Wednesday, July 21, 2010

Book Review (#9 of 2010)

The Commanding Heights: The Battle for the World Economy by Daniel Yergin and Joseph Stanislaw (Here's also a Wiki dedicated to the book.)
Full disclosure: I've owned the book since first semester of grad school and have read certain chapters for use in papers and such, and I also own and have watched several times the PBS-produced DVDs that excellently tell the story (you can too at the link). But, I'd never read the entire book all the way through.

This book is the most comprehensive story of the neoliberal revolution ever written. It explains the post-WWII transition to state-run economies and top-down development to the much more free market oriented neoliberal revolution that started with the end of the 1970s, and the book goes through 2002.

Scott Sumner calls these events an "underreported phenomenon" in an essay he wrote recently, which reads as sort of a brief summary of this book (which I don't know that he's read).

I don't know that it's "underreported" so much as it seems to have been forgotten in the wake of the Great Recession and the backlash against capitalism, and what people perceive to be "market failures" that are really just consequences of unmitigated greed.

Billions of people in China, India, SE Asia, Eastern Europe and elsewhere have risen from stark poverty to a much more empowered lifestyle because of their governments' embrace of freer markets. Governments all over the world used to own everything from train lines to nightclubs to grocery stores, but eventually re-figured out that those would be better run privately. Modern-day Greece is a perfect example of where near statism gets you-- 25% of Greece's population had a lifetime-guaranteed government job going into their EU-mandated fiscal austerity plan. Governments, including the U.S., used to commonly set wages and prices which led to shortages , surpluses, and poverty.

If you want the (mostly) complete story, read Commanding Heights. The appendices alone are great for reference. I recently used the book to refute a fairly well-known liberal blogger's view that "there are zero historical examples of conservatives mobilizing to make the deficit smaller." The young liberal pundit class apparently don't remember anything further back than 15 years and never leave the country. And they parse things in simple terms: "How'd that free market thing work out for Mexico and Bolivia?" ignoring rampant government intervention in those economies or poor monetary policy, or other things that are vitally important.

If Commanding Heights has one obvious flaw, it's at the conclusion of its chapter on Russia. On one page it notes that the new freedoms that Russians enjoy, including freedoms of the press, can never be rolled back. Then, on the next page, it paints a dark uncertain picture where those freedoms are indeed rolled back by Putin & co. Perhaps this is the result of bad editing in a revision?

If you want the most complete picture of world economics from 1945-2002, read Commanding Heights. If you want a view of some of the guiding principles of that neoliberal revolution, read Hayek's The Road to Serfdom, or Milton Friedman's Capitalism and Freedom, or just watch Milton Friedman's Free to Choose series. If you want a more on-the-ground view of how the neoliberal revolution looked in the 1990s, read Tom Friedman's The Lexus and the Olive Tree or The World is Flat. If you want to read a critique of much of the above, read Joseph Stiglitz's Globalization and Its Discontents.

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