Slouching Towards Utopia, J. Bradford Delong
"What follows is my grand narrative, my version of what is the most important story to tell of the history of the twentieth century. It is a primarily economic story. It naturally starts in 1870. I believe it naturally stops in 2010."
"But humanity objected. The market economy solved the problems that it self itself, but then society did not want those solutions--it wanted solutions to other problems, problems that the market economy did not set itself, and for which the crowd-sourced solutions it offered were inadequate."
"One reason why human progress toward utopia has been but a slouch is that so much of it has been and still is mediated by the market economy: that Mammon of Unrighteousness. The market economy enables the astonishing coordination and cooperation of by now nearly eight billion humans in a highly productive division of labor. The market economy also recognizes no rights of humans other than the rights that come with the property their governments say they possess. And those property rights are worth something only if they help produce things that the rich want to buy. That cannot be just."
"The numbers are important: indeed, they are key. As the economic historian Robert Fogel once said--echoing my great-great-uncle, the economic historian Abbott Payson Usher--the secret weapon of the economist is the ability to count. Remember, we humans are narrative-loving animals. Stories with an exciting plot and an appropriate end of comeuppances and rewards fascinate us. They are how we think. They are how we remember. But individual stories are only important if they concern individuals at a crossroads whose actions end up shaping humanity's path, or if they concern individuals who are especially representative of the great swath of humanity. It is only by counting that we can tell which stories are at all representative and which decisions truly matter. The individual technologies are important. But more important is their weight: counting up the overall extent to which people were becoming more productive at making old things and more capable at making. new things."
"What is more puzzling is why industrialization did not spread much more rapidly to the future global south in the years before World War I. After all, the example of the North Atlantic industrial core seemed easy to follow. Inventing the technologies of the original British Industrial Revolution--steam power, spinning mills, automatic looms, iron refining and steelmaking, and railroad building--had required many independent strokes of genius. But copying those technologies did not, especially when you could buy and cheaply ship the same industrial equipment that supplied the industries of England and the United States."
"Before his murder, while in exile, Trotsky would recall his departure from New York City. And in doing so he would capture what much of the world believed. In leaving New York for Europe, Trotsky felt, he was leaving the future for the past: "I was leaving for Europe, with the feeling of a man who has had only a peek into the furnace where the future is being forged.""
"After 2006, the pace of measured economic growth in the United States was to plummet. In 2010, our ending date, many thought this was a flash in the pan because 2010 came just after the nadir of the Great Recession that had begun in 2008. But over the entire decade of 2006-2016, measured real GDP per capita grew at a pace of only 0.6 percent per year--a shocking falloff from anything that had been seen earlier in the long twentieth century. Over the 1996-2006 decade, the pace had been 2.3 percent per year. Over the two decades before that, 1976-1996, the pace had been 2 percent per year, and in the "Thirty Glorious Years" af the World War II it had been 3.4 percent per year. After 2006, exceptional America's furnace's fires were rapidly cooling, if not out, or not yet out."
"What can we do with these insights? Hayek and Polanyi were theoreticians and academicians--brilliant ones. But their insights and their doctrines are important only because they capture deep broad currents of thought that sparked through the brains of millions and drove actions. Not Hayek but Hayekians, and not Polanyi but Polanyians, and those acting on the motives identified by Polanyi, made history. So to get a glimpse of how this played out in practice, let us take a look at economics and politics interacting at the bleeding edge--at the most rapidly growing and industrializing place on the pre-World War I earth, in that era's counterpart to the twenty-first century's Shenzhen: Chicago."
"Perhaps the offers could not be refused because the consequences of accepting them were so good. Perhaps they could not be refused because the consequences of not accepting them were so bad. As the twentieth-century socialist economist Joan Robinson liked to say, the only thing worse than being exploited by the capitalists was not being exploited by the capitalists--being ignored by them, and placed outside the circuits of production and exchange."
"Empires, formal and informal, both accelerated and retarded economic growth and development throughout the global south. But on balance, empire did more to retard than to advance. After all, the business of empire was not economic development. The business of empire was . . . empire."
"From a narrow economists' perspective, inflation is simply a tax, a rearrangement, and a confusion. It is a tax on cash, because your cash becomes worth less between when you acquire it and when you spend it. It is a rearrangement, as those who have borrowed pay back their loans in depreciated currency, while those who have lent have to accept the depreciated currency. And it is a source of confusion, because it is difficult to calculate whether what you--as a company, a household, or an individual--are doing makes economic sense when the numbers entered into your account books at different dates correspond to different amounts of real purchasing power."
"This was, note, and even worse disaster than the standard disaster than really-existing socialism turned out to be. If you walked along the edge of the Iron Curtain and then the Bamboo Curtain from Leningrad to Odessa, along the Caucasus, and then from Yunnan up to the Sea of Japan--or if you looked from really-existing socialist Cuba across the Caribbean to Costa Rica or Mexico--you would see that those countries where the armies of Stalin or Mao or Kim Il-Sung or Ho Chi Minh or (shudder) Pol Pot had marched were, on average, only one-fifth as well-off when 1990 came and the curtains were raised as those that had been just beyond those armies' reach. But Maoists China in the throes of the Great Leap Forward was worse than average."
"What defines this model? First, trade, but managed trade. Undervalue the exchange rate, so that you can export manufactures that are not, initially at least, up to global-north quality standards. And then channel subsidies to companies that have successfully exported--the ones to which global-north middle-class consumers award the prizes. Those same Japanese firms that were protected against imports from abroad were, in international markets, forced to hone their competitive abilities and match international standards of innovation, quality, and price. Very patient cheap capital helped. And by the 1980s it was clear that protectionism had yielded incredible results. Indeed, something remarkable was going on with Kawasaki and Nippon in steel; Toyota, Nissan, and Honda in automobiles; eventually Bridgestone in tires; Komatsu in construction equipment; and Toshiba, Matsushita (Panasonic), and Nikon, Fujitsu, Sharp, Sony, and Canon in electronics."
"For these reasons, social democracy was a powerful force. But there was a problem. It would in the end, perhaps, bring about the demise of social democracy and the rise of what became known as "neoliberalism": there remained, in the shadows, a memory of the belief that the market economy was not society's servant, but its master--that social democratic attempts to vindicate Polanyian rights would impose a crushing burden that would severely hobble long-run economic growth, and would not produce social justice because universalist provision of benefits would make equals of people who should not be equals."
"So what was the global north going to purchase in the marketplace of ideas as its reform program? On the left there was very little. Really-existing socialism had proven a bust, yet too much energy on the left was still devoted to explaining away its failures. On the right there were real ideas. Never mind that to the historically minded they seemed to be largely retreads from before 1930. After all, many of the ideas of the New Deal had been retreads from the Progressive Era of the first decade of the 1900s. The right wing's ideas were backed by lots of money. The memory of the Great Depression, and of austerity's failures in the Great Depression, was old and fading. Once again cries for sound finance orthodoxy and austerity--even for the gold standard--were heard. Once again the standard answer--that everything that went wrong was somehow an over-mighty government's fault--was trotted out. It was, after all, for true believers a metaphysical necessity that it was government intervention that had caused the Great Depression to be so deep and to last so long. The market could not fail: it could only be failed."
"As Baldwin put it, the logic of global production after 1990 was increasingly driven by the "smile curve": low in the middle, high at the beginning and the end. Great value was earned at the beginning by providing raw materials and resources and, more important, industrial design. Little value was added in the middle by increasingly routinized manufacturing and assembly. And great value was added at the end by marketing, branding, and distribution--providing information (and misinformation) to consumers about what they might want from the enormous variety of types and qualities of goods that could be churned out from the expanding capacity of factories. And it was, again, a quilt. Very good things happened in selected places. Other places, nearby in culture, political allegiances, and attitudes, got left behind--either their industries that they drew on for relatively high-value and high-income niches in the world's division of good things packed up and moved away, or they never arrived."
"Financial bailouts are always unfair because they reward those who made bad bets on risky assets. But the alternative would be a policy that destroys the web of finance--and thus a policy that shuts down dynamism in the real economy. A crash in prices of risky financial assets sends a message: shut down risky production activities and don't undertake any new activities that might be risky. That is a recipe for a deep, prolonged depression. The political problems that spring from financial bailouts can be finessed. The fallout from a major depression cannot. Thus, financial rescue operation that benefit even the unworthy can be accepted if they are seen as benefiting all. In 2007-2009, for instance, teaching a few thousand feckless financiers not to overspeculate was ultimately far less important than securing the jobs of millions of Americans and tens of millions around the globe."