[J. Bradford DeLong] Utopia or bust -- the politics of economic governance

My book on the economic history of the 20th century, published last fall, did not include a chapter on the question of the future or “what we should do next,” because my frequent co-author, Stephen S. Cohen, convinced me that whatever I wrote would come to look outdated and silly within six months. He was right: Such arguments are better left to commentaries like this one. So, if I had written a final chapter looking to the future, what should I have said?

Prior to the phantom text, I argue that for most of history, humanity was too poor for political governance to be anything but elites ruling through force and fraud to amass wealth and resources for themselves. But in 1870, the rocket of modern economic growth blasted off, doubling humanity’s technological competence every generation thereafter. Suddenly, we seemed to have acquired the means to bake an economic pie large enough for everyone to have enough. If we could solve the second-order problems of how to distribute and consume the pie so that everyone felt safe, healthy, and happy, a kind of utopia would be within reach.

Yet something went wrong. Between 1870 and 2010, humanity did not gallop, run, canter, trot, or even walk toward utopia. At best, we slouched -- and not even always in the right direction. By the first decade of this century, the engine of economic growth had clearly begun to misfire. Not only could we no longer count on rapid growth, but we also had to account for new civilization-shaking threats like climate change.

The grand narrative of 1870-2010 was about technological triumph, coupled with social-organizational failure. The post-2010 grand narrative has yet to be written, mainly because humanity has been taking hesitant steps in at least four directions.

Some have looked back to the post-World War II social-democratic “New Deal Order,” which was born of a shotgun marriage between Friedrich von Hayek, with his exultant confidence in the power of the market to create prosperity, and Karl Polanyi, who stressed the importance of human dignity and rights other than those pertaining strictly to property. The shotgun was held by John Maynard Keynes, who believed in the power of technocratic economic management to maintain full employment, empower workers by making their time more valuable and euthanize the rentiers through low interest rates.

But that system proved unsustainable in the late 1970s. It could no longer command the support of durable majorities in the world’s democracies, and its foundation of Fordist mass production had begun to fracture. The world economy was moving instead to global value chains and, eventually, to the current information-driven mode of production. To speak of reviving the New Deal today would be like someone in 1690 calling for a return to the 11th-century feudal order that prevailed under William the Conqueror.

Others, meanwhile, have looked in the direction of doubling down on the neoliberal order that succeeded social democracy. For example, the United Kingdom did this starting in the late 2000s, when Nick Clegg, the leader of the Liberal Democrats, decided that his party’s purpose was to persuade voters who didn’t like Tories to support Tory rule. The reinvigorated neoliberalism that followed under Prime Minister David Cameron and Chancellor of the Exchequer George Osborne -- not to mention the farcical experiment that Liz Truss and Kwasi Kwarteng recently pursued -- delivered little in the way of absolute economic growth and offered a strong warning against moving in this direction.

A third option has been to conjure the spirit of ethnonationalism. Advocates of this direction believe that modern society’s principal flaws have less to do with material deprivation than with moral decay owing to the influence of outsiders and those who lack sufficiently deep roots in the blood and soil of the nation: immigrants, moochers, slackers, deviants, rootless cosmopolitans and other sinister forces. Needless to say, this approach has very little to recommend it, both morally and as a matter of economic policy.

The fourth option addresses something that has been absent, or at least waning, ever since 1870. One could abandon the goal of utopia and return to orienting society around an elite -- be it kleptocrats, plutocrats, party bosses, or some combination of these -- that is focused on feathering its own nest through force and fraud. The strong would do what they wish, and the weak would suffer what they must. Going down this road, the closest one could get to a “good society” would be to use the new tools of the information age to enact a winner-takes-all hierarchy gently, rather than with the same brutality as in the past.

None of these options is likely to bring improvement, and some aren’t even feasible. Neoliberalism’s big problem was that it starved society of long-term investment, both in productivity-enhancing technology and in the vast majority of people. Social democracy’s problem was that most people did not want to be passive recipients of government benefits; rather, they wanted the social power to earn (and hence to deserve) their slice of the growing pie.

Is it fantastical to think that a productive and effective synthesis of these is still possible? Or is it just that I am an old ox who has been seeking such a synthesis for his entire career? Given the alternatives, I see no other choice than to keep pushing the same burden around the same circle. Like Martin Luther, I cannot do otherwise.

J. Bradford DeLong

J. Bradford DeLong, a former deputy assistant US Treasury secretary, is a professor of economics at the University of California, Berkeley, and the author of “Slouching Towards Utopia: An Economic History of the Twentieth Century.” -- Ed.

(Project Syndicate)