The Ultimate Lagging Indicator
Article Summary and Author Biography
Daniel Yergin and Joseph Stanislaw's story of the rise and fall of government intervention in the marketplace is colorful, but they are not sure what comes next.
David J. Rothkopf is Managing Director of Kissinger Associates, Inc., and adjunct professor of international affairs at Columbia University's School of International and Public Affairs and at Georgetown University's School of Foreign Service. His next book, to be published by the Carnegie Endowment for International Peace, is The Price of Peace: Emergency Economic Intervention and U.S. Foreign Policy.
Eighteen years after Margaret Thatcher's victory, Paul Volcker's assumption of the Federal Reserve chairmanship, and Deng Xiaoping's initiation of reforms in China, seventeen years after Ronald Reagan was elected President, twelve years after the introduction of glasnost and perestroika, and eight years after the collapse of communism in Eastern Europe, Pulitzer Prize-winner Daniel Yergin and his coauthor, Joseph Stanislaw, make an unassailable case that big government has fallen out of fashion and markets are more powerful than ever before.
Yergin, whose masterful saga of the petroleum industry, The Prize, was acclaimed for both its rendering of history and its insights, is a reporter of formidable gifts. In this book, The Commanding Heights: The Battle Between Government and the Marketplace that Is Remaking the Modern World, he and his coauthor tell with sweep and style of the rise and fall of active government intervention in national economies. They find the drama and human elements in each of their stories, depicting economists and government officials with an eye for color.
Even students of the economic upheavals recounted in this book cannot help but be drawn into what in other hands might be very dry material. Take, for example, the image of Malaysian Prime Minister Mahathir bin Mohammed-now disaffected with global electronic markets after the beating his country's currency has taken-sitting not too long ago at his desk in Kuala Lumpur viewing the world through four computer screens while contemplating the establishment of a Malaysian city of tomorrow called Cyberjaya.
Yergin and Stanislaw take the reader on a whirlwind world tour several times over. But detail is their book's greatest blessing-and its greatest curse. Again and again the authors tell gripping tales of big government gone bad. Again and again they emphasize the same points about governments' shortcomings and markets' strengths. But after all, Yergin and Stanislaw are attempting to chronicle a global transformation, taking readers through the parallel revelations of national leaders and their advisers who watched as local experiments in market intervention produced unwanted results in the face of the emerging market reality the book describes.
Such complaints, however, are carping given the richness of the authors' reporting and the quality of their analysis of how the marketplace forced the reluctant retreat of government from core economic activities that Lenin called "the commanding heights" of national economies. The book is a unique resource for students and an excellent survey for businesspeople and others seeking to understand how the world came to regard markets as the primary regulators of economic interaction.
BUSINESS WITHOUT BUSINESSPEOPLE?
The heroes here are economists, central bank governors, finance ministers, and the occasional head of state. Indeed, reading the book is very much like visiting the joint annual meeting of the International Monetary Fund and the World Bank without the ice sculptures-or the bankers. In fact, it is odd how much credit for the rise of the markets the authors give to government officials and their advisers, and how little to the men and women of the markets themselves. The book devotes precious little space to businesspeople-a couple of pages to the man who privatized Italy's oil company, a couple to a Russian vodka manufacturer, a few to an American telecommunications entrepreneur, and so on. While the book suggests that the growth of global markets has been made possible by a simultaneous revolution in information and transportation technology, it fails to delve into the chicken-and-egg arguments that underlie those developments.
Yes, Ronald Reagan made compelling speeches about rolling back big government and letting the markets work their magic, but if American business had not responded to the challenges of the 1970s and 1980s, if Chrysler had not come out of the bailout a winner, if the American airline industry had turned the air traffic controllers' strike into the plot of a disaster movie, would we be talking about the primacy of market forces today? If Japanese business had not been stultified by the system that created it, wouldn't we be seeing more books like those in the early 1990s prescribing Asian interventionist medicine for the U.S. economy? More of the credit is certainly due those who made markets work, who created the technologies that linked them, who made closed societies impossible, who in many cases-as in the creation of global foreign exchange markets-actually wrested power from governments.
But while the book underplays the significance of market leaders, it makes up for it with its in-depth coverage of the people of the policy world. Friedrich von Hayek and Jeffrey Sachs, Keith Joseph and Manmohan Singh, Domingo Cavallo and Milton Friedman, Yegor Gaidar and Kim Jae-Ik -- each is described not so much as an economist or government official as a crusader. Readers hear of the tragedy of Kim Jae-Ik's assassination, the burden young Gaidar faced living in the shadow of his hero-of-the-revolution-children's-book-writing grandfather, the eccentricities of Keith Joseph, and the courage of Finance Minister Singh, who took on some of India's most powerful special interest groups. It is the triumph of the econogeeks, the technocratic class educated at Harvard, MIT, Chicago, Oxford, and Cambridge who drew up the plans for the dismantlement of bloated state apparatuses that in many cases their teachers or their teachers' teachers had conceived. Recognition of this admirable group and others such as Alejandro Foxley of Chile, Pedro Aspe of Mexico, Sanchez de Lozada of Bolivia, Vaclav Klaus of the Czech Republic, and Leszek Balcerowicz of Poland is well deserved and provides plenty of dramatic stories of new-generation leaders battling entrenched powers.
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