Magic money?

Over the past two decades Robert Kuttner, founder and longtime co-editor of the liberal bimonthly The American Prospect, has written much the same book three times: "The End of Laissez Faire: National Purpose and the Global Economy after the Cold War" (1991), "Everything for Sale: The Virtues and Limits of Markets" (1998), and now "The Squandering of America: How the Failure of our Politics Undermines our Prosperity" (2007). The third time's the charm, it seems.

In this our winter of economic discontent, when the U.S. is suffering from the subprime blues, Kuttner's timing couldn't be better: His gloomy analysis of the American economy is a lot more plausible today than it was during the mild slowdown of the early '90s when "The End of Laissez Faire" was published, much less during a boom period like the late '90s when "Everything for Sale" appeared. One is reminded here of the economic forecaster who picked five of the last two recessions: Every dog has his day, and right now Kuttner's downbeat message has undeniable appeal.

What is this message? Simply put, that "laissez-faire" capitalism is a bad, bad thing. Indeed, "The Squandering of America" is, more than anything else, a 300-page screed against "laissez-faire" capitalism and muckraking exposé of the harm it is said to be inflicting on America.

In the book, leaden prose is complemented by a Manichaean interpretation of American economic history. According to the author's potted periodization scheme, whenever America's economy has performed well historically it is because government played a strong role and whenever it has performed badly it is because government failed to do the same. Kuttner, influenced by a vulgar form of Progressive history, sees our nation developing in large part because the presidential relay team consisting of Jackson-Lincoln-FDR- LBJ passed the regulatory baton from one to another (albeit at some intervals), and, as a result, succeeded at once in taming American capitalism and eliminating various market-created excesses and enormities. In other words, capitalism, left to its own laissez-faire devices, is an unstable system subject to vicious, inefficient and ultimately repugnant outcomes, and it is up to people of good will to moderate and temper the same through management and manipulation.

The period from the end of World War II to the present offers Kuttner a chance to prove his point. In his view, the "postwar boom" between 1946 and 1973 was due mainly to the fact that capitalism was properly managed. For a generation after the war, an active and energetic government pursued enlightened policies that kept the American economy on a stable growth path, ensured that Corporate America shared the bounty of the American economy with labor, and provided both supplementary social supports to an array of disadvantaged sectors/regions/groups, and the investments in social overhead capital and human capital necessary to sustain economic growth.

This balmy situation began to change, according to Kuttner, in the mid-1970s. In his simplistic and borderline paranoiac account of things, American elites of both major political parties started around that time systematically to dismantle the "balanced and managed form of capitalism" and "democratic politics" that made the "Good Society" so great. In so doing, they deregulated and destabilized the economy, ushering in an era of increased inequality, reduced security and opportunity, and diminished democracy. One huge result of such efforts, according to Kuttner, has been "the hidden depression" of the past 30 years, a depression that will seem to many readers, I suspect, better concealed than the weapons of mass destruction purportedly possessed by Saddam Hussein!

The carelessness and sloppy thinking that lead to allegations of a "hidden depression" are evident in other parts of the book as well. Although Kuttner discusses a number of important public-policy matters -- most notably, the causes and consequences of the rise in income inequality in recent decades, the impact of new financial strategies and tools on the world economy, the best governmental mix of fiscal and monetary measures, how best to address problems with Social Security and health care, the effects of globalization on America, most notably -- his arguments are so tendentious, his rejection of opposing positions so complete, and his sense of certitude so off-putting that he will convince no thinking reader who doesn't share his assumptions ex ante.

To be sure, growing inequality in America is a concern, hedge funds pose some risks to our economy, our mix of fiscal and monetary policies in recent decades can be questioned, our social welfare schemes need help, and globalization has hurt some individuals, groups, and regions in the United States. But intelligent and decent people can honestly disagree about these issues, and one might expect a truly thoughtful liberal to concede that arguments counter to his/her own need to be rebutted rather than summarily dismissed. For example, one would never know from reading Kuttner that, on balance, most experts view hedge funds and financial innovations such as securitization in positive terms, and that globalization, on balance, has benefited the American economy.

And what about Kuttner's "hidden depression"? Before one accepts Kuttner's argument that because the strong growth in recent decades was more narrowly based than had been the case between 1946 and 1973, America experienced a hidden depression, one might at least consider evidence marshaled by analysts of various political stripes who have documented the significant improvements in the material living standards and health levels of Americans since the early 1970s. Considering such evidence might have forced Kuttner to modify his position a bit, rendering his case both more realistic and more powerful. Not for the co-editor of The American Prospect, though: Better (and easier) to disregard counter arguments, genuflect toward the New Deal, call for more social spending, and exhort the People to take back America. Ideological smugness has its privileges, apparently.