"THE MOST IMPORTANT EVENT in the recent history of ideas," writes George Gilder in the first sentence of this provocative book, "is the demise of the socialist dream." But if the socialist experiment has failed -- and you can make a pretty good case that it has, not just in the U.S. but in Britain, Tanzania, Poland and points east -- "why does the capitalist vision seem to teeter so precariously over the same ash can of history?"
Why, having put their man in the White House, are so many conservatives suffering a certain post-coital sadness: If they're so victorious, why aren't they happy?
Gilder's answer is that no conservative thinker -- not even Milton Friedman or Irving Kristol or Aleksandr Solzhenitsyn -- has seen fit to provide capitalism with a moral basis, a theology. And, without a creed, the future can look awfully bleak. As Daniel Bell has written: "Scarcely one intellectual figure [has] defended the sober, unheroic, prudential, let alone acquisitive, entrepreneurial, or money-making pursuits of the bourgeois world."
So the task falls to George Gilder, an economist and philosopher who has written in the past on feminism (Sexual Suicide) and poverty (Visible Man). Gilder tackles his chore with relish in a ambitious, idiosyncratic, and in many ways brilliant book. He doesn't succeed in writing "The Capitalist Manifesto," but it's fascinating to watch him try. And enlightening. What makes Wealth and Poverty so valuable is not the theology that Gilder manages to invent for capitalism but the lucid way he describes his vision of the world, a vision shared by more and more people.
If you don't understand the wave of new conservative ideas that has swept this country during the past four or five years -- or if you consider those ideas window dresing for jingoism and bigotry -- then this is the book to read. Gilder introduces all of the key conservative thinkers of the day -- Thomas Sowell, Arthur Laffer, Jude Wanniski & Co. -- and traces their roots to Jean-Baptiste Say, John Stuart Mill and Thomas Edison.
In focusing on economics, Gilder handles complicated concepts well (there's not a graph in the book). His chapter on supply-side theory, which challenges the prevailing assumption of liberal economists that demand takes precedence over supply (and thus tax cuts are inflationary), includes clear explanations like this: "The problem is that demand, like public opinion, does not exist in any very definite and identifiable way; it is a flux of hungers and sentiments which assume particular forms chiefly in response to the flow of supplies. Because there is not demand for new and unknown goods, no demand for unforseeable fruits of innovation and genius, preoccupation with demand fosters stagnation."
This is the crux of Gilder's practical argument for capitalism: A free market encourages entrepreneurs to come up with new, risky ideas; most of the ideas fail, but a few succeed, making not only the entrepreneur but the nation richer and more productive. A planned, socialist economy, on the other hand, produces supplies to meet known demands; new ideas aren't fostered; the economy stagnates. Such an economy proceeds from the assumption that the circle is closed, the world is finite.
Gilder disagrees: "The United States must overcome the materialist fallacy: the illustion that resources and capital are essentially things, which can run out, rather than products of human will and imagination which in freedom are inexhaustible. This fallacy is one of the oldest of economic delusions, from the period of mercantilism when they fantasized that it was gold, to the contemporary period when they support it is oil; and our citizens clutch at real estate and gold as well."
But throughout history, Gilder says, the fastest-growing countries have been the ones "best endowed not with things but with free minds." He cites Germany and Japan, which lost almost their entire physical productive capacity 35 years ago.
What we need, says Gilder, is a society that lets free minds flourish -- which, in his view, means to allow them to invent a variety of products from faster electronic calculators to tastier frozen chicken. The best way to do that is to cut taxes and regulations and thus spur investment. Gilder also advocates letting everyone play the game -- including the poor, who are cut out of things because of a liberal obsession with insuring them against risk.
"The only dependable route from poverty," he writes, "is always work, family, and faith. The first principle is that in order to move up, the poor must not only work, they must work harder than the classes above them. Every previous generation of the lower class has made such efforts. But the current poor, white even more than black, are refusing to work hard." And with good reason: The welfare system and the tax structure, according to Gilder, encourage them not to work.
Welfare, he argues, also destroys families by providing mother and children with an income that doesn't come from the sweat of father's brow. Males, writes Gilder unflinchingly, have historically been the engines that move an economy -- especially married males out to provide for their families. Welfare destroys their spur to work.
The third element of the route from poverty, faith, is defined by Gilder as a belief that the future is good: "Search and you shall find, give and you will be given unto, supply creates its own demand. It is this cosmology, this sequential logic, that essentially distinguishes the free from the socialist economy."
Which brings us to the theology Gilder invents. "Capitalism begins with giving," he writes, and he describes feasts given by primitive tribes in the Solomon Islands. A man would give a feast for his neighbors as a gift, but, as with all gifts, repayment was expected. Not guaranteed, but hoped for. Sure enough, the guests at the first feast would give their own, and "contests of altruism" would develop. To give a good feast, the giver had to understand his guests' desires: "Thus the contest of gifts leads to an expansion of human sympathies." Gilder's point is that capitalist investment involves the same kind of giving. Investment is, in a sense, charity. The returns are unknown -- in many cases there aren't any. But the whole cycle is morally good because it inspires faith, and it expands human sympathies.
I find this reasoning tenuous, not Gilder at his best. Gilder at his best is when he's denigrating the guarantees of the welfare state by quoting Jose Ortega y Gasset: "All life is the struggle, the effort to be itself. The difficulties which I meet with in order to realize my existence are precisely what awaken and mobilize my activities."
Or Gilder in his own words, celebrating the mind as the true source of economic wealth: "The only stable asset among the quakes and shadows is a disciplined brain. Matter melts, but the mind and will can falsh for a while ahead of the uncertain crowd, beam visions across the sky, and induce their incarnation in silicon and cement."
Gilder believes in Say's law: "Supply creates its own demand." But his own book may be a refutation of that supply-side thesis. There has been a crying demand, a need, for an excellent book on the new conservative economics ever since Ronald Reagan was elected president. Wealth and Poverty supplies that demand perfectly.