All Commentary
Sunday, September 1, 1996

The Future of Capitalism

A Disappointing Volume of Anti-Market Clichés

Dr. Bellante is a professor of economics at the University of South Florida in Tampa.

The late Austrian economist Ludwig Lachmann was fond of saying that the future is not knowable, but it is imaginable. In The Future of Capitalism, Lester Thurow has put his imagination to work. His method is to use an analogy to the shifting of the earth’s tectonic plates in order to describe the frictions he sees as building up in the United States and the world.

The “shifting plates” are (1) the end of communism and the need to absorb its released labor; (2) technological shifts that make the location of markets, resources, and capital irrelevant to the location of production; (3) an aging population that will put enormous stress on the welfare state; (4) economic globalization, which renders governments impotent; and (5) the development of a “multipolar” world where the United States can no longer exert its will upon the post-communist world order because the rest of the world doesn’t accept United States leadership, as it no longer needs U.S. protection.

In the very first sentence of the book, Thurow admits that nothing but capitalism seems to work, in terms of providing goods, services, and (at least until now) increasing standards of living. Despite this grudging admission, the author still cannot accept individualism as a basis for organizing society. Chapter 13, Democracy Versus the Market, is where the book’s usually sophisticated rhetoric gives way to all of the simpleminded anti-market clichés of the 1960s. There is the usual resentment of wealth and the attribution of capitalism’s staying power only to the ameliorating effects of government interventions. Otherwise, contends Thurow, unbridled capitalism would generate ever-increasing inequalities that would collapse the system. As compared to the democratic state, capitalism is seen as biased toward consumption and against saving and investment, toward the short run and against the future.

Amazingly, the author seems really to believe that elected officials have a longer time horizon that makes up for the supposed shortsightedness of capitalists and consumers. And he seems oblivious to the fact that it is the redistributive and regulatory activities of the democratic welfare states of Western Europe that have prevented any job growth in the last 15 years, and that have relentlessly shifted the composition of output toward present consumption.

In this chapter and elsewhere the author adds more recent standard liberal concerns to the 1960s clichés. These include the myth that the standard of living of working Americans has been declining since 1973. In a chapter on religion and ethnicity, the author seems to connect terrorism with religious fundamentalists using a very broad brush. Readers will be surprised to find (p. 267) that a fundamentalist Christian group is given “credit” for blowing up the federal building in Oklahoma City.

In the final chapter, the author explicitly declines to make a list of policy recommendations. That’s not what is important: to Lester Thurow, what is important is “persuading ourselves that the world has changed and that we must change with it.” (p. 314) Because this volume thus leads nowhere in particular, it will disappoint even those readers who share the author’s philosophical and diagnostic perspective on capitalism.