Everything is for the best in this best of all possible worlds, Voltaire's Dr. Pangloss used to tell Candide, and many of today's social, political, and, especially, economic pundits owe the good doctor a greater debt than they have acknowledged. Panglossian optimism flourishes in all times and social conditions; there is always a willing audience for defenders of the status quo. Contemporary Panglossians tend to work with a debased form of the Whig narrative of progress: capitalism is the best of all possible economic systems; democracy is the best of all possible political systems; capitalism leads to democracy, and democracy leads to peace.
That in a nutshell has been the credo of both the Bush and Clinton administrations. The triumph of liberal capitalism and liberal economics signifies, in Francis Fukuyama's formulation, the end of history, and unsatisfactory as it might be, the world that has emerged is the best of all possible worlds.
William Greider's new book is a contemporary Candide, an attack on the platitudes that guide policymakers. But it is to Rousseau, perhaps, rather than Voltaire that one should look for his true literary antecedent: it has been said that the second edition of the works of Jean Jacques Rousseau was bound in the skins of those who had scoffed at the first. If half the shocking things William Greider says in One World, Ready or Not turn out to be true, a similar fate lies in store for what will undoubtedly be a legion who scoff at Greider.
SOLD OUT IN SEATTLE
One World, Ready or Not is a wildly ambitious and wildly uneven book of revisionist economics, and Greider hammers his heterodox propositions home as enthusiastically as Martin Luther nailed his revolutionary theses to the doors of the Wittenburg Cathedral. "The whole of Aristotle is to theology," wrote Luther, "as darkness is to light." Greider is no less insistent that the conventional wisdom now guiding the world's governments and international institutions is little more than darkness made visible.
Economic reform has been a failure. Trade liberalization has reduced living standards. The North American Free Trade Agreement has been a disaster. The world is drowning in a glut of savings. Financial assets are grossly overvalued, and the only question is whether there will be an economic catastrophe when the bubble bursts. Only greater government intervention can save the world from economic and, potentially, political trouble on an unprecedented scale.
This is a book that graduate students and coffeehouse dissidents everywhere will enjoy. It is a book for anybody who thinks that the emperor has no clothes and that, as the slogan of opponents of the World Bank and International Monetary Fund goes, "Fifty years is enough." It will comfort the remnants of the democratic left and fan the flames of populist rage. Most fundamentally, it is the book of a prophet, thundering against the sins of financial elites and calling its audience to return to the values of a simpler era.
It is a safe bet that not many professional economists will desert the Brookings Institution and the World Bank, don hair shirts, and follow Greider into the wilderness. Yet to ignore this book would be a mistake; if Greider's answers are not always consistent or clear, the questions he raises are important, and they shed light on some of the issues and problems that will shape national and international politics over the coming decades.
Prophets, of course, are not rare in the world of economic forecasting and financial advice. Greider, however, an iconoclastic journalist who has written well- researched populist critiques of the Federal Reserve (Secrets of the Temple) and American economic policy (Who Will Tell the People?) is not just one of those wild-eyed prophets of doom who burst periodically onto the scene with implausible but dramatic stories about Kondratieff long waves, imminent economic collapse, and the importance of keeping one's savings in gold. He is a gadfly, to be sure, but beyond being a brilliant gadfly who punctures the pretensions of conventional wisdom, he has policy ideas of his own.
THE DARKER SIDE OF CHANGE
The arguments and perspectives that inform One World, Ready or Not are a distillation of an emerging international populist platform in opposition to what Europeans and Latin Americans call "neo liberalism," the economic and political paradigm that has guided Western policy, especially U.S. policy, since Margaret Thatcher installed it in Britain in the 1980s. "There is no alternative," Thatcher used to say in defense of her program of economic reform. Capital markets had to become less regulated and more global; labor markets had to become more flexible; trade had to be more free; government subsidies, spending, and safety nets had to be cut; tax policy had to provide incentives for enterprise. The Keynesian turn of Western economies after the Great Depression and World War II was a ghastly mistake; true capitalism was the less regulated, more chaotic, but freer and ultimately more effective capitalism that held sway in Britain and the United States before 1914 and the long slide to state domination.
There is an alternative, says Greider, and this book is the best shot so far at describing one.
In many respects, the volume is a failure. Taking globalization as its subject, and attempting to deal with its economic, social, and political causes and effects, the book is sometimes overwhelmed by the sheer mass of material. Greider jumps, and the exhausted reader attempts to follow, from the factory floors of Indonesia to the slums of Latin America to Bundestag debates to World Bank conference rooms. Along the way, subjects are taken up and dropped at breathtaking -- and, eventually, mind-numbing -- speed, and they are not always thoroughly explored before being cast aside. But in the most important respects, One World is a major accomplishment. Even when he is wrong, Greider remains interesting; fallible humanity can hardly aspire to more.
Readers familiar with the history of economic thought will find many echoes of Marx and Keynes here, but the keystone in Greider's arch is Joseph Schumpeter's concept of creative destruction as the core process of capitalism. One World is at its best a sustained meditation on this concept, and Greider applies the full force of the complex idea to the full range of the capitalist revolution now sweeping the world. The Panglosses of contemporary neo liberalism can see only the utopia waiting to be unleashed as unshackled capitalism transforms the waiting world. Neo-Marxists and neo-Malthusians can see only the destructive potential for capitalist excess and collapse. Greider attempts to give both these aspects of capitalist change their due weight; that is what lifts One World out of the genre of populist rant and makes it impossible to dismiss out of hand.
Creative destruction is so profound a concept that it is almost inevitably trivialized, reduced to the casual acknowledgment that any economic change produces both winners and losers. Greider's great achievement is to grasp the scale of both the creation and the destruction of economic upheaval. In passages that echo Marx's tributes to the creative energy of the young bourgeoisie, Greider describes the transformations in the global economy: the rapid industrialization of much of Asia, the reshaping of financial markets and the explosive growth of currency trading, the acceleration of technological change in cutting-edge industries, and the new possibilities and horizons opening up on every side.
Yet he understands the darker side of change -- and the way that economic dislocations can transform political realities. In Greider's vision, it is not just that the collapse of the welfare states of Europe and North America may lead to political conflict in those countries or between them and their overseas competitors. Greider asks under what conditions the global economic machine can continue to function, and whether recent and imminent economic changes could undermine the dynamism that brought them about.
OLD PROBLEMS IN NEW VERSIONS
The cycle Greider sees at work in the world is alarming. Changes in technology and the globalization of the world's productive process are gradually and inexorably reducing wages for many, if not most, people in the advanced countries. This undermines purchasing power, reducing demand for the products that enterprises are producing.
The world, says Greider, is on the verge of a new version of an old problem: economic stagnation or collapse produced by excessive savings. To those whose economic horizons have been shaped by the inflation of the 1970s and 1980s, as well as those like the investment banker Peter G. Peterson, who are haunted by the problem of growing entitlements and underinvestment, the notion of death by too much saving sounds paradoxical, even perverse. The parallel Greider wants to draw goes further back, to the 1920s and 1930s. Mass production techniques vastly increased productivity and output in the 1920s. But the wages and incomes of working people failed to keep pace. For some years the spread of the new technology fueled an investment boom, but ultimately the newly productive and efficient automobile, refrigerator, and washing machine factories were pumping out products faster than the market could absorb them.
The short-term result was a stock market rally in the 1920s as the wave of investment generated an economic expansion and pumped liquidity into the financial markets. The longer-term consequence was economic collapse as inventories rose, factories cut production, markets shrank, more people were laid off, and on and on as the vicious cycle continued. In the end, the earnings forecasts based on the optimistic premises of the 1920s proved as overblown as stock market prices in 1929, and the supposed era of permanent prosperity was shown to be merely another financial bubble.
Excessive savings above all are a consequence of the upward redistribution of income. The poor buy more goods if they get more money; the rich invest more in financial markets. When inequality widens too much, vast sums are pumped into securities even as the prospects for increased consumer demand are slowly and silently falling.
Greider warns that this process could be occurring again. Where others hail the taming of inflation, Greider worries about the prospect of price deflation led by excessive productive capacity in increasingly glutted markets. In the automobile industry, for example, Greider uses industry forecasts and analysis to estimate an excess as large as the total current demand of the North American car market. Some, possibly many, of the car factories being busily built around the world will not be needed, Greider warns. Ultimately the investments in many of them will be written off.
Other industries, such as semiconductors and steel, face similar problems. Revolutionary changes in technology and the ability of industry to locate production in low-wage areas have dramatically reduced costs and raised productivity. These advances force enterprises to adjust or go broke: you cannot use yesterday's equipment to win the economic competition of today.
THEY REAP WHAT THEY ROUSSEAU
The more creative capitalism becomes -- the faster productivity rises, the more new technology transforms the way we work -- the more destructive it becomes. The firms and factories that do not adapt will die; the skills of workers and existing plant and equipment rapidly become obsolete; whole nations and regions based on the industries and technologies of past decades lose their competitive edge and sink into decline.
Observers more conventional than Greider acknowledge this, claiming only that the winners will outnumber the losers in the end. Greider agrees in principle, but he says that the happy ending may be more delayed, and the road to resolution of the dilemma may require more destructive detours, than the conventionally optimistic view can foresee.
Again, he draws a comparison with the earlier history of the twentieth century. The productivity increases and technological advances of the 1920s did eventually lead to the great economic expansion and unprecedented mass affluence of the quarter-century from 1950 to 1975, but the road from the 1920s led through the Great Depression of the 1930s and the war of the 1940s before the crowds of winners were able to cash in their chips.
It is, of course, impossible to tell if Greider is right. Perhaps the world is in a new financial bubble and today's upward redistribution of income is the harbinger of a vast financial and ultimately political meltdown. If so, many of the oracles of contemporary economic and political wisdom will be metaphorically if not literally hung from the lampposts as popular opinion turns ruthlessly against the ideas, institutions, and leaders of the preceding period. Herbert Hoover was not a popular man during the depression, and Richard Whitney, president of the New York Stock Exchange in 1929, ended up in jail for embezzlement. The best- selling books of the 1930s were, at least figuratively, bound in the skins of the optimists of the 1920s "new era."
If anything remotely like this happens, some of the solutions that Greider proposes will be tried. New forms of regulation will attempt to control international capital movements and reduce the risks inherent in today's relatively open trade and investment regimes. Vast public investment projects will attempt to replace the tapped-out power of individual consumers to buy, reviving markets and growth and reducing unemployment by the creation of new demand through public spending.
If the new era rolls on, however, and the global economy serenely advances into another period of vigorous expansion and rapid change, Greider's forecasts will be forgotten and fall by the wayside -- much as the Club of Rome's dismal warnings in the 1970s of global food and energy shortages looked increasingly foolish when the anticipated famines and oil shortages failed to occur.
RETELLING THE WHIG STORY
Whatever the verdict on his predictive powers, Greider's contrarian view of the contemporary world has something important to say. There is a recurring tendency in Western and, especially, American thought to equate the spread of market economics with the stabilization of social and political conditions. Nothing could be further from the truth. Capitalism is the world's most powerful form of social organization because it is the most revolutionary. Capitalism did not defeat communism because capitalism was more stable; rather, the frozen stability of planned communist society was unable to match the social and economic dynamism of capitalist activity.
At a distance, one can reconcile the roller-coaster-like ride of capitalist history with the more comforting, Panglossian version of the Whig narrative of progress. Over time, capitalism does lead to democracy and democracy does lead to peace. But, as in the United States after the 1920s, the expanses of time are longer than today's cramped conventional wisdom can perceive, and the ride is bumpier, even if Greider's precise scenario does not come to pass.
Look at France. The rise of capitalism did unleash a process that ultimately consolidated democracy and made the French peaceful. But how long did that take, and what happened in the meantime? Five republics, two empires, two royal dynasties, and a series of expansionary wars that ranged from Moscow to Indochina by way of the upper Nile. And France's progress from precapitalist monarchy to capitalist democracy was relatively smooth and benign. Contrast Germany's journey down that road, or Japan's. Some countries, like Russia, that made promising starts a century ago have taken terrible detours, inflicting on themselves and others untold suffering.
That capitalism has been unleashed across Asia and Latin America is in one sense cause for rejoicing. Capitalism will open new doors to richer and fuller lives for hundreds of millions of people. The dismantling of regulations and controls in Western society does create opportunities for faster economic growth and individual creativity.
But, alas, that is not all it does. That China, India, Indonesia, and Vietnam are now sprinting up the track previously traveled by Germany, France, and Japan does not mean that a universal era of freedom, prosperity, and peace has dawned. Historical change is accelerating. As rural masses pour into swelling cities in Asia, Africa, and Latin America, as new technologies and enterprises rip up the fabric of traditional society, as new political forces duel for control of rapidly evolving societies, tensions are certain to rise. The more capitalism spreads, the more change must be endured, the more risks must be run, the more destruction will go hand in hand with creation.
The triumph of the West in the Cold War, the rapid spread of capitalism through the developing world, and the triumph of neoliberal capitalism over the more regulated and stable mixed economy that prevailed in the last generation do not constitute the end of history but lay the groundwork for an immense acceleration of the historical process. The 21st century will be even more volatile than the bloody century now drawing to a close. This, not the future of the stock market, is the real message of Greider's book, and those who fail to heed it run risks at least as great as those serene French aristocrats who scoffed at Rousseau.