Description
The important role of vested interests is often covered-over in the politi-cal arena by focusing the public’s attention on competing and contentious ideas while usually ignoring the underlying economic interests involved. This tension between ideas and vested interests can be seen in the context of American political-economic history. And importantly, history should be understood in terms of change in ideas, institutions, and policies that both affect, and are affected by, vested interests. American history is a history of an evolving industrial order running through specific stages of political, commercial, and financial development.
The book goes on to examine the factors that promote and undermine economic growth. Entrepreneurial risk-taking, technology, the profit drive, and higher expenditures promote economic growth. Employment and output are products of higher spending, not the other way around. However, particular constraints to growth prevail, making full employ-ment and prosperous social conditions difficult to achieve. The major macroeconomic problem of our age concerns the tendency of the system to stagnate. The social outcomes from stagnation resemble those of recessions. Income distribution is made worse from stagnation but in turn may cause the stagnation.
The book moves on to compare the competing visions on economic policy of two contending contemporary political forces affecting modern American political economy. The counter-revolutionaries have created a modernized 19th century version of economic conservatism in order to roll back the progressive reforms of the mid-20th century. The modern progressive and counter-revolutionary views are contextual-ized by economic stagnation. The book ends by discussing a series of issues connected to democracy, income inequality, and the trend of the economy towards quasi-economic stagnation.
The opening chapter is titled “A Political-Economic History of the U.S.”. This chapter reviews many of the important factors that brought about the capitalist economic system that developed in the U.S. It then provides a view of economic evolution, and covers important policy and economic developments that shaped American society. The history is contextualized by seeing the economy evolve through several industrial eras and eras noted for the development of important economic institu-tions. The particular problems and ideologies of these eras are described. Major reform eras are followed by a modern period of reaction that is attempting to reverse the reforms. This modern period is one of divi-sion between conservatives and progressives, or counter-revolutionaries and reformers, over economic distribution and the social hierarchy. The chapter ends by examining some recent research on economic perform-ance, politics, policy, and inequality.
Chapter 2 is titled “Ideas versus Vested Interests”. This chapter addresses the relative importance of ideas and vested interests in influ-encing politics and public policy. The chapter considers the significance of competing arguments versus competition among economic interests in creating political alignments and in affecting income distribution. The thoughts of prominent modern economists are employed along with The Federalists Papers and social science research to shed light on whether it is ideas or vested interests that most impact society. The chapter ends with some thoughts on the impact of economic education and research on ideas and policy.
Chapter 3 is titled “Economic Growth and its Constraints”. This chapter covers the causes of economic growth by identifying the entrepreneurial virtues embedded in the system that encourage investment and risk-taking. The chapter also emphasizes the importance of demand growth in keeping the economy expanding, and that five built-in constraints to demand growth exist that make full employment difficult to obtain. Financial markets and money growth play a central role in facilitat-ing economic growth, but financial markets and policy affecting these markets can also work against growth. Policy affects institutional design and the dominant current thinking about policy undermines spend-ing growth. The chapter ends by connecting the current policy growth model with Federal Reserve efforts to elevate the stock market.
Chapter 4 is titled “Stagnation, Employment, and Income Distribution”. This chapter discusses a major economic problem, namely economic stagnation, facing modern policy. The economy’s performance in terms of growth, investment, and job creation has tapered off compared to mid-20th century results. Evidence is provided that suggest a possible stagnation tendency gripping the economy. The chapter lays out various ideas about why this may be true, and highlights the issue of employ-ment and income distribution. The chapter discusses how policymakers may respond to the economic stagnation challenge and identifies four basic responses policymakers can take. The chapter ends with the claim that the economy’s performance since the early 1990s lies somewhere between robustness and outright stagnation. The political effects of this level of performance are then examined in terms of the contentions between counter-revolutionaries and progressives.
Chapter 5 is titled “Public Policy in the 21st Century”. This chapter presents some of the modern progressive policy options to address the economic difficulties described in Chapters 3 and 4. These policies rely on demand promotion. The conservative counter-revolutionary criticism of government and its policy positions are described next. Counter-revolutionaries advocate supply-side policies and employ economic ideas reminiscent of the 19th century period. Central to this chapter is a restatement of the current economic challenge of our time and an assessment of the theoretical arguments given by conservatives and progressives. The chapter ends by summarizing the argument that the progressive policy agenda is superior to the counter-revolutionary program. The chapter also addresses how the conservative program may win out in policymaking and how that kind of policy would affect vari-ous vested interests.
The final chapter is titled “Review and Conclusions,” and ends the book by first providing a review of the major themes and points addressed in each of the previous chapters. The review is followed by some additional perspective on the social consequences of economic thinking. A series of interrelated subjects are addressed that revisit the themes of Chapters 3 and 4. The book ends by addressing under what conditions free enterprise and civil liberties can thrive, and what kind of policy changes can be implemented to effectively address quasi-stagnation in the best interest of the larger society. The chapter considers reforms within the current institutional context and reforms requiring structural change.