After Progress: American Social Reform and European Socialism in the Twentieth Century.

• Author: GALBRAITH, JAMES K.
• Position: Review

After Progress: American Social Reform and European Socialism in the Twentieth Century by Norman Birnbaum Oxford University Press, $36.00

The failings of conservative economics

WHEN RONALD REAGAN TOOK office in 1981, two books captured the ideological upheaval of the day: George Gilder's Wealth and Poverty and Jude Wanniski's How the World Works. At the time, many who opposed Reagan treated Gilder and Wanniski with derision, but we underestimated them. Truly, the country's cultural landscape was changing. Socialism, social democracy, social welfare, the social contract, and Social Security were sliding toward disrepute. Henceforward, the market--alone--would rule.

Today, George W. Bush holds White House, with a palace guard of corporate officers from oil, drugs, aerospace, and mining. Globalization has spawned a "cult of impotence," in Linda McQuaig's fine phrase, whose high priest is Thomas Friedman of The New York Times. The number four bestseller on Amazon.com is a fable about mice, mazes, and accepting impotence called Who Moved My Cheese? The morals of these facts, if facts have morals, are (1) the market really does rule, (2) you can't do anything about it, and (3) you'd better not try.

And yet, after 20 years, the political magic of the market is played out. In his campaign, Bush recycled Reagan's program, especially tax cuts and deregulation, and added a call for privatizing Social Security and for investing payroll tax dollars in corporate stocks. The voters recoiled, choosing the thematically tone-deaf Al Gore by over half a million popular votes. This was despite the fact that Gore had virtually no program beyond balancing the budget and defending Social Security and Medicare.

It also seems possible that we have now exhausted the potential of purely market-driven economic growth. The promise of the stock market has gone sour. The high-tech New Economy is collapsing, household and company debts are heavy, and it is possible that interest rate and tax cuts may not suffice to revive either the New Economy or the old. In the California electric-power crisis, we see a confessed failure of deregulation; in the new airline mergers we see monopolies forming. As unemployment rises, calls for government intervention will grow; meanwhile, the public strongly favors tough environmental protection and a higher minimum wage. The Republicans have thus inherited an economic task requiring tools that they oppose, while their free-market mantra has suddenly become, of all things, a liability with the American public.

How could this happen? James Arnt Aune, until recently affiliated with the George Bush School at Texas A&M University, summarizes the libertarian philosophy behind free-market political prescriptions:

"Libertarian policy prescriptions are based on just a few principles, outwardly appealing in their seeming simplicity ... `simple rules for a complex world.' The first ... is that social problems can be resolved by creating a market. Are schools failing? Create a free...