A Textbook Reaction: Part 1
The Utopia Thieves: Progress, Ecology and Neoliberalism — Chapter 7
“I don’t care who writes a nation’s laws, or crafts its advanced treaties, if I can write its economics textbooks.” Quote attributed to Paul A. Samuelson on the header of N. Gregory Mankiw’s blog.
ONE of the big problems we face in regard to getting to grips with these problems of complexity, power, technology, bigness and planning, is that for more than a hundred years, American economics has largely consisted of a pure gainsaying of all such issues for fear that to admit them might lead to Communism, trade unionism or Henry-Georgism.
Instead of the foregoing, intelligent arguments, what the student reading the average American economics textbooks gets, is something like this:
The hedonistic conception of man is that of a lightning calculator of pleasures and pains, who oscillates like a homogeneous globule of desire of happiness under the impulse of stimuli that shift him about the area but leave him intact… He is an isolated, definitive human datum, in stable equilibrium except for the buffets of the impinging forces that displace him in one direction or another. Self-poised in elemental space, he spins symmetrically about his own spiritual axis until the parallelogram of forces bears down on him, whereupon he follows the line of the resultant.
Thus did Thorstein Veblen paraphrase the core assumption of the usual kind of Anglo-American economics, as far back as 1898. And not much has changed since.
It is, indeed, something of an open secret that to offer a surface on which radical or cooperative ideas can gain no purchase, has been the real purpose of the American economics curriculum for at least the last one hundred years, if not longer.
In a 1908 issue of the Yale Review, one of America’s most eminent economists of the day, Nelson Simon Patten, wrote that:
Nothing pleases a socialist or a single taxer better -than to quote authorities and to use the well-known economic theories to prove his case. The economists rubbed their eyes in surprise when this assault first began; but they soon realized that their favorite authors were not so perfect as they supposed and that economic doctrine must be recast so that it would rest wholly on present data. This, I take it, is the real meaning of the present movement in economic thought. It will not accept socialism; and to free itself from the snares into which it has fallen through the careless statements of its creators, it must isolate itself more fully from history, sociology and other disciplines that give undue weight to past experience.
In 1927, another prominent American economist named Frank Fetter accused the even more eminent John Bates Clark of a similar dodge, in the course of several paragraphs that include the phrase “mien of pure theory”. Fetter’s point being that, for most of these reactionary purposes, it ultimately sufficed simply to make economics as abstract and atomistic and disembedded as possible even though (paradoxically) this meant severing its ties not only to any notion of the social good, but also to production.
A quick way to summarise Clark’s contribution to the debate as described by Fetter was that capital, a concept often surprisingly hard to pin down since it is part financial, part technological and part social, should henceforth be treated in purely financial terms.
To add a third term to the title of Lester Thurow’s 1994 Foreign Affairs essay ‘Microchips, Not Potato Chips’, this philosophy seems to hold that microchips, potato chips and even casino chips should all treated neutrally by investors and the tax authorities alike, and ranked as investments purely on their rate of private return, even if this puts casino chips ahead of potato chips, followed by microchips.
And so, likewise, the distinction between industrial capital and the financial capital that was vested in land. Fetter charged that Clark, a descendent of southern plantation owners, was especially interested in that issue.
In a later generation, Paul Samuelson, a particularly eminent textbook author of the post-World War II era and another economics Nobelist, wrote in a late, somewhat confessional article called ‘Credo of a Lucky Textbook Author’, of how the New Deal and World War II’s government-led production and innovation breakthroughs had created a hunger for a “revolution” in economics education: a rejection of all the bean-counting aridities of the Clark era.
The revolution was supplied, briefly, by Lorie Tarshis, a Canadian-born New Dealer whose Fundamentals of Economics was a bestseller for a year after its appearance in 1947.
However, Tarshis soon fell victim to agitation against his text by conservative economic fundamentalists, who accused him of softening up the young people of America for Communism. In Samuelson’s words, from ‘Credo’,
All this, mind you, was just prior to the Joseph McCarthy era of witch-hunting in government, academia and the clergy. During that period and still afterwards, there was often a full-court press by various conservative groups to emphasize sound principles in high school and corporate in-house courses in economics.
Tarshis’s textbook soon ceased to be a bestseller though, apart from that, Tarshis otherwise got off lightly compared to other prominent individuals whose careers were ruined by the later McCarthy witch-hunts.
Samuelson’s ‘luck’ was that, with Tarshis out of the way, he was able to convert his own textbook into a bestseller, stepping into a sudden vacuum. It’s not a form of luck he was especially proud of, he confesses in ‘Credo’. Samuelson added that, after observing what happened to people who pushed the envelope, he thereafter wrote and revised his own textbook book, through its many editions, as if had a lawyer at his elbow.
With all these Smedley Butler-style true confessions and mutual accusations on the part of leading American economic educators so openly in print — confessions and accusations of having served as Cold War ideological “marines”, of having been scared straight by McCarthyism, or of just plain acting as a shill for plutocracy and Southern plantation owners — it’s amazing that anyone takes American textbook economics seriously at all.
As Ha-Joon Chang points out, the Europeans and East Asians mostly don’t. In Europe, for example, to concede that people like Marx made a few good points here and there is the mark of a well-rounded intellectual, even among conservatives. Take for instance François Perroux, a top-level economic advisor to the conservative French President Charles de Gaulle during the go-go years of the 1960s. In an authoritative 1962 book called Le Capitalisme, published by Presses Universitaires de France, Perroux wrote that:
For any capitalist society to function smoothly, there must be certain social factors which are free of the profit motive, or at least of the quest for maximum profits. When monetary gain becomes uppermost in the minds of civil servants, soldiers, judges, priests, artists or scientists, the result is social dislocation and a real threat to any form of economic organization. The highest values, the noblest human assets — honor, joy, affection, mutual respect must not be given a price tag; to do so is to undermine the foundations of the social grouping. There is always a more or less durable framework of pre-existing moral values within which a capitalist economy operates, values which may be quite alien to capitalism itself. But as the economy expands, its very success threatens this framework; capitalist values replace all others in the public esteem, and the preference for comfort and material well-being begins to erode the traditional institutions and mental patterns which are the basis of the social order. In a word, capitalism corrupts and corrodes. It uses up society’s vital life-blood, yet is unable to replenish it.
In France, the value of liberty, which Americans often treat as a be-all and end-all, is officially triangulated with equality and fraternité (solidarity).
All Perroux is saying is that to keep all three balls of liberty, equality and solidarity in the air is a harder juggling act than to just keep tossing up the first one and allow the other two to gather moss on the ground.
If we hop over to the other side of the Rhine, few if any German economists would say that the government should be neutral in the question of whether to encourage investment in casino chips, potato chips or microchips.
And not neutral, either, in its treatment of real estate speculation — by which a few landowners profit “in their sleep” from the crowding of the many — as opposed to precision engineering and all the other more active pursuits by which the Germans now generate enough exports to maintain a high standard of living for the many in a land that has, indeed, been somewhat crowded ever since they lost their easternmost provinces back in 1945, at a time when many of the westerners’ houses had been destroyed as well.
For a few lucky Germans to profit from a general housing shortage has been politically unthinkable ever since 1945.
You might say that Germany is a special case in that regard. But others would contend that we could learn from the degree of Henry-Georgism and socialisation of land that was effectively forced upon the Germans after 1945, even in the pro-capitalist West Germany of the years 1949–1991.
(It was toward the occupation zones of the Western allies and the subsequent West Germany that most of the displaced German-speaking populations of Eastern Europe fled in the years after World War II, in the belief that they would be better off than under the Communists, even though this preference meant West Germany, many of its houses destroyed, also became hugely more crowded than the same part of Germany had been before the War.)
Meanwhile, back in America, Samuelson, just like Patten and Clark before, was doing his best to make sure that American economics students weren’t exposed to any intellectually stimulating debates on the pros and cons of socialism, solidarity and the single tax.
When the Truth is Found to be Lies
One consequence of the blandness, self-censorship and general intellectual ‘decaffeination’ of twentieth-century American textbooks on all social subjects — not just economics; mid-century American sociology also seems to have been pretty turgid stuff — was that, when the ‘counterculture’ finally hit the American university system later on in the 1960s, the reaction against ‘straight’ society and the whole edifice of reason tended to be far more negative than in Europe.
Compared to their American counterparts, the European student radicals of the time, even the ones who brought Paris to a standstill in 1968, still looked like they were living in Eisenhower’s day. It was if they still had faith in a rational form of politics, even on the far left.
The whole essence of modern Continental-European culture has consisted of the juggling of an overly arid rationalism and more romantic and Utopian impulses in ways that are in fact wonderfully captured by the opening scenes, indeed the opening musical bars I am tempted to say, of the episode from which the stills above appear. And by and large the Europeans have done a good job of squaring this particular circle.
But suckled as they were at the withered teat of duller and more ideologically censored textbooks, the American counterparts of the Parisian students were more liable to reject the whole corpus of ‘straight’ reason in favour of irrationalism and dancing to bongo drums.
Unlike the still-political Europeans, the baby boomers of America and the rest of the Anglophone world tended to favour a libertarian, personalised and structureless approach to social problems, in which one would change the world by changing oneself first: an approach summarised by the late William Rorabaugh as a “politics of no politics.”
Sadly, perhaps the most ironic consequence of hippie libertarianism and anti-politics was a further entrenchment of the orthodoxies of the American economics textbook as the post-World War II welfare state gave way to neoliberalism, a development that encountered practically no resistance from the Anglophone boomer generation (who ironically ranked among the welfare state’s principal beneficiaries), though the neoliberal agenda faced more resistance in places such as Germany and France.
Even in otherwise highly anti-Communist and, at the time also, highly authoritarian countries like Singapore, South Korea and Taiwan, there was much criticism of the American economics textbook.
In those countries, reservations about the free-market economy’s tendencies toward exploitation, social corrosion and landowning stagnation seems to have been legitimate enough, so long as you expressed such doubts in terms of traditional Asian virtues and the need to favour industrial development at the expense of the landowner, as a means to decolonisation.
Thus, perhaps, did South Korea justify its five-year plans for the building up of industry in what had, before World War II, actually been the more backward and strictly rice-growing part of Korea.
Five-year plans which were fortunately more successful than most of the better-known Communist ones: thus reinforcing the idea that today’s complex economy not only demands complex organisations, but complex and subtle ideological values as well.
Meanwhile, the United States succumbed to the anti-Communist version of ideological purism: the one-note song of the liberty of the strong and grab what you can, masquerading as reason, which was thus devalued accordingly.
It’s all very ironic.