Is there anything left to argue about in economics? Anything interesting, to be more precise, or important? Some say no. One hesitates to mention "The End of Economics," remembering that "The End of History" turned out not to be. But glide past that. Maybe a stronger case can be made for the idea that all of the big economic quarrels are settled than could be made for the idea that political evolution has reached its end-state.
On the face of it, the notion of a prevailing economic consensus is plausible. The Western market-based economy had only one real rival—socialist central planning—and we know what became of that. The Communist implosion of the late 1980s was felt beyond the borders of the Soviet Union and its empire. Even though, by this time, communism was not much advocated anywhere else, its abject failure sapped the confidence of the Left worldwide, and as a result, the political-economic center of gravity, especially in Europe and in the developing countries, nudged perceptibly to the right.
At home, President Reagan had embarked on a program of deregulation and tax reform earlier that decade. Even before that, Prime Minister Margaret Thatcher had begun to privatize Britain's nationalized industries. Both found the results to their liking, in both political and economic terms. After the fall of the Berlin Wall, this invigorated conservatism met up with a suddenly diminished conviction on the left. Before long, the economic frontiers of the state were being rolled back all over the world. The idea that the government was good at running steel mills, or power stations, or telecom companies—up to then widely accepted in much of the world—was mostly abandoned.
This shift coincided, especially in poor countries, with a new emphasis on foreign trade (which, like privatization and deregulation, is another form of exposure to market forces). In 1991 even India, up to then run by dogged central planners, slowly began to open itself to the world economy. China, despite its official loyalty to Communist ideology, had already moved a long way down the same path. A new age of globalization was at hand, with a stirring triumphalist literature close behind. Today, much the larger part of the world's population is ruled by governments that accept, or say they do, prevailing mainstream thinking on trade and on a comparatively modest role for the state in managing industries.
A smaller role for government, a greater role for markets and international trade in guiding the economy—this is the new orthodoxy. So, yes, you might well ask, what remains to argue about?
Plenty, unfortunately. Look at this another way. The argument between communism and capitalism was as dramatic as one could wish, and it was extraordinarily important—literally a matter of life and death for millions of people. But at the same time, it was intellectually frivolous. Nobody paying attention needed 1989 to tell them that communism was a failed and bankrupt system. It was already well known by then that central planning was a self-deluding pathology. To state the obvious, in Western Europe and in parts of Asia (as well as in the United States, of course) the modern market-based economy was firmly entrenched long before communism collapsed. In practical terms, 1989 changed little in those places. Those events merely took a heterodoxy that was already ignored or defeated, and buried it 6 feet deep.
It would be difficult to overstate the importance of the new economic thinking in other parts of the world—in the former Soviet Union itself, in Eastern Europe, and in many developing countries, especially vastly populous ones such as India and China. Poverty is falling faster than ever before in world history because of market-based economies. Western Europe's retreat from nationalization may not rise quite to that exalted standard, but it too is an important thing in its own right. Yet the fact remains that in the rich world, especially in America and Europe, the biggest economic issues—the ones where the most is at stake, in terms of individual liberty and economic well-being—are as bitterly contested today as they ever were.
Take trade policy, the oldest economic controversy. All of those disputes are now settled, right? They are not. In 2005, the costs of agricultural protection are still enormous, and political resistance to farm-trade reform is still intense. The Doha Round of global trade talks—which matters a lot to the developing countries—is in jeopardy as a result. Trade barriers are still costing the United States a fortune: about $500 billion a year, or $5,000 per household, according to Gary Clyde Hufbauer of the Institute for International Economics.