about such things as the GNP of selected nations) and explicitly making it clear that they do not actually expect to see real-life figures match their numbers.

Rather their multiplicity of models demonstrated the obvious, intuitive and logically irrefutable point that the exponential growth of population and "capital" cannot continue indefinitely within a finite system, such as they take the Earth to be. The exhaustion of key natural resources, and the toll taken by pollution, would become increasingly heavy burdens on economic growth and human well-being, ultimately precipitating the system's collapse – and with it a sharp rise in mortality, and a sharp drop in consumption and living standards. They also contended that the population and capital growth rates of their time, if continued through the twenty-first century, would bring on collapse before 2100 at the latest – an assessment that still appears quite plausible, and perhaps even the common expectation among those attentive to such issues.

None of this seems particularly controversial, and in fact a considerable body of analysis by other researchers has since substantiated many of the study's claims. A 2008 study by Graham M. Turner found that the observed trends reflected the anticipations of the authors, while in a broader sense, so do such findings as the Global Footprint Network's argument that "overshoot" of the planet's ability to replenish the resources being consumed by humanity had occurred by the 1970s, and that we are today consuming the equivalent of 1.5 Earths' worth of resources (in 2012, using up a full year's supplies by August 22). Indeed, in the book's early sounding of the alarm about carbon emissions and their connection with anthropogenic climate change Limits was actually ahead of its time (ironically, a point rarely acknowledged even by those most attentive to environmental issues).

What proved more problematic was the solution the authors prescribed, namely the limiting of material output to specified "sustainable" levels (that particular term was not yet in use) to be met within the coming years.3 The sacrifice of that part of economic growth coming from the consumption of ever-growing quantities of natural resources, especially through the kind of central control required to implement such a project at a global level, was simply unacceptable to the conventional wisdom of the time.

Such ideas were to become even less acceptable as mainstream thought on such matters moved rightward – so much so that it can seem a surprise that this was ever proposed at all.4 One might argue over whether the solution the study's authors prescribed was desirable or realistic, but it is a reminder that today we are far less likely to imagine our social, political and economic arrangements as being so adaptable, let alone adaptable in the name of enlightened, long-term, collective self-interest. The imagination – and the political flexibility – which would even permit this to be envisioned in principle, let alone a workable program, has proved to be yet another resource in too-short supply.

1. This was the third such update, previous updates having appeared in 1992 and 2002, at the 20 and 30 year marks.
2. It should be noted that The Limits to Growth is not a dense scholarly text but very clearly and simply written, making it unlikely that the "intelligent lay reader" (scarce as these may be) will get seriously confused about what it is trying to convey at any point. Instead, as is the case with most Important Books, even ones as short and easy to read as this one, most of those discussing them have only secondhand knowledge of them gleaned from questionable sources – and are motivated by an enthusiasm for dubious ideology.
3. Sustainable economic activity is defined in the 30-year update as activity which does not consume renewable resources more quickly than they can renew themselves; does not consume nonrenewable resources more quickly than substitutes can be found for them; and does not produce more pollution than the Earth system can absorb.
4. The Limits to Growth did not call for "zero growth." One reason was that material output represented only part of economic production and consumption, with services like education and health, for instance, materially "lighter" and so still expandable. Another was that the recommendations allowed for continued increases in material output where technological advance permitted more to be done with a given stock of resources.

International Security in 2012: The Major Stories

It seems fitting to begin this first post of 2013 with a look back at 2012--in this case, that year's biggest international security stories.

Here I am sticking with security as construed in traditional, physical, state-centered terms rather than less conventional matters of economic, energy, food or environmental security.1 This is not to dispute that these other dimensions of life create the context of means and motive in which states pursue traditional security. However, the way changes in these areas tend to develop - slowly and complexly and often ambiguously--makes them difficult to track precisely, let alone identify points of transition which can be meaningfully isolated in a list of Big Developments.2 It might be noted, too, that this has been a year in which the familiar troubles (from climatic disruption and related food price spikes to the eurozone fiscal crisis) worsened in the familiar ways without meaningful response from any major actor--non-stories rather than stories in the strictest sense, even as the problems continued to wreak havoc. (Two partial exceptions seem worth noting here, however. Under the "problem" column, the unambiguous slowdown of Chinese, Indian and Brazilian economic growth, with all that spells for the more than usually vulnerable global economy; in the "solutions" column, the Doha climate conference, the results of which I have found underwhelming, but which some more optimistic observers think at least laid important groundwork for more substantive progress later.)

In discussing traditional security I am also setting aside the kind of headline-grabbers about such things as appointments to particular offices and the personal pecadilloes of specific high-ranking officials (like the appointment of Leon Panetta as Secretary of Defense, or the melodrama of the "the Petraeus affair") that made up Foreign Policy's list of the top stories.3 I suppose I see that sort of thing as simply happening on a not particularly illuminating level of analysis, while also happening to be rather Beltway-centric, and often simply gossipy, in contrast with the more comprehensive and globally-oriented round-up I mean to present here.

Skimming the Headlines
As always, 2012 saw a great deal of continuity, especially in those issues that have tended to command American headlines. The United States continued to combat al-Qaida through military means as well as intelligence and police efforts, with the long-controversial use of military detention, rendition and "enhanced interrogation" remaining unchanged, and the drone war expanded, particularly in countries where internal conflicts are ongoing--Yemen, Somalia and northwestern Pakistan. Over the border American troops remain engaged in a decreasingly popular (and it seems at times, forgotten) war in Afghanistan, while U.S. special forces also made a quiet return to a still conflict-ridden Iraq after the withdrawal of American forces from the country completed in the preceding year.

The North Korean nuclear program still absorbed a significant share of the attention of the major powers, as did the country's ballistic missile-and-space program (which saw space launches in April and December, the second of these successful), while relations among the longer-established nuclear powers had their accustomed rancor. Russia went on opposing American plans to build missile defense facilities in Eastern Europe (extending to threats of preemptive military action), deploy aircraft and ships far from home to demonstrate its reach (one Russian sub reportedly operating undetected by the U.S. Navy for a whole month in the Gulf of Mexico), and once again announce ambitious plans for military reform and modernization. The nuclear arms race between India and Pakistan also goes on, in the main an object of speculation among analysts rather than open statements or significant revelations (the odd missile test apart).

As these nations all milk their military capacities for their prestige value, Europe's larger military powers are continuing to grapple with the implications of the 2008 financial crisis for their defense budgets.

Less noticed, but not to be overlooked, several already ongoing insurgencies and other internal conflicts of varying intensities, notably those in Colombia, Senegal, Nigeria, Thailand, Myanmar and the Philippines, continued through 2012 without signs of resolution.

Other situations have seen somewhat more dramatic developments, however.

The UN General Assembly voted to recognize Palestinian statehood in November as its conflict with Israel went on (at times, well beyond its borders, Israel's bombing a site in Sudan that year in what some regard as a related incident). The longstanding dispute regarding Iran's nuclear program, like North Korea's, continued to absorb diplomatic efforts, and unlike North Korea's, to lead to military incidents between U.S. and Iranian forces, Iranian aircraft firing on a U.S. drone, while the potential for something larger (like a military strike) remains. However, the toughening of U.S. sanctions on the country has added a new element to the situation, by severely disrupting the Iranian economy.

Significant developments were also evident in sub-Saharan Africa, where Sudan clashed with the newly independent South Sudan along their mutual border. Ethiopian troops withdrew from Somalia, while African Union and Kenyan forces remain engaged alongside the government in the country's civil war. Piracy off the country's coast also declined in 2012 (as piracy has also increased off West Africa, though the frequency and ambition of the attacks there is a far cry from what was seen off the Horn of Africa in past years). That region also saw two coups, in Mali and Guinea-Bissau (all the more noteworthy as such changes of power have become a rarity in recent years), and a rebellion in the Central African Republic. In the Democratic Republic of the Congo the M23 rebellion, backed by neighboring Rwanda and Uganda (each dealing with Congo-based rebel groups of their own) added a dangerous, newish element to the complex of conflicts afflicting their region since the 1990s. In South Africa strikes in the mining sector and the violence that has followed (which included a police massacre of striking workers, the first such post-apartheid incident) has raised questions about the stability of the highly unequal country.

The incidence of violence along the U.S.-Mexican border may be falling off, though that claim is a subject of some controversy, especially with the same violence continuing south of the border, though this too may have stabilized or even begin to decline. Much the same may be the case in the Russian Caucasus (even as Russo-Georgian relations - and Georgian relations with Abkhazia and South Ossetia - remained little improved), while Tajikistan saw a rebellion begin and apparently end in Gorno-Badakhshan. India's insurgencies in Kashmir, Naxal and the Northeast, too, may be in decline.

By contrast, Indonesia's Papua province has seen a largely unreported surge of violence. At the same time neo-fascist violence appears to be increasing in restive, austerity-stricken Europe, with the activities of the Golden Dawn in Greece and Jobbik in Hungary, though anti-Roma violence in particular is becoming widespread, particularly in east-central Europe but elsewhere on the continent as well, while there are also signs of an upsurge in anti-immigrant and anti-Semitic attacks.

There have also been some noteworthy developments in the defense policies of certain of the major powers. Germany, while no exception to the trend toward force downsizing and budget-slashing in Western Europe, continues to "normalize" its armed forces, through changes in legislation (permitting the use of German soldiers internally in peacetime) and acquisitions policy (like the purchase of armed drones). Additionally, more slowly and less dramatically than its European allies, the U.S. is also moving toward cuts in defense expenditures, announcing a reduction of almost a half trillion dollars in military spending over the next ten years. The battle over the budget deficit at the year's end also raised the prospect of deeper cuts than that (an issue still unresolved at this time).

Two Particularly Big Stories
Consequential as all the events described above already are, and might become, for the time being the two biggest stories - those involving particularly dramatic turns in situations likely to have wide impact - appear to be the more aggressive tone of the relations between China and the other major powers in East Asia; and the continuing effects of the wave of revolutions sweeping through North Africa and the Middle East from 2011 on.

Realpolitik in the Western Pacific
The U.S. continued in its controversial "pivot" toward East Asia, with 2012 seeing the deployment of U.S. Marines to Australia in April, and discussion of the basing of more U.S. warships in Singapore. It also saw the public unveiling of the AirSea Battle doctrine, widely taken as directed against, and provocative to, China. The summer of 2012 also saw Japan's full nationalization of the Senkaku Islands China has long claimed as its own territory.

Meanwhile, China has continued in its harder line on its claims in the South China Sea, interfering with oil and gas exploration and fishing in the disputed waters by neighboring Vietnam and the Philippines. At the same time China has strongly protested Japan's nationalization of the Senkakus with numerous incursions of its waters and airspace by Chinese ships and aircraft - in December, resulting in the first intercept of a Chinese military aircraft by Japanese fighters in half a century. (Taiwan, too, has contested Japan's nationalization of the islands, resulting in a water cannon battle between Japanese and Taiwanese Coast Guard vessels in September.)

It is often noted that while China remains a regional power, far more equipped for defense than offense, it has continued to take rudimentary steps toward a real power projection capability, many of primarily symbolic significance, like China's dispatching warships to the Mediterranean, but others of more practical consequence, like its flying and landing aircraft from its carrier for the first time.4 Japan, for its part, appears to be stepping up defense spending in response to China's recent gestures in the vicinity of the Senkakus. India, which has its own issues with China closer to home, on which there has little been little progress or regress in 2012 (despite allegations of hype over frictions between the two countries in the Indian press), made a declaration of its intention to defend its interests in the South China Sea region.

Some observers also suggest that China's domestic media has also been taking a more militaristic line, celebrating the acquisition of new technologies, and detailing aggressive scenarios involving Japan and other countries.

From Damascus to Timbuktu
Two years after the Tunisian revolution of 2011 the story of the "Arab Spring" remains far from over, with many countries yet to see stability, let alone the establishment of democratic governments which look viable in the long-term. States which have undergone revolutions (like Egypt), and others where the old status quo has not budged (like Saudi Arabia and Bahrain) continued to see political violence through 2012, though by far the worst of this has occurred in Syria, and northwest Africa.

The fighting in Syria (which, interestingly, was ignored by some authors of last year's write-ups) has escalated into a full-blown civil war, which has led not only to tens of thousands of deaths and an exodus of refugees to neighboring states, but the increasing isolation of the Syrian government, and increasing international recognition of the rebels (the U.S. doing so in December). There have also been serious regional repercussions, including military incidents with Israel and Turkey (which has seen intensified activity by Kurdish guerrillas more freely operating from northern Syria), and the spread of related fighting into neighboring Lebanon.

Additionally, while the Syrian conflict is already not a purely domestic affair (with the rebels reportedly receiving aid from Saudi Arabia and Qatar via a cooperative Turkey, and Syria possibly receiving support from Iran), the scale of the resulting humanitarian crisis, the risk of a wider regional conflagration if incidents such as those already seen continue to occur, and the dangers posed by the Syrian government's chemical weapons, have led to talk of direct intervention by the West. However, the scale of the intervention that would be required, American reluctance to engage in another intervention overseas (especially one involving a large commitment of ground forces, especially in the Middle East), and Russian opposition (and not least, the Russian military presence in Syria) are inhibiting factors for the present.5

Meanwhile, more than a year after the overthrow of Moammar Qaddafi, Libya is still a scene of factional fighting--the unexamined context of the attack on the U.S. consulate at Benghazi. The return of Tuareg fighters with Libyan weapons to Mali was also a factor in the civil war in Mali, which saw an Islamist faction take over the northern part of the country, and brought on a relatively large-scale, French-led international intervention in January 2013. In that same month the conflict spread to Algeria with the hostage crisis at the Amenas gas plant. In short, what began as a war inside Libya has not only fed into another war over the border (leading to yet another intervention by the U.S. and its allies), but shows signs of turning into a broader regional crisis.

Neither the belligerent rhetoric and gestures seen in East Asia, nor the conflicts in the Middle East/North Africa, can be properly considered without reference to the economic pressures faced in those regions. The slowdown in China's economic expansion, combined with the leadership change in that country (two things Japan had in common with China), have been an inducement to grandstanding. At the same time, food and fuel prices had more to do with North African revolutions than Facebook. It may be that the tensions in East Asia, at least, are a matter of posturing rather than imminent war or cold war, but these are no grounds for complacency, especially as those subtler, less Big Moment List-friendly stresses on the international system previously mentioned continue to mount.

1. By "state security" I refer to matters like interstate and intrastate and extra-state wars, skirmishes and military incidents, force build-ups and arms races, large-scale political and criminal violence and state collapse, and the associated political, fiscal and diplomatic maneuverings.
2. Nonetheless, I recommend the New Security Beat's list of its top posts of the year to those interested in keeping up with this issue.
3. You can find the same list of stories on a single page, minus the bandwidth-sucking graphics, here.
4. In January 2013, China's first-ever heavy transport also conducted its first official flight.
5. This presence includes Russian "advisers" manning Syrian air defenses, and recent visits by Russian warships. January 2013 saw a particularly large Russian naval deployment to nearby waters.

Revisiting The Politics of Rich and Poor

As the 1980s drew to a close social critics across the political spectrum widely expressed expectations that the 1990s would redress the preceding decade's tilt in favor of business, wealth and free market pieties. Kevin Phillips, drawing on a theory about political cycles in American history which he had previously used to successfully predict the country's electoral realignment in the late '60s, certainly made that case in 1990's The Politics of Rich and Poor.

That theory identifies a pattern of twenty-eight to thirty-six year cycles in American history, each dominated by a particular party and its politics, which holds the White House and sets the tone for national politics through most of the period. Republican periods (1860-1896, 1896-1932, 1968-?) begin with the party taking a populist stance, typically against inflation and big government (as after the Civil War and World War I, and again by the late '60s), which gives way to a runaway enthusiasm for laissez-faire policy, attended by a worship of business and wealth, with a substantial element of Social Darwinism in the mix (as seen in the Gilded Age, the 1920s, the Reagan years). The less advantaged groups (typically those in rural areas, the interior, and primary industries, as well as labor and the poor generally) inevitably suffer, while the speculative excesses of an ever-more irresponsible financial sector lead to a general crisis. The result is a political backlash which comes to a head when the speculation brings on a crisis, leading to an era of more egalitarian attitudes and policies (the Progressive Era, the New Deal), and some downward redistribution of wealth.1

Of course, this last phase of the cycle never occurred in the '90s, or the 2000s, conservative policies continuing, with the expected effects: continuing deindustrialization and financialization, increasing speculation, debt, inequality. A possible explanation for this would seem that we ended up with two Republican cycles back to back again, just as we did between 1860 and 1932, but Phillips has not advanced such a theory in his later writings, and it is hard to see how he or anyone else could have. When this happened, it was the case that the Republicans were out of power when the crisis came to a head in 1893 (Democrat Grover Cleveland was President instead), permitting them to play the role of opposition, with the help of a more moderate line encompassing an element of economic populism (as with McKinley and Roosevelt). Nothing of the kind has been seen in the post-1968 cycle.

A more likely possibility is that Phillips may have been too quick to call the cycle over. After all, as of 1988, or even 1992, the Republican reign would have gone on only two decades, a rather shorter period than seen in the past - a run up to 2004 still plausible. One might imagine that the unusual circumstances of the War on Terror can account for the second Bush II administration. Yet, the Obama administration fell far short of a "New" New Deal, and might fairly be considered to have continued the cycle into an unprecedented fifth decade, even after the economic shock of 2008, while when running against Obama in 2012, the Republicans remained very much the party of Reagan, rather than taking a moderate line.

It seems quite plausible that if a pattern had indeed prevailed in American politics for the past two centuries, it has since been broken, with the proponents of conservative policies stronger than ever, and just as with the linearity evident in the differences among the Republican heydays, an entirely different analytical approach seems required to explain the fact.

Phillips' own analysis offers clues. One is in the pattern he has identified, which has Republicans and conservatives prevailing in three of the four last cycles. This electoral pattern hints that conservative Republicanism is the "default setting" of American politics, a reading reinforced by the limited extent to which the United States deviated from such policies at even the most liberal points in its history (by comparison with not just continental Western Europe, but even Britain and Canada). The backlashes against conservative policy frequently produced much more rhetoric than substantive change, the Progressive Era, notably, seeing very little action, and this generally in line with the interests of the country's economic elites, as Gabriel Kolko showed in his study of the period, The Triumph of Conservatism.2 One might, in fact, argue that the cycle was less about swings from left to right and vice-versa than swings within the right, from elitist right-wing politics to a somewhat more populist variant of the same (and that not usually for long), with the liberalism of the New Deal era exceptional rather than really representative of the dynamic, a function of the unusual circumstances of the Great Depression, World War II and the early Cold War.

The circumstances of the late twentieth century offered little reason to expect a repeat. Phillips did believe that declinist worry would be a significant source of pressure for reform. However, the stagnation of both Japan and (to a lesser extent) Western Europe, which removed that pressure, were a significant boost to American complacency in the '90s and after. At any rate, the fact remained that conservative policies were not confined to the United States, or even the English-speaking countries, but evident across the industrialized world - including Japan and West Germany. They were increasingly evident, too, in the old citadels of Communism, the Soviet Union and China, with the collapse of the one and the opening up of the other resulting in the whole world being swept up in the neoliberal wave. The extent to which neoliberal globalization actually limited the freedom of any one state to pursue heterodox economic policies may be debatable, but that it made them seem a much less viable path cannot be contested. Additionally, while, as Phillips notes, the late phases of conservative rule historically tend to see the Democrats swing rightward, it does seem to have been the case that American liberalism was in an especially poor position at the end of the twentieth century, considerably diminishing the pressure on the right to take a more populist position. The result is that meaningful redress of the issues raised by Phillips' book appears dismayingly unlikely nearly a quarter of a century later.

1. A fuller description of Phillips' theory can be found in my earlier review of the book.
2. In that book Kolko systematically examines the achievements of Progressive-era reformers to contend that these actually represented triumphs of business. The Pure Food and Drug Act and the Meat Inspection Act, for instance, were a matter of making American agricultural exports acceptable to European importers; national insurance regulation was a way of enabling national insurance companies to escape the state regulation which provided shelter to the smaller, local firms against which they competed; and the Federal Reserve was created to guarantee the availability of the liquidity business desired.

Review: The Politics of Rich and Poor: Wealth and the American Electorate in the Reagan Aftermath, by Kevin Phillips

New York: Random House, 1990, pp. 262.

Kevin Phillips, like Andrew Bacevich and John Dean, is a conservative critic of the country's movement to the right in recent decades, a subject on which he has written throughout his career. In The Politics of Rich and Poor he looked at the '80s as they were coming to a close through the lens of the reading of American history he developed earlier in The Emerging Republican Majority (a book in which he predicted the country's present political alignment as an enduring fact, and certainly one case when a forecaster got things right by rather more than coincidence). The most important portion of this is his identification of a pattern of twenty-eight to thirty-six year cycles in American history. Each of these is dominated by a particular party and its politics, which holds the White House and sets the tone for national politics through most of the period: the era of Democratic-Republican era rule between 1800 and 1828, the 1828-1860 dominance of the Democrats, the 1860-1896 and 1896-1932 periods of Republican rule, the Democrats' dominance between 1932 and 1968, and the last Republican cycle which began in 1968 with the election of Richard Nixon.

Within the Republican cycles there is a pattern which starts with the party taking a populist stance, typically against inflation and big government (as after the Civil War and World War I). Over time this gives way to a runaway enthusiasm for laissez-faire policy, attended by a worship of business and wealth, with a substantial element of Social Darwinism in the mix. Characteristic of government policy are reductions in taxes (specifically, the more progressive taxes), the avoidance or weakening of regulation of big business, and tight money policies which result in deflation or disinflation. The results typically include substantial restructuring of the economy which sees business consolidate in a wave of mergers and the advent of new types of large organization (the great corporations and trusts of the Gilded Age, the mergers of the '20s), debt pile up, and speculation become wilder (with new financial instruments often playing a role). The rich get richer, but the poor get poorer as wealth is redistributed not only between classes, but also economic sectors (with old sectors suffering and agricultural and the extractive businesses in particular taking a hit as new industries take off), and with them, regions (urban areas doing better than rural ones, the coast better than the interior). The result is a political backlash which comes to a head when the speculation brings on a crisis, leading to an era of more egalitarian attitudes and policies, and some downward redistribution of wealth.

The post-1968 Republican cycle was very much in line with this pattern, with Richard Nixon elected after a populist campaign and pursuing moderate policies (such that many a liberal commentator considers him to have been to the left of recent Demcorats), and the Ronald Reagan administration marking the shift to the "heyday" politics of hyper-capitalism. The redesign of the tax system in the Reagan years shifted much of the burden from the rich to the less well-off, while spending on programs which principally benefit the poor was reduced. The rising government accumulation of debt at the time also redistributed wealth via taxpayer money to the holders of government securities (in general, the affluent), as did increased defense spending (which favored military contractors, and the "knowledge sector" workers disproportionately associated with them), and taxpayer-funded bailouts of the riskier forms of the speculation unleashed by deregulation. Deregulation also gave "paper entrepreneurs" a freer hand with mergers and acquisitions, weakened the position of workers, and permitted companies in sectors like communications and transport to reduce service to less profitable (mostly rural) regions. Additionally, the deflationary policies of the early '80s (shorter-lived) harmed homeowners and commodity producers while favoring the holders of financial assets (also benefiting from the high rates of interest at which the Federal government borrowed).

The predictable result was that, just as happened at the same point in earlier cycles, the rich were richer, the poor poorer, with the winners and losers much the same before. Agriculture and resource-extracting industries took a sharp blow while finance boomed. Major coastal cities enjoyed a measure of prosperity as the interior languished - and the more vulnerable everywhere did badly, particularly young people, women, minorities, and workers who had a high school education or less. Nonetheless, a significant difference was that where the earlier heydays of the Gilded Age and the '20s were periods of industrial expansion, the '80s saw deindustrialization as sectors like steel, automobiles and textiles decayed, and the U.S's slipping as an economic power (evidenced in increasing foreign debt, and the purchase of American assets by increasingly influential foreign investors, to which he devotes a chapter).1

All the same, Phillips took the '80s for the '20s, and supposed that the trend had hit its high-water mark, with the shift to a more egalitarian pattern soon to follow, hints of which he found in the slimness of George Bush I's victory over Michael Dukakis in 1988; Bush's rhetoric about a "kinder, gentler America," suggesting a redress of '80s excesses; the worries of even conservatives like George F. Will and Ben Stein over the damage that inequality and its ill effects were doing to the country's social fabric; the emergence of declinist sentiment over the U.S.'s standing in the world (epitomized by the anxieties surrounding Japanese competition); and what he thought was the decreasing ability of Republicans to invoke overseas Communism and the culture wars in support of their position as the Cold War came to an end, and public opinion shifted in favor of the kind of cultural liberalism that had seemed radical in the '60s (like pro-choice sentiment). Even the diminished interest in nighttime soap operas about wealthy families like Dallas and Dynasty seemed to point in such a direction.

Of course, nothing of the kind happened, the policies of the '80s continuing through the '90s and 2000s, with additional upper-class tax cuts, reductions in social spending, deregulation (or lax enforcement of such regulations as remained on the books), despite the familiar results: continued deindustrialization, financialization and worsening inequality.2 Even where culture was concerned, the waning of enthusiasm for business and wealth was short-lived, as demonstrated by the subsequent hero worship of Bill Gates and Steve Jobs and less explicably, Donald Trump; the abundance of "reality" shows about how the other have lives; the revival of the nighttime soap; the popularity of Iron Man at the movies; the desperation of all and sundry to attach the label "entrepreneur" to themselves like some aristocratic title (however marginal their claim, and for that matter, however marginal entrepreneurship has become to economic life and the acquisition of wealth).

The difference between his expectations and the actuality through which we have been living points to the book's principal deficiency. While Phillips offers robust, lucid coverage of a significant part of its central issue, there are a great many key points which he acknowledges, but fails to give their proper due, like the full significance of the differences between the '80s and other Republican heydays. (The economic growth of the '80s was much more a matter of paper profits, and weaker, than in those earlier eras, for instance.) The result is that, even granting the validity of his theory of a cycle prevailing through American history for two centuries, the possibility that circumstances have disrupted that cycle is not even considered. Much as aspiring forecasters are warned against having overly linear expectations about what the future will bring, this certainly seems to have been one time when the projection of an existing trend considerably farther into the future was exactly what was called for.

1. Phillips was clear that this was a matter of the acceleration of American decline, rather than its cause, and also pointed to the U.S.'s heavy defense spending (especially in comparison with Japan) as another factor. American decline would become a major theme in Phillips writing, treated at length in such works as 2006's American Theocracy.
2. The Clinton administration certainly has to be seen in these terms, having given the country free trade in the form of NAFTA and GATT, welfare reform in the Personal Responsibility and Opportunity to Work Act (the name of which says much about the era's rhetoric), and deregulation in the Telecommunications Act of 1996 and the Gramm-Leach-Bliley Act, the former allowing greater consolidation in media, the latter the same in finance, while deficit reduction took priority over other economic and social goals (like the unrealized health care reform plan). It is worth remembering, too, that the Clinton administration sidelined its liberal economic advisers (Robert Reich, Joseph Stiglitz) after the first term in favor of conservatives in the second, while returning Randian banker Alan Greenspan to the Federal Reserve board chairmanship, where he helped feed not just the stock market bubble by flooding the market with cheap money, but responded to its bursting by doing the same, with the real estate bubble of the 2000s the result.

Review: Economics and the Public Purpose, by John Kenneth Galbraith

Boston: Houghton Mifflin, 1973, pp. 334.

In his 1967 book The New Industrial State John Kenneth Galbraith argued that, far from being the market-disciplined firms of neoclassical economics, the large, industrial corporations in crucial sectors like aerospace, defense, computers, chemicals and oil essentially operated like units within a planned economy.1 In Economics and the Public Purpose he put this "planning system" into the context of the larger economy, which also includes smaller, less complex enterprises that can be fairly described as still operating in a market system.2

As might be expected given the disparity in size and power between the economic units involved, the conditions of the enterprises of the "planning system," and those in the market system, very different, generally to the disadvantage of the latter. The large companies of the former are able to exercise considerable control over such crucial matters as the prices at which they buy inputs (through practices like vertical integration, or raising needed capital internally without turning to creditors) and sell their output (for instance, being able to tacitly avoid the more disruptive forms of competition, and pass cost increases along to customers when these are unavoidable). By contrast, companies in the market system cannot, leaving them subject to the vicissitudes of competition, and consistently derive smaller and less secure returns accordingly. The planning system also comes in ahead of the market system where public policy and public support are concerned (as seen when one compares, for instance, the aerospace sector and the construction industry).

The result is evident not just in the differing returns among the heads of these firms--the difference between the income of a Fortune 500 CEO and a small business owner, for instance--but their workers, as a comparison of the lot of a unionized autoworker with that of an agricultural laborer makes clear. However, both these systems still come in ahead of the broader public interest, and the public sector representing it. One result is that the United States is richest in those things supplied by the planning system (like cars and consumer electronics), less well-supplied with the products of the market system (like housing), and least well-supplied by those goods which the private sector does not supply and does not value (like public transport options), making for the mix of private affluence and public squalor that he first addressed in 1958's The Affluent Society.

After presenting this comprehensive picture of the economy Galbraith devotes the last third of his book to laying out a "theory of reform." This begins with the correction of the conventional wisdom on economics (dominated by neoclassical pieties which defend the status quo rather than explaining how things actually work) and reform of the workings of the legislature (with the elimination of Congress's seniority system, a vehicle of the planning system's influence on policy, particularly important).3 However, he also considers an ambitious range of specific economic measures to the end of redressing the imbalance in development and power between the planning and market systems (Galbraith terms this "the new socialism"), and between both of these and the public sector more generally.

The market system would be aided by the encouragement of small business (and its employees) to organize, the extension and increase of the minimum wage, and the conclusion of international agreements to protect their prices and income, while government would make greater efforts to support their "educational, capital and technological" needs--in the interest of fairness as well as the improvement of output in these comparatively neglected areas. Where the planning system is concerned, differentials in compensation inside companies would become an issue in collective bargaining, while the tax system would be rendered more progressive, in part through the closure of loopholes, but also the abandonment of the distinction made among types of income (as between salary and capital gains, for instance).4 Affirmative action and a guaranteed minimum income scheme would be crucial to the extension of the effort to eliminate inequality to all; environmental regulation would implement the principle of what would today be called sustainable development; and the government would assume responsibility for services the private sector does not perform well or at all (like health care, urban housing and local transport).

Galbraith rounds out this program with a number of additional measures, including the nationalization of certain corporations--those in the defense sector (given their relationship to the Federal government, in many respects already public, but in need of being reined in, especially given the arms race to which they contribute), and even large corporations of any type where shareholder power has disappeared due to the diffusion of stock (the case for the superiority of private to public enterprise, after all, depending on the control of a self-interested owner within a free market, now vanished as a practical matter).5 There would also be a national authority charged with coordinating the planning in different industries, which in turn would coordinate the management of the international economy with its counterparts abroad. The achievement of price stability would rely less on the monetary policy Galbraith has found to be ineffectual, and much more on the use of fiscal policy (increasing and reducing not just spending but taxes as necessary), and selective price and wage controls (also an instrument for reducing inequality by limiting the divergence of wages within firms, and between economic sectors).6

Radical as some of the prescriptions seemed even at the time of writing (nationalizations, central planning, etc.), Galbraith believed that the country was already headed in this direction. Of course, the reality proved to be quite the opposite. The economic crises which had just begun at the time he was writing the book--American problems with the balance of payments, the energy crisis--proved an opportunity not for those seeking the reforms he described, but for partisans of neoclassical ideas (like Thatcher and Reagan) to reverse the movement toward more activist, egalitarian direction of the economy underway since the Second World War.

Still, it would be simplistic to dismiss Galbraith's ideas on these grounds. Galbraith's examination of the large corporation and the small business together provides an impressively comprehensive picture of the American economy which remains useful in its broad outlines, and most of its details as well. The most significant changes in the American and world economies since his time have lain in the increased pervasiveness and density of transnational operations, and the expansion and intensification of speculative finance, which do not alter the fundamentals of the picture. Indeed, the ways in which his image has dated have in their way validated Galbraith's diagnosis of the American economy's problems (inequality, deindustrialization, balance of payments problems, environmental degradation), which have sharply worsened--in large part because those orthodoxies he so incisively attacked have predominated, and remain dominant in spite of their consistent and at times spectacular failure to deliver the promised goods.

Of course, even those who will grant his insight on that score can still take issue with his suggested solutions, which are virtually impossible to present within mainstream discussion today, and some of which he was less prone to advance in later works.7 Yet, whatever their deficiencies, in regard to either their practical effectiveness or their political plausibility, the scope and ambition of Galbraith's program stands as a reminder of how timid, tepid and narrow what passes for public "debate" has become--to our great cost.

1. The presentation of the theory of the planning system is here somewhat refined over what appeared in the 1967 book. In discussing the driving imperatives of "technostructure"-dominated companies Galbraith does not write of company "social goals," or the role of "identification" and "adaptation" in the executive's attitude toward his firm. Rather he emphasizes the drive for expansion of the company, and the material enjoyments of high-ranking company officials served by such growth. He also considers the transnational development of that system through the advent of the multinational corporation.
2. The continued existence of such businesses is a function of the small size and lower level of organization of the businesses operating in this area, because the activity they perform is unstandardized and geographically dispersed, the service rendered entails a personal element, or the actors involved are connected with the arts. (In cases this has also been bolstered by legal and political obstacles, as in construction.) One result has been that organization and technology in these areas lags well behind that of the corporate-dominated high-tech sectors, which has kept them small (a result of these smaller, poorer, less secure firms being less able to invest in such things as technical R & D).
3. Galbraith points to such matters as the wall neoclassical economics puts up between microeconomics and macroeconomics, its preference for sticking with the small business version of the firm to addressing the reality of the large corporation, its failure to come to grips with the way in which technological innovation actually occurs, its advocacy of monetary policy as the sole respectable tool of economic regulation, and in general, "the way it rationalizes and conceals the disadvantages of the weak."
4. This is in line with Galbraith's theory of the use of organization to counter the market-upsetting advantages of large corporations in his 1954 American Capitalism: The Theory of Countervailing Power.
5. The stock of the companies would not be expropriated, but purchased with interest-bearing securities.
6. Criticism of the claims made for monetary policy is a long-running theme in Galbraith's work. In The Culture of Contentment he compares the attempt to encourage growth with lower interest rates to "pushing an object along on the floor with a string." It is also not much more effective at taming inflation by restraining demand. In the chapter on the subject in The Affluent Society he contends that higher interest rates have little effect on firms in the planning system because they can use internal savings to fund investments, and when they do borrow, pass costs along to their customers; while consumers are less inhibited by higher interest rates than might be expected because their schedule of payments obscures interest charges.
7. In 1996's The Good Society, for instance, Galbraith left aside the matter of price controls, apparently on grounds of political feasibility rather than practical effect, and made no mention of public ownership as a response to the failure of shareholder power.

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