For most of our ten thousand years on the planet, the vast majority of humanity endured lives of dire poverty and extreme material deprivation. Most people spent most of their time worrying about securing the bare minimum of food and shelter. The Industrial Revolution began to change that dynamic. Still, the British economist and philosopher John Stuart Mill was correct to question in the early 1870s whether “all the mechanical inventions yet made have lightened the day’s toil of any human being.” Soon after, however, the emergence of globalization, the industrial research laboratory, and the modern corporation made possible a rapid upward trajectory in human flourishing and an end to near-universal agrarian poverty. Another British economist, John Maynard Keynes, foresaw in 1930 that the continued progress of science and compound interest could mean that human beings, liberated from pressing economic cares, might find their real challenge to be how to occupy their leisure time and “live wisely and agreeably and well.”
But the explosion of productivity and prosperity over the 140 years that followed the takeoff point in 1870 did not see humanity zooming toward Utopia; at best, we slouched fitfully in that direction. Brad DeLong, an economics professor at the University of California at Berkeley, has written a much-anticipated history of what he calls “the long twentieth century” from 1870 to 2010, entitled Slouching Towards Utopia: An Economic History of the Twentieth Century. In it, he explains how we achieved economic breakthroughs that once would have been considered miraculous — and yet fell short of what that breakthrough promised. And DeLong also explains why he believes that the era of remarkable prosperity, for all its problems and inequities, has now ended.
In this podcast discussion, Niskanen’s Brink Lindsey and Geoff Kabaservice talk with DeLong about why the material abundance that resulted from the great acceleration after 1870 was unevenly distributed between nations and within them, why developmental social democracy failed its sustainability test, and how the long twentieth century was in a sense a contest between the ideas of the towering thinkers Friedrich Hayek and Karl Polanyi. The discussion also covers differing perspectives on “the neoliberal turn,” speculations about how to benefit from the best aspects of neoliberalism and social democracy while avoiding their pitfalls, and a hypothesis as to why capitalism is like the brooms in “The Sorcerer’s Apprentice.”
Brad DeLong: The collapse of confidence in government in the industrial West is of extraordinary magnitude and yet, as I see it, largely unbased in reality. The ideas I’m playing with are that really we need to go back and think more about changing modes of production.
Geoff Kabaservice: Hello! I’m Geoff Kabaservice for the Niskanen Center.
Brink Lindsey: And I’m Brink Lindsey from the Niskanen Center.
Geoff Kabaservice: Welcome to the Vital Center Podcast, where we try to sort through the problems of the muddled, moderate majority of Americans, drawing upon history, biography, and current events. And we’re delighted to have with us today J. Bradford DeLong, better known as Brad. He is an economic historian and macroeconomist who holds a professorship in Economics at the University of California at Berkeley, as well as being a research associate of the National Bureau of Economic Research and a fellow at the Institute for New Economic Thinking.
He also served in the U.S. government as Deputy Assistant Secretary of the Treasury for Economic Policy from 1993 to 1995, where he worked on the Clinton administration’s 1993 budget, on the Uruguay Round of the General Agreement on Tariffs and Trade, and on the North American Free Trade Agreement. Prior to joining the Treasury Department, he taught at Harvard University, Boston University, and MIT. And he is one of the original econ bloggers, who continues to post almost daily on Brad DeLong’s Grasping Reality, which is now on Substack. He also has an excellent podcast with his fellow economist, Noah Smith, which is called “Hexapodia” Is the Key Insight. And not least, he’s on the Niskanen Center’s Board of Advisors. Welcome, Brad!
Brad DeLong: Thank you very much for inviting me. I think we just crossed 40,000 books sold in all formats for my Slouching Towards Utopia, and so I’m still very eager to tell people it exists and talk about it.
Geoff Kabaservice: Well, fantastic! And congratulations on your prodigious and path-breaking book, Slouching Towards Utopia: An Economic History of the 20th Century. It was published in September of 2022, but it’s still flying off airport bookstore shelves around the world, as I can vouch from my visit a few days ago to São Paulo.
Brad DeLong: Oh, wow. It’s in the São Paulo airport?
Geoff Kabaservice: It was indeed, yes.
Brad DeLong: Oh, wow. That’s a major victory of some sort.
Geoff Kabaservice: I think it is. It’s a book I think that we’re going to be talking about decades hence, and it’s also a book that’s been decades in the making. I note that Paul Krugman, writing in his New York Times column of June 18th, 2000 referred to “[Brad DeLong’s] already classic though not yet complete book Slouching Towards Utopia.”
Brad DeLong: Well, at that time there really were only three chapters, right? It was more a marker that this was a book I was trying to write rather than a full manuscript. Admittedly, Paul loved those three chapters and has more confidence in my ability to actually buckle down on projects than I do. The problem was, the end of the book kept changing in the early 2000s.
Geoff Kabaservice: Yes, as you tried to figure out the end point. I gleaned from Annie Lowrey’s profile of you in The Atlantic that the book had its genesis in 1994, when you came across socialist historian Eric Hobsbawm’s book The Age of Extremes…
Brad DeLong: Yes.
Geoff Kabaservice: …which was on what he called “the short 20th century” between the assassination of Franz Ferdinand in 1914 and the collapse of the Soviet Union in 1991.
Brad DeLong: Yes.
Geoff Kabaservice: So what was the process there that led to your book?
Brad DeLong: Annoyance. Annoyance and a lunch, I think at the Harvard Faculty Club, where David Landes and Peter Temin were there. And I was ranting at them about how Hobsbawm had really told the wrong story of the long 20th century. That Hobsbawm story is world communism as tragic hero, born under incredibly adverse conditions that kind of marked, distorted, and stunted it. And it saved the entire world from Nazism before expiring in a low, dishonest way that left bad guys (although not the worst guys) in control. And that kind of blocked humanity’s road to anything that you might think of as Utopia or a truly human world. And that really was not the big story. World communism was not the major actor of the 20th century, and the big story was quite different, and someone should write the right book that was the history of the 20th century.
And Peter and David said, “Well, why don’t you do it? You’re still young. You could take this thing on.” And I hemmed and hawed and said, “Maybe.” And so ever since then, it’s been in the back of my mind as something I should do or somebody should do, and then it was something I should do. And then Basic Books put me under contract, the theory being that I wasn’t making progress on it, and if they put me under contract they could come around once a year and yell at me at how progress wasn’t being made. And then before the plague, I finally said, “Someone should do this, and clearly this someone is me,” and started to work on it in true earnest — that is, the everyday thing. And then the plague came, and now the book is finally out.
Geoff Kabaservice: Well, congratulations on the publication of your long-awaited book. As you probably know, there was an episode of The Monty Python Show that featured the All-England Summarize Proust Competition, in which each contestant had to give a summary of Marcel Proust’s À la recherche du temps perdu in 15 seconds, once in a swimsuit and once in a dress. And I feel like that’s the model for any attempt to summarize Slouching Towards Utopia in this kind of interview format.
Brad DeLong: Yes.
Geoff Kabaservice: But minus the costume changes, let me give this a try. I would say that your book is a grand narrative of the coming of economic modernity over the course of what you call “the long 20th century” that started in 1870 and ended in 2010. And prior to 1870, despite the advent of capitalism and the industrial revolution, humanity still inhabited a largely Malthusian world. Technological improvements never permitted a significant or sufficient increase in production to outpace population growth, and incomes remained stuck at subsistence level. More than 80% of the global population in 1870 lived on what it farmed rather than what it purchased.
But after 1870, growth in incomes in the leading economies of the Global North became supercharged by the critical innovations of globalization, the modern corporation, and the industrial research laboratory. And these changes brought about an unprecedented explosion of prosperity and productivity that, as you wrote, “unlocked the gate that had previously kept humanity in dire poverty.”
Nonetheless, humanity didn’t zoom toward Utopia. At best we slouched fitfully in that direction. And the material abundance that resulted from the great acceleration after 1870 was unevenly distributed between nations and within them, largely because of non-economic developments including the two world wars, the legacies of colonialism, contending economic philosophies about what markets alone can achieve, and the varying competencies and priorities of governments.
I’m pretty sure that was longer than 15 seconds. How else would you amplify upon this very skeletal outline of the themes of your book?
Brad DeLong: I would say that normally you would think that a world in which each generation… We are not just twice as technologically competent as any previous generation, but also resource scarcity is not mounting at a pace fast enough to offset a good deal of that —that would be a world in which it was pretty easy to get pretty close to Utopia. That is, that the kind of tasting the economic pie, figuring out how to use our wealth, what wealth we have, to live as wisely and well as we can, and equitably distributing the economic pie…
Those would seem to be easy questions relative to the basic problem of baking a sufficiently large economic pie. And largely, if you can’t bake a sufficiently large economic pie, you poison everything else, because if there’s no way there can be enough for everyone, then getting enough for yourself and your family involves joining a gang, joining a gang of thugs with spears or gunpowder weapons and their associated tame propagandists, bureaucrats, and accountants, and they’re running a force-and-fraud exploitation and domination game on the rest of humanity.
That kind of poisons everything. But running such a game is hard and dangerous. And once the need is no longer there, once there is plausibly or is about to be enough for everyone, everything else should have fallen into place much more easily than it did, than it has. It still has not fallen into place. Half a mile away from me there is a man living in a box, and killer robots are still stalking the skies over Ukraine, Syria, Yemen, lots of other places. Yes, we have this enormous explosion of wealth, but it is a very sad verdict on humanity that baking a sufficiently large economic pie did not turn out to be the truly hard problem that slicing and tasting the pie did.
Geoff Kabaservice: Well, that’s a very good summary. Before we get into a fuller discussion of Slouching Towards Utopia, I wanted to ask you something about yourself, as I do on this podcast. So where did you grow up? Where did you go to school? What were some of your important influences?
Brad DeLong: Let’s see… I would say born in Cambridge, Massachusetts, when my father was a student at Harvard Law School and my mother was wondering what she should do; she became a psychologist. We moved to Los Angeles, to Pasadena, at three, and moved to Washington DC at six, because my father wanted to work for the Johnson administration rather than be a lawyer at O’Melveny & Myers. Headed off to Cambridge, Massachusetts for college in 1978.
I took a look at the job market in 1982, when I graduated, and promptly turned around and ran back into the university. I decided that since people applying for jobs as assistant professors in history were 40 and had written two well-regarded books, and people applying for jobs as assistant professors in economics were 26 and had one half-written paper, that clearly I should get an economics Ph.D. And so I did, and ever since it has been what the machine learning people call “gradient descent”: do at every instant the thing that I think is the most useful, the most fun, and the most likely to be successful at accomplishing. And it’s been a strange twisting path, and here I am.
Geoff Kabaservice: I think it was in your review of the third volume of Robert Skidelsky’s biography of the British economist John Maynard Keynes that you referred to “the half-science, half-witchcraft discipline of macroeconomics.” I wondered how you came up with that description of your profession.
Brad DeLong: Well, that’s the description of the subprofession, which is the overall study of business cycles and economic growth, as opposed to the micro side of economics where we have firmer foundations. The problem with micro is that the firm foundations are totally wrong but nevertheless somewhat useful, which is a deeper problem. In macro, largely we have simple observations about what tends to happen and frantic attempts to rationalize them through some underlying intellectual structure — which doesn’t do terribly well, in large part because each generation, macroeconomists find that the reaction of the previous generation against and to solve the problems of full employment, stable prices, and economic growth it has undertaken undermine the truth of whatever generalizations and frantic attempts to rationalize them economists have come up with.
Witness the fact that when 2021 came along, the overwhelming bulk of economists were very confident that inflation was not going to be a danger. Because if in the long period before 2020, in which deficient demand had not caused significant reductions in the rate of inflation, well, then a surge of excess demand as the economy reopened would not cause a significant rise in prices. Surprise, surprise! The stable, flat Phillips Curve structure that people had thought they had seen between 1995 and 2020 vanished into thin air in mid-2021, and we’ve been scrambling since to figure out what the hell is going on and what should be done in order to get the economy back into some kind of satisfactory equilibrium, Goldilocks-balanced configuration.
Geoff Kabaservice: It’s my untested hypothesis that adolescents who read a lot of science fiction are more likely to grow up to be economists, and adolescents who read a lot of fantasy are more likely to grow up to become historians. I’m guessing you read a lot of science fiction.
Brad DeLong: Well, a lot of both.
Geoff Kabaservice: Okay. Who were the science fiction writers whom you liked best?
Brad DeLong: Oh, I was an early Heinlein fan, to an extraordinary degree. And I had a soft spot for Isaac Asimov, but much more for his science writing than his science fiction, which is I’d say is embarrassing if one has an emotional age of more than 12 as one starts actually thinking about how human beings actually relate. And thinking about it in retrospect, one feels kind of sad for poor Isaac, thinking that he never kind of figured out how to fit into the social world in spite of his enormous and prodigious talents.
Geoff Kabaservice: You know, I still have a sneaking admiration for Hari Seldon, the great sociologist who can plot out humanity’s future course.
Brad DeLong: Well, yes, and in some ways, that’s a chemist’s view of what history as a subject would be if you could actually in some way apply a law of large numbers and get something like statistical mechanics going, so that you could figure out what is actually happening, what is actually likely to happen. There is a passage, I think in Second Foundation, in which one of the seniors is quizzing a graduate student and demanding that they explain a series of equations and what they mean, and the student is trying the very best they can. And it brings back memories from my own kind of science and also economics courses, as to try to move between the reality of the world and what the framework of analysis is and what the mathematical representation of it is. And the idea that one might be able to bring tools to bear on understanding in the social rather than natural sciences is, I think, something one gets from Isaac.
But there, the decisive moment really was, I think I was 12, and the American Association for the Advancement of Science had come to have its annual meeting in Washington, D.C., down on Connecticut Avenue. And I went down, and in the basement of the hotel they had a whole bunch of things, one of which was a typewriter hooked up to a mainframe computer elsewhere on which you could run Jay Forrester’s world dynamics model.
Well, Jay Forrester’s world dynamics model has pollution as a stock, and when you produce stuff in a polluting way, you add to the pollution stock. There’s a flow from increased pollution, and productivity depends not on the level of pollution now, but on the total stock of past accumulated pollution — and depends highly negatively on it. And you know and I know that anytime you set up that kind of mathematical formulation in which there’s a negative effect of the stock on something, but your current activities only affect the stock — are only a flow into the level of the stock, which is an accumulating variable — that basically what you’re going to get is you’re going to get an absolute crash, because high activity is going to greatly push up the effect of your total pollution stock and its accumulated past activity that pushes down present activity.
And so in the core of Jay Forrester’s world dynamics model was the fact that in the model, industrial civilization was always going to crash — and crash hard, with mammoth famines, 90% population declines, 50% declines in, you know, no matter what you did to the model. Because as we were sitting there in the basement trying different scenarios, it wouldn’t allow you to change that fundamental structure. The only question was: When would industrial civilization crash? And I spent a day playing with this in the basement, and you would watch the typewriter, and it would print out graphs, and each line of the typewriter, it would punch a P or something for population. The graph would be composed of individual letters as the series, making a pattern. It was fascinating, and it made me think this was something that maybe it would be fun to do for a career. And I kept that in the back of my mind.
And then in college, I wound up doing the social studies major, then with a heavy focus on economics, and thinking. “This is actually a fun, interesting intellectual discipline to play with.” But I think the idea that it might be a place where one could think useful thoughts really came from that day spent in the basement of some hotel on Connecticut Avenue when I was 12.
Geoff Kabaservice: That’s a good story, and I see an early rejection of the idea of economics as a dismal science. Brink, I feel like you and Brad have been at least in communication for 20 years now.
Brink Lindsey: I think so. I was an early reader of Brad’s blog and read those early chapters of Slouching Towards Utopia not long after they were up and available online. I wrote a book about globalization called Against the Dead Hand, which came out in 2002, and I recall Brad writing really nice things about it.
Brad DeLong: Yeah, it was very, very nice.
Brink Lindsey: And if we had never corresponded before that, then certainly on that occasion I struck up a correspondence with Brad. And we’ve been chatting, and occasionally seeing each other in the flesh, on and off ever since.
Geoff Kabaservice: Brink, at the start of 2022, you began to share with me some of the ideas you had for what became your Substack, The Permanent Problem, which everyone should check out. And it’s one of those cases of great minds thinking alike, because both Brad’s book and your Substack are in a sense in dialogue with the 1930 essay by Keynes entitled “Economic Possibilities for Our Grandchildren.”
Keynes was writing during the Great Depression, but he believed that in hindsight it would appear as an aberration in what was otherwise a long-term trend of cumulative growth. And he wrote that “the economic problem, the struggle for subsistence, always has been hitherto the primary, most pressing problem of the human race.” But the economic growth that occurred since the 1870 takeoff, he wrote, “means that the economic problem is not — if we look into the future — the permanent problem of the human race.” Because if growth could continue for another century, then “for the first time since his creation man will be faced with his real, his permanent problem — how to use his freedom from pressing economic cares, how to occupy the leisure which science and compound interest will have won for him, to live wisely and agreeably and well.”
So tell me more, Brink, about why that Keynes quote resonated so strongly with you that you named your Substack “The Permanent Problem,” and also your best guess as to why you and Brad seemed to be thinking along similar lines.
Brink Lindsey: Well, I think I’m thinking in a very similar way to the thinking that guided Brad in the writing of his book. So there’s the glass-half-full story that the gates which had locked mankind in dire poverty have been broken open and the path to Utopia is apparently open. Then there’s the glass-half-empty story, which is that despite all of our technological powers and organizational powers and the resources at our disposal, we haven’t figured out — we haven’t gotten really very close to figuring out — how to live wisely and agreeably and well.
And so in my own career, I’ve spent a lot of my time analyzing and writing about the causes and consequences of economic growth and the arrival of material abundance; looking at globalization and writing about the consequences in a cultural and political history of the United States called The Age of Abundance, which looked at history of America since World War II through the prism of the cultural and political reactions to the advent of mass affluence. Here was a society that was something new under the sun, where the fulfillment of basic material needs could be more or less assumed by the vast majority of the population.
That didn’t mean people stopped worrying. It meant they started worrying about new things, in particular about self-expression, self-realization. So all of the tumults of the ‘60s and ‘70s I saw coming straight out of the story I told, coming straight out of the placid suburbia of the ‘50s, and all following from the unfolding logic of a radical change in the human condition, almost necessitating dramatic adaptations in culture and politics.
But I told a pretty happy story. I conceived this book at the end of the ‘90s boom, beginning of the 2000s, before 9/11. I wrote it between 2003 and 2006, and it came out in 2007. At that time, I still thought we were on a glide path to progress, the path of least resistance, that humanity in general and the rich countries in particular were going to get richer and freer and better governed.
Brad DeLong: Well, it did seem then that left-neoliberalism kind of had it right: a proper disdain for bureaucracies and their inefficiencies, and a proper recognition of the great crowdsourcing benefits of what Michael Polanyi would call “mercenary institutions” like the market and fiduciary institutions like science. Add those with the fact that you could be kind of a social-democratic wolf in left-neoliberal sheep’s clothing and talk about safety nets and so forth, and recognize that the right road to a lot of social democratic ends in fact involved not bureaucracy but rather tuning market incentives and getting the great crowdsourcing machine going. That really did seem to be the intellectual sweet spot for organizing production and distribution. And add to that what would seem to be a stable democracy. Frank Fukuyama looked, if anything, a little pessimistic in his talk about “The End of History.”
Brink Lindsey: Democracies were waxing worldwide at that time. But since then, since 2007 — which I think was the last year one could write a history unironically titled The Age of Abundance — since then the glass-half-empty story has become much more salient to me. I didn’t ignore it in writing that book, but the book was an upbeat story: that we had come through the sturm und drang of the ‘60s and ‘70s and had come to a kind of neoliberal, socially liberal consensus. But such was not to be.
And so, still having in my mind the idea that the advent of mass affluence and this switch from “the economic problem” to “the permanent problem,” as Keynes had put it, was really the defining event of our time, I just went back and looked at it again and saw the dark sides of it, the downsides of this change. And the incompleteness of our adaptation to that change now looked much more apparent to me. And so I share Brad’s sort of somber verdict on capitalist mass affluence. Grading on a historical curve, we’re better off than humanity’s ever been. Grading according to what our technological and organizational powers would seemingly enable if we could just get our act together, we’re very much wanting.
Geoff Kabaservice: This is a theme to which we will return. Brad, you name-dropped Michael Polanyi, who’s a British polymath. But the central Polanyi in your book is not Michael but Karl Polanyi…
Brad DeLong: It’s Karl, yes.
Geoff Kabaservice: …who is presented as a kind of counterpart to the Austrian neoclassicist economist Friedrich Hayek, with whom a lot more people will be familiar. So can you tell me something about Karl Polanyi and why his message seemed to be the counterpart to Hayek?
Brad DeLong: Well, Polanyi was another one of the huge number of extremely interesting intellectuals coming out of the Austro-Hungarian Empire, as it stood before World War I; born and molded there, and then generally fleeing everywhere else, usually to America or Britain, and then trying to reflect on the social world as they had seen it, had understood it. And for some reason, that experience seems to have given an awful lot of them special insights, or at least special energy.
Polanyi’s dominant view was that the market economy was a tremendously effective way of crowdsourcing solutions to problems of production. But a market economy is one that vindicates absolutely no rights except for property rights. If you don’t have effective demand for something, you might as well not exist to the market economy. And effective demand is not intensity of need, but rather is intensity of need times your wealth.
Polanyi’s view was that humans form societies, and in societies people believe that they have rights. And to say, “No, the only rights we are going to vindicate are property rights” — that kind of stark utopia was unsustainable. It would call forth some kind of enormous counterbalancing reaction. One way he put it is the market, by saying the only rights that matter are property rights, attempts to destroy everything you might call “society,” and society in return will mobilize and try to destroy the market. And the reaction may be smart, may be stupid, may be left, may be right, may be genocidal, may be a satisfactory compromise. But there will be a very strong reaction against every attempt by the market economy to expand its reach.
And yet because the market economy is so productive, it will keep on trying to extend its reach. There’s an awful lot of money to be made by relying on it. This coming of the market, and then society’s resistance to it, was, Karl Polanyi thought, “The Great Transformation” and was at the root of an awful lot of our problems of distributing and utilizing our wealth.
Brink Lindsey: I’ll just interject here that Brad’s very nice compressed account of Polanyi’s insights represents a massive work of distillation from very low-quality-ore prose.
Brad DeLong: Yes. In some ways, I think the right analogy to Polanyi is Hyman Minsky. I remember Laura Tyson getting off a plane and saying, “I tried to read Minsky on the plane.” In my view, people who talk about Hyman Minsky are almost always talking about Charlie Kindleberger, who took Minsky’s insights, compressed them, and then actually used them to tell fascinating, interesting, amusing stories about financial crises. And Minsky’s influence, I think, overwhelmingly comes through Kindleberger’s understanding and using him. Maybe one of the thoughts I’ve had about my book is that if it succeeds, it might help do the same thing for Polanyi.
Geoff Kabaservice: That would be great. You summarize the messages of Hayek, on the one hand, as “The market giveth, the market taketh away, blessed be the name of the market. And in Polanyi’s case, “The market was made for man, not man for the market.” And you do point out that Hayek’s vision was not a stable principle around which to organize society and political economy. But the distorted Polanyi message — the idea of centralized command of the economy — also was not sustainable and, in fact, led to hideous tyrannies in the early 20th century.
Brad DeLong: Well, Polanyi was a socialist, but he was not a strong believer in central planning. And indeed, it’s actually bizarre that anyone would think that you could centrally plan an economy as a whole. It is true that right now, we have large organizations that kind of are centrally planned. The current valuation that the stock market places on the equity claim to the future profits flowing from Apple Computer is approaching $3 trillion right now, which is a bizarre and awesome sum. It is more than one-ninth of the annual GDP of the United States for this one company. And it is not a market organization; it is a centrally planned organization.
But at virtually every stage within Apple Computer, you wind up having market interfaces, that people are always making make or buy decisions: Do we do this inside? Do we find a counterparty outside? And our centrally planned organizations are very much kept on their toes precisely because they always have to be making these make-or-buy decisions. It eliminates the huge amounts of bureaucratic inefficiency that arise whenever you do attempt to centrally plan every anything.
And yet people tried it. People tried for 60 years to run a centrally planned economy, and it was almost always a catastrophe. You almost always wound up having lost one-fifth or four-fifths of your wealth, of your potential wealth, simply as you attempted to make people follow orders rather than allow some kind of crowdsourcing.
Geoff Kabaservice: I think the Soviet Union’s principal output was actually jokes about the economic deficiencies of the Soviet Union.
Brad DeLong: Well, I thought it was unfinished construction projects.
Geoff Kabaservice: That too. I’m sure you’ve read P.J. O’Rourke on communists’ love of concrete, badly done concrete. Brink, you reviewed Brad’s book for your Substack, and you wrote in part, “Brad’s guided tour through the twists and turns of the Hayek-Polanyi dialectic is a joy to read, with brief but masterful distillations of the descent from the Belle Époque ‘El Dorado’” into the First World War, the rise of fascism, and all that followed after World War II. But you say, “After these cataclysms and titanic ideological struggles, the path to Utopia once more emerged into view — in Brad’s telling, by the virtue of “the shotgun marriage of Hayek and Polanyi blessed by Keynes in the form of post-World War II North Atlantic developmental social democracy.” And these are the “trente glorieuses,” the 30 years following 1945 in a lot of those northern economies, which are still remembered as a kind of economic golden age.
But that, too, failed its own sustainability test, and the trente glorieuses ended not with a bang but with a whimper, with the decline in the growth rate in the 1970s, moderately high inflation, and big spikes in oil prices. And by the way, Brad, your co-podcast host, Noah Smith, just posted a Substack essay on how the 2020s are the new 1970s, which I thought was quite interesting.
Brad DeLong: Interesting.
Geoff Kabaservice: And what followed was “the neoliberal turn,” in which policies moved toward Hayek at the expense of Polanyian rights, which tamed inflation, but the rich reaped the benefits. There again is a very Monty Pythonesque over-summary of the themes of your book, but I think that is an important theme in the book.
Brink Lindsey: In my review, I spent a lot of time lauding and praising the book, but my criticisms were on the account of the neoliberal turn. Brad presents it as a puzzle that the social-democratic economic order was toppled in the 1970s because of a run of inflation and a temporary productivity collapse. One could understand that neoliberalism had its opening at that time. But then when it failed to deliver the goods other than to the well off — it failed to restore high economic growth rates except to the top income percentiles — why did it persist? So that’s a kind of mystery that Brad presents.
In my sense of how this history played out, I think forces much deeper than intellectual disagreement about economic policy, forces much deeper than the disagreement between Hayek and Polanyi, were in play. So the end of developmental social democracy was a more complex affair than just a change in the direction or the orientation or the mix of economic policy; it was a consequence of the changing culture and politics of mass-affluent societies.
And in particular, the revolt against developmental social democracy began on the left, not on the right. First, the developmental part got dropped in the ‘60s, because the New Left thought that basically the economic problem had been solved for good, that the wealth-creation machine was on autopilot, that the Keynesian 15-hours-a-day true mass abundance was nearly at hand.
Brad DeLong: And we see the consequences of that dropping in the Berkeley that surrounds me.
Brink Lindsey: And by the time that exuberant optimism of the ‘60s was put to rest in the ‘70s, environmentalism and its sort of knee-jerk anti-developmentalism had taken hold and had a dominant position on the left. And so the whole idea of increasing human mastery over nature for the betterment of the common man — that just was no longer part of the program.
Meanwhile, the developmental state part was gone too. Social democracy had a paradigm of government where you had energetic, muscular government empowered to act decisively in the public interest. But the New Left-influenced public interest liberalism of the ‘60s was born out of deep suspicion of government power. And so the New Left had all kinds of reasons to have its own brand of libertarianism: it had state power threaten the world with nuclear war, it was causing mayhem and carnage in Vietnam, state power was odious and oppressive in the Deep South in enforcing Jim Crow, state power was complicit in the newly appreciated environmental degradation. So there was a whole lot of suspicion of government power.
Brad DeLong: State power was evil, and Robert Moses was driving highways all the way through New York so people could live in New Rochelle and work in Manhattan.
Brink Lindsey: Yeah. So this new anti-government spirit on the left took hold in the ‘60s, and so the reform project was no longer to give government new powers to act in the public interest, but to ensure that government at every step was subject to criticism and oversight from progressive quarters. So the developmental part was gone, and so by the time people wanted to resurrect the social democratic cause, it was all just about hanging onto existing jobs and hanging onto existing entitlements. A sort of optimistic vision of a social democratic future died in the ‘60s, I think, and certainly in the ‘70s before neoliberalism grew in influence.
Meanwhile, the switch to a post-materialist politics, the switch from the thinking that have-nots and haves is no longer the main axis in politics; rather, it’s “belongs” and “belong-nots,” it’s groups that have been excluded from full participation in the socioeconomic mainstream — that became the axis of political conflict in rich countries, which had the collateral damage of rupturing the working-class coalition and making class-based politics much harder to reassemble when the need for it became apparent in the ‘70s and ‘80s.
Before Hayek and Friedman won their Nobels and Reagan and Thatcher won their electoral victories, Brad’s developmental social democratic road to Utopia had already been abandoned.
Geoff Kabaservice: How would you respond, Brad?
Brad DeLong: Perhaps, quite plausibly. That is the fact that I still cannot really believe or understand why the system that had produced the trente glorieuses, why it collapsed so quickly and why virtually no one was willing to defend it — that it was not Ronald Reagan it was Bill Clinton who said that “The era of big government is over.” And the fact that I, in some ways, am still too much a believer, an unreconstructed social democrat, I think makes it hard for me to get a coherent and sophisticated grasp of why we actually had this particular turn — why social democratic coalitions, developmental social democratic coalitions, class-based, egalitarian social democratic coalitions were no longer easy to assemble or even possible to assemble after the 1970s.
I’m reading and thinking about Gary Gerstle’s book on The Rise and Fall of the Neoliberal Order, which is, I think, as all histories oriented toward the present are, much, much better on the past than the present. His account of the rise of the neoliberal order is much stronger than his account of its perhaps fall. But Brink’s point that the distaste for the way things worked on the left was not as great but was sufficient to cripple attempts to rebuild, or to resist the cries coming from the right about how there’s inflation, there’s bureaucracy and so forth: “We actually need a change. We need a change, because we need to have a more unequal income distribution to incentivize job creators. And we need a change because government needs to get out of the way. Individuals pursuing their own self-interest will advance the public interest much more than any set of increasingly strangling governmental regulations.”
Paul Krugman still doesn’t really believe it happened. He thinks that things would have held on as normal if only there had not been the inflation of the 1970s, if only that had not undermined confidence that government was competent. But it’s much bigger, it’s much broader than that. The collapse of confidence in government in the industrial West is of extraordinary magnitude — and yet, as I see it, largely unbased in reality.
The ideas I’m playing with are that really we need to go back and think more about changing modes of production —that is, how people get their ideas about how the world ought to work from the process of their daily life. And the shift from the mass production economy of the 1930s and 1940s to the global value chain economy of the 1980s and 1990s — that undermined not just institutions like labor unions focused on lunch pails that had played a huge role in stabilizing social democracy, but also led people to have very different ideas about how society should work, ones in which social democracy, the New Deal order that had ruled from the 1930s into the 1970s, was simply no longer something that made sense to enough people for them to be willing to support it.
But I do say I do not think I have a good handle… I think I have a good handle on an awful lot of history. I do not think I have a good handle on what happened in the 1970s and 1980s with the kind of shift to the idea that the state needed to be radically cut back and that the price of accepting “The market giveth, the market taketh away, blessed be the name of the market” — that that price was worth paying to a much greater extent than anyone had thought it was before 1980.
Brink Lindsey: So my second grounds for breaking with Brad’s analysis was that he presents the neoliberal turn as basically a wrong turn, and I don’t see it that way. So here in 2023, looking back on the neoliberal era of 1978 to 2008, we can see the shortcomings and failures of that era. We can certainly see — I can certainly see, as an ex-professional libertarian — the blind spots and errors of libertarian free-market ideology. Nonetheless, the partial truths that Hayek grasped were, I think, underrated in the 1960s and 1970s.
Tyler Cowen, in all his interviews, asks people a string of things: “Is this underrated or overrated?” I think the importance of private entrepreneurship and market competition to long-term economic performance was underrated, and so there had been an enormous expansion of government control over and influence over the economy in the democracies, while a third of mankind was now living under regimes that said that there was no role for markets whatsoever in the organization of social cooperation. It was not a bad time for a rethink and for a reappraisal.
And some things were gotten right. There were some bad regulations that were gotten rid of, price-and-entry regulations that impeded competition to no good end. Those were dispensed with in the United States. A nationalization of industry that made no economic sense was unwound in Western Europe, and that was a good thing.
In the United States, I would chalk up Silicon Valley — you’ve got to give that as a triumph of the neoliberal era. It only happened in the low-tax, light-touch-regulated United States. It didn’t happen anywhere else, the information technology revolution, the signal economic achievement of our time. The peaceful collapse of communism was certainly driven by internal events, but occurred in a larger neoliberal climate of ideas that helped it along and helped an utter miracle that I never expected as a kid, that this would all just go away with hardly any bloodshed at all.
The rise of East Asia and the dramatic drop in global poverty rates was facilitated by neoliberal-inspired and -fortified free trade agreements that opened western markets and kept western markets open to rapidly rising and expanding Asian economies. So for the North Atlantic world, France called 1945 to 1975 the trente glorieuses, but for homo sapiens, I would say it was 1985 to 2015. The neoliberal era was the best era for the material betterment of our species that I think we’ve ever experienced.
So it wasn’t all bad. But the wheel has turned, and the answers that neoliberalism had to problems aren’t lining up with the problems we’re facing. So we’re struggling now to get back on that road.
Brad DeLong: I would say that if you focus on what was the Global South in 1975, and if you say that everything that happened in the Global South from 1975 on up to 2020 is neoliberalism, then indeed neoliberalism is perhaps the best thing that ever happened to humanity. Even Africa appears to be getting its economic developmental act in gear after 2000, which is a wonderful thing to see. Cutting back on the state, betting on globalization, eliminating the license raj in India, eliminating the Maoist- and the Soviet-influenced central planning regime in China… As my friend Yingi Xian says, when the histories are written in 2100 or 2200, they may well say that there was stuff going on in this restricted North Atlantic area before 1980, but that it was in 1980 that humanity picked itself off the mat and walked and that people managed to pull themselves out of dire poverty worldwide, largely because of a Hayek- and Friedman-inspired current of ideas, that the world needed to command-and-control and dominate less and crowdsource more.
You have to have a footnote for East Asia, simply because in East Asia the idea that the government should step away from its developmental state role was a complete non-starter. East Asian governments leaned into the developmental state role massively and extraordinarily successfully. And you can argue about whether everything that happened in the Global South from 1980 to 2020 is properly called neoliberalism. It wouldn’t stand as a concept that originated in neoliberalism.
Brink Lindsey: I didn’t call their policies neoliberal. I said that the success of their policies hinged upon Western neoliberal free trade policies. You can’t have export-led growth from nothing.
Brad DeLong: Was it free trade policies that opened the United States to Asian markets, or was it the neocolonial origins of comparative development in the sense that the United States wanted countries near to non-Maoist China to be an enormous success?
Brink Lindsey: America’s historic conversion from protectionist to trade-liberalizing power occurred in a geopolitical context. It wasn’t driven by renewed appreciation of David Ricardo. But free-marketry on the right, where Republicans had historically been the protectionist party, was helpful, especially during all the stresses of deindustrialization in the ‘80s, in keeping commitment to open markets intact.
Brad DeLong: Yes, yes, yes. The neoliberal thought currents were tremendously important in keeping America as an importer of last resort for the economies of East Asia and allowing them to become as fantastically rich as they are now. So I would say that both geopolitical and neoliberal currents of thought were very important in enabling East Asian growth. But the fact that the neoliberal currents did not penetrate East Asia to a sufficient degree to lead them to unwind their developmental states was important as well. But that’s a whole other podcast: The East Asian Miracle.
Geoff Kabaservice: Brad, you don’t in your book actually say what you think we ought to do going forward. But you did write a piece for Project Syndicate, I think in February of 2023, where you wrote: “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.” Do you think there’s any way to square this circle?
Brad DeLong: With smoke and mirrors? The idea of pre-distribution, that people in West Virginia and Tennessee vote 70% for Donald Trump because they do not want to be Medicaid recipients, they want a strong economy in which they can earn what they deserve and so be able to stand on their feet and buy health insurance, and that Donald Trump, by waging trade war on the Chinese and the Mexicans is going to create those jobs for them — that’s a powerful reason behind the catastrophic episodes of American misgovernance we saw between 2017 and 2020, and that may well return come 2025.
I would say if I were rewriting the book now, I would talk about how now the problem is that among the most important Polanyian rights people have to have is the right to be respected. If you’re respected in some way, rather than if you’re regarded by society (whether it’s the market or the government) as surplus garbage, then you will indeed have a much stronger, much more coherent, much happier, much more Utopian society.
But we also do indeed need to make the long-term investments. And the problem is that a lot of long-term investments, their true benefit comes from the externalities they create: from the communities of engineering practice, from the social learning, from the technological blue-sky things. And in a kind of hard neoliberal world in which the only things you want to do are the things that are validated by the market, a huge amount of those investments simply will not be made.
Intel Corporation produced enormous profits for its shareholders between 2000 and 2020, but it’s producing enormous profits by squeezing every possible marginal dollar out of its existing semiconductor nodes and repurposing its equipment left it in a position in which 2020 comes along, and Intel has no plausible path forward to being a leading edge semiconductor manufacturer. Again, because the things they would’ve had to do in order to enable themselves to compete on level ground with the Taiwan Semiconductor Manufacturing Corporation, those things would not have produced profits for the bottom line, and they were indeed seen as potential wastes of money.
Now Intel is trying to figure out what the hell it is doing, and one of the problems is that a great many of the investments that its current CEO wants to make are things that, while they are overwhelmingly good for the technological community of semiconductor producers and engineers in America, it’s not at all clear they are going to produce any profits for Intel shareholders at all. And that’s a place where the more Hayekian train of thought poses enormous dangers.
Not, however, that our current political system has answers, because an awful lot of rent-seeking can sail under the banner of “These are productive in long-term investments for the future.” Consider the ethanol program.
Geoff Kabaservice: True. Brad, there is a line toward the end of your book, which does seem to point the way forward. You write: “Governments must manage and manage competently, at times with a heavy touch.” And Brink, of course, wrote the great Niskanen manifesto on state capacity and ways to improve government’s ability to execute what it does. And there have been a lot of other works coming out on this theme, such as Jennifer Pahlka’s book on Recoding America. And there’s even some evidence that in your home state of California, people are paying much more attention to the ways in which the California Environmental Quality Act and other things of that sort are really impeding the abundance that liberals say they want. Do you see a path forward along these state capacity lines?
Brad DeLong: I definitely hope so. Implementation is really hard. And quite frankly, I was appalled by the inability of the United States government to get its ass sufficiently in gear during the plague to do what we really ought to be doing. And that makes me fear that the state’s and, to some degree, the private capacity for us to pursue our self-interest rightly understood and to all pull together as a country really is not there to some degree.
Brink Lindsey: It was certainly the pandemic experience that was the major motivation for writing that paper and launching the State Capacity Project.
Brad DeLong: Yeah. I remember when Silicon Valley Bank was on the point of failure, my response the week before was, “Oh, gee. They’ve made an awful lot of bad bets on U.S. Treasuries, which have produced this huge minus on their balance sheet. And yes, it is counterbalanced by the expected future capital gain from these bonds that they are holding to maturity, but will they be able to hold them to maturity?” And I thought, “Well, of course they will. They’ve spent 40 years doing a high-touch service business to Silicon Valley in banking, and they do need to be recapitalized.” But there are huge numbers of rich people in Silicon Valley, who have done an awful lot of business with Silicon Valley Bank over the past 40 years.
And so I expected Kleiner Perkins, I expected Andreessen Horowitz, I expected the billionaire barons, I expected Benioff, and I expected a couple of others to stand forward and say, “Silicon Valley Bank needs to be recapitalized. It’s a valuable part of our community, and we are willing to pony up a share for the recapitalization of Silicon Valley Bank, even though this may not be the best business deal for us personally. This is a valuable part of our community.” And it did not happen.
Brink Lindsey: Instead they yelled, “Fire! Run for your lives!”
Brad DeLong: Instead, people yelled, “Run and pull your money out now!” And it turned out that precisely no one in Silicon Valley believed that Silicon Valley Bank’s high-touch social network of bankers who understood the industry and the sector was worth running any risks or worth committing any of their capital to making sure it survived — and this in an environment in which the big venture capital funds are looking for something to invest in other than crypto. But the idea that they might do what Jamie Dimon did for First Republic — to say, “Well, here’s $30 billion of deposits that you can hold to give you an extra cushion” — that they might do that was simply not on their radar screen.
And that was a shock to me. That was America working in a very different way than I thought it worked, and suggesting that functional societies are ones in which people think that they are on a team and that others have their back. Functional societies are one in which organizations and groups have what Ibn Khaldun called asabiyyah. And when you do not have asabiyyah… Well, the bureaucracy can keep things running and the market can keep things running for quite a while, but when a crisis comes and unexpected unusual action is required, you suddenly find that it’s simply not there at all.
Brink Lindsey: A high-tech economy and a low-trust society are a combustible mix.
Brad DeLong: Yes, exactly.
Geoff Kabaservice: As sort of a last question, Brad… You began your work on Slouching Towards Utopia by taking on Eric Hobsbawm’s vision of communism as the tragic hero of “the short 20th century,” and in its place you put capitalism as the hero of “the long 20th century.” But is capitalism a tragic hero, in your view?
Brad DeLong: No, it’s not a tragic hero. It’s the brooms in “The Sorcerer’s Apprentice,” right? That’s what capitalism is. And you actually need to have the Sorcerer rather than Mickey Mouse in control in order for it to work effectively. I look outside and look around me, and what do I really need? Well, what I really need is a small personal jet copter with a landing pad next to the hot tub in the backyard, so if I want to get to L.A. in an hour to stay with my cousin in Malibu at the spur of the moment, I can do that. And what I actually want in material things is I would like to have an Apple Vision Pro headset now, and not next year or two years or five years from now.
Compared to a world in which primarily all of humanity has a difficult time finding its 2,000 calories a day plus essential nutrients, and spends genuinely hours a day thinking about how hungry we are and how nice it would be to have some more food today or tonight, I really am in Keynes’ world of Utopia where my problem is to live wisely and well, rather than to get more things to make my life easier or more interesting. And an awful lot of that is due to the fact that the market turns out to be an extraordinarily good mechanism at crowdsourcing humanity as an anthology intelligence to solve the problem of production. And that’s an enormous, enormous blessing.
And it’s not something that we can have without capitalism, though we do try to do things otherwise. We always have mixed institutions in some way. We always pull things together through a strange combination of barter and plan (being we have primary purposes and people have allegiance to it), and blat, influence, corruption, favor swaps, and so forth.
But the market, as a way of giving people information, very simple information in the form of a price as to what kinds of things are worth producing right now — it’s so great and so wonderful that that has such an enormous consonance, that that is a way of producing a society in which the free development of all is produced by the free development of each if you just tune market prices to what is socially valued and then let the thing rip. There’s nothing really tragic about that.
But there is the Sorcerer’s Apprentice aspect. Do we really want it to do everything it does? Did we really want it to dismantle the great industrial research labs of the oligarchic manufacturing and distribution companies of America as they stood in 1980? So not tragic hero, but rather brooms in “The Sorcerer’s Apprentice” is the way to, I think, view it.
Geoff Kabaservice: All right. Well, I can actually almost hear that music from Fantasia in my mind right now as we’re talking. Brad DeLong, congratulations again…
Brad DeLong: Thank you very much.
Geoff Kabaservice: Congratulations again on the publication of Slouching Towards Utopia, and thank you so much for joining us here today.
Brad DeLong: Okay, you are very welcome.
Geoff Kabaservice: And thank you all for listening to the Vital Center podcast. Please subscribe and rate us on your preferred podcasting platform. And if you have any questions, comments, or other responses, please include them along with your rating or send us an email at firstname.lastname@example.org. Thanks as always to our technical director, Kristie Eshelman, our sound engineer, Ray Ingenieri, and the Niskanen Center in Washington, D.C.
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