Who Plans the Planners? (Modern Capitalism, by Andrew Shonfield)
Cohen, Stephen
MODERN CAPITALISM, by Andrew Shonfield. New York: Oxford University Press. 456 pp. $4.50. Modern Capitalism describes how advanced capitalist nations manage their economic affairs. It explains...
...These are the stewards of power, and they get few instructions from the legitimate source of power, Parliament...
...But so, Shonfield finds, is the present drift of things in France and Germany...
...A maze of isolated and independent regulatory commissions baffles coordinated policy...
...economy performed poorly because of Washington's unwillingness to assume a strong leadership role...
...Tax rebates and tax deductions, accelerated depreciation allowances, cheap credit, even direct subsidies are used to encourage expansion...
...Furthermore, few large firms have any real objection to following most of the plan...
...The political leaders and the permanent bureaucracy paid homage to the doctrine of separation of public and private economic power...
...It explains how the Germans control their full-employment, rapid-growth economy, how the Swedes retrain labor, how the French plan, how the Italians produce miracles, how the Americans roar around in circles, and how the British bum ble...
...Behind the collection of "carrots" is the stick —but it is rarely used...
...In Germany the bankers control the sources of investment funds and, through their interlocking control of the major companies, they control the uses of that capital...
...economy these past five years indicates that it might be possible to maintain expansion without going "beyond Keynes" as Shonfield advocates...
...The performance of the U.S...
...The book would be better without the concluding chapter...
...Shonfield ought to have examined the difficulties the French have had in coordinating government policy on prices and incomes with the investment plan...
...These are made available to one industry and not another, to one firm and not another...
...a nominal commitment to the "free market") the French and German economies are planned in a roughly similar manner...
...Shonfield's analysis of French planning is excellent...
...In any case, he was not "taken in" by the Plan the way many other enthusiasts of French planning have been...
...What happened to it...
...The burden of the book is to describe the new capitalism and to show how it represents a qualitative change in the system—not just a prolonged version of a traditional "boom...
...Shonfield demonstrates that modern, or neo-capitalism, unlike the old capitalism, is not an automatic, selfregulating system: it's managed...
...The prolonged nature of our boom seems to clinch Shonfield's analysis of the U.S...
...and England in the postwar period...
...The author has a thesis, and he uses the case materials as the substance of his argument...
...Capitalism proved to be a cataclysmic failure in the 1930's, yet it seems to be an engine of prosperity in the postwar Western world...
...He is not a social scientist...
...The booming results of the Keynesian palliatives administered to the U.S...
...lie uses verbs...
...That is not to say that the state did not exert an enormous influence on the economy—the mere weight of the federal budget precludes such a role—but rather that federal power was not systematically used to direct development the way it was in France and Germany...
...The Plan encourages firms that have been reluctant to expand as rapidly as wanted through the use of a complex system of differential favors or incentives...
...The state has no objection whatever to high profits—so long as investment remains high...
...Bargaining is the key word: neither side dictates to the other...
...The new corporatism has little in common with the prewar product that made "corporatism" a dirty word: it is not an unholy alliance of plutocrats, demagogues, punks, and a lower middle class frightened of proletarianization, pitted against the working class and the productive middle...
...But it seems to trouble his more important argument: Keynesian bromides are not enough...
...Shonfield's answer is no shock: it changed...
...it focuses its attention on directing investment in the growth sectors (mostly oligopoly industries) and thereby steers the nation's development...
...it must initiate, promote and control expansion...
...For the Keynesian formulas don't get at the problem of the sectoral composition of growth, at the choices confronting our economy —between more cars or more hospitals, more cities or more highways, more guns or more Metracal...
...Behind the German love songs to Lucius Clay and Adam Smith, the directors of the state, the giant corporations and the great banks coordinate investments...
...The bankers are the crucial link...
...Shonfield's analysis is perceptive and courageous...
...It doesn't plan all economic activities...
...Modern Capitalism covers the whole range of Western economic experience...
...The lack of such coordination has been the primary cause of many of the failures of French planning...
...But he frequently fails to indicate which role he is talking about...
...Despite its rhetoric of "democratic planning" and "popular participation," the French plan is run by a small group of permanent government officials, bankers and corporation executives: the partnership...
...nor, for that matter, did liberal democracy...
...It emphasizes roles, attitudes, and institutions, and these are frustrating concepts for the economist...
...They kept "hands off" and provided "equal treatment...
...The Germans have no "plan"—the word is taboo in Bonn...
...Indeed, the working principle of French "indicative" planning is a fundamental harmony of interest between big business and the state: what is good for Michelin Rubber is good for the nation...
...He refers to the Plan first as a specific institution and then as a symbol for the general partnership between the interventionist state and big business...
...ridiculous mus nascitur: Ombudsmen and better research staffs for members of Parliament...
...If the boom can be sustained on the force of purely Keynesian policy (plus a small war), he doesn't have much basis for arguing that more than Keynesian economics are needed...
...They are directed by a small group of professional managers who are committed to expansion, full employment and high profits, and who unflinchingly believe that they are acting in the public interest...
...economy as soon as Eisenhower's entourage of bumblers was out of Washington seems to have demonstrated conclusively just how effective government action could be —even when limited to simple Key nesian remedies...
...It is managed by a partnership of the state, the giant corporations, and the trade unions...
...It fails to take up the questions he raises earlier in the book...
...Many economists would disagree with this view...
...Mr...
...No production quotas are issued from a central planning bureau...
...Both know that long-run cooperation is essential...
...A four-year development plan in which expansion programs for the principle industries are made mutually consistent reduces bottlenecks, investment hesitations, investment fluctuations, and similar disorderly effects of uncertainty...
...No committee of experts, each writing on his own field, could produce such an informative book, because they could never provide the unending flow of comparisons which give the book its greatest worth and greatest interest...
...if you want to invigorate the economies of the English-speaking nations, public policy is the best place to start...
...The failure of the state to commit itself to an expansionist ethic and to develop the institutions necessary for a determined leadership of the economy is the principal reason for the poor performance registered by the U.S...
...Hence the striking contrast between the continental countries where GNP has been growing at about 4-5 percent per year since the early 'fifties and the Anglo-Saxon nations: a soggy 2½ percent rate of growth in the U.S., and an even soggier 1.7 percent in the British economy during the 'fifties...
...The reasons for this are historical...
...Recently, the democratic Left in France has discovered that a national economic plan is not necessarily an instrument of the Left and is proposing various reforms to "democratize planning...
...For example, MendesFrance advocates the creation of a new house of Parliament, composed of representatives of economic groups, to deal with economic matters...
...As he describes it, the structure of the American political system is brilliantly contrived for self-paralysis...
...All the Left asks is to be let into the game...
...They plan without a "plan" quite as effectively as the French plan with their Plan—perhaps even more effectively...
...The way the system works is simple...
...The continental countries have a traditional disposition toward the attitudes and institutions that complement modern capitalism...
...economy in the 'fifties: a pre-Keynesian outlook (the George Humphrey approach to government policy) is just plain idiocy...
...The initiating "interventionist" role of the state is what principally accounts for the strong showing of the continental economies during that same period...
...he sees through the fog of rhetoric and decorative institu tions that surrounds the Plan and gets at how it actually works...
...Liberal economics, then Keynesian economics (an outgrowth of classical theory) have dominated thought in the U.S...
...it hesitates...
...His concluding chapter, which deals with the "political implications" of the basic changes he has diagnosed, is weak...
...How well it works depends upon how well it is managed...
...Business wants high profits...
...Since the first plan which was promulgated by Executive decree in 1946 (ironically, it was Leon Blum who signed the decree), Parliament has exerted no real influence on planning...
...The trade unions cooperate: they accept the "trickle down...
...But he fails to consider the implications of this drift...
...The cartel manages the supply side and the state acts on the demand side...
...This explanation is rather unorthodox...
...Perhaps fewer would disagree with its corollary...
...In some countries (Sweden and the U.S.A...
...Shonfield makes no A.F.L.-type distinctions between economics, political science, sociology, and history...
...but more than bigness is needed for the system to work well...
...I think Shonfield exaggerates the structural obstacles...
...many more would qualify it...
...our failure is rooted in our proudest institutions...
...The Englishspeaking nations have a traditional aversion to those attitudes and institutions...
...The basic institutions of our economies— giant private corporations, giant trade unions, and giant welfareoriented governments—preclude a return to any other system...
...He unravels the basic trends and does not hesitate before the nasty sounding conclusion: corpora tism...
...the state failed to take on such an initiating role...
...it wanders...
...The French Parliament abdicated its responsibilities in this area a long time ago and reaffirms that abdication daily...
...No real difference seems to exist between planning for the nationalized firms such as Renault or Air France, and planning for privately owned giants such as Citroen, Michelin or Pechiney...
...it means orderly growth...
...Shonfield does not really provide criteria for judging performance that go beyond a high rate of growth and a low rate of unemployment...
...Not many American economists are convinced of the need to go beyond the Keynesian economics that have recently become Established in Washington...
...they have always been repugnant to the British and the Americans...
...Cartels, executive discretion, dirigisme, even corporatism have always been attractive to the French and the Germans...
...It presents a staggering amount of useful information in a lively manner...
...And here the role of the state is the critical variable...
...Neither classical economics nor Keynesianism ever caught on in France or Germany...
...It reads well and will interest the general reader as much as the professional economist...
...The state cannot be a passive partner...
...That is why the U.S...
...Few firms would risk the ill favor of a state apparatus that possesses such complete discretion in the exercise of its power...
...they had a big hand in writing it, and the non-oligopoly industries are not often included in the Plan...
...Shonfield finds that in some countries (France, Germany, and Italy) the state has consciously assumed a role of active leadership in the economy and has committed itself to sustaining full employment and rapid growth...
...He writes well...
...he likes it for what it is...
...and England...
...Despite striking differences in formal structures (a nominally democratic plan vs...
...Big government, big business, and, perhaps, big trade unions are necessary in order for the new system to work...
...He also underestimates the importance of eight years of sheer mindlessness under Eisenhower and the costs of almost a decade of dumb drift...
...Still fewer would be prepared to endorse the French—German model Shonfield recommends...
...It is a good book—solid, clear, persuasive, and remarkably informative...
...Congress guards its powers jealously—when other parliaments are abandoning theirs to the executive...
...The central thesis of this book is that there is no reason to suppose that the patterns of the past, which have been ingeniously unravelled by the historians of the trade cycles, will reassert themselves in the future...
...in other countries (France, Italy, and Germany) they are weak and passive...
...boom can cause his analysis so much trouble...
...It is not simply another collection of juxtaposed case studies...
...Rather, it is rule by the stewards of the great economic interests in—what they earnestly believe to be—the public interest...
...He tries but he fails...
...Would not Shonfield's argument be more convincing— and more relevant—if it were based on the need to direct, as well as to sustain, expansion...
...As Shonfield points out, this kind of discriminatory interventionism has a long history in France...
...Marginal analysis, growth as a function of resource inputs, and evolving technology are more compatible with economic modes of reasoning...
...In other countries (most notably England and the U.S...
...He argues that our Constitutional architecture of checks and balances and our national fetish for scattering power, make it impossible for the state to coordinate its own activities and to begin to use the whole of its power in a determined way...
...the trade unions are strong and active partners...
...Thus Shonfield finds that during the 'fifties the U.S...
...It keeps taxes high and holds back inflationary pressures...
...Shonfield refers to the French plan as " a conspiracy in the public interest...
...The proposal is frankly corporatist (see his La Republique Moderne, 1962...
...But Shonfield shows that the West German economy has a similar steering committee...
...The state buys the cooperation of the firm...
...Success under modern capitalism means more than just rapid growth...
...The structures didn't work because no one tried to make them work...
...Neither Parliament nor the trade unions exert any real influence...
...The argument starts with an obvious problem...
...But, he argues, we have yet to learn to make that system perform satisfactorily...
...Furthermore, behind the lack of will, Shonfield finds a lack of means...
...no threats of nationalization are made...
...This tends to make the planning institution appear far more influential than it now is...
...In France the planning institution is useful on the supply side where civil servants and corporation executives steer investment, but a succession of insecure governments (prior to de Gaulle) proved unable to control demand as firmly as the German authorities...
...The targets are bargained out among the two participants—the business executives and the government officials...
...That means that, for the moment at least, we are stuck with what Shonfield calls modern capitalism...
...Committees of businessmen and government officials prepare long-term investment and output programs for each industry...
...But Shonfield sticks to his thesis: a difference in attitude is the difference that makes a difference...
Vol. 13 • September 1966 • No. 5
