J. Bradford DeLong’s new book, Slouching Towards Utopia, is subtitled An Economic History of the Twentieth Century. But it is not really a history of the economy so much as a history of economic policymaking, what worked and what didn’t—where “work” means not only further enriching the already rich but also making the lives of average people better. Its heroes are the professional utopians, the policymakers who have figured out how to deliver on that project. DeLong’s polemical aim is to show that the process has recently stalled, and to review what we’ve learned so we can get back on track. The book is comprehensive, beautifully written, and fun to read. DeLong has a gift for filling out abstract concepts with memorable stories. One only wishes that his history had a happier ending.
The narrative ought to be one of triumph: “[L]ess than 9 percent of humanity lives at or below the roughly $2-a-day living standard we think of as ‘extreme poverty,’ down from approximately 70 percent in 1870.” Today, “[t]here are more than enough calories produced in the world, so it is not necessary for anybody to be hungry. There is more than enough shelter on the globe, so it is not necessary for anybody to be wet,” and “[t]here is more than enough clothing in our warehouses, so it is not necessary for anybody to be cold.” Yet utopia has not arrived.
Sometimes blunders by officials made tough times tougher. When he was chancellor of the Exchequer in 1925, Winston Churchill returned England to the gold standard, which caused deflation and widespread unemployment. In the United States, the Federal Reserve clamped down on the money supply in 1929 after the stock market crashed, a decision that only deepened the Great Depression. The Soviet Union was a decades-long study in mismanagement, whose pathologies DeLong concisely anatomizes. China under Mao Zedong was even worse. For a long time, governments “had little clue as to how to regulate the un-self-regulating market to maintain prosperity, to ensure opportunity, or to produce substantial equality.” But we’re more sophisticated now. We managed to avoid complete disaster in 2008. Surely we can do better?
The deeper problem is twofold: “[M]aterial prosperity is unevenly distributed around the globe to a gross, even criminal, extent,” and “material wealth does not make people happy in a world where politicians and others prosper mightily from finding new ways to make and keep people unhappy.”
DeLong has some intriguing ideas about what has driven the process of economic growth, which he presents with tantalizing brevity. For instance, he claims without much elaboration that the source of the great spurt in prosperity was the arrival in 1870 of “full globalization, the industrial research laboratory, and the modern corporation.” The result, he estimates, is that the annual growth in the global “stock of useful ideas about manipulating nature and organizing humans […] shot up from about 0.45 percent per year before 1870 to 2.1 percent per year afterward, truly a watershed boundary-crossing difference.” One of the book’s great strengths is its mapping of the big things we still don’t understand, such as why industrialization took so long to spread to South America and Africa. DeLong offers some representative sketches: the sad stories of underdevelopment in India, Egypt, and China; the luckier fate of Japan in the 19th century; and the post–World War II failures in Nigeria, Argentina, and Iran.
DeLong’s portrait of modern capitalism is admirably balanced, recognizing both the spectacular innovation it has produced and its spectacular failings. These aspects, he observes, are unavoidably intertwined. Innovation has casualties. He cites Joseph Schumpeter, who famously wrote, in his 1942 book Capitalism, Socialism, and Democracy, that capitalism is characterized by “creative destruction,” driven by “the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.” This process “incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.”
As a result, growth does not benefit everyone. With the Reaganite move toward neoliberal free trade, economic risk in the United States has been shifted to workers and their families. As Jacob Hacker details in the 2019 expanded edition of his book The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream, jobs have become less secure, and a college degree no longer reliably guarantees middle-class status. Lane Kenworthy reports in Social Democratic Capitalism (2019) that 15 to 20 percent of Americans, in any given year, will experience a 25 percent drop in income, and “about one-third do not recover to their prior income level even a full decade later.” While the country is indubitably richer, many Americans are worse off than their parents were.
The obvious solution is to figure out how to redistribute the gains without slowing the growth. DeLong observes that the neoliberal economist Friedrich Hayek had a Jekyll-Hyde aspect: he understood the productive potential of the market while resisting any attempt to ameliorate its distributive pathologies, and he has, alas, been influential on both counts. The market economy is pretty good at “giving those who own property”—that is, property with market value—“what they think they want.” It can’t even do that without a robust state, because “it cannot by itself deliver enough research and development, for example, or environmental quality, or, indeed, full and stable employment.” The 20th century’s big success stories always had the state as a backstop. Hitler stumbled upon the macroeconomic benefits of deficit spending years before Roosevelt did—in both cases, as it turned out, on the military. After World War II, the Marshall Plan didn’t do much to boost investment in Europe, but it “gave European countries a pool of resources that could be used to cushion the wealth losses sustained in restructuring—and to soothe disappointed expectations from groups of labor and capitalists and landlords who thought they were not getting their proper shares of the pie.”
The book is particularly good at explaining abstruse macroeconomic concepts. For instance, DeLong makes a persuasive case that what happened from 2007 to 2009 was a “Minskyite depression” (named for economist Hyman Minsky), in which a shortage of safe assets creates a crisis of confidence. It is a technical problem with a technical fix (which he describes but which is too complicated to elaborate here). The fix wasn’t handled well, and the effects of that bungling persist. In the United States, “over the entire decade of 2006–2016, measured real GDP per capita grew at a pace of only 0.6 percent per year—a shocking falloff from anything that had been seen earlier in the long twentieth century.” Western Europe similarly stagnated.
The core promise of what Deirdre Nansen McCloskey calls, in her 2016 book Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World, the “Great Enrichment” is that it can provide a better life for everyone. (McCloskey dates its beginning to 1800, but DeLong shows that it was only in 1870 that rates of poverty began to plunge.) It turns out that in order for that to happen, ordinary people have to somehow form an alliance with the professional utopians.
The inadequate response to the 2008 recession demonstrates the difficulties of developing such an alliance. The stimulus staved off absolute disaster, but it was not big enough to prevent long-term damage that continues to this day. DeLong does not grasp the political reasons for that failure. He blames Barack Obama for not pursuing deficit spending more aggressively: “Starting in 2009, the US government could borrow for thirty years at a real interest rate of 1 percent per year— or less. […] Yet Obama seemed completely uninterested.” Actually, Obama was quite interested and fought to enact as large a stimulus as he could get. But the votes weren’t there for more, especially in the Senate. Joe Biden, then vice president, told a reporter: “I love the left saying, well, we could’ve gotten more. Okay, you go get it. You tell me how to get the sixty votes.” Obama knew he was talking nonsense by calling for austerity when unemployment exceeded nine percent: “Just as families and companies have had to be cautious about spending, government must tighten its belt as well.” Extensive polling and focus groups had persuaded the White House that voters had imbibed the idiotic story that deficit reduction was the path to more jobs.
DeLong acknowledges that, after the Republicans took the House of Representatives in 2010, it “promptly turned off the spigot of fiscal stimulus.” It’s not clear whether this is because they didn’t understand macroeconomics or because they understood very well and hoped to deny Obama an economic recovery before 2012 election. Either explanation depends on popular incomprehension of how a Keynesian stimulus works. Obama decided that there was no hope of fixing that, so instead he pandered to it. This might have been his best option.
Genuinely democratic control over the economy won’t be possible until the lower classes whom the economists want to help have some defense against quack remedies. Trump, whose electoral victory crucially depended on working-class votes, offered tax cuts for the rich, climate-change denial, and “random regulatory rollbacks, largely uninformed by technocratic calculation of benefits and costs.” The institutions that used to mediate between the least educated citizens and their government have become weaker and smaller than they once were. As a result, many of those citizens end up getting their information from Fox News. Workers were once clearer about their interests. During the New Deal, one mill worker declared: “Mr. Roosevelt is the only man we ever had in the White House who would understand that my boss is a son-of-a-bitch.” Today, many of those workers vote for Republicans—politicians who work for that man’s boss.
As Jake Rosenfeld details in his 2014 book What Unions No Longer Do, the decline of labor unions over the past several decades has only served to accelerate economic inequality, promoting the growth of new monopolies and exacerbating the disproportionate political power of the rich. That skewing of politics will persist until new centers of information and political organization develop that represent the interests of people who are not rich. The professional utopians need institutions that are invested in promoting clarity, in order to counter all the institutions that are mere factories of confusion and rage. DeLong’s book is a small step in that direction. Its target audience is not the working class, but it isn’t the professional economists either. Rather, it aims at a broad, curious public—precisely the readership for whom economics needs to become less mysterious.
Andrew Koppelman, John Paul Stevens Professor of Law at Northwestern University, is the author of Burning Down the House: How Libertarian Philosophy Was Corrupted by Delusion and Greed (St. Martin’s Press, 2022). Follow him on Twitter @AndrewKoppelman.