A dozen Labor Days — and three presidential elections — ago, the world was in the thrall of American-style capitalism. Not only had it vanquished communism, but it was widening its lead over Japan Inc. and European-style socialism.
Today, that economic hegemony seems a distant memory. We have watched the bursting of two giant financial bubbles, wiping out the paper wealth many of us thought we had in our homes and retirement accounts. We have suffered through two long recessions and a lost decade of income growth for the average family. We continue to rack up large trade and budget deficits. Virtually all of the country’s economic growth and productivity gains have been captured by the top 10 percent of households, while moving up the economic ladder has become more difficult. And other countries are beginning to turn to China, Germany, Sweden and even Israel for lessons in how to organize their capitalist economies.
It’s no wonder, then, that large numbers of Americans have begun to question the superiority of our brand of free-market capitalism. This disillusionment is reflected not only in public opinion polls but on the shelves of American bookstores, where the subject has attracted many of the best economists in the country. Retooling American capitalism has become something of an national — and even international — obsession.
“Capitalism has always changed in order to survive and thrive. It needs to change again,” writes Martin Wolf, the uncompromisingly pro-market columnist for the Financial Times, in an essay in “The Occupy Handbook.”
It would be giving the current presidential campaign too much credit to say that it has become the forum in which Americans will decide what kind of capitalism they want, unless you count the “na-na na-na na-na” mudslinging over Mitt Romney’s outsourcing and President Obama’s welfare regulations. The closest it has come has been the discussion over the president’s inartful comment about business owners who did or didn’t “build” their success.
Although the Republican spin machine reflexively took entrepreneurial umbrage at Obama’s notion that it takes a village to create a successful company, each of the books reviewed here essentially embraces the idea. A pure market economy is an ideological fantasy; even the freest markets operate in a framework of laws, infrastructure, institutions and informal norms of behavior in which government is heavily implicated. Our challenge is in getting that framework right.
Of course, there are some who want to leave American capitalism well enough alone. They include Allan Meltzer, a conservative professor of political economy at Carnegie Mellon University, who adopts the Churchillian view that while capitalism has its deficiencies, it’s better than the alternatives. He spends much of his short book, “Why Capitalism?,” knocking down the old straw men of socialism and communism, as if anyone in America is seriously proposing them these days.
You know Meltzer is spending too much time rereading Kant and Locke when he declares that capitalism’s secret is how well it disperses political and economic power, oblivious to the new role of money in U.S. politics or the harsh realities of global competition — a view that may come more naturally to someone on a campus endowed by the Carnegies and the Mellons. It is precisely this failure to disperse wealth and power that animates our disillusionment.