‘Endangered American Dream’

To the Editors:

When I first saw the headline (“Blame the Foreigner”) I assumed that Robert Solow’s review of my book [NYR, December 16, 1993] must have been mislabelled. But upon reading it, I was genuinely shocked to discover that the outright misrepresentation of my book as a xenophobic tract was all of Prof. Solow’s own doing. Any undissuaded reader will find that the exact contrary is true. Because to do so is one more way of evading our predicament, my book explicitly warns against blaming “foreigners” for any of our woes, all of which I present as entirely self-inflicted. To begin with, some of the chief agencies of our decline (miseducation, legalism, societal defeatism) are not primarily economic phenomena at all. Hence no variety of foreign economic interest could possibly be at fault. Nevertheless, to avoid any possible misinterpretation, I wrote the following (pp. 151–152, minus footnotes):

Certainly neither our European competitors nor the Japanese…[are responsible for] the most original invention of American statecraft since the Constitution: Representation Without Taxation by limitless deficits, so that savings already scant because of private over-consumption are borrowed by the Treasury to pay for the governments’ own day-to-day spending…

They did not arrange the wholesale deregulation…that allowed the morality and urgencies of Las Vegas to infect Wall Street and corporate boardrooms across the land…

They did not seize control of our classrooms, to discredit the discipline and absolute standards that are the prerequisites of all education…

They did not corrupt America’s most excellent legal principles into the grotesque legalism that now employs more than six hundred thousand lawyers (soon to be a million), to enormously complicate every government regulation and every private contract, [and] pursue every slender opportunity for litigation…

Nor did foreigners devise our spectacularly anti-social social programs, by now most nefariously entangled in both racial politics and the crudest racism. There are very few Afro-Swedes yet because Sweden is very generous to unmarried mothers, they…account for 50.9 percent of all births, as opposed to 25.7 percent in the less generous United States, and only 1 percent in notably ungenerous Japan, where 99 percent of all children are still compelled to grow up with both fathers and mothers. That, no doubt, is yet another of those exotic Japanese practices devised by the sinister Ministry of International Trade and Industry—certainly nothing enhances a country’s competitive position more than a population of stable families that can actually guide their children’s education.

In writing the immediately above, I assumed that my sarcasm would be readily understood as such. Yet in Prof. Solow’s review (itself stolidly humor-free), I am depicted as one who actually believes that MITI really is a sinister on-going conspiracy. Again, the exact contrary is true (see “Models and Myths: Prussia and Japan,” p. 97 ff.).

When it comes to international commerce, I did try to assess the cumulative damage inflicted on the US economy (and American industrial workers especially) by one-sided trade barriers and “geo-economic” market-seizing offensives à la Airbus. But even in that context, I blame only our own laxity. Thus my discussion of US-Japanese economic relations ends as follows (pp. 150–151):

[But] it would obviously be foolish and escapist to blame foreigners for American policies, and American delusions. MITI commandos never descended on Washington to impose one-sided access to American markets and American technology…. Far from blaming the Japanese…for our troubles, we should recognize that they have actually mitigated the very broadest shortcomings of the American economy…: the inadequacy of both capital and labor, that is patient capital, and diligent labor. Indeed they have provided their substance to augment the former, and their good example to improve the latter. It is by now a hoary cliché that…Japanese competition in particular, [has] served to reduce managerial sloth….

Prof. Solow writes throughout as the outraged defender of his trade. Thus he simply overlooks the non-economic parts of my book. Yet he still fails to engage with my fundamental critique not of mainstream, contemporary “Anglo-Saxon” economics as such, but of its use (or abuse, I hold) to guide public policy. In essence, I hold that the economy should exist to serve society, not the other way around. Hence economic efficiency should often be subordinated to societal desiderata, (proportionality comes into it, of course), instead of being accepted as the only valid criterion. Thus the NAFTA debate revolved around rival estimates of the purely economic values of the “good” jobs that might be gained, versus the “bad” jobs that might be lost. Yet the chronic unemployment that unhinges the urban under-class of America (intensifying our own domestic intifadah), and impoverishes the less skilled in general, is caused precisely by an acute shortage of “bad” jobs. Precisely because it promises more high-skill “good” jobs at the expense of low-skill “bad” jobs, it follows that NAFTA may be a bad deal for America’s already badly dislocated society, even if it is a very good deal in narrowly economic terms. Having introduced the term “geo-economics” in its present meaning, I am now tempted to coin “economichism” to describe the delusion that a higher total national income is necessarily a Good Thing for all societies at all times.

Instead of argument, Prof. Solow employs insult, writing inter alia that I am “almost entirely ignorant of modern academic economics,” allowing at most that I might have read a single “elementary textbook.” We are all ignorant thank God, for otherwise our intellectual lives would end, but it so happens that I once spent three years at the LSE doing little else but, studying economic theory. That was a long time ago, but I have continued to read at least some issues of some of the journals ever since. Beyond insult, (he portrays me as an unemployed cold-warrior in search of new enemies), Prof. Solow resorts to all sorts of unworthy tricks. Thus, to ridicule my contention that many Americans are already sliding towards Third-World conditions, he compares the 1990 US national income per person with that of…Peru, almost the poorest Latin American country in one of its worst years. Again, to refute my claim that many members of the American underclass “would have been better off morally if not materially if they had been born in Nepal or Thailand,” he cites national income numbers, i.e., the very comparison I was not making. With that, he adds one more jibe: “a military thinker should pay more attention to credibility.” Needless to say, I did not write the Endangered American Dream qua military thinker and, in any case, even Nobel Prize-winning economists should mind their credibility.

Edward N. Luttwak
Chevy Chase, Maryland

Robert M Solow replies:

Mr. Luttwak has three main complaints, other than that I did not much like his book.
The first is that he does not “blame the foreigner.” Well, that depends on what you mean by blaming the foreigner. I found the following passages in a five-minute reconnaissance.

The support of technologically advanced companies or entire industries is an instrument of state power [italics in original]. Thus it is not more and not less than the continuation of the ancient rivalry of the nations by new industrial means. Just as in the past when young men were put in uniform to be marched off in pursuit of schemes of territorial conquest, today taxpayers are persuaded to subsidize schemes of industrial conquest. Instead of fighting each other, France, Germany and Britain now collaborate to fund Airbus Industrie’s offensive against Boeing and McDonnell-Douglas. Instead of measuring progress by how far the fighting front has advanced on the map, it is worldwide market shares for the targeted products that are the goal.

Still, only a small minority among more than 123 million Japanese are intent on waging industrial warfare against the United States—that is the (perquisite) of corporate Japan.

The final offensive weapon is “predatory finance.” If the artillery of research and development can not conquer markets by clear technological superiority…”

In traditional world politics, the goals are to secure and extend the physical control of territory, and to gain diplomatic influence over foreign governments. The corresponding geo-economic goal is not [in original] the highest possible standard of living for a country’s population but rather the conquest or protection of desirable roles in the world economy.

Evidently Mr. Luttwak does claim that They are doing it to Us. It is no contradiction to say, as he does, that the remedy lies at home: We should do it to Them. If we were in danger of being physically conquered by a Canadian invasion, the remedy would similarly lie at home. If we were twice as strong and three times as ferocious, we could beat them back. My view is that our economic and social problems would be just as serious if other economies were less efficient than they are.

Mr. Luttwak’s second complaint is that I, like other economists, think that society should exist to serve the economy, and that a higher total national income is necessarily a Good Thing for all societies at all times. He does not cite any “Anglo-Saxon” economists who hold that view. Here is a passage from Arthur Okun’s Godkin Lectures entitled Equality and Efficiency: The Big Tradeoff (Brookings, 1975). “In this chapter I will examine the ways in which American society promotes equality (and pays some cost in terms of efficiency) by establishing social and political rights that are distributed equally and universally and that are intended to be kept out of the marketplace. Those rights affect the functioning of the economy and, at the same time, their operation is affected by the market. They lie basically in the territory of the political scientist, which is rarely invaded by the economist. But at times the economist cannot afford to ignore them. The interrelationships between market institutions and inequality are clarified when set against the background of the entire social structure, including the areas where equality is given high priority.” This is not atypical. No doubt there are economists who fit Luttwak’s cartoon; but I think that he has revealed once again that he has no clue as to what contemporary “Anglo-Saxon” economists think. I did not comment on his extra-economic judgments because I thought neither of us knew the relevant research.

Finally, he objects to my—more or less random—choice of Peru as a third world standard of comparison for American income levels. But surely he did not expect me to choose Chile or Argentina; they are not third world countries. In his whirlwind tour of Kennedy airport, he compares what he sees with what might be seen in cities in Nigeria, India, Kenya, Pakistan, the Congo Republic, and Indonesia. Every single one of those countries has an income per head lower than Peru’s. (As for “morally if not materially”—which I quoted in full—I thought the moral judgment empty and the casual reference to material warfare worth nailing.)

In geo-football, if you run three plays from scrimmage for no gain, the usual prescription is to punt. That is my recommendation to Mr. Luttwak.