It’s been a tough decade for American capitalism. First, the Great Recession, followed by a slow, uneven recovery, which left behind millions of people and entire regions. Such developments led in turn to rising public concern over inequality, which seemed to be increasing, and productivity, the growth of which was decreasing, sparking talk of “secular stagnation.”
Not surprisingly, all this gloom and doom brought both ambitious politicians and designing academics out of the woodwork. Members of both groups saw political or career-enhancing hay to be made by attacking the economic system from which they themselves benefited and with which the U.S. is associated more than anyplace else: Capitalism. Voilà — the rise to prominence of pols such as Bernie Sanders and Alexandria Ocasio-Cortez, the resurgence of the Democratic Socialists of America, and the trendiness in academia of fields such as the “new history of American capitalism,” the practitioners of which are generally apoplectic about the capitalist system, predicated, as it is, on free markets, private property, and competition. In such a climate, is it any wonder that a highly publicized Gallup Poll taken last summer found that Democrats viewed socialism more favorably than capitalism?
To be sure, capitalism has its problems, though far fewer than any other economic system that’s ever been on offer. Supporters of capitalism can take solace in the fact that some hopeful signs have begun to appear. Indeed, in a scenario consistent with Newton —for every action there is an equal and opposite reaction, and all that — we are seeing defenders of capitalism mobilize in response to the many assaults this system has endured. The business press has been quite active in this regard, and, earlier in 2018, we saw the publication of billionaire businessman/philanthropist Ken Langone’s heart-felt memoir “I Love Capitalism!”
With Alan Greenspan and Adrian Wooldridge’s book, “Capitalism in America: A History,” we have a systematic riposte to capitalism’s critics.
This unlikely pair — Greenspan, the 92-year economist who chaired the Federal Reserve Bank from 1987 until 2006, and Wooldridge, a 59-year old, Oxford-trained historian and long-time writer/editor for The Economist — has risen admirably to the task.
“Capitalism in America” is a lively, often brilliant, and always interesting survey of America’s economic history from colonization to the present. The authors focus on three linked “organizing themes”: Productivity, the concept of creative destruction, and politics. As they see things: “Productivity describes society’s ability to get more output from a given input. Creative destruction defines the process that drives productivity growth. Politics deals with the fallout of creative destruction.”
In their view, the interaction among these themes has spurred creative destruction — think mechanical reapers replacing hordes of harvest laborers or ATMs replacing bank tellers — through most of our country’s history, leading to rising levels of economic efficiency, centuries of growth, and unparalleled wealth accumulation.
Although we still have numerous strengths, the authors believe that the U.S. economy is increasingly characterized by “fading dynamism.” Why? They cite various factors: Problems in our educational system, disappointing productivity gains from IT, declining mobility, and aging infrastructure. Two other factors, however, trouble the authors most: The unsustainable growth of entitlements and our increasing unwillingness to accept the costs of creative destruction. Both of these factors, alas, are expressions of our deeply flawed political system.
Some will find Greenspan and Wooldridge’s book overly bullish on capitalism, and both incomplete and a bit self-serving. There is, for example, relatively little discussion of workers or of Greenspan’s role leading up to the Great Recession. But, on balance, this is a most welcome addition to the literature on both capitalism as a system and the economic history of the United States.
Peter A. Coclanis is Albert R. Newsome Distinguished Professor of History and Director of the Global Research Institute at UNC-Chapel Hill.
“Capitalism in America: A History”
By Alan Greenspan and Adrian Wooldridge
New York: Penguin Press, 486 pages