Brad DeLong is a professor of economics and chief economist of the Blum Center at the University of California at Berkeley, a blogger at the Washington Center for Equitable Growth, and a research associate at the National Bureau of Economic Research. He served as deputy assistant secretary of the Treasury in the Clinton administration.


Alan Greenspan, pictured in 2003. (Ray Lustig/Washington Post)

The world as a whole is much richer than it was three centuries ago. And the United States of America is the richest land of all. For nearly two centuries, its unique dynamic of economic growth has made America, as Leon Trotsky put it after his brief residence in New York, “the furnace where the future is being forged.”


(Penguin Press)

Alan Greenspan and Adrian Wooldridge’s “Capitalism in America: A History” argues that the American love and embrace of capitalism, the resulting entrepreneurial business culture and the creative destruction inherent in the capitalist market system have given America its special, unique edge in economic wealth. In America, successful entrepreneurs, innovators, organizers and promoters have become not just well-off but heroes. They are who we want to be. As John Steinbeck once remarked, in America “we didn’t have any self-admitted proletarians. Everyone was a temporarily embarrassed capitalist.”

Entrepreneurs are our heroes even though, as Greenspan and Wooldridge say, they are at best eccentric, at worst cruel and dangerous, and always hard to live with. They are “almost always guilty of what might be termed imperialism of the soul.” Henry Ford was going to mass-produce cars, never mind that there were not yet enough miles of road for mass-produced cars to drive on. He was going to produce the cheapest possible mass-produced cars by making only one model in one color — black — never mind that a civilization that can require more than 700 kinds of barbed wire craves variety. The first bet paid off: Ford Motor Co. became the dominant industrial corporation of the 1920s. The second did not: Ford lost its place in the 1930s to Alfred Sloan’s General Motors. Nothing could cause Ford to swerve from his plan.

Are Greenspan and Wooldridge correct in this reading of American economic history? Greenspan’s career has certainly predisposed him to make this argument. Him I know slightly, but of him I know very well. He has been an extremely wise and thoughtful teacher, albeit of me only at second hand. As a disciple of Ayn Rand, he has always seen great potential value in acts of heroic economic leadership by industrial visionaries and in arranging society to assist such visionaries. He was the extremely skillful and extremely lucky steward — the closest thing to a central planner — of the American economy from 1987 to 2006 as chair of the Federal Reserve. During Greenspan’s tenure, I thought he made significant policy mistakes six times. Five of those six times I was mistaken. (The sixth was his refusal to push for higher loan standards and reserve requirements during the housing bubble of the mid-2000s.)

Greenspan is right in seeing the potential for heroic economic leadership. His greatest act of economic leadership was truly heroic. It was the last time any Republican policymaker was willing to reach across the aisle. He kept interest rates low as long as he honorably could, and perhaps a little longer, to try to ensure that President Bill Clinton’s 1993-1994 budget cuts and tax increases did not tank the economy in the short run. He provided this crucial assistance to Clinton and helped create the budget surpluses of the late 1990s; and that, plus Greenspan’s growth-oriented monetary policy of the later 1990s, was essential to power the half-decade of high investment and high productivity that fueled the dot-com boom. That was the last time the U.S. economy was firing on all cylinders.

Alas, no one can be heroic all the time. When the government of George W. Bush set out to undo Greenspan’s work with a 2001 tax cut, the Fed chair grumbled in funereal tones at private breakfasts that Bush’s tax cut was “irreponsible fiscal policy.” He was right. And the American economy suffered badly . But Greenspan stayed quiet in public. Later, he regretted his failure to more aggressively criticize Bush’s policy. Nonetheless, he remains a wise, reality-based, patriotric thinker. But he thinks very differently than I do — and that makes him more worth reading.

Wooldridge I do not know — save as a co-author of a book I dimly remember: “The Right Nation: Why America Is Different” (2004). Rereading it I was struck by this: “Imagine Dennis Hastert at one end of the seesaw and Nancy Pelosi on the other end, and you have some idea about which party is sitting with its legs dangling in the air.” And this praise for Republican Hastert and his constituents as salt-of-the-earth real Americans: “growth . . . family . . . resolutely middle class . . . cheerfully middle American . . . middle-class Illinois” alongside mockery of “aristocratic San Francisco,” of Pelosi and her Democratic constituents as parasitic weirdos. Not a whisper about the San Francisco Bay area’s role then — as now — as the engine of the greatest surge of techno-economic innovation since inventor Henry Bessemer experimented with steel. Barely a word about rural heartland towns shedding their economic roles, Hastert’s self-satisfied elite constituents who could not be bothered to lend a hand, the region’s unfriendliness to people who look different and its meth epidemics.

While it is no surprise that Greenspan and Wooldridge have produced this book, they are, I think, broadly correct in their argument. America vastly exceeds Old World powers like Britain, France and Germany in wealth and innovation because American entrepreneurs and business leaders have taken advantage of this nation’s infrastructure and education (and, from 1945 to 2007, a remarkable amount of economic stability) to achieve the learning and economies of scale to attain mammoth profits for entrepreneurs, executives and financiers and low prices for workers and consumers.

The argument, however, is one-sided and does have blind spots. For example, Greenspan and Wooldridge see America as in crisis and blame falling economic dynamism on a motley group composed of liberal intellectuals and politicians, crusaders against injustice and advocates (like me) of raising minimum wages, and others they deem the gravediggers of capitalism. But when I look around the hyperliberal San Francisco Bay area, I see near-universal agreement that entrepreneurial capitalism is good and that the benefits of Schumpeterian creative destruction are vastly greater than the costs; indeed, we here in Berkeley believe the benefits are so much greater that we can afford to take powerful and active policy steps to mitigate the costs — and thus we need to think hard about what those steps might be. I look to very liberal places like Seattle, Denver, Austin, Chicago, Raleigh-Durham, Philadelphia, New York, Boston and elsewhere, and I see the same. I see no decline in economic dynamism because of the fear of creative destruction, and it is in those prosperous and dynamic cities that creative destruction is occurring. It is not American liberals today who have a problem with a dynamic, changing economy.

It is, rather, the conservative parts of America that fear economic growth and dynamism. Where, after all, do we see an absence of upward mobility, an unwarranted fear of immigrants, an unwarranted fear of Muslims, suspicion of kneeling football players, suspicion of education, declining public health, a need to keep women in their place?

I look at the map and see the problem in the areas on which the curse of Barry Goldwater has fallen. Goldwater sought to take electoral advantage of the civil rights era by transforming the Republican Party into a place where those who feared and hated and did not want to interact with African Americans could feel at home. In so doing, he and his successors shifted the GOP’s focus from the interests of those who were or hoped to be wealthy and who looked forward to taking advantage of the “creative” part of creative destruction, to the interests of those who thought they had something to lose in the “destructive” part. As Secretary of State Dean Acheson correctly wrote in the 1950s in his essay “A Democrat Looks at his Party,” the first Republican Party of wealth and enterprise had a great deal to offer in helping to govern America. “The importance of business is an outstanding fact of American life,” Acheson wrote. “Its achievements have been phenomenal. It is altogether appropriate that one of the major parties should represent its interests and its points of view.”

But the second Republican Party does not represent business — those who think the economy is working or will work for them — but rather those who think economic and social change is their enemy. That party stands athwart history, yelling “Stop!,” and does not have much to offer America. That — rather than those groups the Republicans demonize — seems to me to be the source of our economic problems throughout much of the nation.

That is a very different problem from the one Greenspan and Wooldridge see.

But I could be wrong.

And that is one of the things that makes this book well worth reading. Greenspan is wise, is trying his best to think things through, wants only the best, and it’s perfectly fine that he thinks very differently than I do. I am pleased to welcome and endorse this contribution to our public conversation today.

Capitalism
in America
A History

By Alan Greenspan and Adrian Wooldridge

Penguin Press. 486 pp. $35