The history – and future – of American capitalism

Reading Jonathan Levy’s Ages of American Capitalism: A History of the United States has been quite a commitment: over 700 pages of text, plus notes, in hardback. The sheer weight militated against my taking in the grand sweep if its ambition, as I had to read it sitting at home propped on cushions. Nevertheless, it was well worth it.

As the title suggests, the account is organised into different ages: commerce (early days from late 17th century, and the role of slavery); capital (post Civil War to Fordism and the Depression); control (New Deal & postwar golden age); chaos (1980 on). The organising idea is the changed relationship between state and business in each of the eras, but importantly that the state, and political decisions, always ultimately determined the character of capitalism. The private sector – titans such as Morgan and Ford – clearly made a massive contribution to shaping US industrialisation through their business model choices, union-bashing and personal force of will; but they were not writing the story of capitalism on a blank sheet of paper. Government decisions and political forces constrained them and tamed them. And in each of the eras, there were distinct political visions, starting with the conflicting Hamilton and Jefferson visions.

This political economy framing made the final section the most interesting to me, given the many straws in the wind indicating that the 2020s will prove another junction between eras as belief in the “Magic of the Market” (Chapter 19) evaporates. This isn’t to say the Biden presidency will form the template for a new era – and indeed the book stops with the post-GFC recession – but rather that the Reaganite/Thatcherite order has become a disorder.

As in any Big Book, there are lots of interesting details and eye-catching turns of phrase. The superior logistics of the Union Army for example, involving vast military contracts for provisions and even railroad-building: “A highly functional political economy of corruption helped the Union win the war.” The early signs of the importance of the changing geography in US economic development as NASA and companies such as IBM opened facilities in Alabama in the late 1950s, signalling the rise of the sunbelt. The role of JP Morgan in creating forward-looking corporate valuations in the late 19th century merger movement.

There are points at which it seems like the book isn’t 100% in control of the economic terminology. For instance, Levy frequently uses a phrase about deposits ‘pyramiding into New York’ as if it’s a technical term of art. And there are a few scattered graphs that don’t add much to the words – the reproduced paintings are better illustrations of the points being made, be it about the frontier or 1960s consumerism. These are minor quibbles.

The book ends: “I have emphasized that American capitalism is an especially forward-looking economic system, in which expectations of the future play a prominent role in determining the present.” I think this statement is always true, and that it’s the balance between optimism about the future and nostalgia for the past that shapes an economy. The same page later lights on what is particularly distinctive about the US: “its pronounced historical amnesia.” And as Levy concludes, now is the moment for a better imagined future to come into play. Over to the politicians, Biden and the not-yet dormant spectre of Trumpism.

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The unknown pioneer

Many people – including economists, I suspect – won’t recognise the name Colin Clark. Yet he has at least as much claim as Simon Kuznets to be known as one of the pioneers of national income accounting. I came across Clark’s work when researching my book on GDP, and was pleasantly surprised to know that he had been a Fellow (and much earlier a student) at my Oxford college, Brasenose. Eventually I put two and two together and realised that the very nice chap I had spoken to at various events was Colin Clark’s youngest son David, another Brasenose student.

Anyway, this is all by way of preamble to saying how much I’ve enjoyed reading Alex Millmow’s biography, The Gypsy Economist: The Life and Times of Colin Clark. This is the first biography of somebody who worked as a young man with Keynes, taught Richard Stone, and produced some of the first modern statistics on national income; and later corresponded with Kuznets and Lewis, creating the field of development economics alongside them. In 1984 the World Bank honoured him as one of the 10 pioneers of development economics, along with Hirschman, Myrdal, Rostow, Bauer and others. Clark was influential in the Labour Party, being particularly close to Hugh Dalton, before spending many years in Australia, as a government economist in Queensland. Later he returned to England for some years, where he was involved in the founding of the Institute for Economic Affairs.

It is natural to ask why, given his scholarly work, Clark is so unknown now. After all, Stone, Lewis and Kuznets all went on to win the Nobel. The answer probably lies in that career history, and political trajectory. Actually, Clark not only left academia for years to take up a policy role, he also seems to have torpedoed his chances in two other ways. One – emerging clearly from between the lines of the book – is that he was a maverick character, possibly even cantankerous. The other is that he converted to Catholicism and became an ardent advocate of ‘distributivism’, which seems to have been a romantic philosophy advocating small rural communities and the virtue of farming. The biography quotes throughout many comments to the effect that Clark was brilliant but his books and papers were disorganised – lacked an organising analytical framework – and were sloppy in many regards. One typical comment described him as, “Brilliant, original, provocative, eccentric and sometimes just plain wrong.”

Having said this, there are many fascinating aspects of Clark’s thinking that emerge here, including some themes that have re-emerged in economics more recently. One is an early and lasting interest in increasing returns to scale, stimulated by working with Allyn Young. The second is simply the opening up of development economics through the empirics of long-run trends: Clark, like Kuznets, did not focus on (what became) GDP but – in his case – on statistics including income distribution, leisure, macroeconomic stability, and natural resource use and depletion. His Catholicism made him interested in non-state, non-business economic institutions such as churches but also friendly societies and unions – an openness to the economic role of a variety of community institutions only just returning in today’s mainstream economics. It also meant he was pro-population growth (he & his wife had 9 children themselves), considering it essential for per capita growth as modern endogenous growth theories imply, and a fierce critic of the Ehrlich ‘population time bomb’ argument.

This very informative biography made me rather ashamed not to have known anything about Colin Clark until a few years ago, even when his papers were sitting in my college library. I learned a lot more from reading it. The book fills a gap in the history of economic thought, and about the history of policy economics in Australia. (Alas, it’s priced for libraries.)

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Onions and eternal vigilance

This might sound weird, but I thoroughly enjoyed reading The Plague Cycle: The Unending War Between Humanity and Infectious Disease by Charles Kenny. It’s an absorbing history of exactly what the subtitle says, arguing that Malthus was wrong even when he was right: populations were indeed kept in check in a natural cycle for most of history, but the way this happened was infection, not starvation, when population sizes and densities increased by enough to make human settlements attractive homes for various pathogens.

As the book describes, people found responses to waves of disease: keeping strangers out or confining them; cooking and spices (hotter countries or regions have spicier cuisines). Who knew that, “[M]any spices kill bacteria. Garlic, onion, allspice and oregano inhibit or destory every bacterium they’ve been tested on.” But the significant breakthroughs, allowing urbanisation and modern economic growth through agglomeration, depending on the technological advances that started piling up just as Malthus’ book was published.

I say technological, but some advances were ideas requiring no laboratory. Oral rehydration therapy, devised by Indian doctor Dilip Mahalanabis in 1971, is cheap and simple. “But for its full potential to be realised, everyone has to know about it.” The book tells us that 95% of parents in Kerala know to give fluids to a child with diarrhea, but, “In West Bengal – where Dr Mahalanabis did his life saving work over four decades ago – more than half still give children less to drink.”

As the book goes on to explain, the techniques for defeating disease, from the simple to sophisticated vaccines (although – again, who knew? – Gandhi was an opponent of vaccination), enabled urban agglomeration and globalisation. For all their downsides, these have been the dynamo of modern prosperity: people exchanging ideas (in ways that Zoom etc just don’t make possible). It cites Abhijit Banerjee and Esther Duflo’s finding that infant mortality rates are now lower in urban than in rural areas, an amazing reversal of the historic gradient.

The book ends with the new challenges, from anti-microbial resistance, to sentiment about vaccines and the toll taken by the Wakefield scandal, to the institutional challenges manifest in tackling Covid19. While The Plague Cycle represents work predating this pandemic, it could not have been published at a more timely moment. There will be more pandemics. Antibiotics and antivirals are ceasing to be effective because of over-use and mis-use. Continuing basic research has to be funded. I hope everyone will read this and do all they can to get across the message of eternal vigilance in this ‘unending war’.

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Epic reading

Well. It’s been a slow blogging start to March because I’ve been reading Yuri Slezkine’s 1000-page The House of Government. What an amazing book.

It’s an account of the Russian Revolution and the early years of Lenin and Stalin up to the second world war. The book is unlike anything I’ve read before, and is utterly compelling. It braids together an argument presenting early-Soviet Bolshevism as a millenarian religious sect, the sequence of events that led up to the Terror to a large degree as reflected in literature and literary debates, and the perspective of the families who lived in the House of Government, the huge mansion blocks opposite the Kremlin that housed the nomenklatura. The extent of the sources on which the book is based is simply staggering, from archival records to newspapers to personal letters and photographs, and evidently also many conversations with people who had been children at the time. The fact that throughout many hundreds of pages we have met and seen the wives and children makes the final section – parents arrested in the night and never seen again, young children sent to orphanages after their early years of privilege – incredibly affecting.

The device of using the building as the lens on history is what makes the personal thread so effective, but clearly also means this is – despite its length – an incomplete account of early Soviet history. Indeed, it assumes a lot of background knowledge, which I could more or less dredge up from 1st year comparative politics. Nor do I know what I think about Bolshevism as a sect of true believers: it seems plausible in some ways, but again is unlikely to be the whole story. At least, other forms of Marxism are available.

But you shouldn’t approach The House of Government as you would an ordinary history book, even though the people are real, and their words from letters and diaries are quoted at length. It’s obviously a very personal interpretation. I did end up thinking that along with Svetlana Alexeivich’s Second Hand Time, this book opened an emotional window on the USSR that help understand it current-day Russia: traumatic historical events cast a long shadow. Get ready to read an epic. And to read it with a table or pillow to prop it on.

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Railways and culture

The Europeans: Three Lives and the Making of a Cosmopolitan Culture by Orlando Figes is a history of the emergence of a common European culture in music, art and literature in the late 19th century, told mainly through a narrative about three people: leadingopera singer Pauline Viardot (no, me neither), her husband, manager and also expert on Spanish art and music Louis Viardot, and the Russian novelist Ivan Turgenev, who ended up in a menage a trois with the Viardots.

For me, though, rather than this domestic drama, the main attractions were the railways, the publishing techniques and business models, the intellectual property debates, the great exhibitions. All the splendid artistic creations rested on these physical and institutional structures. Some artists and novelists learned to market themselves effectively to ensure commercial success – Zola was one for example, while poor Turgenev was far less worldly. The book even tells of a 19th century superstar economics effect, driven by technology on the supply side and the emergence of mass demand on the demand side, Sherwin Rosen avant la lettre. The Franco-Prussian war started to break the shared culture, and of course the first half of the 20th century torpedoed it. The book is a cracking read.

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