The Marx Mistake

...It’s a work of grand social theory, with a startlingly broad intellectual ambition...

...That limited vision comes through in Greider’s descriptions of what he found as he toured the world doing research for his book...

...Although “the communist experiment failed utterly,” he notes at one point, “the contradictions of capitalism that originally inspired Karl Marx’s critique are enduring, largely unchallenged and uncorrected...

...the stagflation of the 1970s was created in part by wage and price controls...

...Greider’s descriptions don’t match my own observations of economic development in the Third World...

...If my DAVID IGNATIUS is assistant managing editor for business news at The Washington Post...

...He speaks disparagingly of the Harvardeducated economists who tried to instill this thinking in Mexico-as if they were doing something wrong in trying to open a corrupt state-socialist regime to competition...

...Earnest as an undergraduate, unafraid of being labeled a Lefty, Greider is determined to awake us to the cataclysm he sees ahead...

...The new Pittsburgh was less of a blue-collar, union town, but it was no less prosperous than before...

...the global contradictions of capitalism...

...Marx was wrong about that, for some of the same reasons that Greider is wrong, as I’ll explain later...

...His topic is nothing less than the fate of working people as global capitalism, “strong and supple, a machine that reaps as it destroys,” accelerates into the 21st century...

...Greider’s thesis echoes Marx’s famous notion of a “reserve army of the unemployed” that would relentlessly force wages down and produce a final, devastating crisis for capitalism...

...The only beneficiaries of the new order are the financiers-the capitalists, if you will...

...But we can’t afford to continue our generosity...

...Many 45steelworkers (and more importantly, their sons and daughters) retrained and found jobs in new, more productive industries...

...If ever there were an example that, at first glance, might seem to support Greider’s thesis, it’s steel...

...industry argued that this competition was “unfair...

...They offered a measure of security, but at a level that provided little more than subsistence wages for most people...

...This process has pushed U.S...

...To bolster his case, Greider quotes various Clinton administration officials bragging about their success in keeping wage increases low...

...These analysts forgot that as resources become more scarce, their prices rise-stimulating more exploration and production (and development of substitutes), with the new supplies eventually lowering prices again...

...Clinton’s emphasis on education and job training is just the beginning of what’s needed...

...People don’t build factories unless they think they can make money...

...Represented by a strong union (which probably exerted greater control over the industry’s operations than did management), steel labor was able to bargain for unusually high wages and benefits, totaling an average of nearly $20 an hour by 1980...

...This anxiety is everywhere in worlung America, as more companies “downsize” to cut costs and remain competitive in the global economy...

...Like Greider, the steelmakers tended to think in terms of absolute units of output, rather than profitability...

...It gives voice to a powerful current in American politics...

...Moreover, you don’t have to be a socialist to think that if the distribution of income in the United States continues to be skewed toward the wealthy we’re going to have growing social and political problems...

...He goes to Poland and finds workers who have been the victims of capitalist “shock therapy...

...Marx wrote before Thomas Edison, Alexander Graham Bell, the Wright brothers, Henry Ford, Thomas Watson, Bill Gates...

...Greider takes the Mexican peso crisis as evidence that economic globalization can have disastrous consequences...

...Flexible Steel The only industry I can discuss with any confidence is the steel industry, which I covered as a reporter for The Wall StreetJournnl in the late 1970s...

...Ross Perot’s assault on NAFTA...

...Companies that were once run comfortably for their workers and managers are now run for the benefit of the owners, the shareholderswhich means the Wall Street money managers who invest our pension funds and 401k plans...

...The great convulsions of human affairs tend to come from places where the theorists haven’t been looking: the rise of anti-Semitism in Germany, the splitting of the atom, the invention of the microchip...

...Their class systems, based on nepotism and political cronyism, were as rigid as those of feudal kingdoms...

...The American steel industry was an early “victim” of globalization...

...The fate of the world...

...Now, in William Greider, it has one...

...Arguably, these high wages represented a tax on American consumers, who paid the bill...

...Greider argues that what keeps this system going is the benevolent (and misguided) tolerance of the United States...

...It actually happened in the 1970s and %Os, with oil...

...That’s where the Greiders and Perots and Buchanans have it right...

...So potent have the financiers become in the United States, he contends, that they have overwhelmed the business interests that actually make and sell things-and who would benefit from economic policies that fostered more rapid economic growth...

...And for nearly a decade, they used their joint political muscle to keep most foreign steel out...

...His new novel, A Firing Offense, will be released in May...

...He failed to understand the adaptability of modern capitalism, in part because he didn’t reckon on technological ingenuity...

...the home-grown radicals, left and right, whose literature attacks organizations like the Trilateral Commission and the Council on Foreign Relations for supporting free-trade policies...

...It has become an underground river, this populist anger about the effects of economic “globalization...

...The only force that could upset this neat little world was foreign competition...

...If the American steel industry was pouring 100 million tons of raw steel a year, that was inherently good-regardless of the profitability per ton...

...It is one of the virtues of this book that it helps you see such comments, which normally seem as ordinary as the nightly summary of the Dow Jones index, in their true outrageousness...

...The Glass Half Empty So what then is wrong with Greider’s argument...

...Companies laid off thousands of workers as they began to retrench to their best, most-efficient plants...

...But for Pittsburgh as a whole (not to mention the United States) it proved a blessing...

...But if you see only that, as Greider does, you’ve missed the point...

...Inevitably, the U.S...

...This is heresy, especially among economists, who tend to view Marx’s economic ideas much the same way that astronomers regard astrologers...

...This isn’t an economics text...

...Even the steel industry was arguably better off for the changes...

...Indeed, the current high priest of economics, MIT professor Paul Krugman, denounced Greider’s book in The Washington Post as “not only reckless but simplistic, and remarkably illinformed...

...They can produce products anywhere, so they go where labor is cheap...

...In his repeated discussion of “overproduction,” he glosses over the fact that prices are what bring supply and demand in line...

...Lowskilled American workers are getting screwed in the global economy, and the country needs to help them adapt...

...The economic reformers were skating on top of a corrupt, one-party state...

...Greider’s book is “thinking outside the box,” as management consultants are always recommending...

...the capital flight that, until recently, was endemic in countries like Brazil and Argentina was caused in part by those governments’ attempts to control capital...

...That’s the central contradiction in Greider-economics...

...Tens of millions of working Americans believe that their jobs are being exported overseas to countries where labor is cheap-and that journalists and other members of the meritocratic elite, who don’t share their plight, don’t give a damn about it...

...These are bad ideas, for the simple reason that they’re likely to make dungs worse...

...But until recently, it has lacked an articulate spokesman...

...In our devotion to free markets and free trade (an “enthralling religion,” he calls it) we have become the world’s leading dupes...

...That was Marx’s mistake...

...Anyone who visited the oppressive, somnolent China of fifteen years ago and now sees the outpouring of energy, creativity, and wealth of the late 1990s cannot easily disparage the impact of global capitalism on the lives of ordinary people...

...The intricate web of steelmaking that had lined the banks of the Monongahela River since the days of Andrew Carnegie-the coal barges, coke ovens, blast furnaces, and open hearth furnaces, and the rolling mills, plate mills, wire mills-were all shuttered and closed...

...I spent much of my journalistic energy in those days demonstrating that this wasn’t so...

...That’s a much trickier question, and my guess is that Greider’s account is wrong...

...In his emphasis on static units of account-those stacks and stacks of products being produced by all the factories-Greider makes a mistake that’s reminiscent of the environmentalists who warned a few years ago that the world was running out of natural resources...

...Here is where Greider is powerfully right...

...companies to become better mmaged, more aggressive, and more competitive in international markets...

...The desirability of global trade is a settled issue for most intellectuals, and not just economists...

...As a result, manufacturers face a permanent shakeout...

...Workers in this cosseted industry prospered...

...market in the mid-1970s, the U.S...

...The range of respectable opinion these days is, as Greider says, amazingly narrow...

...Workers suffer-both in the countries from which capital is fleeing and in the countries to which it temporarily bestows low-wage jobs...

...America has kept the unwieldy system going by acting as the “buyer of last resort,” consuming a huge chunk of the world’s overproduction...

...The leader of the industry, U.S...

...The Japanese were gaining market share because they were producing better, cheaper steel...

...Yet Mexico’s real problem under President Salinas was that the free market never penetrated far enough-not that it went too far, as Greider maintains...

...It looked like an American tragedy in the makinga microcosm of the zero-sum world Greider describes...

...government intervene to protect workers-with capital controls, tariffs to limit competition, taxes on wealth, debt forgiveness...

...The returns to financial capital have increased in recent years, says Greider, and so has its political power...

...But the seriousness of this problem doesn’t mean we should junk our economic system, and its built-in mechanisms of adaptation...

...Following the analytical path marked by James Fallows, he contends that the great economic success stories of the late 20th century-Japan, China, Korea-owe their success not to free trade, but to protectionist policies that allowed their domestic industries to develop and export...

...Another weakness of Greider’s book is that he doesn’t pay enough attention to the essential adaptive mechanism of a capitalist economy-which is the price system...

...they always wanted to keep a margin of extra capacity to take care of their best customers at the top of the economic cycle-even if that meant keeping open ancient open-hearth furnaces that should have been banked twenty years before...

...Global Warning But is it right...

...To protect against precisely that threat, union and management bound themselves together in a no-strike agreement...

...As our economy has shifted gears over the last 20 years, the richest Americans have been capturing an ever-larger share of the national income-more than at any time since the 1890s...

...and because workers around the world aren’t sharing adequately in the new prosperity, they don’t have enough money to buy all the products being churned out from Detroit to Kuala Lumpur...

...For all his reporting on the ground, Greider is intellectually most comfortable in the upper atmosphere, where those supra-human forces of history operate, pushing us toward ever-deepening contradictions and crises...

...The fundamental weakness, I think, is that in focusing on the “reckless footrace with history,” it fails to appreciate the global economy as a dynamic, complex system that is constantly adapting to changing circumstances...

...The global system is astride a great fault line,” he writes...

...Big, woolly questions like the ones Greider is analyzing get relatively little attention from public intellectuals these days...

...At the same time, our market economy has developed a sharper edge...

...So they innovate, and the world gets richer...

...Indeed, one reason for the relentless innovation of the modern economy is precisely that companies want to escape Greider’s hyper-competitive, zero-sum world...

...Like the grand theorists of the 19th century, Greider posits implacable forces shaping human history...

...But history isn’t a straightjacket...

...Not because he makes mistakes in his economics, but because he makes mistakes in understanding the ingenuity and adaptability of human nature...

...The Cold War is over...

...Greider’s argument bears careful study, for it is radically pessimistic...

...The most productive steel plants in the world are now found in the United States, and though there are far fewer steelworkers, the real take-home pay of those that remain is higher than ever...

...He goes to a booming Malaysia and finds exploited village girls working in electronics factories...

...In particular, he wants to see the US...

...America had lost...

...But steelworkers were blue-collar royalty...

...When Japanese steelmakers first began to make inroads in the U.S...

...It’s big, it’s brave, it’s provocative...

...The adjustments required by the price system are sometimes painful-and Greider is right in worrying that the real wages of low-skilled American workers are likely to fall toward the levels of their global competitors in Mexico or China...

...Japan had won...

...the forces of the free market have triumphed...

...It doesn’t move in one direction...

...As globalization spreads capitalism to every nook and cranny of the world, there are too many factories producing too many goods...

...But it has also thrown a lot of people out of work...

...Things that look ruinous in the abstract often turn out not to be, in the practical ebb and flow of the real world...

...We have become a nation good at snipping and sniping, but instinctively mistrustful of grand abstractions...

...Greider dares to think big in his new book, One World, Ready or Not-on the same world-historical scale as the social theorists who struggled a century ago to understand the first capitalist explosion...

...Indeed, by every measure, real income grew...

...It may have been “unfair” that we bombed their old steel plants to rubble during World War 11, forcing them to build new ones, but that’s life...

...They were operating from new, “greenfield” plants that were the most efficient in the world...

...The evidence against such government controls is persuasive: The Great Depression was created in part by precisely the kind of tariffs that Greider is advocating...

...This is a man who is capable of seeing a cloud in every silver lining...

...Ralph Nader’s campaign against the World Trade Organization as a threat to American workers and consumers...

...If there are too many factories producing too many goods, prices and profits will fall-and people will stop building factories until supply and demand are in sync again...

...Regu I at ion, Regu I at i o n, Regu I at i o n Because Greider doesn’t like the human costs that the market imposes in times of transition, he argues for rigidities...

...Krugman is right that the book contains some dubious economic assumptions and technical mistakes, but these criticisms miss the point...

...Greider calls this “labor arbitrage,” in which managers move whole factories to take advantage of differences in wage rates...

...he goes to Germany and sees heartless financial traders who want to lower the wages of the people sweeping the floors...

...To Krugman, Greider is worse than illiteratehe’s innumerate...

...The state-run socialist regimes that are slowly given way to the market in places like Egypt, India, Indonesia, and Argentina were corrupt oligarchies...

...steel industry began to shrink...

...They weren’t clinging to old open-hearth furnaces...

...That isn’t a hypothetical‘ textbook example...

...In Greider’s view, the world economy is a zero-sum game, in which Asia’s new prosperity (or at least, that of its capitalists) has come at America’s expense...

...Each of their inventions amplified productivity, lowered costs, created jobs and wealth on an astounding scale...

...analysis is right,” he declares, “the global system of finance and commerce is in a reckless footrace with history, plunging toward some sort of dreadful reckoning with its own contradictions, pulling everyone else along with it.’’ Greider even pays a brief but unembarrassed homage to the most potent of the 19th century theorists, Karl Marx...

...It’s downsize or die...

...Even the President’s brother was allegedly involved in drug running and money laundering...

...The men who ran the steel companies never liked to close a plant...

...As the workforce developed new skdls, the region attracted new companies and whole new industries...

...This is Ross Perot’s “giant sucking sound” amplified a thousand times...

...The Marx Mistake Greider reminds us how clever Marx was-and why he was ultimately wrong by David Ignatius THE ISSUE HAS BEEN BUBBLING through American politics for the past decade, surfacing in what often seem unlikely places: Pat Buchanan’s attacks on multinational corporations in the 1996 presidential campaign...

...The United States had built up a vast steelmaking infrastructure, with enormous over-capacity...

...Steel Corp., was afraid of being too innovative, lest it increase its market share and draw an antitrust suit from the Justice Department...

...The resulting insecurity may be good for our economy in the long run, but it’s still unpleasant if you’re on the receiving end...

...The wondrous new technologies and globalizing strategies are able to produce an abundance of goods, but fail to generate the consumer incomes sufficient to buy them...

...Greider is not optimistic, to put it mildly...

...And for many steelworkers and their families, the transition from that old world into a new one was wrenching...

...In this relentlessly competitive world, companies don’t have the luxury to be generous...

...But Big Steel actually offers the clearest evidence that Greider’s doom-saying is wrong...

...Take a trip up the Monongahela River now and, true, you’ll see an economic gravesite...

...The specter haunting the capitalist world in 1997 is overproduction...

...But Greider is insistent-earnest as an undergraduate, unafraid of being labeled a Lefty, determined to awake us to the cataclysm he sees ahead...

...the unresolved legacy of Karl Marx-try talking about topics like those on CNN...