No Time for Hubris

...Rather, Europe got back on its feet thanks to a cockeyed Keynesianism sired by Uncle Sam...

...The search for that redefinition takes up the bulk of this book...

...Wecouldnot, or wouldnot, actforthree reasons...

...In the coming millennium, Keynesianism must go planetary...

...Until recently, it was difficult to convince Americans of the folly of laissez-faire and the desirability of any alternative because the ears of the nation were more closely attuned to the rumblings of the Cold War than to the relatively quiet disturbances in our own economy...

...Kuttner's New View is not only a significant break from the professorial pack, it is also a departure from the main current of American left-of-center thinking...

...Unlike so many economists in academe, Kuttner does not treat his subject as the study of forces operating in a vacuum...

...But in the process Ricardo added an earthly element to substitute for the Deity—namely, "natural attributes" that endowed the various nations with different "comparative advantages...

...During the initial decade of its existence, the IMF was not provided with anywhere near the sums necessary for it to serve as a global lender of the scope Keynes envisaged...

...Before setting forth his "New View," Kuttner offers a caustic critique of classic and neoclassic free-trade theory...

...Disraeli once said "Free trade is not a principle...

...Keynes did not live to see his plan for a new world economic order come to much...

...When a modern global corporation looks for a place to locate its facilities, it seeks low wages, low taxes, government protection and subsidies, favorable exchange rates, skilled workers, and a sound infrastructure...

...But in today's world, with global corporations reaching out to dominate a global economy, denouncing laissez-faire domestically while praising it internationally is both ill-informed and illogical—not to mention illiberal...

...Formore than halfacentury liberals and radicals have been critical of laissezfaire in this country, arguing that the market is vulnerable to manipulation by private interests and consequently requires the countervailing presence of government...

...itself...

...The political climate is far more important than the natural climate...

...In the short run they seemed to work...

...Once that happens, the world will have realized a vision that John Maynard Keynes himself promulgated nearly a half century ago...

...Third, American manufacturers, wholesalers and retailers profited from an arrangement whereby they could have their products made cheaply over there and sell them, with obscene markups, over here...

...It is based on an informed and insightful examination of the recent past, from the Great Depression of 1929 to the Great Liberation of 1989...

...But pretty quickly that plus item also became a minus, as foreign investments in the U.S...

...It was David Ricardo who, in the early 19th century, severed the mythology from the theology...

...matched and then exceeded American investments abroad...

...Running like a leitmotif through Kuttner's dovetailing analyses of postwar changes in America and the world is the term "hegemon," which is not listed in standard dictionaries...

...Kuttner urges the United States to cast off the hubris of a has-been hegemon and begin to think in global terms...

...In the case of the international economy, by contrast, the same good souls have been ready, in fact eager, to let laissez-faire prevail...

...However," writes Kuttner, "just as the beginning of the Cold War in 1947 and 1948 abruptly altered our strategic assumptions and tactical moves, the end of the Cold War in 1989-91 permits—and demands—a fundamental redefinition of the American national interest...

...His démystification, though, does not lead him into the counter-myth of protectionism (which historically has served many nations well, including the United States for most of its two centuries of existence...

...The imbalance was ignored for a while, because income from overseas investments brought in enough to cover our losses in trade...

...In the meantime, Kuttner proposes that we think in terms of moving toward an international mixed economy...

...As the New View matures, it will no doubt evolve a vocabulary appropriate to the world at its present stage...

...To Adam Smith, Professor of Moral Philosophy, the universe—and in particular the economy—was the handiwork of God, who had so orchestrated its mechanisms that, if left alone, they would bring the greatest good to the greatest number of people...

...Not one of them, as a result, really practices free trade...

...Throughout the first two decades after the War, the United States was the world's chief source of capital, machinery and manufactured goods, as well as the main market for foreign wares...

...For although its policies did much to revive and fuel both the European and Japanese economies, they ultimately proved disastrous to the United States...

...In a phrase, toward global Keynesianism...

...Whatever merit Ricardo's theory had when first expounded, the notion of natural attributes is now as outmoded as the trireme, given the revolutions in transportation, communications, data processing, and other technologies...

...Kuttner's description of the complexities that prompted the United States— itself drifting away from Keynesian planning and income redistribution—to finance "social democratic" and "social market" systems in Europe is a masterpiece of condensation and a delicious study in the ironies of history...

...In deference to the myth they lower tariff barriers, and then proceed to impose "voluntary" export restraints, to subsidize special sectors, to play around with exchange rates, to violate export quotas by transshipment through third countries, and so on ad infinitum...

...We needed no barriers on our shores, and the fewer barriers other countries had the more easily we could do our stuff on their soil...

...Laissez-faire at home and free trade abroad were moral imperatives, commandments whose disobedience would ruin nations...

...Thus he proposed an International Trade Organization that would have the muscle to coordinate commerce on a multilateral basis...

...Neither private associations nor governments should interfere with the workings of the "invisible hand...

...Soon we were running trade deficits—importing goods and exporting jobs...

...But for this country to continue to act as the hegemon in a postCold War era—when bipolarity is a bygone and new stars in the economic firmament are beginning to outshine us— would be delusive and self-destructive...

...In the particular context of Bretton Woods, this raised the crucial question of who would make such risky loans to the countries of physically shattered Europe...

...In its attention to domestic politics and international diplomacy, this book is as much a work of historical scholarship as it is of economics in the narrow sense...

...The policies that made sense when the nation-state was truly sovereign over its own economy are no longer adequate in a time when companies are decoupled from countries and economies from polities...

...It was at Bretton Woods, New Hampshire, where 44 nations met in 1944 to plan the postbellum economy, that the towering figure of Lord Keynes introduced a scheme designed to do for a war-wrecked Europe —and other parts of the globe—what his ideology had done for a Depressionridden America...

...Two years later, as he was departing Savannah, Georgia, after the first meeting of the International Monetary Fund (IMF), he suffered amassive heart attack...

...Reviewed by Gus Tyler Assistant President, ILGWU...

...Willy-nilly, then, Uncle Sam prepared the way for a regional federation that could someday be the nucleus or model for an international entity fitting the Keynesian vision...

...The result was what some economists, in speaking of the British case, have referred to as "free-trade imperialism...

...it is an expedience...

...Kuttner notes that the United States, in its role as preacher of laissez-faire abroad and at home during the pax Americana, repeated the behavior of England during the previous century's pax Britannica...

...Things started turning around when Europe and Japan began to pose a challenge in world markets and, indeed, in the U.S...

...Domestically, this means a system where market forces are curbed and contoured by socioeconomic needs...

...In the modern global economy they are archaisms...

...Every nation recognizes these realities...

...At least so argues Robert Kuttner, columnist for Business Week, economics correspondent for the New Republic, editorial columnist forthe Boston Globe, and a founding editor of the American Prospect, a new liberal quarterly...

...Some have speculated that it was brought on by the way participants reluctant to yield an inch of their beloved sovereignty to a supra-national institution had emasculated his ideas...

...Kuttner believes "free trade" and "protectionism" are both concepts drawn from an era when corporations were identifiably national and governments had the ability to control their private sectors...

...Itrefers, of course, to the power that, in any given period, occupies the hegemonic position internationally...

...It took no sharp observer to see that inevitably the greatest of all creditor nations would end up the greatest debtor...

...In two tightly packed, swiftly flowing early chapters, Kuttner describes the interplay between domestic and international economics and politics that led to the enf eeblement of the American Atlas —and, quite perversely, to the strengthening of conservative ideology at the expense of liberalism...

...Were he alive today, he would be delighted to see how his dictum has been confirmed...

...To the extent that there are comparative advantages that enable countries to produce certain goods with particular efficiency, they are more often than not "unnatural" ones arising from national policies and industrial planning—the few exceptions, perhaps, being items such as bananas, diamonds and Norwegian salmon...

...In the 1990s and beyond, Kuttner expects the pendulum to swing again...

...The inconsistency in this position was less glaring in an age when most manufacture was conducted by national corporations on national soil under the eye of the sovereign state...

...Second, we were ready to give away huge chunks of the American economy in order to woo or hold on to supposed allies...

...Kuttner's view of the future is not merely a reflection of his heart's desire...

...Kuttner's chapter entitled "Trade: The New Era and the National Interest" is a gutsy refutation of the prevailing pap on free trade...

...In those six decades, the ideological pendulum has swung from the "rugged individualism" of Herbert Hoover to the New Dealism of FranklinD...

...From its beginning, the theory of free trade became part of a mythology that served to reinforce atheology...

...Keynes' answer: world banks and monetary funds...

...Like England, we were convinced that we could overwhelm any nation economically, even on its own turf...

...The essence of his proposal was to help ravaged nations borrow money to underwrite national planning aimed at growth, full employment and an equitable distribution of income, and thereby avoid or minimize future recessions...

...Conceived in a passionate distaste for Soviet aggression, it was embodied in the Marshall Plan, NATO, and a flow of American dollars to the Continent in the form of consumer purchases and capital investments...

...History may therefore record that Washington did all the right things —for the wrong reasons...

...Globally, it means an exchange of goods overseen by international bodies concerned with maintaining and promoting a mutually beneficial balance among nations and their wealth—in sum, an updated realization of Keynes' vision at Bretton Woods...

...Even human evil—like greed— would ultimately work to the benefit of the commonweal...

...According to his account, the American involvement, primarily intended to create a buffer against Communism, laid the groundwork for the Common Market and the European integration set for 1992...

...First, we were wedded to the notion of free trade, a dogma to which all other nations pay homage, too, and none pays attention...

...He deals with the economic dynamic in its historic context, as a function of politics, culture and myth...

...But the anticipated shift to the Left will not, he makes clear, be a repeat of the Roosevelt era...

...Without serious competition, the country prospered...

...A cardinal virtue of The End of Laissez-Faire is that its bold analysis is coupled with a call to action...

...YetU.S...

...contributor, "Challenge," the New York "Times Book Review" Where in the world is the world heading, economically and politically...

...policy remained unchanged...

...Since planning of any sort would be impossible if a government did not control its economy, Keynes concluded that some international instrument was also needed to regulate the flow of goods across borders...

...Roosevelt, then back to the laissez-faire-ism of the 1970s and '80s...

...The author knows he is challenging the wisdom of the professional guild, since on this issue conservative and liberal academics have long been in almost unanimous agreement (although he is able to cite several respected economists who have recently questioned the inherited orthodoxy...

...As the hegemon in the first couple of decades after World War II, the United States may well have played a positive role that no other nation could or would play...