The eloquent James Grant, the author of “Bagehot: The Life and Times of the Greatest Victorian,” and editor of Grant’s Interest Rate Observer, has penned a review of Jonathan Levy’s “Ages of American Capitalism” in the WSJ.
In Mr. Levy’s vast mural of a book, which he ambitiously subtitles “A History of the United States,” John Maynard Keynes cuts the commanding figure. A few lines from Keynes’s “General Theory of Employment, Interest and Money” (1936), in fact, anticipate Mr. Levy’s central thesis. They read: “A somewhat comprehensive socialization of investment will prove the only means of securing an approximation of full employment.”
Mr. Levy writes to advance the proposition that American capitalism is turning from investment and production to speculation and chaos.
Mr. Levy is less successful at developing his thesis than he is at announcing it. His haziness on the nomenclature and history of finance is one problem, his want of authorial craft is another.
Mr. Levy doesn’t explicitly oppose the enterprise system — he acknowledges that it lifted the world from poverty — but he’s more inclined to disparage than admire the self-organizing dynamics of market-determined prices.
The conclusion to which Mr. Levy’s too numerous pages lead is that government is the indispensable cog in the American economy. It was World War II, a government enterprise if ever there was one, that ended the Great Depression, he contends, and it was the Federal Reserve that led us out of the Great Recession.
Conventionally, the author rushes past the depression of 1920-21, a bear of a downturn that was over and done with in 18 months despite punishingly high interest rates and balanced federal budgets. Why the slump ever ended should be a matter of intense curiosity for anyone who, like Mr. Levy, puts his stock in the Keynesian nostrums of big spending and concessionary borrowing costs. “Capitalism was not going to lift itself out of the slump,” the author writes of the Great Depression, yet our unstimulated capitalist forebears in 1921 somehow decided that prices and wages had fallen low enough to warrant new commitments of hope and capital. The 1920s subsequently roared.
For details on the depression of 1920-21, see Grant’s book The Forgotten Depression: 1921: The Crash That Cured Itself.
Contrary to Levy’s thesis, it’s actually government intervention in the market that makes depressions “great” and creates the economic chaos that Levy falsely blames on the marketplace. Levy’s call for the government to further take over the economy will only make things worse.
If you want insight into the history of American capitalism and economics you will have to turn elsewhere, as you won’t find it in Jonathan Levy’s “Ages of American Capitalism.”