Whoosh!
My friends in economics tell me they are tired of self-appointed but inadequately trained would-be economists. They are not going to review their books any more. Let ‘em go back to school. The economists would do well to make an exception for Edward Luttwak.
Luttwak is a political-social scientist with a special interest in matters of military security and international relations. This interest has necessarily compelled him to think and read about, also to talk about and observe the economies of nations. His conclusion is that the world’s economy has fallen increasingly into the hands of freebooters--what he calls turbo-capitalists. These high-powered buccaneers of the supposedly free market have no scruples. They are in it for the money (why else?), and old standards of government control and intervention are increasingly obsolete and unacceptable. Most governments have reluctantly yielded to this attitude, if only to encourage private enterprise, industrial and financial, to invest in local securities, build plants and lend to local banks and entrepreneurs.
The new global capitalism has some extraordinary achievements to its credit. In East Asia particularly, an industrial revolution has transformed ways of life and activity, altered the landscape, created the schizophrenic division between modern and traditional that is an inescapable concomitant of rapid change. In South America, change has been more uncertain, but such countries as Mexico, Brazil and Chile have seen substantial growth, though not enough to cure a hard case of split personality. Poverty remains, even flourishes, while new enterprises build on an elastic supply of cheap labor.
But, Luttwak points out, what’s sauce for the goose is not for the gander. The older, richer, more advanced countries have been exporting jobs, closing businesses and forcing people into premature retirement and underpaid service posts. The effect is even more shocking in the light of rapid enrichment of young turbo-capitalists, especially those in the financial sector. In the “greatly admired, long-booming American economy,” he notes, 4 million people are millionaires, and almost 200 have a net worth in excess of 1 billion dollars. These high earners know what to do with their income, but Luttwak points to the prosperity of the American market for addictive drugs. Meanwhile, 17 million employed find themselves below the official poverty line. In New York state, with its dynamic, advanced economy, the average income in 1996 of the richest fifth of households was almost 20 times that of the poorest fifth: $132,390 to $6,187.
In general, we find ourselves in a world of growing polarization between a richly rewarded few and the grungy many. But, says Luttwak, the super-rich winners are not allowed, do not allow themselves, to enjoy their gains. At least not in the United States, where a kind of turbo-Calvinism (my word) is the rule. Their holidays are brief, they stay at hotels that serve mediocre, standardized dishes; they take their wives along; they pay large sums to attend educational lectures and seminars. In Japan, no hot baths; in Thailand, no professional visitors. Few of them have the secretarial concubines or trophy mistresses found in other lands (someone should tell that to Hollywood). I haven’t traveled enough in these circles to vouch for such abstemiousness. But I’m ready to take Luttwak at his word.
These people, Luttwak tells us, raise their young in their image: education, examinations, diplomas. No expense is too great, not even the absurdly high fees paid to private universities such as Harvard, Brown and Stanford. The point is, such outlays open the door to highly remunerated careers. But once the child is an adult, we are assured, the parent stops paying. The young adult has to fly on his own. Here I am not ready to take Luttwak’s word. What parents has he been talking to? And even if they say such things, why should he believe them?
The evil antithesis of all this virtue and hard work is crime. “American inner cities, with their high concentrations of turbo-capitalism’s losers, are in a state of permanent low-level insurrection.” Here Luttwak contrasts urban and rural America. Take Idaho (why Idaho?): bigger than England, lush countryside, giant ranches, high-tech industries, few cities--”Calvinist perfection.” Almost no crime, and when crimes are committed, they are severely punished. Parole for good behavior has been abolished, and driving without a valid license is a felony.
Luttwak has his personal peeves. He laments the capture of book publishing by “gigantic conglomerates” that think only of the bottom line and the chances of selling to other media, and he goes on to complain about rapid remaindering and pulping: Publishers won’t keep books in print. There, I think, the fault does not lie with turbo-capitalism but rather with turbo-taxation: When a manufacturer of hardware (metal tools) routinely depreciated his stocks for tax purposes, some keen, logical, greedy tax collector declared that such hard, durable metal objects do not lose value; so no depreciation. So the practice was applied to other more or less indestructible objects--books, for example--and publishers decided that it did not pay to stockpile old inventories.
On the whole, though, Luttwak is keen and accurate, if sometimes sharp in his judgments. He is struck, for example, by the inability of such leaders as Bill Clinton and Tony Blair to get things done and by their substitution of talk and histrionics for action. For him, they are both masterly frauds. He cites in an acid footnote Blair’s near tears on the occasion of Princess Diana’s death, an act that “evoked the admiration of professional actors everywhere.”
This wide-ranging review and critique of the prevailing economic current will not win Luttwak plaudits from the economics establishment, which believes in its mind and heart (as much the one as the other) that free markets and free enterprise are the rational and indispensable recipe for growth and development. But Luttwak has company: Harvard economist Dani Rodrik’s recent defense of protection and the worried misgivings of George Soros on the risks and dangers of uncontrolled speculation and monetary movements. Globalization and free-floating enterprise may seem logical, irresistible and everywhere triumphant, but nations are still self-conscious and self-interested units, and even such international unions as the European one find it hard to impose the consequences of homogeneity in the face of local opposition.
The problem in the last analysis is who will choose and decide. Leave it to the market and you get unhappy results. Leave it to the elected or self-appointed monitors and do-gooders and you get uneven, expensive results. So Luttwak prefers a compromise, however imperfect and messy. Better that than a divided, unjust society with “not-so-rapid economic growth”--a world of “Silicon Valley heroes and vales of despond.” This, he says, is the turbo-capitalistic “reversal”: The society ends up serving the economy, not the other way around. To be sure, turbo-capitalism beats authoritarian systems, but it can’t be “the culminating achievement of human existence. Turbo-capitalism, too, shall pass.”