Slouching Towards Utopia?: The Economic History of the Twentieth Century
Part VI: Slouching Futureward
J. Bradford DeLong
University of California at Berkeley and NBER
XXIV. East Asia's Rise
XXV. The Soviet Union's Fall
XXVI. Slouching Futureward
Bibliography
Appendices
Slouching Towards Utopia?: The Economic History of the Twentieth Century
XXIV. East Asia's Rise
J. Bradford DeLong
University of California at Berkeley and NBER
August 1996
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Japan:
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Little Dragons:
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The Great Leap Forward and the Cultural Revolution:
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The Era of Deng Xiaoping:
Slouching Towards Utopia?: The Economic History of the Twentieth Century
XXV. The Soviet Union's Fall
J. Bradford DeLong
University of California at Berkeley and NBER
August 1996
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Sputnik:
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Fidel Castro:
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Leonid Brezhnev:
The person who saw this most clearly was the German classical liberal Max
Weber. He saw that socialism would become nothing but a synonym for bureaucratic
despotism. And:
History shows that wherever bureaucracy gained
the upper hand, as in China, Egyptit did not disappear. A progressive elimination
of private capitalism is theoretically conceivable. What would be the practical
result? The destruction of the [dehumanizing] steel frame of modern industrial
work? No! [S]imply that also the top management of thesocialized
enterprises would become bureaucratic.[T]here is even less freedom, since
every power struggle with a state bureaucracy is hopeless.
State bureaucracy would rule alone if private
capitalism elminated. The private and public bureaucracies, which now check
one another to a degree, would be merged into a single hierarchy. This
would be similar to the situation in ancient Egypt, but it would occur
in a much more rational[ized]and hence unbreakableform.
[Bureaucracy t]ogether with themachineis busy
fabricating the shell of bondage which men will perhaps be forced to inhabit
as powerless as the fellahs of ancient Egypt. Who would want to deny that
such a potentiality lies in the womb of the future
This was written in 1917. Weber was right. From
the perspective of 1990 there is little to add. One slogan of the turn of
the century American labor movements was "one big union." The
slogan of twentieth century socialism might as well have been "one
big bureaucracy."
Weber did not note the corruption (and the related economic disruption and
waste) that would come to dominate "socialist" economies, and
Weber had no inkling of the periodic waves of mass terror required to preserve
Communist Party power in the face of the enormous gap between the party's
of_cial ideology and its actual practice. In fact, socialism turned out
in the direction that but much worse than Weber had anticipated beforehand.
The principal reason that Marx feared market economies turned out to be
false: they did not have a powerful inner dynamic leading to a polarization
of the distribution of wealth. This had become clear by 1883, or at least
by 1900, even though it had not been clear in 1848. The appropriate reaction
to the fact that growing material wealth was trickling down should have
been enthusiasm. Markets are powerful instrumentalities for controlling
and guiding persons and organizations. They generate a rapid pace of innovation,
provide for ef_cient recombinations of factors of production into new enterprises,
and pressure large organizations toward effective ful_llment of their productive
missions. To the extent that markets can be harnessed for the purpose of
building Utopia, scarce public administrative capacities and competencies
can be redirected to other uses. A society that can harness markets uses
a form of sociological judo, applying small amounts of pressure at key points
to make inertia push results in desired directions.
But the response of those who had positioned themselves left of social democracy
was not enthusiasm that it would be easier to approach utopia than Marx
had expected. Instead, the response was the continued denigration of systems
that assigned a prominent role to either private production or market exchange,
and a worship of hierarchical administration and bureaucracyunder the name
of "conscious social control and administration of production for use"as
the answer to all problems. Whatever utopia is, it does not consist of one
big corrupt bureaucracy. And so the left has had little constructive to
offer social democrats and others trying to manage and reform the "mixed
economies" of the twentieth century.
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Is Reform Possible?
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After the Fall: the Satellites:
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After the Fall: Russia:
Slouching Towards Utopia?: The Economic History of the Twentieth Century
XXVI. Tomorrow
J. Bradford DeLong
University of California at Berkeley and NBER
August 1996
John Maynard Keynes in the early 1930's forecast the economic possibilities
for his grandchildren. He looked forward to tremendous growth in
wealth, and to sociological and moral transformation. The tremendous growth
in wealth has taken place. In large part the sociological and moral transformation
has not. But the twentieth century has still seen marvels: it is no exaggeration
to say that it has seen as much economic history take place as the previous
three centuries, and more than took place in any millenium ending before
1600.
Overview
The twentieth century has seen the pace of accumulation and productivity
growth in the industrial core ratchet up by a few notches. The nineteenth
century saw material wealth within rich countries more or less double. The
twentieth century has seen material wealth multiply more than tenfoldby
so much that it is doubtful that the rate of total productivity growth over
the century has a meaning. This multiplication of wealth has goven many
of the relatively poor in modern industrial economies standards of living
comparable to, and in some dimensions far exceeding, those that the rich
of a century ago experienced.
The twentieth century has seen the substantial reduction of racism as an
of_cial ideology and has seen an enormous transformation of the gender division
of labor, at least within the industrial core of the world economy. The
extreme reduction in fertility, the expectation that women will spend considerable
portions of their adult life in the paid labor force, and the opening of
educational and employment opportunities to women have worked at least half
of a profound transformation of the economic roles of the sexes.
The twentieth century has seen a rising tide lift most boats, at least within
the industrial core. There are still homeless, beggars, and hungry. But
the widening of the distribution of income and wealth feared by Marx has
not taken place within industrial economies. However, the "convergence"
of nations toward approximately equal levels of productivity has not yet
begun. John Stuart Mill's optimism was as misplaced as Karl Marx's pessimism.
While there is substantial reason to believe that all, or almost all, nations
will be richer at the end of the twenty-_rst century than they are now at
the end of the twentieth, there is little reason to believe that the distribution
of incomes and wealth across nations will be any tighter in relative terms.
The twentieth century has seen the decline of agriculture. Agriculture used
to absorb half or more of a nation's household. In advanced industrial economies,
agriculture is the activity of only a tiny minority. For most of the twentieth
century the decline of agriculture was matched by the rise of industry.
Manufacturing became the largest single sector measured either in terms
of production or in terms of employment. Now manufacturing employmentespecially
assembly-line and craftwork manufacturing employmentis declining, while
the various sub-components of the service sector grow larger and larger.
The twentieth century has seen governments that rank among the worst in
human history. It has seen wars that have killed soldiers and civilians
in numbers that previous centuries could not have imagined. Democracy and
representative governments did not _ourish for most of the twentieth century.
The interwar period saw more than twenty nations try and then abandon parliamentary
institutions. The post-World War II period has seen many more do the same.
Today democracies are at a high point, with the fall of most Latin American
dictatorships and juntas in the past half decade. But democracy is not secure.
The most destructive government of the twentieth century was the aggressive,
highly nationalistic régime that ruled Germany from 19331945. Hitler's
National Socialism in_icted extraordinary slaughter on its own and its neighbors'
populations. Perhaps _fty million were killed by the Nazis and in the European
portion of World War II. Barely behindwithin an order of magnitude of the
slaughter brought about by Hitlerwere the governments of Stalin and Mao.
Other Communist governmentsfrom the bureaucratic despotisms of eastern Europe
to the famine-inducing régimes of Ethiopia and Cambodia to the unholy
cross between Leninism and absolute hereditary monarchy found in North Koreahave
been tolerable only by comparison with Stalin and Mao. In all cases, Communist
governments have brought political unfreedom and material impoverishment
in their wake.
Many other governments have, to a lesser degree, consciously or unconsciously
sacri_ced economic growth to the perceived necessities of state building
and to the task of maintaining the current régime. The result has
been disappointment in development: in spite of the openness of the storehouse
of industrial technology to all and the extraordinary returns to be gained
from borrowing from this storehouse, the poor countries of the world show
no sign of having begun to catch up to the richer in the twentieth century.
This would have come as no surprise to Karl Marx. Social formations in which
the dominant powers have a strong interest in rapid growth and development
are rare: only the merchant and businessman-dominated societies of western
Europe had such a tendency before the industrial revolution. And so it is
not surprising that bureaucracy and army-dominated régimes do not
have such a dynamic of rapid growth and development.
The twentieth century has also seen, in some countries, some of the best
governments known to world history. The social democratic mixed economies
and welfare states of the industrial core have laid the foundations for
human happiness to a greater degree than any previous régimes. The
mixed economies are far from being utopias. It is sobering and yet gratifying
to know that they are as close as any segment of humanity has yet come.
The twentieth century has seen the United States gain and lose its position
as the standard-bearer of the new age. For most of this century, Europeans,
Asians, South Americans, Africans, and Australians wanting to see what the
future is like have travelled to the United States. They will not do so
in the future. The features that gave America its industrial predominance
relative to other advanced industrial economiesits extraordinary land, its
well-educated and skilled labor force, the enormous extent of its market
in a world hedged by trade barriers and tariffs, its concentration on the
"American system" of mass production through interchangeable parts
(which turned out to be the principal locus of technological advance in
the twentieth century), and its high quantity of investment in the machines
that embody modern industrial technologieshave passed or are passing. Europe
today has as large a tariff and trade barrier-free market. Germany has a
superior educational system. Japan invests moreinvests twice as much per
capitain machinery and equipment. The next century will probably see no
country play the role of path_nder to the future that the U.S. played in
the twentieth and that Britain played in the nineteenth century.
Will America fall far behind other countries? It is doubtful: too much of
the basic research and development that underlies new technologies is still
done in America. It is still too large a market. Its economy is still open
to new entrepreneurs and innovations, and this seems unlikely to change.
The distribution of income within America, however, is likely to move in
an unfavorable direction. The unskilled have done very well in America in
the twentieth century because their labor was essential to the productivity
of the land, capital, and skills owned by those at and near the top of the
income distribution. As communications improve and the effective size of
the world shrinks, the advantage of unskilled workers in New York vis-a-vis
unskilled workers in Mexico City or Bombay is likely to decline. Just as
_rms have learned to weave their webs of production across continents and
countries in the twentieth centuryreducing differentials in wealth between
regions of the United States and countries of the EEC by an order of magnitudeso
_rms will learn to weave their webs of production across oceans in the twenty-_rst
century.
The regions of the United States are much more equal, although New York
City is no more equal, today than it was at the turn of the century. Gaps
in wealth between nations are much, much larger than gaps in wealth within
nations have ever been. So the increasing span of control exercised by _rms
over the next century is likely to see a reduction in wealth inequality
between nations, and an increase in wealth inequality within industrial
nations, in the next century. Either educational systems in the industrial
core will become much better and essentially all work in the industrial
core will either be skilled work or untraded services, or the relatively
unskilled will _nd themselves under extremely heavy pressure in the labor
market and their wages will drop in relative terms.
The only edge that unskilled workers in the United States in the next century
will have over unskilled workers elsewhere will be their knowledge of the
English language. This will give them a powerful edge, but it may well not
be enough. America's image of itself as an egalitarian country, where "making
it" is easy for those with industry and enterprise, may not survive
long into the twenty-_rst century. The economic prospects of our
grandchildren who will be in America are bright, but their prospects are
much much brighter if they make sure to be counted among the educated and
the skilled.
The Pace of twenty-_rst Century Growth
What else does the twenty-_rst century hold? Will the pace of economic growth
continue? In all likelihood yes. The underlying engines of development that
have forced the pace of twentieth century economic growth in the industrial
west are still there. Innovation is still a key road to market dominance
and pro_ts. Research and development are still being carried out. Governments
are still willing to provide the public goods of infrastructure and organization
without which market economies cannot function. The most likely future sees
a turn of the 22 nd century in which life in the industrial westwhich will
then have changed its name because it will encompass the Paci_c rim as wellis
as different from today as life today is from life a century ago at the
turn of the twentieth century. Could we see it, we would be in the position
of Edward Bellamy: having our technological imaginings in all likelihood
outstripped by reality. Every reason that John Maynard Keynes gave, 60 years
ago, for expecting economic growth to continue and compound at an exponential
pace is still valid.
Does the twenty-_rst century inevitably hold a continuation of the trends
of the twentieth? No. At least three things could stop the wave of increasing
wealth: wars, governments, and environmental catastrophes. War today could
annihilate human civilizations and severely reduce human populations in
a week or less. It is unlikely that anyone will start a war certain to end
in the mutual destruction of the contending parties. It is much more likely
that someone who believes they have a sound grasp of situations and psychologies
will _nd out, too late, that it is not so. A large war is not likely in
the next century, but there seems to be no reason to run the risk. A far-sighted
political strategy in the post-World War II period would have long since
taken many more steps to reduce the possibility of even limited nuclear
war than have been taken to date.
More likely than a single, civilization-destroying, worldwide nuclear war
are a series of small wars, each affecting a relatively small part of the
world. The destructiveness even of modern conventional weapons is such that
little industrial infrastructure will survive. Civilian populations may
well not survive as other than refugees either. Such wars may well impoverish
those who survive them for a generation. But they are unlikely to reach
into the industrial heart of the world economy. The rich nations are too
well defended, and know that they have too much to lose.
There is one major caveat: writing a century ago, in the late nineteenth
century, I would have said the same thing. I would have said that the industrial
world had outgrown war, that wars had been fought for dynastic monarchs
and conquerers but now representative governments were in the saddle and
would _ght defensive but not offensive wars, and that modern wars were too
expensive and destructive to be contemplated. They were too expensive: civilization
in Europe was nearly destroyed by World Wars I and II. But the rise of militant
nationalism meant that offensive wars to avenge imagined insults against
the nation were conceivable, and were in fact fought with deadly skill and
extraordinary enthusiasm. Just as the cautious, limited war politics of
Bismarck was followed by the rash, total war politics of Hitler, so the
cautious politics of Bush and Gorbachev may be followed by something else,
that _ghts destructive wars for causes we can barely imagine, in the next
century.
Governments will, in many corners of the world, continue to impoverish their
peoples in the interest of securing the short-run power of the current régime.
The number of such governments will with luck diminish. But they will not
disappear. The anomaly in historical perspective is not rule by bureaucrats
and soldiers interested in power and luxury, and not in economic growth.
The anomaly in historical perspective is rule by merchants, industrialists,
and workers who do have a primary interest in rapid economic growth. But
governments will not stop economic growth altogether. There are too many
countries with too many governments. Some of them will play the role of
Britain in the nineteenth century or Holland in the 17 th , and become _rst
homes for entrepreneurship and innovation and second objects of emulation
by other nations.
Environmental degradation is the most likely problem to halt, or severely
retard, economic growth in the twenty-_rst century. Market economies are
excellent tools for _nding resources, superb incentive mechanisms for organizing
production, but they are unlikely to be successful at preserving environmental
quality. Industrial civilization now has reached the stage where its activities
may well signi_cantly alter the world's climate in poorly understood ways.
The market will be excellent at _nding scarce resources and at responding
to demands generated by environmental change. But it will have no mechanism
to balance off prosperity and sustainability.
Governments are unlikely to do much better. There are too many governments
divided into too many factions with too many grievances against one another.
Each government will bene_t only marginally from its own restraints on its
people's pollution. Yet few governments will yield up enough of their sovereignty
to allow for signi_cant sanctions to be applied to reduce pollution. The
poor periphery will demand the right to use the dirty technologies the rich
core used when it industrialized. The rich core will plead for cooperation
on the grounds that sustaining the environment is a precondition for anyone's
success. Mutually agreeable bargains are far from assured.
The twentieth century saw market economies generate immense wealth. The
twenty-_rst century will see whether governments can agree on enough to
sustain environmental quality. The odds do not appear to be as good as one
would wish. Pre-industrial civilizations were for the most part unable to
avoid running up against the limits of their available resources, no matter
whether the most binding constraint was wood, land, or water supplies. It
would be surprising if a group of governments, some governing very rich
nations and others governing very poor nations, could do better and avoid
running up to or over the edge of environmental catastrophe.
Approaching Utopia?
The twenty-_rst century will, if disaster is avoided, see material wealth
de_ned as power over nature continue to increase rapidly, at least in the
industrial core. Its end will be as much ahead of us in technological power
as we are ahead of the end of the nineteenth century. And to the extent
that this material wealththis power over natureis used to worthwhile ends,
it will greatly enlarge the possibilities for human happiness just as the
possibilities for human happiness today are much advanced over the late
nineteenth century.
But the history of the twentieth century teaches us that material wealth,
wealth understood as command over nature, is of limited use in building
utopia. It is an essential prerequisite. But it is far from suf_cient. Of
the four freedoms that Franklin Roosevelt thought ought to be every human's
birthrightfreedom of speech, freedom of worship, freedom from want, and
freedom from fearonly freedom from want is secured by material wealth. The
others remain to be secured by other means.
John Maynard Keynes believed that increasing wealth would trigger a moral
and psychological transformation: people would begin to concentrate not
on producing more material wealth but on using their material wealth to
attain psychological and social ends. After all: "the economic problemis
not the permanent problem of the human race." Keynes thought that this
would be obvious by the time society attained the levels of wealth that
we have attained. Yet it is not obvious to us that the economic problem
has been solved. The moral and psychological transformation that Keynes
expected to see is not here, and there is no reason to believe that it will
come.
The past century has seen the industrial core of the world economy move
closer to utopia. Most people in industrial nations are richer, freer, better
educated, and better able to plan their lives and accomplish their purposes
than in any previous time or other place. Whether the next century will
see still more progress is in our hands. Many things could stop it: war,
environmental catastrophe, or the collapse of representative governments
are clear possibilities. But another thing that could stop it would be if
we do not use our wealth thoughtfully. Wealth, after all, is power to accomplish
our goals. And goals are not always chosen wisely.
If John Maynard Keynes or Edward Bellamy could see us, they would see us
as a mixture of extraordinary wealth and re_nement with brutal barbarity.
Although we have far outstripped the imaginings of previous utopians in
technology, we have not reached the level they expected in psychology or
sociology. It has turned out to be much easier than expected to make humans
rich, and harder than expected to make them wise. Multiplying wealth has
been straightforward. Making people happy, or ending poverty has not.
Expect the same thing to hold at the end of the twenty-_rst century. The
wealth required to feed, clothe, and educate everyone to the standards of
the relatively rich in the twentieth century would consume only a small
part of the resources available to the end of the twenty-_rst. But of our
grandchildren, some will be homeless, and those who are bankers will still
step over the sleeping bodies of those who are the homeless on their way
to work. Those of our grandchildren who are rulers will still _nd building
_ood shelters and levees a lower priority than subsidizing the army or accumulating
foreign bank accounts against the day of their overthrow. And so _oods will
still kill others of our grandchildren in the hundreds of thousands.
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Development:
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Ecology:
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Equality:
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Technology
Critics of Marx's attack on market capitalism's alleged inability to distribute
income equally have tended to fall into two schools. The _rst is the "so
what?" schoolmade up of thinkers like Friedrich von Hayek, Irving Kristol,
and Robert Nozick. They argued that the market's distribution of income
and wealth is the just distribution: it is the distribution that arises
if everyone uses their own powers and capacities to produce and then to
voluntarily exchange commodities with one another. Each gets to keep the
work of his own hands or to freely dispose of his wealth to his heirs or
whoever else he wishes to bless, and each exchanges his goods for others
only when it seems advantageous to do so. What could be fairer than this?
According to this school, concern over the distribution of income is motivated
by ideological envy of the smart and productive. According to Kristol, economists
study the income distribution not because it is or ought to be a matter
of public concern, but because they have been distracted from their proper
tasks by ideological "quasi-socialist conceptions of justice"
that are "destructive ofeconomics as a scienti_c discipline."
Attempts to shift the distribution of income, by incentives or taxes, away
from what the free market produces is unjust the equivalent of theft, according
to Nozick; and leading inevitably to totalitarianism, according to Hayek.
Even if market capitalism did produce a grotesquely inegalitarian distribution
of wealth, according to this school, it would still be the right system
for producing and allocating goods. Levelling policies have no economic
justi_cation and have only a shaky political or moral one as well, for it
is not clear whether equality is "an ideal or a nonideal for a good
society."
This school is such as to make refutation dif_cult: their universe of values
and assumptions is "crazy" in that it has so little in common
with the one that the rest of us take for granted that it is hard to determine
what arguments will have purchase. One argument that should have purchase
is that all social orders have at least a part of their foundation in acts
of violence. Northerners forcibly con_scated thefor the most part peacefully
inheritedslave property of southern whites during and after the Civil War
even though those holding slaves had for the most part acquired them "justly"through
purchase freely agreed to by both buyer and seller, through free gift, or
through inheritance. Slave property was fruit of a poisoned tree.
Similar conclusions would apply to other forms of property that trace their
roots back to violence. But consequences ramify. It is impossible to say
what items of property would exist, and who would own them, had the slave
trade and the Civil War not happened. All we possessincluding our literacy,
and the prenatal and neonatal diets rich in protein to which we owe our
"natural" intelligencewould not be ours if it not for some past
unredressed violence. All we can produceexcept what food we could gather
and catch with handmade stone tools alonewe owe to technological knowledge
developed by previous generations of humanity that we have not paid for.
It is not possible to say what the state of things would be if all past
violence were fully redressed. To say that the present distribution is just
because it is the result of just exchanges and transfers starting from some
just earlier position is meaningless. The earlier position from which the
just exchanges have proceeded is just only by the principal of force
majeurethat we had the might to create the earlier position and declare
it just, and that what we say still goes because you are too weak to change
it. The principle that "justice consists solely of justice in exchange"
is a cloak for the principle that "the strong do what they can, and
the weak suffer what they must."
Another major factor certainly as important and perhaps much more important
affecting the distribution of income and wealth across countries in the
twentieth century. was the spread of Communism. Wherever Communism spread,
economic catastrophe and disaster followed. And the economic facet of the
disaster of twentieth century Communism was an order of magnitude less than
the political and moral disasters that struck where Communist Parties took
control.
Approach Shanghai from the sea in the middle 1980's. The _rst impression
is of old movies set with New York around 1940 as a backdrop. There are
Art Deco skyscrapers. The steel and glass towers of the post-World War II
era are absent. Instead, buildings have steel frames but stone interiors.
The waterfront is crowded. The buildings are twenty stories tall. But they
look like buildings of _fty years ago. The _rst reaction is that China is
building itself up, but because it is a poor country it is using less materials
and more labor intensive construction methods, and so its buildings look
like buildings of two generations ago in the United States.
Then, peaking over the riverfront, the new construction becomes visiblethe
new joint venture hotels and of_ce buildings. The _rst reaction passes to
a second: the Shanghai waterfront looks like it was built in the
1930's because it was built in the 1930's. That hotel is where Noel
Coward _nished writing his comedy Private Lives. This department
store was _nished in 1936. In the 1930's, Shanghai was a city of six million
people, the richest in China, and the entrepôt for trade throughout
Asia. Hong Kong was a relatively small, poorer settlement of a couple of
hundred thousand. In the 1940's after World War II, it looked like Shanghai
was set to resume its old role as middleman and manufacturing center for
the Paci_c rim. Then Mao came.
Today Hong Kong is a city of six million people with a material standard
of living about half that found in the United States. It has taken over
Shanghai's role as entrepôt for Asia. Shanghai's export manufactures
and trading industries were shut down in the _rst few years of Communist
rule. Shanghai today is a city of fourteen million people, and still the
richest in China outside of the regions adjacent to Hong Kong. Its physical
infrastructure appears unchanged from the 1940's: no new sewers, no new
transportation systems, no new buildings (and little maintenance on existing
buildings). Judging from the lack of investment in public infrastructure
and by the number of rusting hulks on the riverbank downstream, it was not
until the 1980's that prosperity in Shanghai again reached its level of
the 1930's. This may be true of the Chinese countryside as well: some peasant
reports suggest that peasants ate better in the 1920's and 1930's than they
have since.
If we credit World Bank estimates of levels of production at current exchange
rates, China halfway through the period of Communist ruleChina in the late
1960's, after the collectivization of agriculture, the "Great Leap
Forward," and the _rst stages of the cultural revolutionhad a level
of material wealth a third of India at that time and below the poorest countries
like Mozambique, Zaire, or Bangladesh today. Hong Kong then, in the late
1960's, had a level of material wealth perhaps ten times that of Shanghaian
edge that it has maintained to this day. Yet there is no doubt that Hong
Kong was the poorer city in the 1930's. If Shanghai today were as prosperous
and productive as Hong Kong, then three small regionsHong Kong, Shanghai,
and Taiwan, with 4% of China's populationadded together would produce as
much total product as all of China. Taiwan and Hong Kong together produce,
by themselves, more than half as much total production as does all of China.
Crossing from Hong Kong to Shanghai, or from Taipei to Beijing is like passing
through a reality warp that leads to some horrible alternate universe that
should never have been. Levels of material well-being fall by a factor of
at least _ve. The headquarters of the Hong Kong and Shanghai Bank in Hong
Kong is steel and glass, forty stories tall, and is a bank: a place where
savings are deposited and then committed to support productive enterprises
and investments. The former headquarters of the Hong Kong and Shanghai Bank
in Shanghai is half a century old, twenty stories, made of steel, stone
and concrete. Its facade is crumbling. It looks unrepaired and unmaintained.
It holds the of_ce of the key factor making the difference between Hong
Kong and Shanghai today: the Communist Party.
It is hard to measure the degree to which Communist governments have impoverished
their nations in general. It is very dif_cult to measure material wealth
in Communist countries. The structure of prices is very different from what
it is in market economies. Some commodities are nearly free. Other commodities
are completely unavailable. The quality of goods is low, and uncertain.
Many commodities can be acquired, but not for their prices of record. Perhaps
they can be acquired in exchange for bribes or favors. Perhaps they are
allocated on the basis of status. The work week is very longespecially if
time spent standing in extra lines is counted as "work" rather
than "leisure."
Nevertheless, some have guessed and tried to assess levels of real material
income and wealth in Communist countries. And world politics has provided
natural experiments: countries or regions that appeared very similar before
the Communist takeover but that have since been divided by the iron curtain.
Consider China and Taiwan, Vietnam and Thailand or the Philippines, North
Korea and South Korea, Cuba and Venezuela, Hungary and Austria, Czechoslovakia
and West Germany, and so forth. United Nations attempts to estimate standards
of living not at current exchange rates but in terms of purchasing power
suggest that Taiwan is today 3 1/2 times as wealth as China, Thailand is
nearly four times and the Philippines more than twice as wealthy as Vietnam,
South Korea is twice as wealthy as North Korea, Austria and West Germany
are twice as wealthy as Hungary and Czechoslovakia, and Venezuela half again
as wealthy as Cuba.
The recent rusting of the iron curtain, however, has led many to conclude
that previous estimates of material well-being under Communist rule were
overstated. Few think today that eastern Europe is as rich as southern Italy,
or that the former German Democratic Republic had an economy almost as rich
as Spain. Goods produced behind the iron curtain were of much lower quality
than western analysts had allowed. And so the estimates of wealth under
Communist rule have continued to drop.
Comparisons made accepting the U.N. estimates suggest that Communist governments
have, in the generation that they have ruled, managed to reduce material
standards of living by half relative to what they might well have been otherwise.
And this is almost surely a signi_cant understatement. It is interesting
to note that on the same estimates the USSR todayCommunist for two generationsis
only one quarter as wealthy as western European countries like Italy or
France. Given the USSR's immense natural resources, it is not unreasonable
to think that three-fourths of its potential wealth has been lost under
seventy plus years of Communist rule.
This extraordinary degree of self-impoverishment by Communist régimes
would come as no surprise to Max Weber, whose perception that "socialism"
was another word for bureaucratic despotism came before the reality. Bureaucracies
focus on regulation and control, not on revitalization and growth. It would
also have come as no surprise to Marx: the business class is, according
to Marx, a progressive class because its internal dynamic of competition
leads to the accumulation of capital and the creation of innovation. Other
ruling classes based on other forms of "property"in the case of
bureaucratic despotism, "property" in the sense of places in the
state's administrative hierarchydo not have this same internal dynamic,
and should not be expected to generate rapid economic growth.
What would have come as a surprise to both was the extraordinary violence
shown by Communist countries against their own citizens. The decimation
of populations has no parallel except for the terror and murder seen under
Nazi rule in Europe. In the Soviet Union, 510 million died of starvation,
were executed, or were imprisoned in Siberia and died there of overwork
as part of the collectivization of agriculture in the early 1930's. The
Great Purges of the late 1930's may have seen another 25 million dead. After
World War II 3 million returning prisoners of war, freed from Nazi imprisonment,
were sent direct from Nazi prison camps to Siberian prison camps; very few
of them ever returned home. In the forty years after the Russian Civil War,
from 1921 to 1961, the Soviet régime killed perhaps a tenth of its
population, and another tenth may have been imprisoned and exiled and then
released.
The USSR is not the worst of Communist régimes. More died under Mao.
A larger proportion of the population died under Pol Pot. Ho Chi Minh's
successors impoverished Vietnam to a greater degree than Stalin and his
successors impoverished the Soviet Union. Thus the _rst lesson history teaches
is that, when a government avowing Marxist-Leninist principles seizes power,
cuts off the _ow of information, and sets about to transform the country,
fear the worst. The following generation will see two-thirds or more of
the country's potential material wealth destroyed, and is as likely as not
to see a tenth of its population killed and another tenth imprisoned or
exiled.
The years since the U.S. became an industrial economy have seen one Great
Depression: 192941. Whether assessed by the relative shortfall of production
from trend, by the duration of slack production, or by the productdepth
times durationof these two measures, the Great Depression is an order of
magnitude larger than other depressions, and deserves to be covered _rst.
It is straightforward to narrate the slide of the U.S. into the Depression.
The 1920's saw a boom as _rms invested in capacity and consumers bought
durable goods on credit in quantity for the _rst time. The 1920's boom was
the result of optimism: businessmen and economists believed that the newly-born
Federal Reserve would stabilize the economy, and that the pace of technological
progress guaranteed rising living standards and expanding markets. The Federal
Reserve's attempt in 1928 and 1929 to raise interest rates to discourage
stock speculation brought on an initial recession. Caught by surprise, _rms
cut back their own plans for further purchase of producer durable goods;
_rms making producer durables cut back production; out-of-work consumers
and those who feared they might soon be out of work cut back purchases of
consumer durables, and _rms making consumer durables faced falling demand
as well.
Businessmen, economists, and politicians (most memorably Secretary of the
Treasury Mellon) expected the recession of 19291930 to be self-limiting.
Earlier recessions had come to an end when the gap between actual and trend
production was as large as in 1930. They expected workers with idle hands
and capitalists with idle machines to try to undersell their still at-work
peers. Prices would fall. When prices fell enough, entrepreneurs would gamble
that even with slack demand production would be pro_table at the new, lower
wages. Production would then resume.
Instead, falls in pricesde_ationduring the Depression set in motion contractions
in production which riggered additional falls in prices. With prices falling
at ten percent per year, investors could calculate that they would earn
less pro_t investing now than delaying investment until next year when their
dollars would stretch ten percent further. Banking panics and the collapse
of the world monetary system cast doubt on everyone's credit, and reinforced
the belief that now was a time to watch and wait. The slide into the Depression,
with increasing unemployment, falling production, and falling prices, continued
throughout Hoover's term.
There is no fully satisfactory explanation of why the Depression happened
when it did. If such depressions were always a possibility in an unregulated
capitalist economy, why weren't there two, three, many Great Depressions
in the years before World War II? Milton Friedman and Anna Schwartz argued
that the Depression was the consequence of an incredible,and unlikely sequence
of blunders in monetary policy. But those controlling policy during the
early 1930's thought they were following the same gold-standard rules of
conduct as their predecessors. If so, why didn't obedience to such rules
lead to similar blunders earlier?
At its nadir, the Depression was collective insanity. Workers were idle
because _rms would not hire them to work their machines; _rms would not
hire workers to work machines because they saw no market for goods; and
there was no market for goods because workers had no incomes to spend. George
Orwell's powerful account of the Depression in Britain, The Road to Wigan
Pier, speaks of watching "several hundred men risk their lives
and several hundred women scrabble in the mud for hours searching eagerly
for tiny chips of coal" in slagheaps so they could heat their homes.
For them, this arduously-gained "free" coal was "more important
almost than food." And all around them the machinery they had previously
used to mine in _ve minutes more than they could gather in a day stood idle.
Workers who kept their jobs, even with reduced hours, and _nanciers whose
money was invested in bonds prospered during the Depression. Their nominal
incomes in dollars dropped, but prices dropped even more: the baskets of
goods they could buy increased. Farmers, workers who lost their jobs, and
entrepreneurs who had bet their money on continued prosperity were the big
losers of the Depression. Production was a third less than normal and the
distribution of income had shifted toward those who kept steady employment
or who had invested their _nancial wealth conservatively. As a result, at
the nadir the standard of living of losers taken all together was perhaps
half of what it had been in 1929.
No large-scale social insurance programs compensated the losers from the
Depression during Hoover's term. In contrast to Europe, the United States
had no effective system of unemployment insurance to cushion job loss. The
Federal government's only signi_cant action before the New Deal was the
Veterans' Bonusgranted over Hoover's objection. State governments, with
limited abilities to tax, could not come close to _nding the resources to
signi_cantly cushion the decline in living standards of the unemployed.
Recovery began with the inauguration of Roosevelt. The two initial planks
of the New Deal were the abandonment of the gold standard with the concomitant
attempt to force the dollar price of gold and other commodities up, and
the National Industrial Recovery Act (later declared unconstitutional) with
its explicit aim of keeping competition from pushing wages and prices down.
These two broke the expectation of further de_ation. The end of de_ation
caused a mini industrial boom. Thereafter output slowly increased and unemployment
slowly decreased throughout the New Deal.
While the shift in expectations brought about by the announcement of the
New Deal deserves credit for breaking the downward slide, it may be the
casesuch arguments are still controversialthat the New Deal hindered the
recovery as well. New Deal spending was by and large not de_cit spending:
each dollar Harry Hopkins funneled into relief was matched by a dollar removed
from private-sector pockets by taxation, causing little if any rise in aggregate
demand. The alliance of the New Deal with organized labor may have led to
policies biased toward maintaining the real incomes of those still employed,
perhaps at the expense of the unemployed in the late 1930's.
Social democracy came to America in the New Deal. The fact that the Great
Depression was the impetus for the leftward shift had an impact on the form
of the post-WWII American welfare state. In Europe social democracy had
an egalitarian bent: it was to level the income distribution as well as
insure citizens against the market . In America the major welfare state
programs were built up as insurance in which individuals on average
got what they paid for. They were not tools to shift the distribution of
income. And the pro-labor framework set up by the National Labor Relations
Board was of most use to relatively skilled and well-paid workers with secure
job attachments who could use the legal machinery to share in their industries'
pro_ts; it was of less use to the ill-paid without secure attachment.
The Great Depression did create a new orthodoxy in politics: the government
was now seen as responsible for maintaining production. Goverment de_cits
in recessions were seen as signs that the government was boosting demand
to keep the Depression from happening again. Con_dence in this commitment
to maintain spending helped, perhaps more than the commitment itself, to
keep the post-WWII era free of Great Depressions. Instead, the government
risked an acceleration in in_ation rather than even a small chance of a
severe Depression. Over time, this pro-in_ation bias intensi_ed, became
anticipated, and so lost some of its ef_cacy.
As _gure 2 shows, the result was that the post-WWII United States has experienced
only three mini-depressions: the slowdown in growth during the second Eisenhower
administration, the OPEC shock (197475), and the Volcker depression (197982).
All were deliberately courted by governments that momentarily gave priority
to reducing in_ation at the cost of unemployment, and even such governments
were unwilling to push contraction too far. The post-WWII United States
coped with these mini-depressions relatively well in the sense of providing
comparatively generous unemployment insurance and income support to the
"deserving unemployed"who had previously held secure, higher-wage
jobs. It did less well at supporting those unemployed who had not previously
been in the middle-class circle.
Thus the continued maintenance of American industrial preeminence requires
that the U.S. do at the turn of the twenty-_rst century what Britain did
not do at the turn of the twentieth: train and educate a skilled labor force,
maintain a high savings rate, have _nancial institutions to channel savings
into the domestic accumulation of the machines that embody industrial technology,
and have modern business enterprises to take advantage of economies of scale
and to translate scienti_c knowledge into productive engineering applications.
From this perspective, the prospects for the maintenance of American economic
preeminence appear very slim. The U.S. educational system is no longer particularly
good or advanced. U.S. _rms are not _nding it easy to accumulate capital
to continue to bet on advanced machines and technologies. Andespecially
with a large federal budget de_citthe U.S. savings rate is no longer high.
Slouching Towards Utopia?: The Economic History of the Twentieth Century
Bibliography
J. Bradford DeLong
University of California at Berkeley and NBER
September 1996
"If I have seen further than other men, it is because I have stood
on the shoulders of giants," said Sir Isaac Newtona pretty tall fellow
himselfin trying to focus attention on how much of a collective product
"his" physics was. And it is indeed true that any book is a collective
work, with credit owed back to the unknown Phoenecian who _rst decided to
use a stylized picture of an ox for the sound "a."
But in writing this book I have become more and more aware of how few of
the thoughts and ideas are mine, in any real sense, and how many are other
people'seither things that I have learned directly from them, and things
that I have learned indirectly from watching them think, learning how to
think like them, and then applying their patterns of thought and skills
of induction to events and situations.
Perhaps my greatest intellectual debt is to Lawrence Summers: there is a
very real sense in which most of this book is my rendering of the twentieth
century economic history book that he would write were he an economic historian,
for it is primarily by watching him that I have learned how to be an economist.
Only slightly less important are Jeffrey Williamson, who in addition to
teaching me how to think has taught me almost everything I know about the
British industrial revolution and third-world development; Barry Eichengreen,
who knows more than I will ever know about the Great Depression and the
international monetary system and whose writings, especially Golden Fetters:
The Gold Standard and the Great Depression, are the foundation-stones
of much of my understanding; Peter Temin, whose Did Monetary Forces Cause
the Great Depression? is magni_cent, and whose Lessons from the Great
Depression is
Slouching Towards Utopia?: The Economic History of the Twentieth Century
Appendices
J. Bradford DeLong
University of California at Berkeley and NBER
September 1996
DeLong; Econ. 115; Fall 1996 Slouching Towards Utopia?
1 For example,
Paul Baran and Paul Sweezy, Monopoly Capitalism.
2 See Irving Kristol,
"Comment on Alan Blinder," in Martin Feldstein, ed., The American
Economy in Transition (Chicago: University of Chicago Press, 1982);
Robert Nozick, Anarchy, State, and Utopia (Cambridge, Mass.: Harvard
University Press, 1975); Friedrich von Hayek, The Road to Serfdom
(1948). The _nal quotation in the paragraph comes from Kristol.
It is hard to determine whether Kristol and Nozick intend or wish their
works to be taken completely seriously: they may be writing things that
they think are true, they may be writing things that they think are outrageous
and more true than false. Certainly the other philosophical work of the
individual "Robert Nozick" gives no hint that the individual
strongly holds the beliefs set out by the authorial voice, Robert Nozick,
of Anarchy, State, and Utopia.. And the fact that "Irving Kristol"
the individual chooses to live in greater New York implies that he strongly
rejects the position taken by the authorial voice, Irving Kristol, who
unfavorably compares anomic life in Great Neck today to vibrant communal
sociologically-integrated life, complete with Tsar and Cossacks, in the
Jewish Pale of Settlement in the late nineteenth century.
3 When a country closes
itself off to foreigners, it is not because it fears that foreigners will
learn military secrets. As Arthur Koestler wrote: "[as] the Germans
knew as well as the Russians, military secrets and even the more crass
forms of political persecution are easy to hide by normal police methods.The
secret which the [interwar] Soviet Union so jealously guarded was the average
living conditions of her citizens. Behind the fireworks of statistics,
symbols, and tokens lay the vast land of reality, the everyday life of
people in Kazan and Saratov, Ashkhabad and Tomsk, no to speak of the Forced
Labour Camps on the White Sea, of the exiled and deported millions in Siberia
and Central Asia." Arthur Koestler, "Soviet Myth and Reality,"
in The Yogi and the Commissar.
Friedrich A. von Hayek, Prices and Production (London: Routledge
and Kegan Paul, 2nd ed. 1935):
p. 98: "And, if we pass to the situation in the following depression,
it is still more difficult to see what lasting good effects can come from
credit expansion. The thing which is most needed to secure healthy conditions
is the most speedy and complete adaptation possible of the structure of
production.If the proportion as determined by the voluntary decisions of
individuals is distorted by the creation of arti_cial demand resources
[are] again led into a wrong direction and a definite and lasting adjustment
is again postponed.The only way permanently to `mobilise' all available
resources is, thereforeto leave it to time to effect a permanent cure by
the slow process of adapting the structure of production"
pp. 1612: "[U]p to 1927 I shouldhave expected thatthe subsequent depression
would be very mild. Butin that year an entirely unprecedented action was
taken by the American monetary authorities[who] succeeded, by means of
an easy-money policy, inaugurated as soon as the symptoms of an impending
reaction were noticed, in prolonging the boom for two years beyond what
would otherwise have been its natural end. And when the crisis _nally occurreddeliberate
attempts were made to prevent, by all conceivable means, the normal process
of liquidation."
Gertrude Himmelfarb, The Idea of Poverty: England in the Early Industrial
Age (New York: Vintage Books, 1983).
(on the Poor Law Commission's reasoning) pp. 1602: "[T]he reportcomplained
of the `mischievious ambiguity of the word poor' which gave the
laboring poor the illusion that they were entitled to a share of the `poor
funds'[which] was all the worse because the `right' was couched in language
that was so vague.The alternative [the Commission posed] to this vacuous
notion of right was the idea of `contract'. The laborer had no `right'
to a `reasonable' or `fair' or `adequate' subsistence; but he did have
a contract in the form of wages which determined teh level of his subsistence
and the limits of his expectations."
p. 160: "While the report criticized others for violating the Elizabethan
laws, it itself went againstthose laws.The Elizabethan laws were, in fact,
genuinely and unambiguously `poor' laws precisely because they did not
make any sharp distinction between poor and [deserving and unable to work]
pauper.They were enacted at a time of great economic dislocationalso a
time when society assumed responsibility, in theory at least, for `poorer
folke', when it was thought natural and proper not only to relieve distress
but to set wages and prices, terms of apprenticeship, and conditions of
work."
p. 308: "Blake's `Dark Satanic Mils' is generally taken to be a condemnation
of the cotton factories. In the preface to Milton, where the phrase
appears, it refers to the universities and intellectual establihsments
which worshipped the false [classical] gods [of literature] instead of
the Bible, Shakespeare, and Milton."
p. 315, paraphrasing Morning Chronicle reporter Angus Reach: "The
poet who longed for the `dewy call of incense breathing morn' rather than
the `dismal clank of the factory bell' had not considered the man with
a family to feed who preferred to earn twelve shillings in noisy, smoky
Manchester rather than six shillings in the dewy _elds of Wiltshire. To
purify the air of Manchester was to quench its furnaces and deprive its
inhabitants of their dinners.[T]hose sunlit hills and vales concealed a
poverty more grinding and hopeless than was to be found in the cellars
and garrets"
Himmelfarb citing Engels' Condition of the Working Class in England
(p. 278): "Since the antidote [Communism] matured only as the disease
[Capitalism] did, the disease had to run its course.'And as the English
nation cannot succumb under the _nal crisis, but must go forthborn againwe
can but rejoice over everything which accelerates the course of the disease'."
Her footnote: "This is another example of the `worse is better' principlethat
makes reactionaries preferable to reformersandNazis preferable to Social
Democrats."
Himmelfarb citing Macaulay (Himmelfarb p. 363): "It is now the fashion
to place the golden agein times when noblemen were destitute of the comforts
the want of which would be intolerable to a modern footman, when farmers
and shopkeepers breakfasted on loaves the very sight of which would raise
a riot in a modern workhouse, when to have a clean shirt once a week was
a privilege reserved for the higher class of gentry, when men died faster
in the purest country air than now die in the most pestilential lanes"
(Thomas Babington Macaulay, Works (London, 1875), I, 333).
Blaine Harden, Africa: Dispatches from a Fragile Continent (New
York: W.W. Norton, 1990)
pp. 1617: "Africa's problemspervasive and ghastlyare not the _nal
scorecard on a doomed continent. They are preliminary readings from the
world's messiest experiment in cultural and political change. Africans
were no asked whether they wanted to be guinea piga.Europeans overwhelmed
the continentcarved it up intocoloniesall of them administered from the
top down.Then, after sixty years or sothe Europeans turned their authoritarian
creation over to the Africans. `Seek ye _rst the political kingdom and
all else will follow'. That was the heady advice of Kwame Nkrumah, the
founding father of Ghana. More than thirty years and seventy coups later
it has become painfully clear that `all esle' does not follow. The political
kingdomis a principal cause of Africa's crisis."
p. 234: "As my friend the ambassador said'[n]obody among African statesmen
can stay in power making nice speeches and carrying a white handkerchief.
There is always some rough stuff'. The rough stuff has accumulated in direct
proportion to economic miseries. One spring night in 1988, Kuanda[claiming
that] businesses [were] trading on the black market[sent] soldiers [who]
took over the shops of one hundred and eighty-seven Zambian merchants,
almost all of them of Indian or Pakistani descent. Black Zambians cheeredand,
for several days, were diverted from their chronic complaints about the
lack of bread, cooking oil, and soap.[Kuanda] had bought himself a little
time by `Asian bashing'a standard technique of East African leaders who
need to shore up popular support."
The moral equivalent of war
how the Republican virtues, and to some degree the Christian virtues, are
admirablebut are responses to adversity, so only a fool would trigger circumstances
that lead to their showing themselves
This has implications for the "dullness" of modern life
Brave New World, in which tragedy and con_ict turn out to be necessary
for full humanity, and yet are absent (and can hardly be manufactured,
for then they are not true tragedy and con_ict: [actually this last is
not true, most forms of tragedy and con_ict are manufactured in
this sense: "the thrill of victory, and the agony of defeat"])
The fall of the iron curtain as the end of the twentieth century
fascism, not communism, as the true opponent of liberalism (or social democracy)
in the twentieth centurya struggle that is not yet over, for fascism is
alive and well
No one was ever sure what communism was. Started out as liberalism + common
property/equal wealth. Turned into something like fascism very quickly.
What fascism is:
cretinism of parliamentary democracy
voters easily manipulated by last voice that they hear
nationalism
will-to-power
historical tasks of the nation: politics as the realm of power and control
leadership principle
unity principle
John Lukacs
Martin Feldstein's spring 1980 Economics 2010c lectures. Where we went
wrong in macro policy
underestimated how quickly in_ation premia became included in interest
rates
underestimated how quickly past in_ation became incorporated in expectations
of future in_ation
underestimated what the "natural" rate of unemployment was
Paul Sweezy, The Theory of Capitalist Development (New York: Oxford
University Press, 1942).
pp. 1819: "It follows that the tendencies or laws enunciated in volume
1 are not to be interpreted as direct predictions.Their validity is relative
to the level of abstraction on which they are derived.Recognition of this
fact would have saved a great deal of sterile controversy. As an example
we may cite the famous `law of the increasing misery of the proletariat'
which Marx called the `absolute general law of capitalist accumulation'.It
constitutes in no sense a concrete prediction.Marx says as much in perfectly
clear language.Having stated the law, he immediately addes `Like all other
laws, it is modi_ed in its working by many circumstances, the analysis
of which does not concern us here.' It would be impossible to have aplainer
warning not to interpret the law as a concrete prediction."
p. 135: "Even the idea that the business cycle is the inevitable form
of capitalist development is widely accepted; such well-known theorists
as Spiethoff, Schumpeter, Robertson, and Hansen have been at great pains
to emphasize this point."
p. 191: "`The monopoly of capital becomes a fetter upon the mode of
production. Centralization of the means of production and socialization
of labor at lat reach a point where they become incompatible with their
capitalist integument.The knell of private property sounds. The expropriators
are expropriated.' This is, however, not so much a prediction as a vivid
description of a tendency."
p. 361: "We must conclude that, because of the differences in their
underlying economies, the socialist sector of the world would [after World
War II] quickly stabilize itself and push forward to higher standards of
living, while the imperialist sector would _ounder in dif_culties."
Paul Baran and Paul Sweezy, Monopoly Capital (New York: Monthly
Review Press, 1966).
pp. 13839: "One need not have a speci_c idea of a reasonably constructed
automobile, a well planned neighborhood, a beautiful musical composition,
to recognize
that the model changes that are incessantly imposed upon us, the slums
that surround us, and the rock-and-roll that blares at us exemplify a pattern
of utilization of human and material resources which is inimical to human
welfare."
p. 156: "The history of recetn decades is particularly rich in examples
of the substitution of authoritarian for democratic government in capitalist
countries: Italy in the early 1920's, Germany in 1933, Spain in the later
1930's, France in 1958"
p. 182: "Having already achieved the status of a `have' power by the
time the Germans and Japanese were ready to launch their leadership bids,
the United States was constrained to make common cause with the other `have'
powers in the First and Second World Wars."
p. 189: "Acheson quickly made clear what he meant.He listed seven
of these points. First Point: The German, Austrian, and Japanese peace
treaties must make those countries `free'in other words, capitalist countries
allied with the United States. Second Point: `Orderly representative processes'
must be introduced into `the whole group of countries we are accustomed
to think of as the satellite area'in other words, the Soviet Union must
stand aside while the United States organizes counter-revolutions in Eastern
Europe."
p. 287: "But capitalism's basic law of motion, temporarily thwarted
[during World War II] soon resumed its sway. Unemployment kept steadily
upward, and the character of the new technologies of the postwar period
sharply accentuated the disadvantages of unskilled and semi-skilled workers.By
the end of the 1950's the real state of affairs could no longer be concealed:
it was impossible to continue to believe in the existence of a meliorative
trend"
p. 365: "The highest form of resistance is revolutionary war aimed
at withdrawal from the world capitalist system and the initiation of social
and economic reconstruction on a socialist basis.[T]he revolutionary peoples
have achieved a series of historic victories in Vietnam, China, Korea,
Cuba, and Algeria. These victorieshave sown the seeds of revolution throughout
the continents.It is no longer mere rhetoric to speak of a world revolution:
the term describes what is already a reality and is certain to become increasingly
the dominant characteristic of the historical epoch"
Paul Sweezy, The Present as History (New York: Monthly Review
Press, 1953).
p. 39: "If a theory is to be judged by its fruits, no commentary on
[James Burnham's] The Managerial Revolution is required, beyond
Burnham's own ponti_cation: `I have predicted the division of the new world
among three super-states. The nuclei of these three super-states are, whatefver
may be their future names, the previously existing nations, Japan, Germany,
and the United States.'"
p. 50-1: "Burnham alleges that[for] a society [to be] socialistit
must be. fully democraticWithout entering into a discussion of the
precise meaning of the term `democracy', we may agreethat socialism has
been historically thought of as `fully democraticin all spheres'. We may
also agree that this does not apply to the Soviet Unioni in the political
sphere, where there is a single-party system and certain restrictions on
civil liberty. At the same timethere is more genuine democracy in the economic
and social spheres in the Soviet Union than anywhere else in the world."
p. 62: "From the standpoint of economic science, the political leadership
in the Soviet Union is acting as the agent of the working class. No relation
of exploitation exists between controllers and workers.The real issue is
one of general interests and objectives, which are prescribed by the structure
and form of social relations as a whole. In this sense the objective of
those who direct the Soviet economy can only be production of use values
which corresponds in every way to the interests of the working class. We
might, therefore, say that the working class is the ruling class in the
Soviet Union."
p. 76: "those who understand that in essence Marxism is a method of
analysis and a guide to actionwill be in little doubt that Schwartz has
mistaken the enrichment of Marxism by the two great twentieth-century revolutions
[of Lenin and Mao] for its decomposition."
p. 286: "[Hayek] even goes so far as to compare Nazi anti-semitism
withthe liquidation of the kulak in the USSR. The two things, of course,
have absolutely nothing in common. The Jew remains a Jew; the kulak could,
and most of them did, become a collective farmer on exactly the same terms
as his fellows."
p. 352: "The publication in 1952 of Stalin's Economic Problems
of Socialism in the USSR would make possible today a more satisfactory
reply.In the light of [Stalin's] explanationI would like to amend the statement
which Mr. Kazahaya criticizes.[The amended statement] conveys my meaning
more accurately than the original wording and is, I think entirely in accord
with Stalin's view."
Karl Marx, Value, Price, and Pro_t (London, 1898):
p. 42 (end of VI): "To explain, therefore, the general nature of
pro_ts, you must start from the theorem that, on an average, commodities
are sold at their real values, and that pro_ts are derived from
selling them at their values, that is, in proportion to the quantity
of labour realized in them. If you cannot explain pro_t upon this supposition,
you cannot explain it at all."
p. 76 (XIV): "With the development of the productive powers of labour
the accumulation of capital will be accelerated, despite a relatively high
rate of wages. Hence, once might infer, as Adam Smith, in whose days modern
machinery was still in its infancy, did infer, that the accelerated accumulation
of capital must turn the balance in favour of the working man by securing
a growing demand for his labour.But simultaneously with the progress of
accumulation there takes place a progressive change in the composition
of capital.If the proportion of these two elements of capital [wage
advances and all other capital] was originally one to one, it will, in
the progress of industry, become _ve to one, and so forth.In the progress
of industry the demand for labour keeps, therefore, no pace with the accumulation
of capital. It willincrease in a constantly diminishing ratio as compared
with the increase of capital.
"These few hints will suf_ce to show that the very development of
modern industry must progressively turn the scaleagainst the working man,
andsink the average standard of wages.
"the working class ought not to exaggerate to themselves the ultimate
working of these every-day struggles. They ought not to forget that they
are _ghting with effects, but not with the causes of those effects, that
they are retarding the downward movement, but not changing its direction;
that they are applying palliatives, not curing the malady"
Noam Chomsky, After the Cataclysm (Boston: South End Press, 1979).
p. 148: "[I]f a more appropriate comparison [than that of the Pol
Pot to the Nazi régime] is, say, to France after liberation, where
a minimum of 3040,000 people were massacredthen perhaps a rather different
judgment is in order.[T]here is a considerable range of opinions on this
score among quali_ed obervers, though the press[is] generally ignoring
mere questions of fact."
p. 150: "We have seen how effectively the Western propaganda system
creates, embroiders, plays up, distorts, and suppresses evidence according
to imperial needs. [Perhaps] the worst atrocities have taken place at the
hand of a peasant army devastatedby U.S. bombstaking revenge on the urban
civilization that they regarded, not without reason, as a collaborator
of their destruction.Future victims of imperial savagery will not thank
us for assisting in the campaign to restore the public to apathy and conformism"
p. 218-9: "[A]n explanation [of Kissinger-Nixon policy] that appears
to us quite plausible[is that the d]estruction [by bombing] of rural Cambodia,
by imposing the harshest possible conditionswould servetwo classic ends:
retarding social and economic progress, and maximizing the brutality [of
the Khmer Rouge régime]. Then the [American] aggressors would at
least be able to reap a propaganda victory from the misery they had sown.[T]he
goal of increasing the harshness of the Khmer Rouge, a predictable consequence
[of the bombing], was also quite probably an intended one."
p. 291: "If a serious studyis someday undertaken, it may well be discoveredthat
the Khmer Rouge programs elicited a positive responsebecause they dealt
with fundaemntal problems rooted in the feudal past and exacerbated by
the imperial system. Such a study, however, has yet to be undertaken."
p. 293: "What enters history in the United Statesis a versionthat
suits the ideological requirements of dominant social groups.The central
theme that liberation from Western domination is a fate to be avoided at
all costs is consistently and persistently drilled into popular consciousness[by]
an awesome system of indoctrination and thought control"
p. xi: "There has been remarkably little serious effort to try to
determine or comprehend what really happened in Cambodia [under the Khmer
Rouge]. Some have also warned of the consequences of the hysteria that
was being whipped up in the West that the accusations against the régime
in Cambodia might `become the pretext of a Vietnamese invasion' Those whojoin[ed]
in the international hysteria undoubtedly contributed to exactly the consequence
the Vietnamese invasion of Cambodia]."
p. xiv: "The negative side [of the Khmer Rouge]has been presented
to a mass audience in a barrage with few historical parallels apart from
wartime propaganda. [T]he war was followed by an outbreak of violence,
massacre, and repression.[T]he entire population was compelled to share
the lives of the poorer peasants. The _rst of these consequences is an
atrocitythoughthere are unanswered questions as to itslocus of responsibility.[T]he
second is an atrocity by Western standards, though it is worth noting that
the peasants may not regard it as an atrocity"
p. 2934: "Perhaps evidence will be forthcoming to support the claim
of the British Foreign Of_ce that `many hundreds of thousands of people
have perished in Cambodia directly or indirectly as a result of the policies
of the Communist government', evidence more credible than the material
on which they uncritically relied. There is no doubt that many hundreds
of thousands, if not millions of people have perished in other third world
countries in the same period as a direct or indirect result of the policies
of the Western powers, victims of aggression, starvationhideous conditions
of worketc. The conclusions from such a comparison seem obvious."
Friedrich Hayek, Law, Legislation and Liberty: The Mirage of Social
Justice vol. II (Chicago, Il.: University of Chicago Press, 1976).
p. 66: "[T]he prevaling belief in `social justice' is at present probably
the gravest threat to most other values of a free civilization."
p. 80: "`[S]ocial justice'[understood as the] argu[ment] thatdeparture[s]
from equality of material bene_ts [have] to be justi_ed by somecommon interestis
based on a specious analogy with the situation in which some human agency
has to distribute rewards.But earnings in a market system, though people
tend to regard them as rewards, do not serve such a function. Their rationale
(if one may use this term for a role not designed but developedwithout
people understanding how) isto indicate to peoplewhat they ought to do"
p. 93: "[W]hile in a market order it may be a misfortune to have been
born and bread in a village wherethe only change of making a living is
_shingit does not make sense to decribe this as unjust. Who is supposed
to have been unjust?especiallyif these local opportunities had not existed,
the people in question wuld probably never have been born at all[for lack
of] the opportunities which enabled their ancestors to produce and rear
children."
Friedrich Hayek, Law, Legislation and Liberty: The Political Order of
a Free People vol. III (Chicago, Il.: University of Chicago Press,
1979).
pp. 1712: "It is certainly sad that men can be made bad by their environment,
but this does not alter the fact that they are bad and must be treated
as such.Egalitarianism is of course not a majority view but a product of
the necessity under unlimited democracy to solicit the support even of
the worst.It is by the slogan that `it is not your fault' that the demagoguery
of unlimited democracy, assisted by a scientistic psychology, has come
to the support of those who claim a share in the wealth of our society
without submitting to the discipline to which it is due. It is not be conceding
`a right to equal concern and respect' to those who break the code that
civilization is maintained"
John A. Hall, Liberalism: Politics, Ideology, and the Market (Chapel
Hill: U.N.C. Press, 1987), p. 193 ff.:
"[T]he directiveof modern history is that of speeding up industrialization.
In these circumstances, the equation of commerce and liberty no
longer holds. The generalization to be made about this whole situation
is quite horrible: forced development is socially brutal. Such development
cannot be achieved under the ægis of soft political rule, and this
means that the chances of a transition to democracy are correspondingly
at a discount.
"[M]odernization, under whatever politicial ægis, involves at
least disciplining the peasantry and at most forcibly removing it from
the land.The dif_culties involved in nation-building.[N]ew statesface such
tasks as the removel of tribalism, the destruction of rival cultures, the
creation of a lingua franca, and the establishment of national bureaucracies.[Sectoral
change and nation building] are but two of the preconditions of industrial
society, but they clearly justify the contention that forced development
is socially brutalizing.Third World countries have learnt with time that
successful modernization is impeded by democracy. For people do not easily
accept the loss of their land and of their customary ways of life: this
requires force [and]a totalizing ideology. Nationalism is one such ideology.Marxism
has considerable appeal. Perhaps the most powerful ideologyis that of Islam
"It behoves liberals to think very carefully as to the judgment they
should place upon the savageries of modernization.Some old regimes defeat
piecemeal attempts at improvement, and can only be changed in a
root-and-branch mannerTsarist Russia and late imperial China. Total social
engineering is indeed savage, and it should not be romanticized. But in
so far as such engineering successfully achieves the transition to industrial
society, it must be accepted by liberals on negative utilitarian grounds.The
forced transition to modernity splits the innermost desires of liberals:
they must endorse the change, while being horror-struck at its effects"
"Preface" by Harold Laski (pp. xi, xii) to Victor Gollancz et al., The Betrayal of the Left (London: Victor Gollancz, 1941): "... the adoption by the Communist Party of Great Britain of the policy of 'revolutionary defeatism'...: