Economists in the Crosshairs
I have to admit at the outset that I am
a card carrying financial economist and know or knew several of the economists
mentioned in the book. New York Times editorial writer and former economics
reporter Binyamin Appelbaum has written a screed blaming the Chicago School of
economics for the vast increase in economic inequality since 1973. Trust me he
gives them way too much blame/credit because the amorphous forces of
globalization and technology have done far more to create the winner take all
society we seem to be living with.
He basically argues that the economics
profession staged a hostile takeover of Washington politics. The profession
rises from the bowels of the Fed to the near stardom of CEA Chairman Walter
Heller in the Kennedy White House. It was the heyday of Keynesian economics as
the Kennedy-Johnson tax cuts engendered the mid-1960s boom. It was the failure
of Keynesian economics to predict that inflation and unemployment could exist
side-by-side that opened the way for the Chicago School. He specifically
signals out Milton Friedman, Arnold Harberger, Richard Posner and Michael
Jensen among others as his villains.
Appelbaum really doesn’t understand how
the 1970s inflation unhinged society. For most American the economy seemed to
be out of control and he doesn’t note that the tight bracket unindexed income
tax system confiscated the real wages of the American people. Thus although
pre-tax wages rose faster than inflation; after-tax they did not. Thus to me
Fed Chairman Paul Volcker was a hero.
His careful research shows up in his
discussion of how the draft ended under the impetus of Nixon aide Martin
Anderson, the intellectual arguments of Milton Friedman and the strong
technical work of Walter Oi. He also discusses the role of dissent in the armed
forces by highlighting an anti-war demonstration that took place in
Fayetteville, North Carolina adjacent to Fort Bragg where actress Jane Fonda
spoke. I attended that demonstration. He showed real diligence in coming with
the source for this event in an unpublished Duke Ph.D. dissertation written by
air force colonel Scoville Currin.
Appelbaum has mixed feelings about the
volunteer army, but I suspect that if the United States had a draft after 9/11
he would be far less ambivalent. In 2001 Appelbaum would have been 23 years old
and I just can’t picture him taking mortar fire in the Hindu Kush Mountains of
Afghanistan or being face down in the mud on the banks of the Tigris River in
Iraq.
He devotes a chapter to the role of the “Chicago
boys” in the 1970s Pinochet dictatorship of Chile. There Chicago trained economists’
orchestrated policy of the regime. To Appelbaum their policies weren’t all that
successful, but he stopped the clock in 1990. He doesn’t really speculate on
what would have happened if assassinated socialist Chilean president Salvatore
Allende remained in power. It could very well turned out be a facsimile of the
Chavez/Maduro hell in Venezuela instead of it being the thriving country that
it is today.
Appelbaum rightly notes that the Reagan
deregulation of the 1980s had its origin under Jimmy Carter. Where under the
Senate leadership of Edward Kennedy and with the backing of Ralph Nader both
the airline and trucking industries were deregulated. Here the economist in
charge was Alfred Kahn. We can thank him for cheaper airfares and the hassles
of flying today.
In his obsession to blame economists for
inequality Appelbaum also leaves out the massive failure of all too many urban
and rural public schools. If anything most economists are on the side of the
angels in attempting to improve public education. Further he fails to mention
that for all practical purposes the Democratic Party abandoned American workers
for the siren calls of identity politics.
Appelbaum has written a very readable
book. Unfortunately he way over-states his case. He should have been more
modest. By the way that is the same advice I give to my economist colleagues. His
personal vignettes about the economists he discusses are terrific and unlike
most books, read his footnotes. There are loads of interesting kernels there.
For the full Amazon URL see: https://www.amazon.com/review/R2TASSYK4EXXP4/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv
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