The economic summit won't matter

Gar Alperovitz

December 17, 1992|By Gar Alperovitz

AS Bill Clinton devoured economic advice at his two-da "summit" meeting, a sobering concern arose: Just how much do new policies really matter?

Has federal economic policy ever had a major impact on 20th-century U.S. economic experience?

Our economy has rarely achieved sustained high employment except in wartime or in unusual postwar conditions.

Early in the century we were in trouble until World War I bailed us LTC out. The postwar years faded into the mixed bag of the 1920s, which collapsed into the Depression until (after a brief New Deal upswing faltered) World War II bailed us out.

The postwar boom followed, abetted by the Korean War, the Vietnam War and the Cold War.

The wartime destruction of Germany, Japan and Britain, our major competitors, helped too, until they returned to the commercial battlefield. Having binged on huge tax cuts and military spending in the 1980s, we now appear to have entered the era of sustained post-postwar stagnation.

Except for a tiny, temporary blip in the 1960s, there is little evidence that federal policy, as against special conditions, ever produced a trend toward long-term economic change.

Globally, we are past the highly unusual temporary boom of the third quarter of the century. No new burst of vibrant world trade expansion is likely to help us, with Japan and the European Community in deep trouble.

Mr. Clinton's economic package almost certainly will involve speeded-up contracts for investment in infrastructure, investment tax credits, job training programs, modest near-term additions to the deficit to stimulate the economy and (hoped for) moderate longer-term deficit reduction, plus federal intervention to help specified industries compete.

There will be some positive gains in all this, I hope. Despite all the hoopla, however, many economists point out that the package is not likely to make a major dent in our deeper economic problems.

Additions to the deficit that would stimulate the economy are likely to be moderate, and middle-class opposition to new taxes will tightly constrain new public spending.

Even if the economy continues its modest uptick, this does not necessarily mean there will be many new jobs.

Over the long haul, industrial policies also seem likely to have only a marginal impact on our $6 trillion economic system.

Mr. Clinton must develop legislation; Congress must amend and approve it; a new bureaucracy must be built and the independent industries affected must agree to cooperate. Even if serious legislation on industrial policy is carried out, the money and scale of industries will be small relative to the overall economy.

In any case, while we stumble ahead with first-generation policies, Japan, Germany and others will move on to more advanced refinements.

Mr. Clinton's strategy aims at getting us out of the recession and simultaneously beginning structural reforms. This may involve wishful thinking both about the inevitability of a rebound and the impact of new federal approaches.

We may simply be in for a long, painful era of unresolved economic decay.

Before World War II, many liberal and conservative economists were pessimistic about the political possibilities for economic policy. Alvin Hansen and Joseph Schumpeter argued that persistent stagnation was endemic to capitalism, the result of chronically weak consumption or a recurrent failure of investment or both.

It would be a paradoxical postscript to the collapse of socialism if we were forced to debate the longer-term implications of the decay of capitalism.

Nevertheless, the Clinton era -- summits, advice, policy packages and general enthusiasm notwithstanding -- may well lead us to this fundamental question.

Gar Alperovitz is writing a book about post-capitalist and post-socialist political economics.

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