Global Pursuits
Calleo, David
Global Pursuits THE IMPERIOUS ECONOMY by David Calleo Harvard University Press. 265 pp. $17.50. The failure of Ronald Reagan's supply-side economics and Cold War foreign policy to...
...Kennedy sought to achieve near-full employment (defined as 4 per cent unemployment) through deficit spending and easy money...
...By accepting a more modest place in history, the United States can reduce its enormous military expenditures...
...Calleo argues that Kennedy's policies jeopardized the American dollar, whose value had been fixed at Bretton Woods at $35 an ounce of gold, and undermined American industry...
...In the face of growing European pressure and the first U.S...
...As a result, the dollar depreciated, which cheapened both American exports and dollar-denominated OPEC oil imports...
...John Judis (John Judis is the political editor of In These Times and a contributing editor of The Progressive...
...Calleo notes that Europe and Japan's economic revival and the spread of industry to the Third World "represented not so much the decline of America as the revival of the world...
...At the same time, he pursued Pax Americana by increasing military expenditures and pressing for the removal of global trade barriers against the export of American goods and capital...
...He urges that the United States accept a role as an equal among the world's nations...
...military budget...
...Calleo suggests that the place to begin is the American contribution to NATO, which accounts for half of the U.S...
...In The Imperious Economy, Johns Hopkins political scientist David Calleo takes his place beside Herbert Muller (Revitalizing America) and Robert Reich and Ira Magaziner (Minding America's Business) in calling into question both the Reagan Administration's supplyside economics and the neo-Keynesian aggregate demand management practiced by the Carter, Nixon, Johnson, and Kennedy administrations...
...He favorably cites Milton Friedman's concept of a natural rate of employment, which defines the level of unemployment consistent with noninflationary growth...
...Calleo's other proposals concern the domestic economy...
...Calleo is more ambiguous on this question...
...Deficits financed by inflationary dollar creation were combined with depreciation, which raised the price of imports...
...Calleo has little sympathy for Ronald Reagan's claim that Carter was responsible for America's decline or that an injection of free-market economics will cure the patient...
...he allowed the dollar's value to float in relation to other currencies...
...To have based America's future as a nation upon its episodic career as a dominant world power would thus have been a very bad bet historically...
...But Calleo's critique of the foreign and economic policies of the Kennedy, Nixon, Carter, and Reagan administrations is far too valuable to allow this unfortunate proposal to diminish one's appreciation of The Imperious Economy...
...Calleo's book has the added virtue of questioning America's pursuit of global supremacy—the perpetuation of Pax Americana, or Henry Luce's dream of an American Century...
...Like Kennedy's strategy, it was inherently inflationary...
...He advocates a "system of rational planning—with the government allocating resources and rewards in a fashion adequate to satisfy not only the economic requirements of growth and stability, but the political demands for progress and equity...
...the United States was exporting its inflation to Europe...
...Calleo argues that Carter simply followed through on Nixon's strategy and suffered the consequences...
...Kennedy's overseas military expenditures—augmented, of course during the Johnson and Nixon Administrations— and his encouragement of American multinationals led to steadily increasing balance-of-payments deficits...
...The failure of Ronald Reagan's supply-side economics and Cold War foreign policy to restore America's place in the sun have encouraged a generation of critics who are questioning the assumptions that unite Reagan and his predecessors...
...Geopolitics," Calleo writes, "came to the rescue of economics...
...Calleo believes that the United States has a lower rate of natural employment than West Germany because of the lack of homogeneity of the American working class...
...trade deficit in the Twentieth Century, Richard Nixon tried in 1971 to modify Kennedy's strategy...
...in Western Europe, they reminded allies of America's contribution to their military defense and threatened tariff barriers...
...By discouraging longterm investment and encouraging shortterm speculation, this inflation contributed to the decline of American industry and helped price American goods out of foreign markets...
...But, as Calleo notes, Nixon's strategy "did little to cure America's economic decline...
...He seems to be suggesting that for a full-employment program to work, American workers must subordinate their separate interests to the national interest and hold down their demands for wages and social services...
...He sees planning as a means to enforce an equitable but uncomfortable austerity on the unruly populace...
...Nixon abandoned the Bretton Woods agreement...
...But can planning make possible a fullemployment economy...
...Calleo insists that the United States cannot pursue Keynesian full employment policies, free trade, and global supremacy without undermining the American economy...
...In the Middle East, Nixon and Henry Kissinger tried to win Saudi and Iranian support with massive arms deals...
...Nixon's purely tactical use of wage-price controls only postponed price spirals...
...By 1978, Europe was fully in revolt against the declining dollar, and Carter resorted to high interest rates and recession to stem the outflow of dollars...
...Calleo's argument begins with the Kennedy Administration, the apotheosis of Cold War liberal policy...
...The success of this "mercantilistic" strategy depended on Washington's ability to persuade both Western Europe and the OPEC countries to accept an arrangement that was not in their economic interests...
...These obliged European banks and governments to hold growing amounts of inflated dollars...
...Calleo's version of economic planning, then, appears to be closer to Felix Rohatyn's model than to Francois Mitterrand's...
...Kennedy's fullemployment budget and military expenditures created swollen deficits, which spurred inflation...
...He points in particular to the urban migration of blacks...
...Calleo treats Reaganomics, with its tax cuts and high defense budgets, as a bastardized form of Keynesianism, with no BOOKS more chance of success than the Kennedy or Nixon strategies...
...Calleo doubts whether Americans can still achieve prosperity and defend at all cost our perch atop the pyramid of nations...
...In the end, Calleo proves timid in pressing his case against liberal and conservative prescriptions for the future, but his account of the weakness of American policy from Kennedy to Reagan is exceptionally clear and persuasive...
Vol. 46 • November 1982 • No. 11
