Monday, December 14, 2009

Paul Samuelson, 1915-2009: A Loss In A Time Of Economic Illiteracy

By Manifesto Joe

Paul A. Samuelson, America's first Nobel laureate in economics, died Sunday at his Massachusetts home at age 94. He had lived long and accomplished great things, so I wouldn't normally have taken much note of his passing.

But Dr. Samuelson represents the passing of more than just one person. This was perhaps the last great economist who saw firsthand the transformation of American capitalism, and he went on to profoundly change the way many academics approach the discipline.

However, his passing is especially disheartening when one surveys the U.S. landscape and sees how little change his innovative thinking has wrought on Main Street, where Tea Baggers bandy the word "socialism" about without being able to accurately or adequately define it.

Dr. Samuelson was not a socialist, but rather a Keynesian, heavily influenced by British economist John Maynard Keynes (1883-1946). Like Keynes, Dr. Samuelson was not seeking an end to private ownership of the means of production. Keynes regarded Karl Marx's Das Kapital (1867) as an obsolete text, and far from an adequate prescription to end modern capitalism's shortcomings.

Where both Keynes and later Dr. Samuelson broke with the classical school of economics was on the role of government in finance, trade and the general welfare. Simplistic people on the economic right commonly mislabel this activist/interventionist approach as "socialism," but that's because they don't even know what socialism is. (See my previous post for the Webster's definition.) Mere income redistribution isn't "socialism" -- any time a government entity changes tax policy, subsidizes something, or appropriates public money for any purpose, income is redistributed. It is simply a question of to whom -- and historically, it has more often been the rich who benefited.

The Keynesian school is one that Dr. Samuelson popularized at least to some degree with his seminal Economics textbook (19 editions, first published in 1948).

The New York Times obituary for Dr. Samuelson contains a couple of paragraphs that sum up this peaceful revolution well:

The textbook introduced generations of students to the revolutionary ideas of John Maynard Keynes, the British economist who in the 1930s developed the theory that modern market economies could become trapped in depression and would then need a strong push from government spending or tax cuts, in addition to lenient monetary policy, to restore them. Many economics students would never again rest comfortably with the 19th-century view that private markets would cure unemployment without need of government intervention.

That lesson was reinforced in 2008, when the international economy slipped into the steepest downturn since the Great Depression, when Keynesian economics was born. When the Depression began, governments stood pat or made matters worse by trying to balance fiscal budgets and erecting trade barriers. But 80 years later, having absorbed the Keynesian teaching of Mr. Samuelson and his followers, most industrialized countries took corrective action, raising government spending, cutting taxes, keeping exports and imports flowing and driving short-term interest rates to near zero.

What the economic semiliterates of the right have failed to understand, generation after generation, was that government activism didn't harm capitalism. On the contrary, it rescued it from a time, around 1932, when the old approach was on its knees and the ref was counting. In the U.S., there were delays and powerful opponents (sound familiar?), but eventually the new approach ushered in our greatest era of growth and prosperity to date, 1945-73, ended only by OPEC's first oil embargo.

Dr. Samuelson's basic text has sold about 4 million copies to date. Back in the early '90s I worked for the publishing house that was doing the revised editions, and it was still one of the most widely adopted textbooks in the country.

Sadly, both Keynes and Dr. Samuelson left much work to be done. The concept of a mixed economy is standard throughout much of the developed world, but still lost on many Americans. I still encounter people, otherwise educated, who think in terms of "free market" versus "command economy," not comprehending the fundamental logical fallacy of such an "either/or" notion.

It isn't "socialism" when governments intervene to mitigate capitalism's once-devastating boom-and-bust cycles. Dr. Samuelson once described the prosperity wrought by laissez-faire as a fragile flower indeed -- the busts can devastate many millions of lives. In the modern economic era, our booms have perhaps been more modest than in the roller-coaster days of the 1920s, but our busts have been commensurately less painful. Even the reactionary Bush II administration, confronted with a potential global economic meltdown, resorted to -- gasp -- Keynesian intervention to avert a repeat of the 1929-33 disaster.

But this year's Tea Party spectacle demonstrates how little has been learned in America, in spite of Dr. Samuelson's life work. As many people as there must be out there who took freshman economics with Dr. Samuelson's book as the course text -- well, there are many antidotes to education, such as cheating, lazy professors and teaching assistants, and just the human habit of reverting, postcollegiate, to the brainwashing of a conservatard home.

The best tribute that nonsocialist progressives can give Dr. Samuelson is to spread the word. This isn't socialism -- it's capitalism tempered by uncommon sense.

A revealing postscript from Dr. Samuelson: "It is not too much to say that the widespread creation of dictatorships and the resulting World War II stemmed in no small measure from the world's failure to meet this basic economic problem [the Great Depression] adequately."

Manifesto Joe Is An Underground Writer Living In Texas.


Marc McDonald said...

Good piece, but I'd like to make one point:

>>Keynes regarded Karl Marx's Das
>>Kapital (1867) as an obsolete
>>text, and far from an adequate
>>prescription to end modern
>>capitalism's shortcomings.

Das Kapital was not a prescription to end capitalism's shortcomings. It was a critique of capitalism, but offered no specifics on how to fix it, or remedy it.

Marx simply explained, criticized and noted the flaws in capitalism and predicted its eventual demise. (And before anyone claims Marx was wrong on this count should note that history ain't over yet).

Marx's criticisms of capitalism remain valid to this day. He remains one of history's great thinkers. But, sadly, he gets blamed for every bad thing that ever happened in the name of "Marxism."

The fact that the mere mention of Marx still sends shivers down the spines of wealthy elites worldwide show the man must have been on to something when he explained how workers were getting screwed.

Manifesto Joe said...

Marc, you lead me to the big criticism I have of Marx: He was a great diagnostician, but a lousy pharmacist.

I can't claim to have read "Kapital" entirely, but from what I've seen it is the most definitive criticism, to date, of the capitalist system.

But, he had nothing to replace it with.

An argument that emerged later:

Keynes and his followers DID.

SJ said...

@Manifesto Joe,
-great post and summation of Samuelson, who my friends referred to as the "iceberg" in college (as in Paul Samuelson pretty much wrecked supply-side economics and most "Randian" wishful thinking about free markets.)
I may have to respond again piece-meal as there's a lot in what you wrote and particularly in your exchange with Marc McDonald about Marx: all good points.
Samuelson was definitely one of the giants, I'm sorry that he lived to see the Great Depression and now this latest global calamity but at least we have his work and perspectives as tools against the foolhardy and their policies. Somebody will listen.

Manifesto Joe said...

Hi, Marc and SJ:

I confess that in my high school days I was -- gasp -- a libertarian conservative. A couple of economics courses in college got me moving the other direction, and by the time I was 20 or 21 I was reading Marx with an open mind. I didn't have the patience to wade through all of "Kapital" but was shocked by how much history I didn't know, simply because it is rarely taught in classrooms. One thing that Marx discussed in his magnum opus was The Enclosure Movement in England and Scotland, in which wide stretches of land that had been regarded as the commons were taken and fenced for sheep grazing. This screwed countless yeoman farmers out of their sources of game, firewood and gathering in the commons. Soon many had to give up the land and go with their families to the already crowded early industrial cities, where they were a swelling pool of cheap labor. All very convenient for the ownership class, both rural and urban.

In six years I spent getting B.A. and M.A. degrees at two Texas universities, I never heard one professor discuss The Enclosure Movement, not even in World History II. I read it in Marx! So, I've certainly got to hand it to him. He "deconstructed" old-style capitalism better than anyone else.

Jack Jodell said...

Thanks for another in a long line of outstanding posts, Manifesto Joe. Samuelson was indeed extraordinary and I will miss him.