THE TROUBLE WITH CAPITALISM: AN ENQUIRY INTO THE CAUSES OF GLOBAL ECONOMIC FAILURE
By Harry Shutt
256 pp., $22.50
It is useful to challenge conventional wisdom. In "The Trouble With Capitalism," economist Harry Shutt tackles the notion that capitalism has triumphed in the post-cold-war world and that the global marketplace is the wave of the future.
He identifies an impressive array of potential problems, but does not make a compelling case for their existence. Moreover, his analysis peters out when he gets around to presenting alternatives.
Shutt begins by taking issue with a "seemingly irresistible consensus" - the supposed belief that laissez faire capitalism has so clearly demonstrated its superiority over all imaginable economic systems that any deviation from it is "untenable and unsustainable." Any reasonable person would share his disdain for such a consensus, should it exist.
After setting up an unrealistic standard for evaluating capitalism, Shutt has a lot of fun identifying departures from his concept of pristine marketplace decisionmaking. He equates all those interventions with support of "private business interests."
Indeed, some regulations have benefited regulated industries. Typically, these are controls over entry, prices, and profits, many of which have been phased out in the past two decades. But Shutt ignores the rise of environmental and safety regulations, which often have been enacted over the opposition of the affected industries. In focusing on "big business," he also overlooks the job-creation role of new and small companies.
Similarly, when he writes about "tax breaks," he equates the entire category with subsidizing business. For the record, this reviewer has opposed many of these special business "incentives." However, the largest tax breaks are directed to middle-class consumers.
Shutt states that the capitalistic system is afflicted with "chronic economic stagnation." He does not document this key assertion, although it is the basis for his conclusion that capitalism is a failure.
He does devote considerable space to a very selective reading of economic history. For example, he contends that in the mid-1960s, the notion of perpetual growth based on judicious governmental intervention became "unchallengeable orthodoxy." In reality, many conservative or market-oriented economists, led by Milton Friedman, challenged that contention loudly and often.
More recently, he blames Tory economic policy for Britain's recession in the early 1980s. However, he ignores the rapid growth that has taken place in recent years, the fastest in Western Europe. Shutt's recurring theme of stagnating economies and declining demand for capital, reminiscent of naive Marxist thought, has been overtaken by events.
In lieu of any detail, he offers several general principles for a new economic system, including:
1. Decentralizing collective decisionmaking while increasing international integration.
2. Redirecting the flow of resources from rich to poor countries.
3. Restricting capital flows in the case of countries that have not set limits on profits.
4. Requiring industrialized countries to give up their sovereignty in return for integration into the world community.
Shutt concludes with a neat cop-out: He can't anticipate all the problems that would confront the newly evolving structure, so governments must be willing to experiment. (It would have helped if he had tried to anticipate some of the problems.)
A rough paraphrase of Winston Churchill's conclusion on democracy comes to mind: Capitalism is the world's worst form of economic system, except for all those others that have been suggested from time to time.
* Murray Weidenbaum is chairman of the Center for the Study of American Business at Washington University in St. Louis.