The Vampire State and Other Myths and Fallacies About the U.S. Economy.

• Author: Judis, John

THE CURRENT DEBATE OVER ECOnomic policy is dominated by what might be called grim realism. It holds that over become soft and flabby and that in order to regain our economic health we have to undergo a diet of strict austerity, beginning with the federal budget, whose extravagance is draining vital fluids and leaving us listless and torpid. Its most fervent proponents include banker Pete Peterson, former Senator Paul Tsongas of the Concord Coalition, and two time presidential candidate Ross Perot, but it also underlies the competing positions of the Republican Congress and the Clinton administration. Both sides agree, in effect, that America must tighten its belt and curb its budgetary excesses. It's merely a question of which programs to cut and when. In a new book, Fred Block, an economic sociologist at the University of California at Davis, argues that this grim realism is based on highly misleading metaphors that have affected popular and academic theories about the economy. Anyone who wants to understand the current debate over balanced budgets and entitlements should read Block's book.

Block, drawing upon Donald McCloskey's analysis of the role of metaphor in economic thought, argues that current thinking has been shaped by a narrative, or allegory, that is sustained by metaphors. The narrative is the story of "Amazing Grace"--of a sinful wretch who through effort and self-denial is finally saved. In terms of the economy, it is the story of an American economy that was once buoyant and healthy, but has become sick and flaccid, and can only be saved through painful exertion. The dominant metaphor casts capital as blood and the government, or state, as a vampire sucking this precious fluid out of the economy. If you listen, it's everywhere--Steve Forbes promising to "drive a stake into the heart of the Internal Revenue Service," Arizona Senator Jon Kyl comparing current budget policy to "bleeding a patient with leeches in order to make the patient healthy"

Block disputes the aptness of this vampire metaphor in two respects. First, he argues that the metaphor of capital as blood vastly overstates the importance of money capital and savings to new investment and growth. Investment and growth, he argues, depend on a host of factors, including new technology, industrial organization, and, perhaps most important, the presence of unutilized human and technological resources. The availability of cheap credit can spur investment, but not in the...