By Robert Heilbroner and Lester Thurow
Book Review
By Richard E. Noble
"Everything you need to know about how the economy works and where it is going" - this is the sub-title of this book. And I must say that it is a rather 'large' statement.
And does it live up to that declaration?
Well, first this book tries to establish for us a definition of Capitalism: what it is; when, how and why it began; how it works and how it doesn't work; who were some of its key participants in generic terms and a brief introduction to a few of history's economic theoretical greats.
We are introduced briefly to Adam Smith, Karl Marx, John Maynard Keynes and one or two more modern day contemporaries in the study of economics. It is explained that this is not one of the natural sciences but a social and theoretical branch of learning. It is relatively new in terms of the history of mankind never mind the history of the Universe.
We tag all the traditional bases; supply and demand, labor and management, profit and loss, investment and savings etcetera, etcetera. But we do kick it all up a notch by including in our discussion some previous unmentionables; labor theory of value, surplus profits, humans as commodities and the overall morality of a for-profit society. This was very refreshing.
We then kick it up another notch by getting into a discussion or should I say 'instruction' on the private and public sector, deficit spending and the national debt, and nationalism and the global economy. Again this was very refreshing.
The authors' explanation or apology for the National Debt I found especially intriguing.
The authors explain that 'debt' is common to both the public and the private sector, but they are evaluated differently by the sectors and the general economic public.
All private enterprise and all of the nations and the world's largest corporations have debt, we are told. But debt in the private sector is not termed debt - it is called "investment". For a company to expand, grow and make more profits it must borrow and invest. This is normal and usual and to be expected.
But when the government borrows to stimulate growth and expansion in the nation and the society it is termed as "debt." It is never labeled as "investment" as it is in the private sector. In other words the authors suggest that the National Debt could be equally and more fairly categorized as the National Investment.
The authors go so far as to make the following analogy. Rather than stating, as the politicians do, that we are saddling our children and grandchildren with the enormous burden of the National Debt we are instead leaving our children and grandchildren a safe deposit box full of interest bearing National Treasury Department bonds and securities.
I find this logic not only troubling but possibly deceptive or at best maybe naive.
When our grandchildren go down to that safe deposit box and retrieve the great legacy of Treasury Notes and securities that we have left them it will only be a small percentage that will find to their delight interest bearing certificates. Only the top ten percent of our society will be receiving this inheritance. The remaining 90% of us will find mortgage payments that we will all be required to pay to the ten percent among us whose ancestors were prudent and successful enough to leave their children and grandchildren all these securities. Not only that, but at the present time 25% of our National Debt is owned by foreign countries. So the 90% of our children and grandchildren who will be inheriting the mortgage payment on the interest bearing treasury notes will be mailing 25% of their payments to China, Japan, Russia, India, France, England etc.
The other point that I find troubling in this discussion is that the authors give the impression that debt (investment) is not only good but that it is as things are and should be. In other words, they suggest the notion that without borrowing and going into debt how else for god sake is any business supposed to expand and grow? Debt in the name of investment and growth is normal and usual. It is an a priori fact of economic truth.
Well what about this. What if a business or corporation made profits? And what if the executives of these businesses saved some of the profits or transferred some of these profits into future reasonable and affordable investments and growth without borrowing any money from anybody?
Now far be it for me to suggest that this is actually possible in the real corporate world but let us just theorize. Let us just say hypothetically that this were actually possible. Would this not then be a better alternative than borrowing and creating future debt with future deductions in future profits from future interest payments?
And so as for the Federal Government, what if the Federal Government did not spend all of the money that it got every year and placed so much in a contingency fund to be spent when necessary for investment, growth and overall stimulus to the national economy? Now again though all the Practical Philosophers (economists) out there may deem this in the realm of paradoxical or self-contradictory let us continue to fantasize or theorize. If it were in fact possible for the Federal Government to not spend more money than it takes in every year and to put some aside for a rainy day would this not be a better economic plan for the future than a closet full of treasury bonds and securities owed to the wealthy among us and our economic rivals throughout the world? I mean if it were possible, wouldn't it be better to have no debt in place of any debt? In other words I am going so far as to suggest that "debt" is bad and "no debt" is good
This is meant to be understood as a question not as an answer. As Andy Rooney so often states, I was just wondering ... did any of you ever think about such a possibility?
I did enjoy this book as you can see it did give me much to think about. I found the authors discussion on the public and private sectors and globalization objective and well balanced.
