The New Deal & Neoliberal Orders: Introduction:

We decided at the start dedicate a couple of weeks to discussing political economy, not necessarily in the grand sense. Political economy papers in economics can be narrow studies of interest groups and the exertion of political power to gain income and resources. Political economy papers in economics can delve into deep theoretical concepts about how humans associate in a game theory context, given various endowments, potential threat points, and the desirability of achieving cooperation. However, there is a middle ground. That middle ground considers how our government is structured as it manages our economy, and how the government's management of the economy has evolved over history. This is a topic that I explored extensively in my 600-page book, Slouching Towards Utopia <bit.ly/3pP3K>.

I should start by saying that it was not my original plan to write such a book. The book manuscript did not start as a work about the political economy of the world since 1870, focusing on the global north. Instead, it began as an examination of taking as an organizing frame the idea that the hinge of history was 1870. That date marked the transition from a time when the rate of global technology growth was so slow that it was nearly entirely consumed by population growth and increased resource scarcity, keeping humanity in poverty, to a post-1870 era which Simon Kuznets first called Modern Economic Growth. In the Modern Economic Growth era, fertility was bound to lose its race with technology, and so humanity began to grow wealthier. Since 1870 humanity has grown far wealthier. Income and wealth is appallingly unequally distributed worldwide. Nevertheless, the average person today has ten times the material wealth and the real income of the average person as of 1870.

Starting from this idea that 1870 was truly the hinge of history, the book was then supposed to make four explorations: (a) the workings of a pre-1870 economy and society, (b) the reasons behind the transformation in 1870—why then? why not earlier? and why at all?—the industrial and sectoral details of the process of Modern Economic Growth, and the political-economy consequences of humanity's rapid ascent to previously unimaginable wealth.

However, as I wrote the book, the topic drifted. I became increasingly focused the contrast between the rapidly growing cornucopia of produced commodities on the one hand and our collective failure to equitably distribute that cornucopia or to use it wisely for the well-being of society. Despite the massively increased resources and enormously increased life expectancy we enjoy today, people today do not live in anything near to utopia. We still are hag-ridden by anxiety, violence, and inequity. Clearly, mal-distributed material wealth alone is not enough to solve society's problems. The question we need to understand is: Why not?

For the next two weeks, the last two weeks of the course, we will discuss the rise and potential decline of that Neoliberal Order which has shaped the global north's economies and societies since around 1980. Our discussion will be based on the assigned excerpted chapters from Gary Gerstle's book The Rise and Fall of the Neoliberal Order and my book Slouching Towards Utopia.

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The pace of change in technology, modes of production, and social organization since the year 1000 has been remarkable. And in each era the way people work has taught people different lessons about how society should be organized, and has imposed different constraints on what modes of organization people will accept.

The pace of change since 1870 has been particularly significant, in that it has meant that we have had to to rewrite society's organizational software on top of the changing technological productive hardware every 40 years. And we have had to do so without a clear idea of what will fit and what will not. Moreover, the situation at any time is confused, with a variety of surviving elements from previous eras still hanging on.

The socialists of the late 1800s, led by Friedrich Engels, argued that the mode of production would ultimately determine society. In doing so, they were following in the footsteps of arguments made by Adam Smith and Adam Ferguson. But with the rapid pace of change since 1870, can we say that? Is there enough time for the "last instance" to come in which society finds a pattern that fits with the underlying technological foundations of society? That, I think, is an open question.

Between the solidification of imperial-commercial society and the coming of steampower society there were at most two centuries. Steampower society was not socialist. The socialists of the late 1800s said that this was simply because there had not been enough time for the revolution to come, and it was coming. But they were wrong. Steampower society never became socialist. And technology moved the mode of production on to that of applied science society. Since then, there has never been enough time for enough social experiments to be tried and failed and thus for the underlying logic of the economy to make itself felt and drive society to a pattern that "fits" it. As a result, there is little sense in which the political-economy system of governance over the market and society fits with the technological underpinnings.

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This is the framework from which I approach our topic, and from which I read Gary Gerstle's book, The Rise and Fall of the Neoliberal Order: America in the World in the Free Market Era.

The introduction to the book asserts that after 2010 we see the beginning of the end of the "Neoliberal Order". It defines a "political order" as: a constellation of ideologies, policies, and constituencies that dominate, so much so that even its opponents find that they have to borrow their rhetoric and accept its terms. One example if this is Dwight D. Eisenhower in the 1950s, claiming he could manage the New Deal order better than Democrats. Another example is Bill Clinton in the 1990s, saying the age of big government was over.

Gary Gerstle and Steve Fraser created this concept of a political economy order. They used it to analyze the rise and fall of the New Deal Order from 1930 to 1980. Why did the New Deal Order rise? It was forged by Franklin Delano Roosevelt in the crisis of the Great Depression. Why did the New Deal Order fall. Gerstle and Fraser saw many sources of discontent—racism, over-bureaucratization and inefficiency, and a feeling that ossified institutions were limiting possibilities for human freedom. sources of discontent.

Why did the Neoliberal Order rise? It was driven by Ronald Reagan and Margaret Thatcher. It was solidified in the 1990s with Bill Clinton and Tony Blair, who represented New Democrats and New Labour. In the 2000s, George W. Bush attempted to spread the neoliberal order through the Washington Consensus. Would the Neoliberal Order have risen without the political talents of Ronald Reagan and Margaret Thatcher, the luck that kept them in office, and then the fall of socialism in 1990 that they took credit for? Perhaps, and perhaps not.

The Neoliberal Order began to decline due to cultural conflicts, and the Great Recession and the inadequate response of the Obama administration to it.

So, what do people think of this thumbnail sketch of big history, in which Gary sets the rise and fall of the Neoliberal Order in the introduction to his book? Does it seem accurate, at least as applied to the global north, the United States, or perhaps the United States north of the Mason-Dixon line? Or does it seem to miss important aspects that should be included? I'm interested in the dichotomy and explanations of the neoliberal order between, on one hand, Robert Gordon's productivity-centered explanation focusing on the crisis of profitability, and on the other hand, more social or political explanations like the civil rights movement and May '68 in France?

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Econ 210a 2023 04 19

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I want to thank Gabe. I want to thank the Stones. I want to thank the Stone Foundation. I want to thank the production team for this very nice opportunity to deliver my thoughts on how inequality is a Gordian knot of a socio-economic problem that has us as a species pretty completely flummoxed—even though human progress across the 20th century is, in many

I will divide my thoughts tonight into four parts:

1. Rebalancing the University, the Strike, & What We Deserve

The first part of this talk—the current strike. We are, here and now, in the third week of a strike by our graduate students, who teach so much for this university and who find themselves under great stress, as they can see the lives stretching ahead of them, falling wildly short of the lives, they anticipated when they decided to enter graduate school. They are complaining not so much about inequality per se—they are among the richer half of Americans, certainly; but rather that they are not receiving what they think they deserve.

Such questions of what you deserve, and its relationship with inequality, are knotty ones…

What do we deserve? And how does it tie into issues of inequality?

A story:

Back when I was finishing up college at the start of the 1980s it was the Volcker disinflation. Leaving the university to enter the highest unemployment job market since the Great Depression seemed hazardous. I did not want to do what my father, sister, brother-in-law, brother, sister-in-law, and wife, all round up doing—go to law school. But what would our lives be like if we went to graduate school? I noted, even then, that people applying for assistant professorships in economics were 26 with 1/2 written article and extravagant praise from their advisers, while people applying for jobs as assistant professorships in history were 35 with one book published to good reviews, and another well on the way. So it was going to be economics.

My close friend Andrei Shleifer and I then went to the archives and went through the list of all those receiving Ph.D.s in economics from Harvard ten and fifteen years before. We found two people we had heard much of—Steve Marglin and Bob Barro. We found that about 1/3 of those 15 years out were tenured professors, overwhelmingly at state universities, and liberal arts colleges. We found that about 1/3 were bank or corporate senior vice presidents, doing forecasting and similar chores. We found the rest scattered—but looking as though they were doing interesting economics-related things in government, for international agencies and businesses, and elsewhere, and making enough money to hold body and soul together. All in all, it seemed likely to be a path to a very nice life—with an economics Ph.D. at least, history seemed dicier.

So I took the plunge, and things have turned out vastly better than the principal of mediocrity would have led me to expect, overwhelmingly because of good luck in the small and also the very large—born in the mid–1900s United States with a prenatal and neonatal nutritional environment that kept my brain from being protein-deprived during its development, and raised and molded into a personality with many great flaws and some excellences which are as-if fine tuned to give me great social power in the particular society in which we live.

Most recently, my book published early this fall, “Slouching Towards Utopia: An Economic History of the 20th Century” is an instant “New York Times” bestseller, peaking at #6 on the nonfiction list that has—so far—sold approximately 25,000 all-format copies worldwide.

But let me return to the strike, and to the University of California’s graduate students. Even as I went through graduate school and beyond, things were changing, and the gap between we economists and what was going on elsewhere in the university was growing. The maid of honor at my wedding, married a very smart and hard-working man my age who went and got his PhD in history, starting graduate school when I did. I was promoted to full professor here at Berkeley in the same year that he got his first tenure-track assistant professor job. And here in economics, job prospects for our graduate students are still very good: tenured professors do sometimes retire, and their slots are usually filled with new tenure-track appointments; International agencies and business schools are still expanding rapidly, and greatly value Ph.D. economists; Silicon Valley thinks our students have a great deal of utility. Here in economics, we professors can say: your lifestyle while in graduate school will be relatively spartan, but your pay will ramp up very fast afterwards: don’t worry.

In other departments in this university, professors cannot now say this to the graduate students. In fact—given that American universities by and large ceased to grow a generation ago, and the absence of business-school and international-organization demand for the Ph.D.’s of other non-STEM disciplines—they have not been able to say that your post-Ph.D. prospects for a fulfilling life and job —in your Ph.D. discipline_ are bright for a generation. For a generation, in the humanities and social sciences (and I know many Ph.D.’s in math and physics now doing things like financial arbitrage and computer game design), becoming a graduate student has been starting a low-paying job as a teacher, with the attached opportunity to write a dissertation that might, with very low probability, put you on the path to a tenured professorship somewhere someday. Becoming a graduate student has not been entering a phase as an apprentice with a spartan lifestyle leading to a relatively secure career path.

For a generation university administrations nationwide have noted this transformation and failed to deal with it.

I cannot judge any individual administrator harshly. California Hall starts each month hoping to take bold action to fix the problems of and tackle the opportunities open to the university—but three days into the month it finds it must focus all of its attention on senior-faculty retention cases, as universities with much larger endowments seek to attract us senior professors. Plus there is the iron logic of a successful bureaucracy that accumulates for generations, undisrupted by either market forces, partisan-political circulation of elites, charismatic renewal, or clear and obvious substantive failure. C. Northcote Parkinson told a parable of this iron logic: A “civil servant, called A, finds himself overworked”. At the end of the story A has six subordinates C through H, is more overworked than before, and yet the seven of them accomplish less than A did on his own, as most of their time is spent cancelling each other out.

But I can judge the administrative system as a whole that has brought us to our current position harshly. There is no vision. And we are told in Proverbs 29:18 that King Solomon said: “Where there is no vision, the people perish”.

And that is the end of the first part. The takeaway? Our current strike is not merely a short-run contest at the margin over the distribution of the university’s resources, but rather the surfacing of a very difficult problem of how the university of the future is to be organized for our collective benefit.

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2. Since 1980: The Rising Inequality Surprise

The second part of this talk is how my self of 40 years ago that I talked about before—my twenty-year-old self—would be very surprised to find his elder self here, talking about inequality as a first-order problem for human society.

That twenty-year-old self confidently expected his lifetime to see a great narrowing of income and productivity differentials across nations. Roadblocks formed by imperialism and colonialism—external to a country and internal—by distance, and by blinkered ideologies had greatly widened income and productivity differentials since 1800. But those historical forces were passing away. Global development was on the agenda. And the profits to be made from raising productivity worldwide to Global North standards were so great that every exertion would be made to make it happen.

But, of course, that convergence has not happened.

Looking across nations, the world today is about as unequal as it was when I was born in 1960, albeit somewhat less unequal than at the moment of peak international income and productivity inequality in 1975.

Moreover, that twenty-year-old self confidently expected income and status differentials inside America to fall, not rise, over his lifetime. Racism and patriarchy seemed to be in retreat, and the underlying framework of social democracy—the New Deal Order, as historian Gary Gerstle likes to call it—gave us on the one hand full employment and rapidly increasing investment in education which gave market power and productivity to labor, and on the other the social-insurance state and progressive taxation which significantly leveled pre-fisc inequality and disrupted plutocratic dynastic accumulation. The dominant political-economic understanding of how this New Deal Order had come about had been most compactly set out by the great Simon Kuznets, with his heuristic of the “Kuznets Curve”. As my teacher Jeffrey Williamson summarized it in his Yale Kuznets lectures:

• As an agrarian economy industrializes, inequality rises simply because the modern-industrial sector pulls away from the traditional-agrarian one.

• More important, however, is that, at least in the early stages of industrialization, technological progress is labor-saving—makes capital a substitute for rather than a complement to labor—and so boosts returns to capital while lowering returns to labor.

• Moreover, a largely agrarian poor class, not yet through the demographic transition cannot afford the human-capital investments in their children needed to rescue the next generation from poverty.

• And last comes the substantial amplification of wealth disparities from the rewards to market position in increasing-returns and high fixed-costs industries.

The consequence? As industrialization takes place, income and wealth inequality rise, very substantially, producing a Gilded Age that the rich of later generations see as a Belle Époque.

All of these factors, however, are reversed in the later stages of industrialization. After the demographic transition is completed, resources to invest in human capital are ample. Rural-urban wealth gulfs are steamed away by the market. Technological progress becomes more labor-complementing than labor-substituting. Easier technological diffusion makes first-mover advantages of less important. Plus there is more: even an oligarchic political society can believe in antitrust to curb its plutocracy; and, most important, literate working class can organize and flex its political muscles for first political democracy, and then social democracy—steeply progressive taxes and an ample social insurance state

Simon Kuznets thus envisioned, and the near-consensus back when I was 20 or so agreed, that post-WWII social democracy—the New Deal Order—was very much a Fukuyama-like “end of history”. Yes, there were historical survivals from a worse past: the economic consequences of racism, sexism, past wealth dynasties and the transmission of wealth inequality. But those were all ebbing away. Robber barons were replaced by corporate techno structures. Political democracy made wealth, the servant of rather than the master of society.

Once again, it did not happen.

Or, rather, it happened—and then, with 1980, came the Neoliberal Turn. It turned out that social democracy —the New Deal Order—was in no sense an “end of history”. The future after 1980 did not see increasing equality of opportunity that continued to reduce inequality of result. Instead, we entered into the Second Gilded Age, in which we are now enmeshed. . And that is the end of the second part. The takeaways? The failure of post-colonial convergence, and the Neoliberal Turn of the early 1980s and the consequent coming of our Second Gilded Age, were great surprises to the supposed wise of previous generations.

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3. Why the Neoliberal Turn?

And now I get to my third part: Why? Why the Neoliberal Turn?

Let me start this third part by focusing down, and dropping international income and wealth, disparities from my subject. They are probably the most important part of global inequality from the perspective of the human race as a whole. But I have limited time and limited knowledge. So let me focus on the reasons for the coming of the Neoliberal Turn, and our consequent Second Gilded Age.

Let us first go back to the days of 150 and more years ago—the years when humanity was ensorcelled by the Devil of Malthus. Slow productivity growth ,poverty, and the patriarchal requirement that one have surviving sons if one were to have social power—those all meant that population pressed upon the limits of subsistence. There was simply no way that humanity could possibly bake a sufficiently large economic pie for everyone to have enough.

What was one then to do, if one wanted enough for oneself and one’s family?

The answer was straightforward: one strained every nerve and muscle to become part of an élite. That élite would then elbow other potential élites out of the way. It would then run a force-and-fraud domination-and-exploitation game on humanity, so that it could grab enough for itself. Thus politics and governance were, primarily, how that élite—thugs with spears, and later with gunpowder weapons, assisted by their tame accountants, bureaucrats and propagandists—ran this domination-and-exploitation game, using of the resources they extracted to maintain their dominance, and some to build and enjoy their high culture.

Come 1870, however, the spell of Malthus began to lift. Worldwide, technological progress over 1770 to 1870 had been three times as rapid as over 1500 to 1770, which in turn had been three times as rapid as in the previous Agrarian-Mediæval years. But even 1770–1870 had not yet been fast enough to trigger the infant-mortality decline and the demographic transition to low fertility, and hence the ability to invest in a mass education on a large scale. After 1870, however, the global rate of technological progress more than quadrupled to something like our current 2% per year. Better nutrition, followed by a growing ability and growing knowledge to make public health investments—those started to push infant mortality on the way down. The population explosion could not keep up with technological advance. Slowly and unevenly, the fertility decline began, and, haltingly and unevenly, real income growth began to accelerate.

Within a generation after 1870, it became apparent that humanity had found what John Maynard Keynes was to call “Economic El Dorado”. It became apparent that it would not be that many more generations before humanity could bake a sufficiently large economic pie for everyone to have enough. And then, after that, what would be the point of the domination-and-exploitation machine run by the elite? Maintaining it was expensive. Why not have a free society of associated producers in which people rotated through the needed administrative tasks? It was not that anyone especially “deserved” more. The true source, after all, of rapidly growing human wealth was not the sweat of those currently doing the work. It was, rather the treasures of technological knowledge that all had inherited from our predecessors.

One answer was that “soon” was not “now”, and that the domination-and-exploitation machine needed to be kept going in order to power the engine of research and development, capital accumulation, and economic growth. As John Maynard Keynes, fully flying his upper-class twit freak flag, put it in 1919. Let me read out a long passage:

Precisely the inequality of the distribution of wealth… made possible those vast accumulations of fixed wealth and of capital improvements which distinguished that age from all others…. The immense accumulations of fixed capital which, to the great benefit of mankind, were built up during the half century before the war, could never have come about in a Society where wealth was divided equitably…. This remarkable system depended… on a double bluff or deception…. The laboring classes… from ignorance or powerlessness… compelled, persuaded, or cajoled by custom, convention, authority, and the well-established order of Society into accepting, a situation in which they could call their own very little of the cake…. The capitalist classes… theoretically free to consume it, on the tacit underlying condition that they consumed very little of it in practice…. There grew round the non-consumption of the cake all those instincts of puritanism…. Saving was for old age or for your children; but this was only in theory,—the virtue of the cake was that it was never to be consumed, neither by you nor by your children after you…. Society knew what it was about. The cake was really very small in proportion to the appetites of consumption…. If only the cake were not cut but was allowed to grow… a day might come when there would at last be enough… and men… could proceed to the nobler exercises of their faculties…. But these thoughts lead too far from my present purpose. I seek only to point out that the principle of accumulation based on inequality was a vital part of the pre-war order of Society and of progress as we then understood it, and to emphasize that this principle depended on unstable psychological conditions, which it may be impossible to recreate…

In short, for Keynes in 1919 the maintenance of Edwardian class structures and Gilded Age-levels of wealth and income inequality was essential for the progress of human race. And the restoration and shoring up of the Belle Époque order of economic and social inequality was the principal task of post-WWI reconstruction. And in 1930 he stressed the point:

For at least another hundred years we must pretend to ourselves and to every one that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight…

It has not quite been 100 years since 1930. But it has been 103 since 1919.

I cannot resist digressing to note that six years later Keynes had changed his tune. Under pressure from the Great Depression and the threats to liberal society then emanating from Moscow and Berlin, in 1936 he wrote about how:

The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes…

Full employment was to be attained by letting Keynes’s technocratic students run a low interest-rate monetary policy supplemented by a “somewhat comprehensive socialization of investment” to match investment effort to desired savings at full employment.

But wealth and income inequality? A low interest-rate policy, Keynes hoped, would lead to the euthanasia of the rentier: plutocrats would find themselves only able to exercise the social power banked up in their wealth by spending-down their capital, and so ceasing to be plutocrats.

However, do not go too far toward full equality!:

There is social and psychological justification for significant inequalities of incomes and wealth, but not for such large disparities as exist today…. It is better that a man should tyrannise over his bank balance than over his fellow-citizens… It may still be wise and prudent statesmanship to allow the game to be played… so long as the average man, or even a significant section of the community, is in fact strongly addicted to the money-making passion…

But also:

It is not necessary… that the game should be played for such high stakes as at present. Much lower stakes will serve the purpose equally well, as soon as the players are accustomed to them….

In my Slouching Towards Utopia book I speak of the post-WWII global-north social democracy that Simon Kuznets thought of as the end-state of the inequality story as: the shotgun marriage of Friedrich von Hayek’s insights into the market as a social device for crowdsourcing solutions to human problems with Karl Polanyi’s insights into the refusal of humanity to accept any order in which the only rights that count are property rights and only the rich have social power and voice, blessed by John Maynard Keynes. I think that gets his final position as… presiding minister?… Father-in-law?… of social democracy broadly right.

This was, as I said in part 2, supposed to be “The End of History”: political democracy in tandem with social democracy, as the surviving remnants of plutocracy, patriarchy, and racism died away.

So why then the Neoliberal Turn?

To put it broadly, there are three theories.

The first is “unlucky accident”—you hear this, I suppose, most often from Paul Krugman. It was the inflation of the 1970s that destabilized belief in the New Deal Order, and the Neoliberals—those who believed that the rich needed to be made richer so that they focused their energies on being job creators rather than evaders of punitive taxes, who believed that the non-rich needed to be made poorer to incentivize them to cease being slackers and moochers, and that the market did things for good reasons, meaning that whatever income distribution the market generated was there for good reason which people should not dispute—who then picked up the pieces.

The second is Thomas Piketty’s theory. In broad and oversimplified strokes, it is that tenor of politics is largely determined by the concentration of wealth, and that even when the political power of potential plutocrats is at a low ebb they still have sufficient influence to maintain the typical rate of profit at 5% per year. Thus take 5% per year. Subtract from that the proportion of wealth that potential plutocrats consume, give away, and are taxed. Subtract from that the rate at which the labor force plus non-rich real incomes grow. If the answer is greater than zero, plutocratic wealth is becoming a larger share relative to the economy and a Gilded Age is on the way.

In Piketty’s view, Gilded Ages are the rule, and social democracy is the exception. We transitioned from social democracy to our Second Gilded Age in the global north as population growth fell and immigration restrictions lowered the rate of growth of the labor force, as the end of catch-up growth and productivity slowdowns reduced the rate of non-rich income increase, and as left-wing parties took their eyes off the ball and became “Brahmin”: focused on demonstrating that they took a proper moral attitude toward injustices rather than focused on lunch-pail income issues.

The Neoliberals themselves had a mish-mash of reasons as to why the Neoliberal Turn made sense:

• Make inequality greater to re-incentivize both the rich job creators and also the non-rich potential slackers and the moochers.

• Social democracy was hopelessly corrupted by rent-seeking.

• Social democracy was vastly over-bureaucratized.

• Market means were better at attaining worthwhile social-democratic ends.

• In fact, the market has a wisdom and a logic of its own, and if it produces inequality, it must be doing so for a reason.

• The coming of information technology allows for a much more flexible, pro-freedom mode of social organization.

• Social democracy is insulting: it gives you good things by virtue of your status as a citizen, when what you need is the opportunity to earn good things.

Let me briefly comment on the last of these. There is a great clip of American actor Craig T. Nelson saying:

I’ve been on food stamps and welfare. Did anybody help me out? No!…

There is a logic under there. Food stamps and welfare are not “help”. Why not? Because they force him to trade his self-respect for food and shelter. They make him one-down, a moocher, in the great reciprocal gift-exchange network that is society. And Craig does not want to be a moocher—does not want to be the guy who always takes and never reciprocally gives. To assist him by providing him with the chance to pull his weight and contribute would be to help him out. To simply feed and house him by virtue of his status as citizen, asking nothing in return, is to degrade him.

And there is something worse than the social democratic state forcing you to be a moocher. It is watching it enable others to get away with being moochers themselves. We heard this on Mitt Romney’s post–2012 election conference call:

The president’s campaign… focused on giving targeted groups a big gift… forgiveness of college loan interest… free contraceptives were very big with young, college-aged women…. [For] African American voters, ‘Obamacare’ was a huge plus… getting free healthcare worth, what, $10,000 a family, in perpetuity, I mean this is huge…. With regards to Hispanic voters, the amnesty for the children of illegals…

And in Mitt Romney’s leaked dinnertime conversation:

There are 47 percent who are with him: who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it…. My job is is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives…

Now Mitt Romney is not a bad man. He will be either my 51st or 52nd favorite out of the 100 senators in the next congress. And he has a strong, visceral aversion to social democracy precisely because it offers a drop of “to each according to their needs”.

The takeaway: social democracy—the New Deal Order—failed its sustainability test at the end of the 1970s. Perhaps it could have been revived and restored, even if somewhat zombie-like. Certainly those of us who worked for Bill Clinton or Tony Blair thought so. But I think people go too far when they see the coming of the Second Gilded Age as unhappy accident, or even as simply the consequence of r > g in a world of demographic and productivity slowdown.

There are an embarrassingly large number of powerful candidates for the Neoliberal Turn ranging from the large political megaphones that money can buy through the vulnerability of social democracies to rent-seeking to the deep structure of human or perhaps only Indo-European language thought in placing a very high value on reciprocal gift-exchange as social glue. That the even moderate steps toward less income and wealth inequality taken during the age of social democracy proved unsustainable should give all those who wish for it pause.

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4. What to Do?

Finally, I arrive at the fourth part of my talk: Given all this, what should I do? What should we do? What should you do?

Remember, first, that economics’s utilitarian roots place an extremely high value on equality. We have every reason to think that the marginal utility of consumption declines steeply with wealth, even after we have gotten out of the range where a 50% increase in family wealth, cuts infant mortality by 50% and raises adult height by 2 inches. Any aversion to interpersonal comparisons of utility turns out, in practice, to be a claim that maybe it does not matter if they are poor because they would not appreciate the finer things. It is obvious how to judge any such claims.

Remember, second, that economics’s libertarian roots also place an extremely high value on equality. Absolute wealth is power over nature. Relative wealth is social power: power to seek the attention and assistance of others, to have a voice in what we are collectively going to do—and it is collectively, because on our own each of us would have a life nasty, brutish, and likely to be short. As John Stuart Mill wrote, the lives of the poor are lives of degradation and imprisonment. If one is locked in a cage, it does not matter much whether there is no key or whether one is just not rich enough to buy a key

Remember, third, ethical philosophy also places an extremely high value on equality. We have none of us made anything by our hand and brain alone, but only through what has been freely gifted to us in the form of this planet and of the accumulated stock of human wisdom, to which we are all heirs.

We understand why, before 1870, human societies were greatly unequal: humanity had no chance of baking a sufficiently large economic pie for everyone to have enough. Those who did have enough did so by virtue of their participation in the élite’s domination-and-exploitation scheme. Since 1870 humanity has accomplished a great deal: we now have the technological powers to bake a sufficiently large economic pie that everyone living before 1870 would have seen as certainly more than enough. Yet, although we have solved the problem of baking a sufficiently large economic pie, The problems of slicing and tasting it—of equitably distributing our collective wealth, and of utilizing it wisely and well so that people live lives in which they feel safe and secure, and are healthy and happy —those continue to flummox us, more or less completely.

That the social democratic order collapsed so rapidly around 1980 makes me think we should look back and try to figure out why it had not collapsed earlier—what had changed then? I am tempted to put forward the hypothesis that what had changed was the aging of those with visceral memories of the Great Depression and of World War II, who had in the front of their minds an unusually strong degree of empathy with others, remembering how the world, chance, and fate had demonstrated that we were all in this together.

So perhaps the first step is to recognize that this loss of solidarity is odd, for we are all in this together.

In his Wealth of Nations, Adam Smith argues against those who claim that a more unequal society is a better society, for in a more unequal society the rich and the government can get more work out of the poor for the same amount of coin. Adam Smith pulls an intellectual-judo move, drawing on expectations about gift-exchange:

No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, clothe, and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged…

There are people in Pakistan whom I do not know who wove the carpets that are on the floor of my house. Whenever one of dogs looks like it might vomit, we frantically hustle them outside because the rugs are things of great beauty, which enrich our lives. In fact we should spend more time than we do looking down at them and admiring them. The thing about a well-functioning gift-exchange relationship is that each party benefits greatly on net, and each party believes that the current favor balance is against it, so it needs to do more and thus to strengthen the relationship.

Every time I walk on any of my carpets, I should think: I am really one-down with respect to the balance of favors vis-à-vis the people in Pakistan who wove this, and I should strive harder to appreciate the artistic gift they have given me, and find more ways to better their lives. I should take care that they’re somewhere close to the front of my mind.

I wish I had more to offer you. But I do, at least, have this. Thank you very much.

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Nov 29

The Annual Stone Lecture: Slouching Towards Utopia

Join us for the annual Stone Lecture, featuring economist J. Bradford DeLong

By UC Berkeley, College of Letters & Science

Tue, November 29, 2022, 5:10 PM – 6:30 PM PST :: Sibley Auditorium [virtual option available] UC Berkeley Berkeley, CA 94720

Around 1870 came a great shift: invention sprinted forward, doubling our technological capabilities each generation, utterly transforming the economy again and again. The possibility of being able in the not-too-distant future of baking a sufficiently large economic pie for everyone to someday have enoughcame into view. Surely then we would be able to shift governance and politics so that we could collectively build a utopia? Surely it was the baking of the sufficiently large economic pie that was the large problem. Surely the slicing and tasting the pie—equitably distributing humanity’s immense technology-enabled wealth, and utilizing it so that people felt safe and secure and were healthy and happy—were second-order, more-easily-solved problems?

Join us for a talk by Berkeley Economics Professor Brad DeLong, followed by audience Q&A. The event will be followed by a reception. Live-streaming available as well.

This event is sponsored by The James M. and Cathleen D. Stone Center on Wealth and Income Inequality at UC Berkeley.

‘Learnedly and grippingly tells the story of how all the economic growth since 1870 has created a global economy that today satisfies no one's ideas of fairness. The long journey... will continue…’—Thomas Piketty

"A magisterial history."—​Paul Krugman

“If you want to follow the conversation right now on global economic history, you should check out Brad DeLong’s Slouching Towards Utopia.”―Adam Tooze, on The Ezra Klein Show

“Deeply engaging…a work of strikingly expansive breadth and scope.”―Benjamin M. Friedman, Harvard Magazine

“Slouching Towards Utopia is an impressive achievement, written with wit and style and a formidable command of detail.” ―The Economist

The James M. and Cathleen D. Stone Center on Wealth and Income Inequality at UC Berkeley was created to serve as a research hub for campus and beyond, enabling UC Berkeley’s world-leading scholars to deepen our understanding of the inequality in society and formulate new approaches to address the challenge of creating a more equitable society. The Center serves as the primary convening point at UC Berkeley for research, teaching and data development concerning the causes, nature, and consequences of wealth and income inequalities with a special emphasis on the concentration of wealth at the very top. Learn more

<https://www.eventbrite.com/e/the-annual-stone-lecture-slouching-towards-utopia-tickets-457921504547?aff=ebdssbdestsearch>

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FIRST: Slouching Towards a Free Market:

It is truly a shame that my USC Slouching Towards Utopia <bit.ly/3pP3Krk> event was not videotaped: it went the best of all my events so far, in large part because I was talking to the excellent Jake Soll—and we were also talking about his excellent new book: Jake Soll: Free Market: The History of an Idea <https://www.amazon.com/Free-Market-History-Jacob-Soll/dp/0465049702>.

Jake’s and my books are just close enough that the overlap of our concerns is near-total but sufficiently far apart that virtually nothing is repetitive.

But the event is now lost… tears in the rain…

All I have is my memory, and my notes.

So let me try to reconstruct at least some of the highlights of what was heard and said. It is in all cases difficult to reproduce passages word-for-word, so my method will be to make the speakers say what is in my opinion demanded of them at each occasion, of course adhering as closely as possible to the general sense of what they really said:

Selected Reconstructed Highlights:

Brad DeLong: The market economy, as that genius Friedrich von Hayek said, is one of the best possible mechanisms for crowdsourcing, for harnessing humans’ collective potential as an anthology intelligence. A bureaucracy turns almost all of us into mindless software bots following rules set down by some small committee of bureaucrats who understand only about a third of what is going on, and are completely ignorant of the knotty edge cases. A central-planning system turns us all into mindless robots going through motions decreed by some central planner who has no clue about what is actually going on given his direct reports’ powerful interest in telling him convenient lies. The best thumbnail description of how chains-of-command actually work comes from SF&F author Lois McMaster Bujold’s novel “Brothers in Arms”, in which we read: “No, no, never send interim reports," said Miles. "Only final ones. Interim reports tend to elicit orders. Which you must then either obey, or spend valuable time and energy evading, which you could be using to solve the problem”…

Brad DeLong: But the market economy with property rights and contract obligations—as long as those are established, and as long as market prices are consonant with social values, all of the decision-making is pushed out to the periphery where the information is, all of the human race is incentivized to take actions to increase human wealth, and so all of the brain- and muscle-power of humanity is turned into an anthology intelligence focused like a laser beam on the problem of applying technology to produce necessities, conveniences, and luxuries. Friedrich von Hayek the idiot thought the unleashed market would do the whole job—or at least all the job that could be done.

Hayek’s argument was that the market would then put technology to work. True, the market would not produce “social justice”. But Hayek’s argument was to ask for social justice was to be disappointed: It would undermine prosperity and put us on The Road to Serfdom. The social-justice bureaucracy would turn into kleptocracy. And the administration of things would turn back into not the government but the domination of men, for power corrupts, and absolute power corrupts absolutely. Lenin had thought that once society could produce enough for all—once you had Soviet power plus electrification—there would no longer be any point to engaging in domination. People would rotate through administrative jobs, much as professors undertake to be department chair only reluctantly and under some duress, and those administrative jobs would be within the competence of everyone, for all that would be required would be the ability to add, subtract, multiply, divide, and “issue appropriate receipts”.

Von Hayek thought Lenin was naïve. Von Hayek was not wrong. And accountant Jake Soll to my left will tell you that “issuing appropriate receipts” is a remarkably subtle and complex task.

Milton Friedman might add that if you tried to achieve social justice, you might probably achieve something else, and that it was better to trust to the rough productivity-rewarding justice of the market than to “social justice”: Milton Friedman lived in a world in which he had been fired from his job at the University of Wisconsin, because a member of the Wisconsin legislators said the Wisconsin-Madison economics department already had too many Jews.

Yes, von Hayek and Friedman agreed: “the market giveth, the market taketh away: blessed be the name of the market” was the only sensible gospel that should ever be preached…

Brad DeLong: Each generation after 1870 humans had to try to figure out how to write new economic-sociological-political software to run on top of the changing forces-of-production of hardware so that society did not crash in a context in which Schumpeterian creative-destruction was destroying occupations, livelihoods, and communities as it created immense wealth…

Jake Soll: What DeLong is doing with great expertise for the twentieth century… I was trying to do for an earlier period…. The dichotomy, between von Hayek’s just completely free libertarian market, and Karl Polanyi’s idea that you would need a society, a democratic, decent society with human rights for things to function. I feel like Brad is more polite than I am about von Hayek. Reading von Hayek upsets me because I find him to be paranoid. His statements about the state are just not helpful…. If you know anything about history, you know that no one comes starts complaining about states until they start becoming powerful at the end of the 17th century. States are so delicate and hard to build. The anti-statist mind only emerges once the state is there and stable. This seems a remarkable lack of sophistication on Hayek’s part—though I understand where Hayek is coming from, coming from World Wars coming from totalitarianisms…

Jake Soll: John Maynard Keynes believed in the free market here—was very much scared of totalitarian communism and believed that in order to save capitalism, at a time when it was under great stress, one had to help it to full employment, because mass unemployment would pose such an incredible danger to democracy and to civil society and to freedom. Therefore, the state would have to help with employment by in times of great dearth of spending…

Jake Soll: Adam Smith… was seen as a kind of proto-libertarian…. But that is not the Smith that I know from living a lot of my life in the 17th and 18th centuries…. Everyone I live with has been dead a really long time. So I stay up all night speaking to the dead and trying to dig in and find out what they thought, and it can make you a little bit crazy.

Brad DeLong: It also can make you sane. There is a letter of Niccolo Machiavelli’s saying that the only times he feels happy are after dinner when he puts on his fancy clothes and goes into his library—to talk to the dead, and listen to them answer him. But that was because he was at the time terrified they were going to drag him back to Florence and torture him again, and reading in his library distracted him from that. And he was a little nuts.

Jake Soll: You have to be a little nuts to kind of do what we do, and spend all this time with books.

Brad DeLong: I spent more time arguing with my dissertation advisors by myself in my shower than I ever spent talking to him in person.

Jake Soll: Many of our conversations are hypothetical, yes. And the more you do those hypothetical conversations out loud, the more your family thinks that you're insane. But that's another story…

Jake Soll: I took Adam Smith… and I went back…. If you read enough, and if you know enough references, you can hear the references in Smith's book…. Everything he and his mentor and very close friend David Hume did was done through the lens of a Roman moralist named Marcus Tullius. Cicero, probably the most important pagan author. In the European tradition, until 1954, every heavily educated person would have read quite a bit of Cicero…. He wrote about exchange, and Smith wrote about exchange…. But he's not the first person to look for… an economics working in a self-perpetuating way…. Cicero says if exchange is done by like-minded people of the same class—he means senators, which he was the first in his family to become—and if they only exchanged from love, that means “friendship in a disinterested way”, then wealth will just be created. It's quite a remarkable statement…. You go back through economic thinkers, you will constantly find references back to this…

Jake Soll: There is a key moment at the end of the 17th century. Louis XIV had a famous finance minister, Colbert, and I happen to have spent 15 years of my life in his archives listening and looking for things. Colbert also pops up in Adam Smith's writings. Smith hates Louis XIV. But his Minister, Colbert—Smith has strong mixed feelings about. Smith said that Colbert brought in too many regulations, and favored merchants and what we would call today industrialists when Smith he should have supported farmers. But Smith also said that this guy Colbert was a good manager of government…. And I thought: That’s really interesting. I hear echoes of Colbert in Smith. They're supposed to be antithetical—Colbert the father of this mercantilism, of the state-run monopolistic war-making economy, while Smith was supposed to be the father of liberal free markets. In the Colbert archives, I found this not to be necessarily true…

Jake Soll: Colbert over and over again stated that free markets were preferable if you can trade in a symmetrical way. He said: France today has been destroyed by religious and civil war, its industrial base is broken, it is thus unable to make good trade deals—if it trades with Holland today, it will be destroyed. He said: I don't think we can actually beat the Dutch in terms of individual productivity. But if we can build a market that can trade with the Dutch and the English freely, if we get trust and competence, if we get a certain level of industry, and if we can then write acceptable trade treaties, we can d o so successfully. This was visionary market-building. Free-market thinkers, until a certain point in the 18th century, believed that the state had to build markets for them to be free…. Free markets would be made by a state that would help the  market and what that meant could be very different things. So my book became this back and forth of free market-thinkers demanding market freedoms but also demanding state support for creating the conditions in which a market is going to work…. It can even counteract sin. Everything humans did was sinful. But if people traded together, they would kind of sin at each other, and that would counter the sinful desire. And that moves into this idea that vices can become virtues—that greed can produce things. And that gets to this kind of crowdsourcing idea…

Jake Soll: I made the decision not to discuss Polanyi in my book. I now regret it. It was dishonest—I didn't want to come off as the leftist guy who thinks Polanyi is right. But I guess that is who I am. See: I am admitting it here. He was a brilliant guy. Lke Brad, I believe that the market is a key engine, is absolutely essential and important, does amazing things. But in structuring the market the state has an enormously important role—to say that the state can only do bad is misleading and very dangerous. You can't have a good market without a state…

Jake Soll: What I wanted to do is wind the clock back to the old way, and say: Look, if we're going to argue about free markets, about how markets work best, if we look at any situation we will see the state. So let's drop this pretense that we can get rid of the state and start talking about the state in a more sophisticated way. And lots of people don't like this….

Jake Soll: Why didn’t I talk more about the 20th century? I don't have the expertise. Brad does. And so, for me, it was incredibly gratifying to read Brad's book…

Brad DeLong: In response, let me throw out four things and you can decide which one we want to talk about.

(1) Quousue tandem abutere, Catalina, patentia nostra? That is the opening line of Marcus Tullius Cicero's most famous speech, his First Oration Against Lucius Sergius Catalina: O , Cataline! For how long are you going to take advantage of our patience? Cicero was not just a thinker and a writer, but also a rubber-meets-the-road politician, and an extraordinarily effective one. He was, I think, the only person in two generations to be elected one of the two consuls of the Roman Republic without having had a consul as a father or grandfather.

(2) I seem to have more tolerance for von Hayek—see him as more balanced between Dr. Jekyll and Mr. Hyde than Jake does. Some of what von Hayek does not see comes from the fact that his Vienna is not one of the world’s economic-growth polls. In the Vienna of Hayek’s youth governance was still, in large part, what it had been back in the Agrarian Age: the major business of what state there was was to ensure that some have enough by taking from others. The state is then a group of thugs-with-spheres assisted by their tame accountants, bureaucrats and propagandists.

After 1870, and in the growth hot spots before, once you get the potential for real prosperity, once you get post-1870 the technological competence of the human race doubling every generation, you start thinking: of course we can get rid of the state; it’s primarily this apparatus of exploitation-and-domination, of force and fraud. You get things like Lenin saying that under Full Communism, coming real soon now, there won't be any government of men but merely the administration of things. We will all rotate through the ministerial administrative jobs—someone having to take the boring job of chair of the academic department for a year or so. After all, all the administrative jobs require is that you are able to add, subtract, multiply, and divide and issue receipts. Now at this point Jake will say that the accountants’ job of issuing receipts is actually a really complex and subtle one.

(3) Moving to the meat of Jake’s book: Cicero was living through the transformation of Rome. It had been the center of a small society of largely self-sufficient aristocrats bossing the slaves and commoners tilling the large individual farms that they had grabbed via conquest. It was become the capital of a large empire ruling over a commercial economy with a sophisticated and complex division of labor that required a dense network of exchange. How were things going to work. Cicero’s answer was that trade was mutually beneficial and wealth-creating when it was between people of equal social power and status.

Cicero was not wrong. go back to Econ 1. One thing you may have missed is that the games from exchange Dash in the area above the supply and below the demand curve to the left of the market equilibrium point—is distributed depending on how desperate suppliers and demanders are for the deal. If people have other options and things to do—if you have to cut the price a lot to get demanders to buy a little more, or if even a large increase in price only gets suppliers to provide a little more—then they will get the lion’s share of the surplus, and their counterparties will benefit very little from exchange. Those who do not want the deal very much have an enormous bargaining advantage, and hence much more social power. And Colbert saw that—he was in a position somewhat analogous to Cicero, with Europe moving out of its society of serfs, knights, and lords into the gunpowder-empire world of the early modern years.

The Jean-Baptiste Colberts, the Alexander Hamiltons, the Adam Smiths, the David Humes—all are all trying to figure out how you have to tweak things so that it can be made to work. If you look at Adam Smith's Wealth of Nations, you see that it has five parts, only the first two of which are of great interest to economists proper. The third is economic history. The fourth is a critique, sympathetic and unsympathetic by turns, of Colbert’s mercantilism and of Turgot’s physiocracy. And the fifth, by far the largest book, is about all the things government needs to do for the free market to actually work—one of the most important of which is public education precisely, because someone who is caught up in this division of labor and has little property of their own is desperately going to need to be educated or else they will wind up stultified and living an unhappy life.

(4) Remember that von Hayek lives in the 20th century world, in which the market economy is the water in which we swim: what is needed to make the market work is already there, and largely beneath his notice. But von Hayek also comes from Eastern Europe, where governance is still primarily domination-and-exploitation. Hence he reaches his answer, but his answer is unhelpful in many ways.

We face a much sharper problem than did Cicero or did Colbert and Smith. Colbert and Smith live around 1700, in the gunpowder-empire age between the feudal society of 1000 and the steampower society of 1870, in a time of great growth and development. There was a lot of technological change and associated econo-social-political change from 1000 to 1870.

Since 1870, howver we've had that much technological change  as was seen over 1000-1870 in every single generation: from the steam power economy, to the second industrial revolution economy, to the mass production economy, to the distributed mass consumption economy, to the global value chain economy. And now we're well on our way to the info biotech economy. The problems of actually figuring out how you organize things so that the market society does not crash are coming at us much faster and are more urgent. Before 1870it  was very likely that your life was a lot like that of at least one of your grandparents. Well, since 1870, it has been unlikely that's the case.

There are four things to talk about…

Jake Soll: Brad's book is the story of the force of this new technologically-driven market and its constant stumbles and slouches: its capacity to create create great wealth, but this constant need to go back to the state. I do think there's an intellectual history tension. Brad is very Hegelian: each time a free market, neoliberal, libertarian, economic ideal arrives, he shows that actually it has been semi-disastrous, and cannot and will not continue. He shows very clearly how a fully state-run economy just doesn't work—it didn't work in Russia, or in China, until China starts really opening up. Isabella Weber is going to be speaking in November—we’re going to be doing an event together—about how China avoided shock therapy, the history of free market thinkers going into China, and China's interest in certain aspects of free-market thought and how to put that under an authoritarian state. The remarkably realistic vision of history that the Chinese have may come from many of the Chinese elite,having more perhasps of a French than an Anglo-Saxon education. It’s a remarkable story…

Jake Soll: Looking for a perfect system—that is extremely dangerous. Slouching, tripping, negotiating, there's always going to be a give and take, there's always going to be this kind of fall or tripping. I get where Hayek is coming from—there is that discussion of the Prussian state. I tried to be fair, but it's it's very hard. It's very hard…

Jake Soll: Usually free-market means—and this is meant in the 18th century—getting rid of taxes and any other impediments affecting the richest. In the 18th century, that meant enlightened aristocratic farmers and landowners. Early free-market French thinkers and Adam Smith believed that these farmers could unlock lock the wealth of nature, if they were just allowed to so—this is an old Roman nature cult that expands with Newtonianism and the discovery of the New World. I try and tell the story. It's an ancient crazy cult—which might be one reason we're still stuck with it now—this idea that just letting the richest people produce and commune with some natural force. It doesn’t seem to work. Yet it still seems to be in people's consciousness, to the point that the British economy was just crashed by one of these concepts. It seems crazy.

Brad DeLong: It is the very distant descendant of Cato the Elder: take care of your farm and your slaves and then all will be well. This descends down to Margaret Thatcher's, we need to lower the taxes on the job creators, and all will be well. In my book I quote Eric Hobsbawm—the greatest communist historian, maybe the greatest historians of the 20th century. He was also someone who in the early 1930s was a teenage Jew living in Berlin with Nazis marching outside calling for the immediate murder of himself and his family. And so he made certain political commitments he never would revisit—to the end of his days you could get him talking about how Stalin was underappreciated. Yet even Hobsbawm would say of Britain in the 1970s that he unions were too powerful—exerted their social power to raise their wealth not by increasing production, but instead by inconveniencing the public—and so the good ship “Social Democracy” needed a thorough neoliberal scrub by Margaret Thatcher.

However, it is now a generation and a half later. Liz Truss shows up with the Margaret Thatcher playbook. Truss says: Let's do this again. But, lo and behold, the economy underlying economy is different. We haven't had 30 years of Labor Party intellectual dominance, building up the infrastructure of the British economy.Her chancellor put forward the plan—and financial markets want no part of it, crash, judge that these policies simply do not fit the requirements imposed by the level of the current technological forces of production.

Jake Soll: Even back in the day—it was a little difficult for me to watch some interviews with Thatcher, wtaching free-market leaders explaining why the free market didn't work. That goes all the way back to the 18th century: if we had just been allowed more power, if we hadn't been thwarted by people who didn't believe in the free market, our free-market reforms would have worked.

Brad DeLong:  Oh, it goes back much, much earlier than that. Consider Jeremiah and company. The kings of Judah are desperately trying to make alliances with Egypt to the south to protect themselves from the Assyrians coming down from the north like the wolf on the fold. The kingdom of Israel—the northern kingdom—has already been conquered, and its people, or at least its élite, had been deported to Nineveh. Now the Assyrians are coming back. Pharaoh says, quite reasonably, that Egyptian forces need the protection of the gods of Egypt, and so there need to be shrines in Jerusalem. Jeremiah says: No! You must not tolerate the Egyptian gods! You must cleave to YHWH and YHWH alone! Jeremiah is listened to. In the end, it is Nebuchadnezzar of Babylon who conquers Jerusalem and deports the élite of Jerusalem to Babylon. And the response of Jeremiah’s successors is that even though we spurned the Egyptian Alliance, in the end, we did not worship YHWH hard enough. Our policies did not fail the people. The people failed the policies.

Jake Soll: This pattern of thought went into Christianity: Give your wealth and all of your pleasure away to either the poor or to god of free will, and you will get the treasure of the Kingdom. If you do that, it will work out even here on earth. The narrative is deeply embedded in the western tradition. You can show its long genealogy. It is why, in these European and post-European countries, there is this clinging to this dream. I wanted to call my book: “history of a dream”. Laura called it: “the history of an idea”. I can't argue with Laura. But it was a dream. People are actually telling me no one believes this anymore. But it was my classmate from Cambridge, Kwasi Kwarteng, who stood up and threw out the whole thing as policy in what was almost an evangelical moment…

Brad DeLong: John Maynard Keynes and his successors and disciples did think that they had unraveled the Gordian Knot in the post-WWII generation: progressive taxes on the rich, a large social safety net to provide for the poor and the unemployed, Pigovian taxes and subsidies to deal with externalities, and the commitment to full employment. In a market economy the only rights that are respected are property rights. If you don't own valuable property, you don't have a social voice or social power. But under full employment even raw individual labor is a valuable commodity, and so everyone as some social power. Plus Keynes thought that the policy of full employment would require one of low interest rates. And if interest rates are very low, then either plutocrats reinvest their earnings to maintain their wealth share or they spend down their capital, and so lose their social power. Thus the low interest-rate and high public-investment policies to maintain full employment solve the twin problems of giving social power to the not-rich and curbing the excessive social-power of the rich. Thus very judicious and very light-handed central planning and government interference, regulation, structuring of the market could actually get us to where we wanted to go. But this fell apart in the late 1970s, with the coming of Reagan and Thatcher, and its inability to maintain durable political majorities in elections. And so we are now still searching for something else…

Brad DeLong: My book doesn't have a “what we do next to make the 21st century great” chapter. It does not have such a chapter because my coäuthor Steve Cohen convinced me that any history book that ends with such a chapter undermines its authority because the what-we-should-do-next chapter looks ridiculous six months after the book's publication. So I'm looking forward to writing the what-should-we-do-next? chapter in the next few months, and then rewriting or replacing it with a new version every two years, and I should be able to make this one of my successful business lines for a generation.

The first thing to grasp is that reaching back into the past for models is almost certainly doomed. Any institutional configuration that even semi-worked in the past is unlikely to work today, because things are different. We don't have the 35% of the labor force in manufacturing, with 20% of the labor force in essentially semi-robotic mass-production assembly-line jobs that we had back in 1948, that supported the strong union movement and the egalitarian push for social democracy that worked then—that forced even Dwight Eisenhower, a very, very conservative person by nature, to govern by saying: I am going to be a much better prudent, more efficient, and more effective manager of the New Deal than the Democrats will be, in large part because I'm not in bed with their particular interest groups, and I can focus government spending on things we need—interstate highways, a space program, a strong military to fight the Cold War, rather than on things that democratic interest groups kind of happened to want.

How does that apply to us right now? It's probably no surprise, but I think that Biden is moving in the right direction—massively investing more in the communities of America that are currently not attractive places for people to have jobs. We need to do this because attractive places like LA are doing all they can to prevent the building of large amounts of extra housing. So for the first time in American history, people have not been moving from places where wages are low to places where wages are high, because they can't afford to buy houses here. And it is not as bad here as in San Francisco.

The supply-side progressive agenda is the perhaps the best one for America going forward right now. But that also needs to be paired with some attempt to get the world as a whole back into the framework where we agree we are all headed for a future of greater peace, greater prosperity, and also greater public voice and discussion. That last seems to be the very hardest. We have the Grand Prince of Muscovy thinking that the way to persuade Ukrainians that they are a Russian ethnicity not by sending the Bolshoi Ballet to perform, not by sending orchestras to play the works of Mussorgsky, not I would be sending out poets to read the works of Pushkin in Ukrainian cities out loud, but by sending killer robots to blast people from the skies. This is the world we have…

Jake Soll: I’m gonna be the voice of early modern history—perhaps of reaction. One playbook from the past works: education, and public education, and public higher education. We’ve had deindustrialization in the Midwest. I spent some of my life there. You see not just a disinvestment in manufacturing but a disinvestment from what were grand public universities. That old playbook of grand ambitious education at all levels does create wealth and a quality of life and a desire to invest. That could turn things around.

Brad DeLong: The Republican Party platform! The Republican Party platform of 1863: free labor, settling the frontier—the technological frontier—and land-grant colleges.

Jake Soll: The land-grant colleges were incredibly successful, created vast amounts of American wealth. And the Americans of the Midwest took no interest in them, and are now throwing them away. It is startling to me, seeing the wealth of these institutions and seeing Americans literally discount them in every sense of the term. So I think there's a, there's an older playbook, which has to be renewed now. We are not going to be able to find prosperity without global cooperation. And I believe education is absolutely essential to this at all levels. One last point, within all this technology is culture—ballet and poets and all these things, they really do still play a huge role.  Think about Japan, and the strange way Japan produces massive global culture that we're not even always aware of. These things work and make places attractive, and make us able to cooperate and work together. Cultural interaction between humans around the world is so important: key to avoiding war and creating this understanding that we're going to have to have…

Jake Soll: We did have these small pockets of remarkable wealth creation—Tuscany in the late Middle Ages, the Dutch Republic in in the early Renaissance, places with remarkable levels of literacy, perhaps 75% of Tuscans in 1375. Remarkable levels of Holland literacy mixed with a very specific form of tolerance. Literacy and tolerance will give you a capacity to manage the changes that come at you with much more ease. That might sound naïve and super old-fashioned…

Brad DeLong: I think Keynes would say, and I know I would agree, that there's a difference between very low interest rates that are produced by a shortage of safe assets in an economy and very low interest rates that are produced by an expansionary full-employment monetary policy, which carries with it a high level of investment and hence a relatively low rate of profit. With a low rate of profit you have higher wages. The trap you're worrying about is one that the world economy has been in for most of the past 20 years, but the cause is a significant shortage of safe assets and hence a wide gap between the rate of interest that you earn on safe bonds like those issued by the US Treasury on the one hand, and the rate of profit and thus return on a diversified unit-beta equity portfolio yield on the other. Most of the problems are a result of that wide gap, and not because of the low interest rates themselves…

Brad DeLong: There’s lots of stuff that might have been in my book on the cutting room floor. I am not yet organized to be able to claim to have a director's cut. But in the published version, immigration shows up in a major way only twice. First, it shows up as the thing that makes the United States “the furnace where the future is being forged” in the 20th century, as the United States brings in huge numbers of people from around the world and makes them Americans. Second is the role played by migration in the development of underdevelopment. If you come from Asia, you're not allowed into places like Canada, like Australia, like Argentina, like the United States—unless you're willing to go to Angel Island, spend a year there in quarantine, and maybe be sent back to China afterwards. Thus the enormous migration flow from Asia is directed into various tropical countries. Consider Malaysia: Chinese workers brought in from the Pearl River Delta, British capital, and Brazilian biotechnology because the British have grabbed rubber plants from the Brazilian Amazon, shipped them to Kew Gardens, and then shipped them to Malaysia and found that in Malaysia rubber grows like a weed because its pests and parasites are an ocean away. Hence the Brazilian rubber industry is decimated by Malaysian competition. That story, over and over again, structures the world into a developed global north and an underdeveloped and poor global south—one which is too poor to have a large enough middle class to support the development of its own indigenous manufacturing and engineering to any great degree…

Brad DeLong: A number of things make the world since since 2010 different from the world before. From 1870 to 2010 humanity’s technological competence doubles every generation with Schumpeterian, creative destruction creating immense wealth while destroying entire occupations and industries and livelihoods and communities. The task is to manage this process—to keep solving the problem of baking a sufficiently-large economic pie from disrupting our ability to slice and taste, to distribute and utilize our wealth, so that people feel safe and secure and are healthy and happy. Over 1870-2010 we make great strides at solving the problem of baking, but the problems of slicing and tasting flummox us.

Since 2010 we have had a marked slowing of the rate of technological progress. I blame this on Reagan and Thatcher, on the coming of neoliberalism, both in terms of government’s much lower willingness to invest in the future, the increasing shift towards corporate short-termism with the destruction of industrial research labs, and the U.S. has abandoned its role as semi-benevolent hegemon. Plus there is the emergence of new civilization-shaking problems: nuclear proliferation reaches critical mass, neofascism has surged, and not even oil companies can pay enough to keep an active stable of global-warming deniers in their employ any more. This year the monsoon was 300 miles south of where it is supposed to be—a lot more rain flooding Pakistan and a drying-up Yangtze River. 3.5 billion people live in the six great river valleys plus the monsoon regions of Asia.They are not rich enough to simply pack up and move to Vancouver and get jobs there.

Dealing with global warming and dealing with killer robots armed with nuclear weapons—those are big problems the world is going to face starting now that it did not before 2010…

Brad DeLong: I am not going to lecture you. People who want me to lecture them should read the book, or maybe listen to the audiobook as recorded by the amazing Alan Aquino—who is much more convincing at presenting my arguments than I am. Remember Mel Brooks. The now very old TV show “The Dick Van Dyke Show” was a thinly fictionalized account of Mel Brooks's experiences, for Sid Caesar. They made a pilot starring Mel Brooks. It was absolutely awful. They concluded that Dick Van Dyke could be a convincing and good Mel Brooks on TV, but Mel Brooks could not…

Brad DeLong: There is far more about wines than anyone with only one liver can learn—even about French wines, even about that subset of French wines that come from lands that were once part of the dowry of Eleanor of Aquitaine…

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Slouching towards utopia? Brad DeLong on the economic history of the 20th century

Resolution Foundation

The 20th century was one of unparalleled economic growth – from rising living standards and an explosion of material wealth, to massive falls in poverty and deprivation. But it was also one of huge economic disruption, caused by, and the cause of, brutal global conflicts, as well as one of competing economic philosophies and outlooks, whose popularity have waxed and waned over time. Understanding what underpinned these huge economic shifts – and their impact on individuals, communities, and societies – is important to understanding our history and the turbulent present we are living through. Few people are better equipped to explain these shifts than world-leading economist and polymath Brad DeLong.

Brad will join Resolution Foundation Chief Executive Torsten Bell to discuss these issues, which are the subject of his new critically-acclaimed book Slouching Towards Utopia: An Economic History of the 20th Century. Brad will also take part in an audience Q&A as part of an interactive webinar, which will be broadcast via YouTube and the Resolution Foundation website. Viewers can submit questions to Brad DeLong before and during the event via Slido. Speakers J. Bradford DeLong, Professor of Economics at Berkeley University Torsten Bell, Chief Executive of the Resolution Foundation (Chair)

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In this HEDG Hosts event, Professor Paul Sharp and Research Assistant Joe Bilsborough spoke to Brad DeLong - Professor of Economics at UC Berkeley - about his new book Slouching Towards Utopia: An Economic History of the Twentieth Century. Described by Paul Krugman as a "magisterial history", this fascinating conversation spanned centuries of growth and technological change, via Keynes, Hayek, Polanyi, and much more.

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<https://ooo.mmhmm.app/z_qFypOnWQmnxzEGWVj5C7>

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<https://www.friendlycitybooks.com/utopia>

For orders of multiple copies, please contact us at info@friendlycitybooks.com.

Get a free audiobook with a monthly membership to Libro.fm through Friendly City Books.

YouTube: Virtual Book Talk

From one of the world’s leading economists, a grand narrative of the century that made us richer than ever, yet left us unsatisfied  

Before 1870, humanity lived in dire poverty, with a slow crawl of invention offset by a growing population. Then came a great shift: invention sprinted forward, doubling our technological capabilities each generation and utterly transforming the economy again and again. Our ancestors would have presumed we would have used such powers to build utopia. But it was not so. When 1870–2010 ended, the world instead saw global warming; economic depression, uncertainty, and inequality; and broad rejection of the status quo. 

Economist Brad DeLong's Slouching Towards Utopia tells the story of how this unprecedented explosion of material wealth occurred, how it transformed the globe, and why it failed to deliver us to utopia. Of remarkable breadth and ambition, it reveals the last century to have been less a march of progress than a slouch in the right direction. 

“Brad DeLong learnedly and grippingly tells the story of how all the economic growth since 1870 has created a global economy that today satisfies no one’s ideas of fairness. The long journey toward economic justice and more equal rights and opportunities for all shall and will continue.”

—Thomas Piketty, #1 New York Times–bestselling author of Capital in the Twenty-First Century

“The author conveys a wealth of information in elegant, accessible prose, combining grand, epochal perspectives with fascinating discursions on everything from alternating-current electricity to the gender wage gap. The result is a cogent interpretation of economic modernity.”

—Publishers Weekly, starred review

J. Bradford DeLong, an economic historian, is a professor of economics at the University of California, Berkeley. He was a deputy assistant secretary of the U.S. Treasury during the Clinton administration. He writes a widely read economics blog, now at braddelong.substack.com. He lives in Berkeley, California.

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EVENT SUMMARY

Join PIIE for a presentation by economist J. Bradford DeLong on his new book, Slouching Towards Utopia.

Before 1870, humanity lived in dire poverty, as the slow crawl of invention was offset by a growing population. Then came a great shift: invention sprinted forward, doubling our technological capabilities over successive generations and transforming the economy. Our ancestors presumed we would have used such innovation to build a utopia. But it was not so. The world has instead seen global warming; economic depression, uncertainty, and inequality; and broad rejection of the status quo.

Slouching Towards Utopia tells the story of how this unprecedented explosion of material wealth occurred, how it transformed the globe, and why it failed to deliver a utopia. Of remarkable breadth and ambition, the book reveals the last century to have been less a march of progress than a slouch in the right direction.

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IMHOS 49 - Slouching Towards Utopia

The International Macroeconomic History Online Seminar Series, jointly organised by the Graduate Institute's Centre for Finance and Development, Centre for Economic Policy Research and a consortium of numerous other universities and institutions from around the world, aims to keep the flow of intellectual debate active and to bring macroeconomic history topics to an interested public on a regular basis.

31 August 2022: Slouching Towards Utopia, Brad DeLong (University of California, Berkeley).

Chair: Rui Esteves (The Graduate Institute and CEPR)

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Recorded on Sept. 1, 2022, this panel featured J. Bradford DeLong, Professor of Economics at the University of California, Berkeley, discussing his recent book, Slouching Towards Utopia: An Economic History of the Twentieth Century.

Professor DeLong was joined in conversation by Robert Brenner, Professor Emeritus and Director of the Center for Social Theory and Comparative History at UCLA. The talk was moderated by Steven Vogel, Professor of Political Science and Political Economy at UC Berkeley and Co-Director of the Network for a New Political Economy (N2PE).

This event was co-sponsored with the Network for a New Political Economy (N2PE).

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