The Evils Of Markets

FREE-MARKET CAPITALISM is the secular religion of our time. It is a creed triumphant. It won the cold war--and then the ideological battle in Washington, turning liberal Democrats into "Eisenhower Republicans" and ordinary Republicans into small-government zealots. Today, whether the issue is stealth-bomber contracts or schoolbooks, the central precept of laissez-faire capitalism--that markets are much better than governments at allocating so- ciety's resources--underpins most economic-policy decisions. Free-market fever has given a new, savage look to the American corporation as well: Downsizing. Deregulation. Decimated trade unions. "Employability" over employment. All are symptoms of the jostling, desperate grab for markets that rules the day.

The private sector is so pre-eminent--and so touted as a panacea--a backlash was inevitable. There are signs, at last, that this is happening. In the last year we have seen an outcry over widening income gaps between rich and poor, fierce criticism of proposals to privatize Social Security and, most recently, the public neutering of Newt (remember the "Republican Revolution"?). Now two liberal journalists, William Greider and Robert Kuttner, have seized the moment. In a pair of new books, they argue it's time to rethink the Zeitgeist. The gospel of markets is vastly overstated and, in Greider's view, potentially catastrophic for the world economy. Their common theme: government, not greed, is good.

That's a shocking apostasy for this era. Yet both books should be taken seriously, if only because Greider and Kuttner represent liberalism's A team. It was Greider, now national editor at Rolling Stone magazine, who in the early '80s revealed the worm in the apple of Reaganism when he outed budget director David Stockman as a nonbeliever. Kuttner is a columnist for BusinessWeek who, among other virtues, acts as a sane if predictable counterpoint to his loopy libertarian colleague Paul Craig Roberts. In his latest book, Everything for Sale (410 pages. Knopf. $27.50), Kuttner delivers a powerful empirical broadside. One by one, he lays on cases where governments have outdone markets, or at least performed well: scientific research, electric power, even city ambulance services.

If you can get through the numbing detail, it all makes for a healthy corrective. Kuttner is mostly right in his paean to the mixed economy. The excesses of today's free-market absolutism are almost as bad as those of the big-government era they ended. Where Kuttner goes wrong is in harking back too often to the postwar boom years, when the regulation left over from the New Deal and World War II didn't seem to get in the economy's way. That time is past and irretrievable. The world has caught up to us.

Which brings us to Greider. His book, One World, Ready or Not (528 pages. Simon & Schuster. $27.50), is far more ambitious, and far more problematic. As a review of the trouble spots of the world economy, it is a tour de force. Greider has novel insights into the ways in which capital has trampled over labor, and into the dangers of global oversupply as everyone rushes into new markets at once. But rather than mere problems, at every turn Greider sees disaster lurking. Words like "calamity" and "abyss" pepper the pages. Yes, there's reason to be concerned that a "rentier's regime" of inflation-phobic bond traders has cowed governments into holding back growth. Solutions like a securities-transaction tax--an old idea that Greider resurrects--should be considered. But it's a bit much to compare today's big financiers to Robespierre during the Terror. And yes, the 1995 peso crash was a mess, but is Mexico really one of "scores of nations that have been taken hostage" by Wall Street?

Nonsense. In fact, Mexico was a one-of-a-kind case traceable to its own government's unbelievably irresponsible policies; two years later, despite many expectations, no other economy has imploded. Fund managers in New York, meanwhile, have established a civil dialogue with Third World governments, disciplining them far more gently. What really undercuts both Kuttner's and Greider's big-think prescriptions is that the mechanism they both so mistrust--the marketplace of practices and ideas--has already begun to correct things. Downsized, outsourced companies are starting to realize they're suffering from corporate anorexia and are "upsizing." GOP House members, upset by the poll numbers, are sounding more polite. Even Bill Clinton boldly if cryptically announced in his second Inaugural Address that "government is not the problem, and government is not the solution." (Well, it's a start.)

Ultimately, Greider's errors are the most serious. He mistakes capitalism's occasional blowups for a deeper systemic problem. There is simply no evidence that the problems run so deep. He frets that someone should be in charge: a juggernaut of global capitalism is loose and "no one is at the wheel." Yet this begs the question. Whom do we really want at the wheel of the world economy? Just having Alan Greenspan at the Fed is scary enough. Isn't capitalism, in the end, simply the best way of maximizing people's freedom? To paraphrase Churchill on democracy: it may be a terrible system, it's just better than any other.