The Vanity of Human Markets|
Robert Kuttner challenges the prevailing orthodoxy of laissez-faire economics
February 26, 1997
In a recent column appearing on The New York Times op-ed page, Thomas L. Friedman referred to the now-famous remark by Alan Greenspan that Wall Street's ongoing rise is being driven by "irrational exuberance." Friedman countered that when looking at the United States economy from abroad (especially from Europe and Japan), "some exuberance seems quite rational." In fact, if you had to design a country best suited to compete in a world whose defining feature is "globalization," he continued, "in many respects you would have designed today's America." This view reflects the other defining feature of our historical moment: free-market capitalism is ascendant across the planet, while here at home the ideology of laissez-faire economics has returned with a vengeance during the past fifteen years after decades of Keynesian liberalism.
But if the prevailing winds are blowing in favor of ever-expanding and freer markets, in the past few months there have been some notable gusts in other directions. The billionaire financier and philanthropist George Soros wrote in the February issue of The Atlantic Monthly that the main threat to our "open society" is no longer Communism but capitalism. A widely noted book by the journalist William Greider, One World, Ready or Not: The Manic Logic of Global Capitalism, warns that "Our wondrous [economic] machine ... appears to be running out of control toward some sort of abyss." And of course there's Greenspan himself, whose comment about "irrational exuberance" gave many in the financial world pause.
Enter Robert Kuttner, a founder and co-editor of The American Prospect magazine, a longtime contributor to The Atlantic, and the author of Everything For Sale: The Virtues and Limits of Markets (Alfred A. Knopf, 1997). Kuttner conceives of his new book "not as a manifesto" but as "a sober sorting out." Exploring the way markets really work, he asks what are their proper boundaries and seeks "to reclaim a defensible middle ground." Kuttner recently spoke with Atlantic Unbound editor Wen Stephenson.
From The American Prospect, March-April 1997
Everything for Sale has attracted quite a bit of media attention already. How do you feel about its reception thus far? Has the response been what you'd hoped it would be?
Generally, yes. Having one's book on the cover of The New York Times Book Review is always nice for an author. The Washington Post's review was very gratifying, too, because it was by a conservative woman from the American Enterprise Institute who treated it respectfully. On the other hand, The Wall Street Journal ridiculed it, as did the online magazine Slate. I think free-market zealots who are almost religious in their enthusiasm are going to see anybody who dissents from that view as a kind of flat-earth type. But it's better to be attacked than ignored.
Central to your argument in Everything for Sale is a conviction that a "mixed economy"--one in which the government intervenes to temper the free market--is necessary not only for a healthy economy but also for a decent, civil society. Don't most economists and economics writers take the mixed economy for granted? Is anyone really advocating true laissez-faire economics? Does your definition of the mixed economy differ from that of others?
There has been a whole intellectual current, beginning in the 1970s, that has argued that most of what government does can be done better by the private market. There's a whole spectrum of opinion, of course, but the center of gravity is much further to the right on this issue than it was twenty years ago. For example, you have the great influence of so-called "Chicago Economics." You've got the movement to deregulate and privatize, the feeling that when government has to intervene at all it should intervene in a market-like way. Then you've got the more extreme people who are almost absolutist libertarians. There's a book out by Charles Murray that basically says you can shut down most of the government. There's the Law and Economics movement in the law schools, which benefits from tens of millions of dollars of right wing foundation money. So there are economists and other ideologues who may not think that we can exist with no government but who do think we ought to have a "night-watchman state," where the only role of government is to protect one's personal security and property--and everything else you can leave up to the market.
In Everything for Sale you suggestively cast the conflict between a laissez-faire and a mixed economy in terms of a quasi-religious struggle, as though the forces of a zealous ideological orthodoxy or fundamentalist dogma are lined up against those of moderate, common-sense, rational dissent. Is there reason to think there's a kind of economic Reformation brewing in the West? If so, are you Luther nailing your theses to the church door?
You can reduce the free-market zealotry to a bumper sticker: Marketize Everything. And you really can't reduce the other side of the argument to a bumper sticker, because people like me who believe in a mixed economy would certainly say that there are some things that can be very efficiently left to the market, other things that require government programs, and still other things that are a complicated blend of some government and mostly market, and that you have to get down to cases. So almost by definition my side of the argument is more practical and more guided by what you actually find when you look at the economy, whereas the other side of the argument is just more doctrinaire.
You're talking about the marketizing of the public, political realm. Nicholas Lemann, writing in the February issue of The Atlantic, pointed to something that seems like a reverse trend: the politicizing of the private realm. In the article "Citizen 501(c)3" he observes that in domestic social policy there has been a shift in power in the United States from government to private, non-profit foundations such as Soros's. Do you agree that there has been such a shift? If so, do you think it's a good thing or a bad thing?
Furthermore, non-profit institutions are increasingly responsible for social services. This has been going on in one form or another since the 1960s--in a sense, if you go back to the settlement-house movement around the turn of the century, it's been going on for almost a hundred years. As government recedes as a player, to some extent non-profit institutions try to fill the void. There's much, much more of that than there was twenty or thirty years ago, and I think that's probably, on balance, a good thing. These community institutions, which are typically non-profits, tend to be less bureaucratic, tend to have more of a real community sense of mission.
In The Atlantic's March cover story Peter Edelman condemns last year's welfare-reform legislation as "The Worst Thing Bill Clinton Has Done," saying it sets in motion a "race to the bottom" that will harm millions of poor children and legal immigrants. Edelman argues that the first and most important part of any effort to fix the bill must be "jobs, jobs, jobs." In your estimation, is there any hope that our economy can create enough jobs on its own to move significant numbers of those currently receiving assistance from welfare to work? How does wealth redistribution fit into the picture? What, if anything, can the government do at this point, given the political realities of the moment?
First of all, the Federal Reserve can take its foot off the brake, let the economy grow faster, and let the unemployment rate in the private sector come down. Secondly, we need to recognize that a lot of people who have been on welfare are people who are difficult to make employable. Employers, not without reason, have some hesitancy in hiring former welfare recipients. People need training, people need child care. A lot of people on AFDC have very disorganized lives--they have difficulty meeting the expectations of conventional jobs. It's the role of goverment to get these people back into the job market.
Lester Thurow, reviewing William Greider's new book, One World, Ready or Not: The Manic Logic of Global Capitalism, in the March Atlantic, points to what he calls "the ideological paradox of our time." He writes, "Capitalism is myopic and cannot make the long-term social investments in education, infrastructure, and research and development that it needs for its own future survival. It needs government help to make those investments, but its own ideology won't allow it either to recognize the need for those investments or to request government help." This sounds very much like what you and others are saying right now. What, if anything, can be done to alter the prevailing ideology of unfettered laissez faire? Are we stuck with Thurow's paradox? Will fundamental change only come as the result of some global crisis, as Greider suggests in his book?
Even laissez faire requires ground rules, ground rules in turn require laws, and laws--which are written by legislators who are freely elected--are a reflection of politics. The idea that you can use markets to pursue public purposes is very much in vogue right now. Look at things like school vouchers, tradable pollution rights, and the auction of the broadcast spectrum. To some extent that's right, but you can't do that without a clear set of policy objectives and a clear set of ground rules--and those reflect legislation, and legislation reflects politics. So the idea of a market existing in some realm that's divorced from civil society, divorced from politics--Robinson Crusoe's island--I think is a very dangerous fantasy.
Copyright © 1997 by The Atlantic Monthly Company. All rights reserved.