New Dimensions of Political Economy by Walter W. Heller
Ornati, Oscar A.
NEW DIMENSIONS OF POLITICAL ECONOMY, by Walter W. Heller. W. W. Norton. Paper, $1.75. THE "NEW ECONOMICS" are clearly in. Congress, the federal bureaucracy, the commander in chief, the...
...The process stopped in 1953...
...What is being weighed is how strong expansionary forces are and whether they will take place now or six or nine months hence...
...Our tools of economic management are far less than precise when we remember, for example, that there are even considerable underestimates in the Census...
...Pragmatism inherently is an ex post doctrine even though, in its most vulgar forms, it is used to justify future action...
...T'is a pity...
...Matched against the 4.6 per cent of the Truman years it turns into a mere "respectable record...
...That such participation is hard to achieve is clear...
...The new political economy has not changed matters—in terms of the distribution of wealth and income it is the entire community that helps those already well off...
...Indeed, individual political rights and activities have not been curtailed—on the contrary, they have been expanded...
...The discussion of the distributive disadvantages of the tax cut appears only in a discussion of Presidential doubts, political pressures, and the fact that "the long shadow of Galbraith had fallen across the White House with a renewed call for expenditure increases rather than tax cuts in the face of unmet needs for public services...
...But the matter of income distribution, which underlies all of these questions, is really never tackled...
...But this achievement is overstated...
...how an adviser can go further than the President and how in turn, on occasion, the President is ahead of his advisers is well told...
...Economic action has been shifted from a corrective to a propulsive orientation...
...Equality of opportunity is presented as a policy constraint—should it not be a goal...
...The current Congressional debate of whether to accept the Johnson-proposed tax increase reflects no theoretical or political advance over the discussions surrounding the 1964 tax cut...
...What it means is well illustrated in the impact of the recently "planned tightness" in mortgage monies for home construction...
...The political corollary is continuing discretionary and precise action rather than automatic anticyclical governmental intervention...
...The poor benefit also from the country's planned propulsive orientation, and surely no sane man would advocate rejection of a pattern of economic management solely because it benefits the rich still more...
...What the economists refer to with unwarranted neutrality as a 1 per cent shift in rates meant here that an average white-collar worker—who postponed, freely, the buying of a house by one year—lost, freely, almost two years' pay...
...Heller notes that experience with fiscal and monetary management has made mincemeat of the Hayekian thesis that planning was the road to serfdom...
...nowhere is there a hint that in a nation of borrowers keeping prices stable benefits only a minority of lenders...
...Putnam's Sons, 1965), traces the paradoxes in the relationship between the Administration and the business community, leaving no one in doubt that the acceptance of the new economics depended on the latter's good will...
...Heller lauds the triumph of experience over old ideas...
...A rate of growth of 4.8 per cent per year looks miraculous only after the Eisenhower years...
...But it is typically American that the substitution of ideas is presented as the result of experience...
...This is no minor accomplishment...
...compare the 25 years it took Congress to learn the new economics with the more than 100 years it took the Tennessee legislature to admit the existence of the new biology...
...That the country has "learned to live with administrative deficits" seems less impressive once we remem91 BOOKS ber—as Heller made sure Kennedy would remember in his Yale speech—that the current deficit is, relative to Gross National Product, less than half of the 1945 deficit...
...The theme of the "death of ideology" is turned around in a section dealing with the dislodgement of the doctrinally pure at heart from their old ideological foxholes...
...Heller's reminiscences make good history...
...In all this Heller is an excellent guide...
...Who benefits from the application of the new economics...
...That the issue is important is equally clear...
...Yet for a full understanding of the social and economic costs, as well as benefits, involved in the policy choices, we should not lose sight of who it is that is getting more equal more quickly...
...Hayek and other laissez-faire advocates of his ilk never contributed much more than the perversion of materialistic determinism, which stems from a lack of faith in democractic man...
...ECONOMICS, LIKE POLITICS, deals with the question of who gets what, when, how, and why...
...Heller claims no more for it...
...THE NEW POLITICAL ECONOMY is no more than Keynes cum growth...
...Whether price increases are politically desirable or not and what they will mean and for whom is not asked...
...But there are some more subtle problems...
...Hobart Rowen, in The Free Enterprisers: Kennedy, Johnson and the Business Establishment (G.P...
...The acceptance of the new ideology is a matter involving more than the development of a "new consensus...
...As they propel an economy where returns are on the basis of private profit, the answer is clear: the rich, the near-rich and most particularly the large corporations and their stockholders...
...The redistributive impact of our tenacious wedding to the mythology of "inflation" is never discussed...
...That we are all neo-Keynesians, how it came to be, and that it is a good thing is well told by the former chairman of the Council of Economic Advisers...
...In fact, what has really happened is that one economic theory was displaced by another...
...A change in interest rates, for instance, changes the parameters within which decisions are made: the individual—consumer or producer —is still free to make decisions, and his political rights are unaffected...
...for a while inequality increased...
...Briskly and with ease he pilots the reader through notions such as "fiscal gap," "fullemployment surplus," "monetary twist...
...Yet, in some ways the book claims too much and evades what should be central...
...Beginning with 1935, a quintile-by-quintile analysis of income distribution indicates a slow but continued reduction in inequality...
...This is required reading for the action intellectuals and an excellent refresher in contemporary economics...
...How the education of, by, and for Presidents on matters economic progresses...
...Congress, the federal bureaucracy, the commander in chief, the intellectual establishment, the fourth estate, indeed all who matter are now Keynesians...
...Heller notes concern with poverty, the quality of life, and all the other topics so popular these days...
...But he does not participate in—and is not aware of—the establishing of the new limits, the new rules that determine his actions...
...To it the Washington economists, time, and MacNamara have added the quantification of economic goals and the development of tools of economic management...
...Heller's case is based on the "miraculous achievement" of a six-year period of unprecedented prosperity and the effect of the 1964 tax cut...
...THE NEW ECONOMICS not only have taken hold, but they seem to have taken hold in precisely the framework that Heller advances...
Vol. 15 • January 1968 • No. 1
