Money Watch

Sunday, September 16, 2007

Stepping back from narrow debates, several new books try to illuminate the broad economic forces behind rising inequality, tax cuts, immigration and public planning.

-- Alan Cooperman and Carlos Lozada

SUPERCAPITALISM

The Transformation of Business, Democracy, and Everyday Life

By Robert B. Reich

Knopf. 272 pp. $25

Do capitalism and democracy go hand-in-hand? Not always, says former Labor secretary Robert B. Reich. Since the mid-1970s, the stock market has surged, productivity has risen and prices for many goods have fallen in inflation-adjusted dollars. But Reich argues that democracy has weakened. Inequalities have ballooned, and traditional means of keeping them in check (progressive income taxes, good public schools and healthy trade unions) have eroded.

Reich blames what he calls "supercapitalism," in which companies compete globally to give consumers lower prices and investors higher returns. Large corporations, he says, have less economic power than in the past. As consumers and investors, most Americans benefit from the intensifying competition. But as citizens, we're losing ground, and the reason, Reich says, is that supercapitalism has "spilled over into politics," as hard-pressed companies seek favors from government.

-- A.C.

THE BIG CON

The True Story of How Washington Got Hoodwinked and Hijacked by Crackpot Economics

By Jonathan Chait

Houghton Mifflin. 294 pp. $25

Just a few decades ago, many Republicans worried deeply about deficits and inflation, and relatively little about tax cuts. "People who advocate only cutting taxes live in a dream world," Bob Dole, long the archetype of commonsense conservatism, said in 1982.

How tax cuts became "the be-all and end-all" of conservative domestic policy is the subject of Jonathan Chait's The Big Con. He begins with supply-side economics, which took a kernel of truth -- tax rates can affect economic behavior -- and turned it into an obsession. It's hard not to laugh when Chait, who writes the New Republic's acerbic "TRB" column, quotes supply-siders claiming ESP and using their tax theory to explain why babies cry. "Let me put it straightforwardly," he writes. "They are deranged."

But the book turns sober when Chait aims at a harder target: why ideas that George H.W. Bush derided as "voodoo economics" were embraced by the rich and powerful. -- A.C.

IMMIGRANTS

Your Country Needs Them

By Philippe Legrain

Princeton. 374 pp. $27.95

If consumer goods, money and ideas are allowed to dart from country to country with little regard for borders and no need for passport stamps, why shouldn't immigrants enjoy the same freedom?

That's the premise of Legrain's book, an effort to apply the logic of free trade to the anything-but-logical U.S. immigration debate. A former Economist correspondent, Legrain cites study after study to show that immigrants don't compete for jobs with natives, reduce local wages or burden welfare systems. Instead, he argues, they take jobs that most citizens in rich countries avoid, bring new skills and boost the local economy.

He buttresses his case with inspiring stories of immigrants around the world, yet he needlessly tars anyone opposing unfettered immigration as cruel, benighted or prejudiced. Indeed, the argument that immigration is analogous to international trade is not necessarily a winning strategy in a country where free trade itself is regarded with suspicion.

-- C.L.

THE BEST-LAID PLANS

How Government Planning Harms Your Quality of Life, Your Pocketbook, and Your Future

By Randal O'Toole

Cato. 416 pp. $22.95

O'Toole, a senior fellow at the libertarian Cato Institute, presents an across-the-board indictment of government planning. Whether zoning suburbs, designing rail systems or determining how much timber to cut in national forests, he says, federal, state and local planners are trying to simplify dizzyingly complex problems. Inevitably, they focus on one or two resources, fall prey to planning fads and succumb to pressure from interest groups. "Instead of predicting the future," he writes, "they envision what they want and try to impose that vision on the future."

But O'Toole's horror stories of planning gone awry don't answer the overarching question: What's the alternative? "Almost everything that planners do," he writes, "could be done better . . . with properly designed user fees, markets, and incentives." But who is to decide whether these are "properly designed," and on what basis? Might that involve a bit of . . . planning?

-- A.C.