This is an important book on two levels. First, it explains the various economic ideas most people do their best to avoid dealing with in a way accessible even for those of us whose eyes tend to glaze over at mere mention of the subject. Second, it provides information for those only just learning about the mess neoclassical/neoliberal economics has created—a field guide, if you will, to how we got here, and who drove the bus everyone except the 1% has been systematically thrown under.
It’s become common wisdom to blame the paralyzing level of wealth inequality on the Republican—i.e., “conservative”—party, in particular because of Grover Norquest’s infamous “Taxpayer Protection Pledge” that intended to “make the government small enough to drown in a bathtub”.
The man usually given credit for moving the US economy into neoliberalism is Milton Friedman. However, while he is unquestionably the progenitor of modern free-market capitalism, it was his colleague George Stigler who introduced the rabid anti-regulatory element that’s created the modern oligarchy, a position even Stigler’s most important apostle, Sam Peltzman, referred to as “propaganda”.
It was Stiglitz who tilled the soil in the hallowed halls of Congress and the Oval Office that left the federal, and later state, government amenable to the gospel message that competition is superior to regulation for controlling market behavior. The message took hold just as Ronald Reagan took office. The result, unfortunately, we saw too clearly in 2008*.
The problem with neoclassical/neoliberal economics, this excellent and easy-to-read history of the movement suggests, isn’t that the theory doesn’t work. On a limited level, it does. However, the moment it became married to politics, in a country where profit is sought at any cost, it became more like religious dogma, and so not subject to question. Academic certainty became academic arrogance as the Chicago School economists went from being high on ideas to being drunk on power, refusing to accept any data that refuted their fixed beliefs.
They had the right audience, given our culture defines success solely in terms of material wealth. As a result, the converts adhere to the basic tenets of neoliberalism—limit money, cut taxes and government spending to the bone, limit or preferably eliminate regulation, support free trade and unrestricted investment, limit inflation to no more than 2% by manipulating interest rates—despite there being no only no evidence such a system is sustainable but in the face of mounting evidence it’s driving us to disaster.
And why not? It’s a system that works perfectly from those in a position to benefit from it. It’s as though a gang of thieves announced stealing was the only way to run the economy then eliminated all the laws against stealing except the ones that prevent the majority of the non-thief population from doing so.
*For an excellent, if slightly more technical, analysis of how this happened, I recommend ECONned by Yves Smith.
Disclaimer: I received an advance review copy of The Economists’ Hour from the publisher, which I found very flattering since I hadn’t requested it. I’m pleased I can unequivocally recommend it.