Money, It's a Gas
The Lexus and the Olive Tree: Understanding Globalizationby Thomas L. Friedman
Farrar, Straus, & Giroux, 394 pp., $27.50
Surrender: How the Clinton Administration Completed the Reagan Revolutionby Michael Meeropol
University of Michigan Press, 400 pp., $29.95
Turbo-Capitalism: Winners and Losers in the Global Economyby Edward Luttwak
HarperCollins, 290 pp., $26
Devil Take the Hindmost: A History of Financial Speculationby Edward Chancellor
Farrar, Straus, & Giroux, 386 pp., $25
The Great Disruption: Human Nature and the Reconstitution of Social Orderby Francis Fukuyama
Free Press, 336 pp., $26
Last summer, a lot of media buzz was created when iVillage's IPO made a lot of quasi-journalists into millionaires. Michael Kinsley, of Slate, wrote an article about "Internet envy" in which one passage really made me sit up. Kinsley writes of his friends in the less lucrative humanities fields: "At the crucial moment when they make their choices, many of these people honestly believe that money -- beyond the cost of upper-middle-class comfort -- is not all that important to them, and most of them may turn out to be right. But some are responding to the fleeting hormonal surges of youthful idealism, or to the special status hierarchy of the academic subculture where they temporarily reside. In the most tragic examples, a charismatic professor will entice them into a lifetime of French medieval history, about which their curiosity is exhausted before they get their Ph.D.s. In less extreme cases, they become writers. Then they discover, in their 30s or 40s, that money is important to them after all. This is the moment when reading about some 28-year-old who's suddenly worth $300 million can have an effect that requires medical attention."
The medical attention part hurt. I've always liked Kinsley's irony, especially when it is aimed at common enemies. But this article left its little barb in my hide. Not that I was dumb enough to pursue French medieval history -- no, my B.A. was in, uh, French literature. But I suspect, sadly enough, that there isn't much of a difference. Kinsley implies, here, something that I rather suspect is true: that the choice to pursue French literature with vim and vigor is not much different, in economic terms, than the choice to pursue, say, cocaine as a lifetime hobby, a choice which is also often taken at a tender age -- except that, if worst came to worst, you can always sell cocaine.
However, on good days I'm glad I can talk endlessly about Stendhal's relationship to the moraliste tradition. So I decided to turn the tables and cast a cold eye on the money culture. Making up a rather haphazard reading list, I plunged in.
Because of the feverish nature of the fortunes being made, i.e., Kinsley's $300 million 28-year-olds, as well as the persistent widening of inequality of both income (which is the yearly grab of money) and wealth (as in assets) since that epochal year 1980, I took the systematic approach. The first book to look at, of course, is Thomas Friedman's The Lexus and the Olive Tree. Friedman, who is officially The New York Times' Foreign Affairs columnist, is a well-known enthusiast for what is called neo-liberalism. Friedman essentially equates this with globalism. If you put enough disparate passages together, you get a sense of what this means: Free-market solutions are to be preferred to government interventions; services must be privatized; the financial sector must be de-regulated, with the regulations left promoting efficient markets (although, significantly, it is just fine for the government to be the guarantor of last resort, as with deposit insurance); and, crucially, the monetary and fiscal policies must be essentially taken out of the hands of elected representatives (or, to put it in graffiti terms: Central Bankers Rule!).
This is pretty much the way Friedman sees the world going. He calls the result the "Golden Straightjacket." In the resulting growth of the GDP (gross domestic product), income inequality is a given, the labor markets become flexible (which is another way of saying: underpaid, overworked, and permanently cowed), and "knowledge workers," which include software engineers, CEOs, and -- surprise surprise -- foreign affairs columnists for The New York Times, amass Kubla Khan-style opulence. And everybody lives happily thereafter, except some three billion or so types on the bottom, who worry Friedman for their tendency to rob their betters.
I have troubles with this vision of the world. First, Friedman's reasoning is in a slight but distinct disconnect from reality -- the East Asian crisis looks more like the failure of globalism than its triumph. The recovery which is happening right now in Korea and Malaysia is a robust rebuff to neo-liberal tenets. If anything, it looks like a small number of derivatives traders, rather than a large number of investors -- Friedman's "electronic herd," speculators on a global scale -- had a lot to do with that particular shortfall of confidence. And the East Asian "Tigers" aren't changing their stripes; the state bureaucracy is continuing to direct cartels, interfere with currency trading, and in general acting like they don't want to imitate Margaret Thatcher's England.
Friedman is an incredibly boobish writer. An example that particularly rankles is the way he uses the word "democratization." Now, you and I, we'd probably think of that word in connection to democracy. And democracy in connection with elections, and no taxation without representation, and things of that nature, which vaguely call up civics class from the eighth grade. But Friedman simply uses democratization to mean "increase in quantity of." Sometimes he uses it to mean: "scattering of." So if more people buy stocks, that is democratization. Even though a lot of that stockbuying is really absolutely non-democratic -- that is, aggregates of money moving through mutual funds -- Friedman is undeterred. This puts him in the odd position of maintaining that it is more democratic that elected officials have less power over the economy than non-elected ones, like Central Bankers, who are acting for the "democratic" mass of stockholders, who are represented not by a legislature or an executive but by a mutual fund manager. In other words, democratization means the opposite of what it used to mean. It is more democratic, in Friedman's terms, for Chase Bank to dictate Mexico's economy than the Mexican government. This is a form of linguistic gerrymandering which I find positively Orwellian. Besides which, I don't believe efficient markets equate to young fund managers playing video poker with some poor country's GDP.
Michael Meeropol's Surrender: How the Clinton Administration Completed the Reagan Revolution should definitely be on the reading list of you Rage Against the Machine types out there. It is an accessible radical argument: populist economics with a minimum of charts. Meeropol includes a useful chapter on how the progressive deregulation of the financial sector, which has blessed us with venture capitalists (everybody put your hands together) and derivatives traders (everybody boo), has worked to shift money to those who invest the most, and want the highest return for their money. That's right, the infamous top 5% income bracket. However, what really exercises Meeropol is the delusive populism of the deficit debate, which was the filter through which the political economy of the Reagan years was debated in the early Nineties. It became fixed in the popular mind that our children were going to have to "pay down" the debt, as a certain short Texas billionaire put it. As Meeropol points out, this delusion is based on thinking of the state's outflow as an elaborate overhead cost. Like a business, the government's money goes to goods and services which also represent investments. The USA, in this respect, is no different than a railroad company, or some other long-running company, which is still, technically, paying off debts from 100 years ago. Debts are naturally rolled over because it is in the nature of countries and companies to grow, and it is in the interest of creditors to loan. This is why we are still paying for the Civil War in the U.S. debt. It mistakes the whole purpose of borrowing in the modern economy to act like the U.S. government was some drunk, asking for money to go on a binge. Our children won't have to pay down the debt because no large organizations pay down debts.
In fact, Meeropol rather grudgingly concedes that Reagan was right to use deficit financing to pull the country out of a recession in the early Eighties. According to Meeropol, Reagan fucked up by pursuing an inconsistent economic policy, pumping money into the system and then clamping down on the money supply via high interest rates. Then, of course, there are the specifics -- the purpose for which, under Reagan, the government expended our money. Here, I'm a little more suspicious of Meeropol -- he seems to think it was fine and dandy for Democratic administrations to throw money at defense, and economically stupid for Republican administrations to do so. I suspect partisanship, especially as he never alludes to the financing of the Vietnam War as a cause of the inflation in the Seventies, which many economists think certainly had to be the case.
Meeropol's story leads us to another book which has received surprisingly little press, Edward Luttwak's Turbo-Capitalism. Luttwak is a think-tank kind of guy, one of those mysterious names which pop up in journals like The Atlantic Monthly and The New Republic with the big-think kind of articles. The military used to be his domain of expertise, but lately he's been think-tanking about "Geo-Economics."
Turbo-Capitalism is like the evil twin to Friedman's book, taking up the factors, one by one, that Friedman enumerates, and showing how they are leading us to a double civilization. On the bottom, it's a Hobbesian jungle in which the set patterns of family life and middle-class culture are as inexorably dissolved as peasant culture was by the industrial revolution, to be replaced by impoverished existences of sensationalism and drudgery. On the top, the entrepeneurial ethos rules, barring any intervention to prevent the "Americanization" of the world. Luttwak is an immigrant to our shores, and he ritually genuflects to what a great civilization we have going. Then he starts smashing things. Two chapters entitled "Money as Religion" and "Shopping as Therapy" even roused my latent patriotic impulses, which are pretty weak. Luttwak diagnoses Americans as obese, childish, and victims of a truly profound breakdown of the family so that, in order to achieve any emotional satisfaction at all in our pretty much primate-level lives, we go out to faceless malls and burn up our credit card limits on imbecilic gifts for ourselves. It is a mass circle-jerk of consumerism. Meanwhile, the real family unit, which Luttwak, touchingly, takes to include three or four generations, living in the same house, has been farmed out to old folks' homes or Florida. So our negative savings rate, our urge to hurt one another in public spaces with automatic rifles, and, I guess, saturated fats, all come together in one great American psychosis. It's the blob scenario of apocalypse.
Where Luttwak is most interesting is his critique of America's vaunted "flexible labor market," which is why we have 3-4% unemployment rates and the French have 12 to 14. As Luttwak points out, the French worker also has tons more benefits than we do, and his inclination, when unemployed, is not to uproot himself from his near and dear to find a job where he makes less in some vocation he isn't particularly interested in. It's true, there is something culturally suspect about the American worker's naked vulnerability to his employer. This, combined with a wraparound media machine continually urging purchase, has replaced the healthy hedonism of property ownership with the neurosis of compensatory buying. Voilà: mall culture.
All of this should remind us that economics is embedded in the grander projects of human reality. Adam Smith, the father of us all, was as adamant as Marx on the role of economics as a cultural "multiplier." The way you make money, and what you make money on, is going to have a primary influence on how you live, and the ideals you hold. Adam Smith makes a distinction, which, to our modern eyes, is illegitimately value-laden, between productive and unproductive labor. The latter is what has now become the service economy, while the former is the mode of adding value to the materials upon which one works -- in other words, manufacturing or agriculture. The accessories to unproductive labor -- lawyers, bureaucrats, or, in today's world, consultants and advertisers -- Smith considers as so many prodigals, while productive labor, characterized by limiting the gratification of desire, industry, and saving, is looked upon much more benignly. Whatever, therefore, we may imagine the real wealth and revenue of a country to consist in, whether in the value of the annual produce of its land and labor, as plain reason seems to dictate; or in the quantity of the precious metals which circulate within it, as vulgar prejudices suppose; in either view of the matter, every prodigal appears to be a public enemy, and every frugal man a public benefactor.
The Internet has, undoubtedly, spawned a speculative bubble around itself, which goes a long way toward explaining Kinsley's "Internet envy." Edward Chancellor's Devil Take the Hindmost: A History of Financial Speculation, besides being immensely fun to read, has a lot of relevance to the current stock market boom.
Chancellor, his author's bio tells us, writes for the Financial Times and The Economist. I'm no Anglophile (you don't study French lit if you're an Anglophile), but the English standard of business journalism is clearly higher than the American. Chancellor draws effortlessly upon art and literature, as well as upon business history, to explain his cases. Guess what? He doesn't need to use hackneyed sports metaphors, shaky analogies, or straw man arguments. (These are depressingly standard in most American business journalism.) Chancellor's book is in competition with the classic Extraordinary Popular Delusions and the Madness of Crowds, by Charles Mackay. Mackay's accounts of the South Sea Bubble and Tulipmania have seeped into the folklore. Like folklore, Mackay has a none-too-tender attitude toward fact. Lately, economists have been revisiting past speculative bubbles to show the rational structure of them. The subtext of this rewriting of history -- bubble denial -- is to justify our current climate of financial deregulation. Chancellor is having none of that. His account of the bubbles have a freak-show fascination which Chancellor's considerable storytelling abilities accentuate. But it is his condensed criticism of the speculative fevers of the Eighties and Nineties which make him more interesting to me. Chancellor is an ace demolisher of bullshit, which presently parades around as the Efficient Market Hypothesis. Efficiency, here, is derived from its earlier, liberal use. Market distortion is translated into information terms, and efficiency is now gauged by randomness. Real mavens of efficient markets claim that, theoretically, it is impossible to overvalue financial assets. In other words, they deny the importance of intrinsic value. It is one of those little ironies of life that deconstruction, or the denial of essence, has become a whipping boy of cultural conservatives just as their colleagues in the economics department quietly push the denial of essence into an economic dogma -- one of those ironies, I can't resist saying, which I would never be aware of if I hadn't gotten a French degree.
After reading the mordant Chancellor, we get to the bottom of my pile. Francis Fukuyama has attracted a big following in certain business circles. He was a minor official in the Bush administration when he published The End of History and the Last Man. It was, indeed, the perfect corellative to the triumphalist mood immediately attendant upon the fall of the Berlin Wall. Fukuyama there took the Hegelian trope of the End of History and applied it to the status quo, circa 1991.
What do you do for an encore, when History is over? Well, you look back. The Grand Disruption wants to tell us how we got to this point in history. But it wants to do it not with the tracking of specific habits and dispositions within the environment of modernity, but as a further exercise in the grandiose world view. The argument, briefly, is that, starting in 1950, about, and going all the way until the mid-Nineties (say 1994), the West experienced a prolonged moral disruption. Violent crime rose, marriages eroded, civil life became more precarious, and drugs became widespread. Fukuyama pegs this argument to several graphs, showing rises in bad behavior all over the place, from Sweden to California.
What to say about this argument? Well, the first thing that comes to mind is that it must be wrong.
Consider, for instance, violent crime. Fukuyama considers whether his statistics account for all crimes, or just reported crimes. What he never considers is the status of crime itself. You would never understand the moral climate of Germany, 1933-1945, by looking at the police reports. Why? The police were committing the crimes. To consider violence and violent crimes to be one entity is to strain at a mugging and swallow a massacre. Really, between World War I and the end of World War II, there was a grand disruption, which resulted in the massacre of perhaps 25 million people, the forced emigration of perhaps another 20 million, and the death toll, from wars, of at least 10 million. If we project backward with those figures in mind, we find that the Grand Disruption is characterized by one thing: The West was much, much more peaceful than at any time since the end of the Napoleonic wars. Fukuyama is a suburban Toynbee. His world view has the restricted scope of the confirmed philistine.
It is part of Fukuyama's astonishing blindness that he doesn't see the civil rights laws in the Sixties as a moral triumph, and part of the backlash against the savagery of the earlier part of the century. Projecting backward, how many of the peaceful, non-divorced citizens of Fukuyama's fantasy would be liable to heavy suits stemming from their massive and systematic discriminations against women, blacks, Hispanics, and gays?
I could continue to play this game, but I've made my point. Fukuyama buttresses his observations with a few speculative forays into sociobiology. Sociobiology might have some scientific merit, but using the habits of Western-style humans, circa 1990, to tell us about human nature, seems either trivial or misguided. Surely if we are looking for constants, we should examine longer civilizations -- like the ancient Egyptians. There we do stumble upon a universal human truth -- our innate disposition to worship cats. Having recently house-sat a particularly grouchy cat, I have many questions about just how this trait promoted evolutionary adaptability.
Which will be, perhaps, next summer's project.