Public Monopoly

[Charles Mueller <cmueller@xxxxxxxxxxxxx>]

Date:         Tue, 8 Dec 1998 09:18:58 -0800
Reply-To:     mckeever <mckeever@xxxxxxxxx>
Sender:       The Other Economic Summit USA 1997 <TOES97@xxxxxxxxxxxxxxxx>
From:         mckeever <mckeever@xxxxxxxxx>
Subject:      Book review
To:           TOES97@xxxxxxxxxxxxxxxx

>From another list FYI:

H-NET BOOK REVIEW
Published by H-PCAACA (August, 1998)

	Daniel Yergin and Joseph Stanislaw. The Commanding Heights: The Battle
Between Government and the Marketplaces That Is Remaking the Modern World.
New York: Simon & Schuster, 1998. 457 pp. Illustrations, bibliographical
references, index. $26.00 (cloth), ISBN 0-684-82975-4.

Reviewed by Ulf Zimmermann, Kennesaw State University.

	Lenin made his antepenultimate public appearance to defend his desperate
readmission of private trade and agriculture in 1922, declaring that the
state would, after all, retain control of what he christened the
"commanding heights." Yergin and Stanislaw are concerned to explain why t=he
control of these heights has increasingly shifted from the state to the
market in recent years. They do this by giving not just a global gazetteer
of twentieth-century politics and economics but also an equally insightful
guide to the ideas and individuals behind this shift.

	With the failures of capitalism in the 1920s and 1930s, and the initial
successes of governments east and west, both in the New Deal and in Soviet
central planning, and in the war, government seemed, after that war, the
unequivocal solution to problems such as the unemployment the market had
earlier permitted. Countries around the globe adopted a variety of
government-managed approaches to running their economies, from the Soviet
extreme and its many imitations to strategic nationalization as in Britain
and government-business-labor corporatism in Germany down to government
regulation in the United States.

	India's independence from British rule as of 1947 marked the beginning of
the end of colonialism, and all the newly emerging countries, like India,
saw state control as the only alternative. (It had, after all, worked in
industrial latecomers like France and Germany, but, mutatis mutandis, many
of these new nations did not let go of their industries when they could go
it on their own--and ultimately strangled them.) Indian policymakers, for
example, eventually recognized the great entrepreneurial successes Indians
were achieving, as in the U.S., were possible only once they were out of
India and its overregulated economy.

	Where most of these purely state-centered efforts failed, many of Asia's
countries succeeded through a mix of government intervention and market
forces. Where India was the model for the "Third World," Japan and its
Ministry of Trade and Industry demonstrated that there could indeed be such
a mix as Confucian Capitalism-- Max Weber's claim to the contrary
notwithstanding. As we know from the current headlines, though, this
approach seems to have succumbed to the debilitating excesses of inbreeding.

	In the U.S., government regulation had become necessary, first to control
the railroads in the late 19th century, and then in banking and other
financial industries. But by the end of the 1960s, after innumerable new
regulatory agencies had been created--several, ironically, by the Nixon
administration--many perceived free enterprise to be straitjacketed by
regulation, and it was, just as ironically, Ted Kennedy who started the
deregulatory trend in Congress with the airline industry.

	Direct state control seemed to have shackled industry altogether in
Britain, and in getting the government out of business it thus became the
model for the market reform that has been sweeping the world in the nearly
two decades since. Here as elsehwere Yergin and Stanislaw nicely bring in
those theories and personalities which compelled action. To give but one
pivotal example, Keith Joseph, a member of parliament, had turned into the
"mad monk" who preached relentlessly about entrepreneurship and initiative
and the wealth these created for everyone in the nation. He found
intellectual support in the economic theories of Friedrich von Hayek and
Milton Friedman, which are at the center of this shift to markets, and
created a think tank to develop and broadcast their ideas the length and
breadth of what was left of the British empire. Most important, Joseph
persuaded parliamentary colleague Margaret Thatcher to reread Hayek--and
soon enough she would be leading the party with this ideology, and shortly
thereafter the whole country.

	Initially, of course, all her reforms, chiefly privatization, were
unpopular in the extreme. But her Falklands victory seemed to vindicate her
and enabled her to press on with them. (Argentina's defeat, meanwhile,
likewise prompted its leadership to redirect its economic policies in the
same way--with great success.) While Thatcher's radical belt-tightening
created much unemployment at the time, today Britain is far behind the
continent in its unemployment rate.

	Just how badly excessive state control stifles initiative and innovation
and hence prevents real economic growth was best revealed by the fall of
the Berlin Wall which allowed more than the occasional peeks the rest of
the world had had behind the Iron Curtain. The exposure of the East German
economy--that much-touted exemplar of communist economic progress--showed
palpably just how poorly the politics and economics of central planning had
worked and showed the truth of what the workers said of their workers'
states: "They pretend to pay us, we pretend to work."

	The implosion of the Soviet system thus discredited all kinds of statism,
and that sped up trends towards markets already underway. With
denationalization in Britain and deregulation in the U.S., their economies
are booming, and countries everywhere are increasingly following suit, from
continent to continent, as Yergin and Stanislaw richly depict. Yet they
rightly wonder whether markets will really deliver the goods in terms of
economic growth, employment, and higher standards of living for all.

	While they are partial to the market case, they do not neglect the signal
cautionary tales of regulatory laxity that can be spun from, say, the
sorrily underpublicized savings and loan debacle. While there may have only
been some of us who understood and weren't happy with how that was handled,
there'll be many more of us who'll understand and won't be happy with what
we're getting in health care. As these cases demonstrate, markets don't
always exercise the self-restraint we might like them to, and Yergin and
Stanislaw therefore see government stepping in more as a referee than a
major player itself. So now the question is, What are the rules of the game
it must enforce? The way health care is going, it seems clear that the
public will ultimately demand more regulation (as it may perhaps in the
financial markets that are increasingly dictating not just our economic
well-being).

	Having interviewed practically the whole pantheon of intellectual and
political leaders involved in these developments around the world, Yergin
and Stanislaw are able to dramatize political history and even the dismal
science: character, atmosphere, and the telling anecdote make their volum=
e, compendious as it is, into a compelling read for students and lay readers.
Even academics will find much here, though they may wish for a bit more
critical analysis of a politics that leaves government as mere referee
between those who control the markets and those who have no choice but to
shop in them.

Library of Congress call number: HD87.Y47 1998 Subjects:
Economic policy
Markets
Privatization
Deregulation
Economic history -- 1945-
Competition, International Citation: Ulf Zimmermann. "Review of Daniel
Yergin and Joseph Stanislaw, The Commanding Heights: The Battle Between
Government and the Marketplace That Is Remaking the Modern World,"
H-PCAACA, H-Net Reviews, August, 1998.
URL: http://www.h-net.msu.edu/reviews/showrev.cgi?path=3D8156903556446.

Copyright =A9 1998 by H-Net and the Popular Culture and the American Cult=
ure Associations. It may be reproduced electronically for educational or
scholarly use. The Associations reserve print rights and permissions.
(Contact: P.C.Rollins at the following electronic address:
Rollins@xxxxxxxxxxxxxxxxxxxxxx).

                                    _______________


Charles Mueller, Editor
ANTITRUST LAW & ECONOMICS REVIEW
http://webpages.metrolink.net/~cmueller

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