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Capitalism in America: A History by Alan Greenspan and Adrian Wooldridge

Published in October of 2018.

People on campus are always asking me what I’m reading.

Last week, my answer to the reading query had been to say that I’m reading a book co-authored by Alan Greenspan about the history of American capitalism.

Typically, colleagues are polite about my book choices. They express interest. They mention similar books.

In the case of Capitalism in America, the local campus response has been less positive. The sticking point does not seem to be the subject. Everyone I know loves a good economic history.

Rather, the problem lies with the co-author. Why they wonder, would I want to read a book by Alan Greenspan?

The general campus consensus in my completely unscientific and non-representative sampling is that academics think that any book on economics by the former Chair of the Federal Reserve (1987-2006) is bound to be self-serving and ideological.  When I inform my campus colleagues that the book is neither, they don’t believe me.

Perhaps small New England liberal arts schools are different. Unrepresentative of academic sentiments towards the authors of books. You tell us.

What I will tell you is that there are four good reasons to read Capitalism in America. Two of these reasons have to do with what Greenspan and Wooldridge (an Economist columnist with a PhD from Oxford) get right, and two for what they get wrong.

The first big thing that Capitalism in America gets right, and reason enough to read the book, has to do with the arc of material progress that the book describes. In these dark days of political schizophrenia and wealth concentration, it is easy to long for an imagined better past. We shouldn’t make that mistake.

Capitalism in America excels at showing how far the nation has come in every measure of health and well-being. Improvements in how we are housed and fed are only matched by the degree in which work has become less dangerous and more fulfilling. Almost any big problem that we have in 2018 would seem insignificant to 95 percent of the population one or two centuries ago.

The second area where Capitalism in America shines is Greenspan and Wooldridge’s description of the importance of infrastructure spending as an engine of growth, and their concern about the cost of our failing bridges, dams, and power grid.

One cause of the federal government's inability to invest in infrastructure is the failure to address the consequences of an aging nation on entitlement spending for Social Security and Medicare. It may come as a shock to most American’s (including maybe you) that today’s retirees are likely to get far more back from these programs than they have contributed.

The reality is that Social Security and Medicare are pay-as-you, meaning that today’s workers pay for today’s recipients.  As the proportion of workers-to-retirees shrinks, as medical care gets more expensive and as people live longer, the current funding mechanism becomes untenable. Either benefits will have to go down (or be received later), or taxes will need to go up.

Where Capitalism in America gets it wrong, at least from my reading, is in two significant ways. The first blindspot that Greenspan and Wooldridge is the failure to give the government much credit for the economic progress that they so ably describe. This is a traditional conservative / pro-business economic history. The authors are fans of small government, low taxes, and minimal regulatory oversight.

I may not agree that the market is the answer to every challenge, as Greenspan and Wooldridge often imply, but I can understand this view. What I can’t understand is why the role of government in creating the conditions for prosperity (all that infrastructure) and the basic science in which so much of our modern world is built (the jet engine, the internet, etc. etc.) fails to get much credit.

The fourth way in Which Capitalism in America comes up short is not about how the book explains the past. This is an excellent one-volume economic history of the US. Instead, it is about how the book looks at the future.

Greenspan and Wooldridge seem to have bought the argument that our best economic days are behind us. They seem to have been greatly influenced by Robert Gordon’s The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War.  

I’m not quite sure why Greenspan and Wooldridge are so pessimistic. They wrote an entire book about how the combination of democracy and capitalism has resulted in at least two centuries of sustained (if uneven) material progress. Why do they think that the conditions are not ripe for further big advances?

Sewers, mass production, R&D labs, mass production, antibiotics, mass higher education, jet travel, the computer, and the internet all came along with the US was less educated, less populous, less wealthy, and less educated.

Can we discount the idea that solutions will be found for the challenge of abundant production and storage of renewable energy? Might smart robots relieve the necessity for humans to perform soul-deadening and dangerous repetitive jobs?

Can we imagine a future of smart mobility, where transportation grows every safer and cheaper? In our world of higher ed, aren’t you a little bit excited about how mass personalization of online education platforms will raise the educational floor - making small-scale relational education ever more valuable?

Capitalism in America would make a fine book for today’s college students to read. They should know how far we have come. They should be exposed to ideas about the proper role of the market and of government, even if those ideas need to be thoroughly debated.

If this book is assigned, however, an effort needs to be made to convince our students that the future is exciting and scary and unknowable - but likely better than the past or the present.

As it stands, however, judging from the reaction I received, I have doubts if this excellent book will ever be assigned, much less read, on our campuses.

What are you reading?

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