Everything for Sale

...As Kuttner explains it with regard to the regulated energy indus-tries, the rate structures of the past had assumed rising use and declining costs...

...But the construction of the production-oriented economics necessary to do so has bare-ly begun...

...What underlay the failures of the in-terventionist state is that it ignored pro-duction...

...But rapid noninflationary growth can be achieved only when output per worker grows at a rate much more rapid-ly than has occurred recently...

...A buoyant economy still is the best means to alleviate pover-ty...

...At its root declining rates of labor-productivity growth are the sin-gle most important reason that incomes have not grown and inequality has in-creased during the last twenty years...

...There is no doubt that, as Kuttner puts it, "the practical task is to determine when regulation improves efficiency, what sort of regulatory strategies to pur-sue, which regulations take precedence over others, and where is the point of diminishing returns...

...What this suggests is that what liberal-ism needs, but Kuttner does not provide, is a supply-side counterpart to demand-side Keynesianism...

...These, in turn, generated, as Kuttner puts it, "more political pressure to end the monopoly and allow in com-petitors, further undermining the old system...

...For liberalism once again to be at-tractive it must offer a credible strategy to raise the incomes of the great major-ity of United States households...

...In a series of penetrating discussions concerned with labor mar-kets, health care, financial institutions, and environmental and work-safety is-sues, Kuttner is merciless in exploring the lack of realism and the illogic un-derlying the view that markets, left alone, will result in socially optimal out-comes...

...Kuttner points out that the po-litical constituency which supported the initial efforts at deregulation extended on the political Left to include Ralph Nader and Ted Kennedy...

...It is likely that these failures more than anything else have prompted the con-servative resurgence in the country...

...The failure of government policy oc-curred at both the macro- and microec-onomic level...

...Keynesian economics called for the public sector to regulate the demand for goods and services and thereby indirectly affect both prices and employment...

...Kuttner is right when he ar-gues that "the grail of a perfect market, purged of illegitimate and inefficient distortions, is a fantasy-and a danger-ous one...

...But faced with increasing prices for imported oil, it possessed no tools other than raising unemployment to combat the resulting inflation...

...And, tellingly, Bill Clinton has shown no inclination to reverse the process...

...For the glorification of the market in our current public discourse represents, at least in large part, a reac-tion to the failure of government eco-nomic policy during the 1970s and early 1980s...

...But Kuttner has per-formed a valuable service in bringing to-gether the profession's scattered insights concerning the weaknesses of unregu-lated markets...

...Indeed, it is striking that a good deal of the deregulation which came to be as-sociated with the Reagan administration in fact was initiated during the Carter presidency...

...But Kuttner's attack, and others like it, will not be sufficient to reverse the lais-sez-faire tide...

...The re-cessions of 1973-74 and 1979-80 reflect-ed this incapacity...

...BOOKS Liberalism's unfinished business Jay R. Handle If all that a rehabilitation of liberalism in this country requires is a devastating cri-tique of laissez-faire eco-nomics, Robert Kuttner's new book will do the trick...

...As a result, the hope for its resurgence is bleak...

...Without a sharply defined focus of its own centered on restoring income growth among those groups, Kuttner's book reads too much like a call to restore the interventionist policies that have al-ready been found wanting...

...But though Schum-peter was every bit the dissenter from the orthodoxy about markets on the po-litical Right that Kuttner makes him out to be, it has to be remembered that he was quick to defend income inequality as essential in promoting capitalist de-velopment...

...But he does not seem to real-ize that, until a credible alternative which utilizes the public sector to help create wealth and to distribute it fairly has been articulated and defended, the pol-itics of the country will continue to be supportive of increased marketization...

...He writes: "In markets where the consumer is not effectively sovereign (telecommunications, public utilities, banking, airlines, pure food and drugs), or where the reliance on mar-ket verdicts would lead to socially in-tolerable outcomes (poor health care or education, pollution, gross inequality of income, the buying of office or purchase of professions), a recourse purely to in-effectual market discipline would leave both consumer and society worse off than the alternative of a mix of market forces and regulatory interventions...

...Economists have long known of market failures...

...When fuel prices dramatically advanced, pressures were created "both for rate hikes to cover costs and for new rate structures to discourage usage...

...The upshot was rising prices and decreased demand...

...Furthermore, the botched effort by both the Nixon ad-ministration and then later that of Jimmy Carter to manage the petroleum short-ages which were created by OPEC pro-vided an additional wedge for those who believed that government should remove itself from the economy...

...For while the American people may or may not take seriously the more exaggerated claims made on behalf of the market, it is certain that reliance on it is preferable to the policy void cur-rently existing on the political Left...

...At the microeconomic level, govern-ment regulation in the inflationary con-text of the 1970s proved to be clumsy and ineffective...

...It is not at all clear how far Kuttner is willing to follow the inegali-tarian policy recommendations associ-ated with the Schumpeterian tradition...

...Depressingly, however, these specific tasks remain overwhelmingly ignored by liberalism...

...Kuttner does take up the issue of long-term growth and invokes the authority of Joseph Schumpeter in support of his argument that competitive markets may not be the best means to promote eco-nomic expansion...

...Indeed, Kutt-ner himself, in regretting the abolition of the Civil Aeronautics Board, never-theless writes that "in fairness the actu-al CAB (as opposed to an ideal one) may have been corrupted beyond remedia-tion...

...Stagnating income among the poor and middle class dates from those years...