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�THE WHITE H O U S E
W A S H IN G T O N
January 6. 1098
LEADERS AND THINKERS DINNER
DATE:
TIME:
LOCATION:
FROM:
I.
January 7. 1998
7:30 pm
Blue Room
Rahm Emanuel
Sid Blumenthal
Paul Begala
Michael Waldman
PURPOSE:
To provide you the opportunity to hear a broad range of views from various intellectuals
on issues that relate to the larger themes to be addressed in the State of the Union.
II.
BACKGROUND:
See attached materials for background on invited leaders and thinkers. These materials
include samples of some of the participants' most recent writing to help you belter
understand the issues they are bringing to the table.
III.
PARTICIPANTS:
Briefing Participants
The Vice President
The First Lady
Mrs. Gore
Rahm Emanuel
Michael Waldman
Sid Blumenthal
Paul Begala
Participants
Erskine Bowles
John Podesta
Sylvia Matthews
Sid Blumenthal
Ann Lewis
�Bruce Reed
Gene Sperling
Michael Waldman
Ron Klain
Melanne Verveer
VP Policy Advisory (T)
IV.
S E Q U E N C E OF EVENTS
Briefing:
Dinner:
Oval Office
Blue Room
6:15 pm- 6:30 pm
7:30 pm
-You will make opening remarks.
-Sid Blumenthal will monitor and facilitate discussion.
V.
PRESS C O V E R A G E
Closed Press.
VI.
REMARKS
No formal remarks.
�THINKERS AND LEADERS DINNER
ATTENDEES
Benjamin Barber: Walt Whitman Professor of Political Science at Rutgers University. A
leading thinker on globalization and political culture. Barber has authored numerous works,
including Jiluul w McWorhl and Strong Democracy.
Samuel Beer: Harvard professor emeritus of political philosophy. Beer is a former Rhodes
Scholar and the author of numerous books, including the recent To Make a Mation. ihe
Rediscovery of American Federalism. Beer is also an expert in trans-Atlantic political links.
(Recently he has written several pieces on Tony Blair.)
Albert Camarillio: Director of the Stanford Center of Race and Ethnicity. Author of numerous
books and articles on race relations, Camarillo recently published Chicano Affairs Office, a book
dealing with the evolution of the Mexican American community.
Bill Galston: Professor of Philosophy at the University of Maryland.
Randell Kennedy: Kennedy is currently a professor at Harvard Law School, and a member of
the American Law Institute and the editorial boards of The Nation. Dissent, and The American
Prospect. He is also a trustee of Princeton University. Kennedy focuses his studies on a variety
of issues, including contracts, freedom of expression, and the regulation of race relations.
Kennedy recently published a book on law and race relations titled. Race. Crime and the Law.
Michael Lind: A contributing Editor at Harper's Magazine and term member of the Council on
Foreign Relations. Lind is an established writer and thinker on issues ranging from American
politics and foreign policy to culture. His work has appeared in numerous national magazines,
journals, and newspapers. A protege of both William F. Buckley Jr. and Irving Kristol, Lind
broke with the conservative movement in protest over the appeasement of the resurgent far right
by conservative intellectuals.
Paula Rayman: Director of the Radcliffe Public Policy Institute, Rayman developed and
directed the New Economic Equation (NEE) project to address the connected economic,
workplace, and family concerns facing Americans today. Rayman also works extensively in
issues related to women and science.
Dani Rodrik: Rafiq Hariri Professor of International Political Economy at the John F. Kennedy
School of Government, Rodrik also serves as the joint editor of the Journal of Policy Reform and
as the associate editor of the Journal of Economic Perspectives, Journal of Development
Economics, European Economic Review, Review of Economics & Statistics, and Economic
Politics. Rodrik's research and writing focuses on a variety of international economics issues,
including international economic integration, the political economy of policy reform and the role
of conflict-management institutions in determining economic performance.
�Richard Rorty: Professor of Humanities at the University of Virginia. Rorty has also instructed
philosophy at Yale University and Wellesley College. Among other honors. Rorty has been
awarded the MacArthur and Guggenheim fellowships. Rorty is a current member of the
American Philosophy Association and the American Academic Arts and Sciences Association.
Recently. Rorty published the books Ohjcctivity. Relaiirism and Truth and Essavs on Heidegger
and
Others.
Michael Sandel: Professor of Government at Harvard University. Sandel teaches political
philosophy. Sandel was a Rhodes Scholar and is currently a member of the Board of Trustees of
Brandeis University, the Board of Syndics of Harvard University Press, and the Council on
Foreign Relations. Recently. Sandel published Democracy 's Discontent: America in Search ofa
Public Philosophy, a "thinking person's guide to the current rethinking of the role of government
in America" (George F. Will).
Cass Sunstein: University of Chicago professor of law and political science and member of the
President's Advisory Council on Public Interest Obligations of Digital Television. Sunstein deals
with a variety of issues including constitutional law. environmental law, telecommunications and
media law and regulatory law and policy. Sunstein recently authored. Free Markets and
Democracy, a book arguing for a new social compact. He also frequently writes for The Atlantic
Monthly and writes a column for The New Republic.
Barbara DaFoe Whitehead: A member of the Massachusetts Governor's Commission of Father
Absence and Family Support and co-director of the National Marriage Project at Rutgers
University. Whitehead is an established scholar on issues of family and child well-being. Her
work appears in numerous publications, including The American Enterprise; The Woodrow
Wilson Quarterly; Reader's Digest; and many national newspapers.
Patricia Williams: Professor of Law at Columbia University, Williams currently serves on the
board of the National Organization for Women Legal Defense and Education Fund. Williams
authors the column "Diary of a Mad Law Professor" for The Nation. Williams focuses on legal
and racial issues. Recent publications include The Alchemy of Race and Rights and The
Rooster's Egg. Seeing A Color Blind Future: The Paradox of Race.
Daniel Yergin: Pulitzer Prize winning author and historian, Yergin heads an international
consulting business focused on energy industry issues. Yergin recentlyfinisheda book on the
new economy.
�LEADERS AND THINKERS DINNER
BACKGROL ND WRITING MATERIALS
Dinner attendees were invited to submit short pieces of their current work to help you better
understand some of the issues they have been handling. The pieces listed below are attached. 1!'
desired, we can gather additional information for you.
A.
Samuel Beer
""Britain after Blair." Political Science Quarterly (October/December I W )
B.
Albert Camarillo
••Affirmative Action and the Creed of American Opportunity."
C.
Randall Kennedy
"Social Justice Demands Sacrifice," Los Angeles Times (6/12/97)
"'In Praise of Racial "Integration"" Intellectual Capital (7/24/97)
D.
Michael Lind
"A Forgotten Founder Could Save the Democrats." Washington Post (11/23/97)
E.
Paula Rayman
"A Labor Day look at working men and women," Boston Globe (9/1/97)
"Radcliffe-Fleet Project Team Report" Radcliffe Public Policy Institute (12/97)
F.
Dani Rodrik
"Sense and Nonsense in the Globalization Debate," Foreign Policy (Summer 1997)
G.
Richard Rorty
"The People's Flag is Deepest Red," Audacious Democracy: Labor, Intellectuals, and the
Social Reconstruction of America
H.
Michael Sandel
Democracy's Discontent: America in Search of a Public Philosophy.
Introduction and Afterward
I.
Cass Sunstein
Free Markets and Social Justice, Introduction and Afterward
J.
Barbara Dafoe Whitehead
"Women and the Future of Fatherhood," The Wilson Quarterly (Spring 1996)
K.
Patricia Williams
"The World Beyond Words," The Nation (9/22/97)
"Big Words, Small Divisions," The Nation (8/25/97)
"The Theft of Education," The Nation (5/19/97)
L.
Daniel Yergin (and Joseph Stanislaw)
The Commanding Heights: The Battle Between Government and the Marketplace That Is
Remaking the Modern World, Introduction
�Affirmative Action and the Creed of American Opportunity
AlCarnarillo
A Forum on "Affirmative Action, the! University, and Beyond"
October 12, 1995
In the increasingly heated debates over affirmative action policies at
the state and federal levels, opponents and proponents alike tend to react,
recoil, and obfuscate, in my opinion, the central tenets of why affirmative
action policies and programs were established during the 1960s. The core
premise of affirmative action has not been and is not about numerical
quotas; it is not about reverse discrimination; it is not about preferential
treatment to unqualified recipients; it is not about guaranteeing equal
outcomes; it is not about group rights vs. individualrights.Politicians and
other influential people who couch affirmatiive action discourse is these
terms do a great disservice to the American public, for they add to
misunderstanding and help to drive the wedges of political divisiveness
deeper into our society. Advocates, pro and con, must come to terms wib
what is fundamentally at the heart of affirmative action and seek to confine
debate to issues of greatest concern in contemporary society. The debate is
far too supercharged for constructive discussion to take place concerning
modification of existing policies or consideration of other options. We
must strive tofinda common language or understanding about the
�premises and historic goals of affirmative action if we have any hope of
moving beyond rhetoric. I want to suggest to you today such an approach,
based on an historical analysis of affirmative action policy developed in the
1960s and based as well on current realities in the U.S.
If you strip away the rhetoric about pros and cons, and place of
affirmative action in a broader historical context, affirmative action is
principally about opportunity in American society. Johnson's presidential
order, of course, arose from the immediate context of the modem Civil
Rights Movement and recognition that certain categories or groups of
people -African Americans in particular- had been denied access to
opportunities and suffered from the historical effects of discrimination.
Johnson's affirmative action order was fundamentally about establishing
"equal" opportunity for a national racial minority, a policy that was
expanded to include women and other groups previously excluded from
opportunities based on race, creed, color, and national origin.
Johnson was primarily concerned about "equal" opportunity during
an era in which he^hrust into the spotUght of national leadership, but his
concern with opportunity echoed a long history of an American value tliat
has been at the core of American democracy -something we might the
creed of American opportunity. Revolutionary leaders in the 18th century
struggled to break the yoke of English colonial rule and, among other
things, sought oppportunity for Americans in tlie fledgling repubhe.
�Visionaries in the 19th century linked American greatness and national
identity with the abundance of opportunity open to common folk who could
rise above their station, In the 20th century, leaders such as Franklin
Roosevelt during a time of crisis formulated New Deal policies aimed at
restoring hope for economic recovery and the return of opportunity for
Americans. In the 1960s, President Johnson also responded with policies to
restore a sense of hope and to facilitate "equal" opportunity for historically
disadvantaged groups of Americans.
I submit to you that the search for and development of national
policies to foster opportunity is as American as apple pie, and not to view
affirmative action in this light is to deny an ethos of fundamental
importance to Americans, past and present. In U.S. history the theme of
opportunity is critical to understanding so much about the uniqueness of
American democracy and social mobihty in a land of plenty. One of the
great qualities of American society over time has been the opportunity
afforded to countless millions of people to better themselves and to use
their ingenuity and resourcefulness to advance themselves, their families,
and their communities. This is the stuff which constitutes the core of the
American Dream, both real and imagined. And, yet, many of the tragedies
of the American past are associated with the other milhons of Americans,
who because of the color of their skin, their gender, their foreign
nationidity, were excluded -sometimes systematically by law and other
�rimes by custom-- from the avenues of opportunity, As a student who
studies race and ethnicity in American society, I know painfully well this
history of isolation, separation, alienation, and exclusion from the
opportunities open to the majority of Americans. Lyndon Jolinson, in his
own era, wanted to do something to establish opportunity for Americans
who were victimized by this historical legacy of exclusion. In a very real
way, Johnson and his colleagues were modern-day advocates of the creed
of American opportunity.
We must not lose sight of this powerful, important value which has
defined part of the character of the American nation for over two hundred
years. As we approach the end of the century, we must take a hard look at
opportunity structures in American society and we must consider ways to
maintain avenues of opportunity for Americans in an environment
characterized by a rapidly changing national and global economy. As the
U.S. continues to struggle to maintain economic stabihty and growth in the
post-industrial era, the historic avenues of opportunity and upward social
mobihty for Americans are at risk. Gone, for the most part, are the
industrial jobs which once allowed working class men and women to
achieve a step ladderriseto the middle class. No longer is a high school
diploma, or even a college education for that matter, a springboard to
opportunity. Today the middle class feels threatened with insecurity, the
working classes dubious about their future and fear of inopportunity as die
�fate for their children. One need not look tc^far to see so many
socioeconomic indicators which point to an impending crisis in American
society as we head into the next millennium.
*the gap between the haves and have-nots, between the rich and poor
in American society has grown substantially since the 1970s', we have
become in recent decades the most economically stratified society among
all industrial nations of the world (for example, 1992 census data revealed
that the top 1 percent of the wealthiest households in the country own 40%
of the national wealth; the top 20% of wealthiest households own 80% of
the nation's wealth
•"seenfroma different angle, approximately 32 milhon Americans,
about 13% of the total population, live under the official line of poverty as
estabhshed by the federal government; milhons of others Uve just above or
near this poverty level
* when one considers ethnicity and race in an analysis of poverty, the
percentages skyrocket: in 1991 33% of all African Amencans and 29% of
all Latinos lived in poverty; the rate for non-Hispanic whites was 8
%
•"women and children constitutte the fastest growing sector of poor
people in the country; the rates for minority children are astronomical
*though the historic gaps between wages earned by minorities and
whites have closed somewhat since the 1970s, the differential in income is
still enormous; the education gap at the college level is also huge (college
�grads among whites is 28%, for African Americans 14%, 10% for Latinos,
and 11 % for Indians)
Whether we examine income, poverty rates, educational
achievement, welfare dependency, out of wedlock births, or other
socioeconomic indicators, one thing is still obviously clear: groups of
Americans, particularly women and minorides, lag behind their white male
counterparts. The legacies of historical discrimination and racism still
plague our society. But even beyond considerations of race and gender,
opportunities for advancement in American society have changed and the
proverbial playingfieldis uneven for a growing percentage of the U.S.
population.
Thirty years after the development of affirmative action policies to
enhance equal opportunity, the need to support this type of structure of
opportunity continues to exist. But perhaps it istimeto reconsider policies
which promote and support the historic creed of American opportunity.
Perhaps an ominous future, to be brought about by economic restructuring
and increasing instability, may force us, in this era of decreasing spending
on social issues and an American public distrustful of government as usual,
to reformulate policies of opportunity. Should we abandon the affirmative
action policies developed during Johnson's Great Society? No! I for one
could not tolerate, nor do I think society could tolerate, returning to what I
experienced as young Chicano from a South Centtal Los Angeles
�community who entered college at the dawning of affirmative action era at
the University of California system (personal account at UCLA). I am an
affirmative action baby, to borrow from tlie words of Stanford alum and
Yale law professor Stephen Carter. But unlike Carter, I'm proud to be an
affirmative action baby! Had it not been for affirmative action in higher
education when I came of age, I would not have been encouraged to pursue
graduate study by my mentors who saw in me potential; I would not have
been at Stanford these past 20 years if affirmative action had not been taken
into consideration by the Department of History and the School of
Humanities and Sciences in an effort to hire theirfirstand only Chicano
historian. I am an affirmative action baby, a recipient of an opportunity to
develop skills and to pursue a career unthinkable among my parents and
their generation.
I want to leave you with some questions to consider, questions I too
must consider as I grapple with issues of opportunity in a changing society,
Do we need to reconsider affirmative action policies in light of possible
other alternative policies which get at the problem of oppormnity in
American society today? If we can move beyond the stalemate of rhetoric
and knee jerk advocacy for and against existing affirmative action poUcies,
then I would answer, yes. But I would submit to you that we must consider
first, irrespective of race and gender, sectors of our population at greatest
�risk, Americans who are excluded and isolated from the socioeconomic
mainstream, people who desperately need help in accessing opportunity. If
Americans are still supportive of the creed of oppormnity for the havenots, then it follows that the sectors of our population iu greatest need will
continue to include a disproportionate number of women and ininorities as
well as other people who occupy the lowest rungs on the economic ladder.
�:
nK KSDAY.
Commentary
JLNE 12. W!
LOS ANGhLES TIMES
PERSPECTIVE ON RACE RELATIONS
Social Justice Demands Sacrifice
unfortunately, the horrid conclilions thai inendce so many
Amtricar.s sturk in onr hUrk
jnd brown ghettos continue to
wreak havoc even without the
^idof r.iri.il rrulevnlenrH Mere
indifference will suffice.
The problem facing the
president or anyone ebe ssnously concerned with addressinft the core of racial inequity
is not porcuading th(« Great
Americiin Middle that burning black (or
any other) churches is terrible or that it
is disguKtin^ to haip people simply
because of the color of their skin. The
vast majority nf people have already
been persuaded tn embrace these propositions. The real problem is persuading
the Great American Middle to reorient
fundamentallv the allocations of power
The president must
W4
T
persuade the American
majority to share power
and privilege in a
'pigmentocracy.'
By RANDALL KENNEDY
hus far in hia campaign to summon
Americans to confront and over,
romp their racial prnhlrms. President Clinton has focused almost excluRively upon bigotry that virtually all
inHligrnt and respectable people now
dbhor: the color barrier that excluded
black baseball players from the major
IcaRues. the notorious medical experiments on black men in
Tuskegce. racially motivated,
violent hate crimes.
It is useful for the president
to highlight these despicable
acts Insofar as some Americans remain unaware of the
extent to which contempt for
people of color has poisoned
society. It would be a mi|Uke.
however, for the president to
suggest that aggressive bigotry lay at th« heart of our
current racial dilemmas.
If racially motivated violence, the Ku Klux KUn, lh«
N-word, and the ugly sentiments that nourish these vile
outcropping* of racial animus
were suddenly to disappear,
wc surely would be left with a
better society. This welcome
development, however,
would have little effect on the
isolated, miserable, crlminogctic circumstances in which disproportionately large numbers of blacks, Latinos and Native Americans live. Nor
would the sudden, magical disappearance of racial hatred matsively reduce
the discriminations that unfairly burden
minorities in me criminal justice system
and housing and employment markets.
Many of the deprivations that ensnare
large numbers of racial minorities are
vestiges of past injustices that perpetuate
harms even in the absence of any continuing purposeful aim to do so. Thus,
require an expensive reconstrucuon. \yy.
tho ascendant politics nf ihe moment is
averse to redistributing wealth and
opportunity downward, whether in
terma of class, gender or race. To push
the nation toward the realization of its
ideals will require the president to tell
the public something that he appears
loath to articulate: that social justice, like
many of the best things in life, is costly,
and that for us to pay this cost is
worthwhile.
The president, like many commentators, speaks as if ceasing to engage in
raCMl discrimination ia cost-free, At if all
that such a renunciation would entail is
merely the forgoing of an arbitrary gesture. Dut thnt is often not so. Of course,
?ome racial discrimination stems solely
from bigotry; but a lot of racial discrimi
notion is strategic Strategic
racial discrimination arises
when people calculate, often
Leadership u Hacc R«Iciitoni correctly, thut they can attain
n
some extra bit of security by
using race (typically coloredneon) as a proxy for an
increased risk of danger. Much
of the racial discrimination
engaged in by home buyers,
uxl drivers and employers is of
this sort. They Initially disfavor colored neighborhoods,
potential customers and prospective employees not
because they are bigots hut
because they perceive that
doing to will maximize their
self-interest, at loa*t In the
short term.
and privilege that continue to make
America a "pigmentoeraey" despite the
Kubstantial and heartening chances for
the better that have occurred over the
past 50 years. To carry out this task will
require mnre lhan a willingness to avoid
gratuitously inaulUng or harming others
because of their race. It will also require
something that President Clinton has yet
to mention with any real clarity:
sacrifice.
Redressing the wounds left by our
long history of racial oppr*Kxion will
If racial discrimination that
adversely affects minorities
were solely an activity carried
out by marginal creeps, It would
not constitute the maior problem that It
is. The fact that racial discrimination
often does advance the narrow selfinterest of intelligent, decent. Influential
people is what gives it deep roots and
makes any serious effort to uproot such
practices a far more difficult and disruptive venture than the president's rhetoric has so far indicated.
Randall Kennedy it a prolessor al Harvard Lav) School and the author of "Race.
Crime and tht Law "
�Intetlcctual
Opinions: Editorial
Cjpit.il.com
In Praise of Racial "Integration"
by Randall Kennedy
July 24, 1007
Home
RoJatmd Links
AI%o St
rm«« tvlatten* In Amanea.
Our P r v b l f n t t l c P t o m t n t o e r t c y
•• Randall K a n n ^ d / t S '
ftttdx hopa aoildtt turmoil.
1
Fnllnwlng (hts articlo. wo havo set up a special mod rat9d discussion section
for thoso who wish to comment Attar you read the article, b<s suna to add your
oplntun
S
Conversations about race relations would be considerably improved If
participants cianneo Key terms tnat are used often but seldom defined.
"Integration" is one such term. Commentators go on at length about "the
loss of the integrationist dream" or the "dearth," "betrayal" or "tragic
failure" of Integration. Many, however, decline to specify what they mean
by "integration."
First, a definition of desogregatlon?
Although on© can define integration in a variety of ways, the most
attractive of its versions was compellingly (albeit incompletely) outlined
by Martin Luther King, Jr In "The Ethical Demands for Integration," a
speech delivered on December 27. 1962 in Nashville. Tennessee. King
sought to define the term and in so doing offered comments that are
relevant today. Noting that integration and desegregation often are used
Interchangeably. King correctly insisted on dlstJngulshlno me two
concepts
Search
Desegregation means, at the very least, ceasing cogregation _ th©
purposeful separation of the races A minimalist conception of
desegregation considers it complete when authorities stop using race as
3 criterion for decision making A broader, more demanding conception
of desegregation considers It complete when the vestiges of segregation
-- such as habits of racial choica or patterns of unequal distribution of
resources — have be«n eliminated King championed desegregation but
viewed it. even in its broadest sense, as "only a first step on the road to
the good society." "We must always be aware," he urged, "that our
ultimate goal Is Integration."
A more meaningful goal
To King, integration is "more profound and far
reaching than desegregation . . (It] is the positive
acceptance of desegregation and the welcomed
participation of Negroes [and au persons] into the
total range of human activities.'' In a comment that
Illuminates the contemporary landscape. King
remadced that (w]e do not have to took very far to
see the pernicious effects of a desegregated
society tnat Is not integrated. It leads to physical
proximity without spiritual affinity .' It gives us a
society where men [and women] are physically
desegregated and spiritually segregated, where elbows are together and
heads are apart."
M
Emphasizing the spiritual, voluntary and private core of the sentiments
and conduct that is essential to integration. King asserted that "the
demands of desegregation are enforceable demands while the demands
of integration fall with n the scope of unenforceable demands." He
expressly eschewed the notion that law can play no salutary role in
transforming society. "Judicial decrees," he notes," may not change the
heart, but they can restrain the heartless." But King also conceded the
limits of governmental action, noting that it alone "cannot bring an end to
�integrated society." In his view, "[t]hose dark and demonic responses will
be removed only as men [and women] are possessed by the invisible,
inner law which etches on their hearts the conviction that all men [and
women] are brothers [and sisters]."
Worth fighting for
The Kingian conception of racial integration means bringing people of all
hues together across racial boundaries in such a way that they
eventually conceive of themselves and others no longer as members of
separate racial tribes but instead as neighbors united by ties that run
deeper than feelings of racial kinship, integratlonlsts are animated by an
ethos that prompts them to disregard race in evaluating the essential
worth of people. This does not entail ignoring the difference that race
makes. Integrationists - or at least those integrationists who recognize
the current realities of American life - recognize that race matter In
terms of the distribution of societal resources, with Blacks, Latinos, and
Indians continuing to be victimized by invidious racial discriminations In
a wide variety of settings. Integrationists seek, moreover, to create a
society in which the intimate and equal association of people of different
races in all spheres of life - from Congress to the neighborhood to the
factory floor to the movie screen to the bridal suite - is welcomed as a
normal part of a multiracial democracy. As the distinguished historian
Eric Foner writes. "(p]roperly understood, Integration means not only the
removal of economic, social, and political obstacles to full participaton In
every area of American life but changes In the contours of personal life
so that friendship, comradeship and intimacy between the races can
become far more common than is possible today"
This is what integration means to me. How to develop this vision will
require deep thought and persistent effort. For now though, it is enough
to declare openly that racial integration, though often ridiculed and
frequently pronounced dead, is a beautiful, living, practical idea whose
popularity too often is minimized. It is a goal that I admire and embrace
and still believe is possible to attain.
Randall Kennedy Is a professor at Harvard Law School. He Is also a
contributing editor of IntellectuatCapital com.
Related Links
Is integration the right goal for America? Are we making progress toward
achieving the Integrated society King so eloquently envisioned? Post
your comments below.
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�Britain after Blair
SAMUEL H. BEER
THE title is pretentious, but it does serve
to concentrate the mind on the big question: what is the long-run significance of
thus recent parliamentary landslide? It
has been called a watershed election.
Between what and what?
Once before I used this rhetorical
device when in 1954 I called a piece I
was doing for this quarterly—the first
thing of mine published in it—'The
Future of British Politics'. My enquiry
started from the fact that, much to the
surprise of many observers, the Conservative Government of 1951 had accepted
nearly the whole massive programme of
reform carried out by the Labour Government of 1945. Asking 'What is the
meaning of this convergence of party
policy?', I worked my way to the conclusion that 'Britain seems to have entered
on a long period of political peace.' Not
bad as political predictions go. For nearly
twenty years that consensus held under
GaitskeU and Macmillan, Wilson and
Heath.
I had spent the previous twelve
months looking at British political parties, attending conferences, visiting constituency parties, listening in on the
House of Commons and interviewing
an array of politicians ranging in opinion
from Clement Attlee to Rab Butler. The
richest episode had been dinner with
virtually the whole parliamentary Liberal
Party, which the election of 1951 had
reduced to a mere six MPs and sent on
its way to inevitable oblivion, according
to practically all expert opinion. Politics,
many complained, was in the doldrums—and it was, I believe, the general
election campaign of the next year which
R. W. Apple of the New York Times in his
first foray into British politics reports as
'the lull before the lull'. Yet only a few
years before, Labour had swept the great
Churchill out of power in a landslide for
socialism. All this greatly interested us
Harvard liberals who were much concerned with how to reshape the New
Deal for postwar Amenca.
1
The Whig model and its
problems
Parliamentary landslides and periods of
policy convergence are familiar features
of British political history. Although the
two phases are normally separated in
time, they fit together in function, constituting what one might call the Whig
model of political progress. Typically, in
this model, the party of change, championing a programme of reform, finally
overwhelms the party of the status quo
and puts through its own proposals,
which sooner or later are accepted by
its former opponents, who consolidate
these gains, possibly with marginal
amendments, when they in tum take
office. Innovation, convergence, consolidation: these are the phases by which
majoritarianism is converted into consensus and the country as whole progresses
in its realisation of the common good.
As a description of reality, this sounds
a bit too good to be true. Yet these
generalities are pretty well supported
by the historical record of those parliamentary landslides which recent comment has frequently compared with
Blair's victory: 473 Whigs v. 172 Tories
© Th* PoUtktl Quinvlr PubUihtafCa Ud. 1997
Mildai
Publuhad by BUdcwatt Pubhriwn. 1 « Cowtqr Road, Oriord OX4 1JF. UK md M Main Stmt. MA 0214*, USA
O
317
�in 1832; 399 Liberals v. 134 Conservatives
in 1906; and 393 Labourites v 213 Conservatives in 1945. If the future is like this
political past, then the landslide which
gave New Labour 419 to the Conservatives' 165 seats in 1997 will usher in a
period of radical reform comparable to
the achievements of Lord Grey, H. H.
Asquith and Clement Attlee.
The snag is, of course, that when measured by these precedents. New Labour
is very short on programme. Appearances are revealing. If you can remember
what Ut Us Face the Future, the Labour
manifesto of 1945, looked like, compare
that slight pamphlet, printed on that
grey, flimsy, wartime paperstock, with
New Labour, New Life for Britain, the
glossy, magazine-size presentation of
1997, nearly half of whose forty pages
are devoted to colourful illustrations. The
language of 1945 was as succinct as the
speech of Clement Attlee, whose complete answer to the question of an interviewer was often simply 'Yes' or 'No'.
Yet when put alongside the Public and
General Acts of 1945-50, the manifesto is
matched, paragraph by paragraph, by
corresponding statutes. Nationalisation,
social services, land use, public housing,
redistributive taxation and full employment: the mere mention of these categories of reform suggests the immense scope
of the promises made and kept by Old
Labour In 1997 the language of the
manifesto is as uplifting and highminded as the oratory of the present
leader, whose celebrated address at the
1994 conference was one of the most
exciting political speeches I have ever
heard. But if you took notes on the
content of the speech or of the manifesto,
I surmise that they were short, disconnected and insubstantial.
That lack of substance in manifesto or
mandate could be worrisome. British
governments enjoy a concentration of
authority unique among contemporary
democracies, and indeed it is thanks to
this fusion of executive and legislative
318
SAMUEL H BEBR
powers that the party of change, whether
Whig, Liberal or Socialist, has been able
to make those sweeping advances so
honoured by the progressive tradition.
Among the safeguards against abuse are
the explicit, programmatic commitments
which such governments normally have
given to the voters during the campaign.
Blair's content-free appeal to the country
would seem to remove that safeguard. In
fact, it does not, since his avoidance of
radical new commitments in economic
and social matters has been expressed
in comprehensive and specific pledges
of 'no change' in the fundamental
reforms of the previous regime. It was
no accident if, as the Guardian concluded,
'the British voters were hard pushed to
see much daylight between the policies
of John Major and Tony Blair.' Labour
was so vulnerable to the charges of union
domination and 'tax and spend' that only
a militant rejection of socialist doctrine
and ardent embrace of free market capitalism could make it a winner. There is no
pledge of full employment. The options
for unemployed youth echo American
workfare. Above all, the vision of the
good life for the individual looks not to
equality, but to opportunity.
In an historical perspective, therefore,
1997 is not an innovating election like
that of 1945, but a consolidating election
like that of 1951. At that time, as Chris
Patten has emphasised in his Coningsby
Lecture, Rab Butler made the Conservatives 'again electable'. In 1997 Tony Blair
did the same thing for his party, but with
such unexpected success as to produce
that psephological monster, a landslide
for the status quo.
Tory radicalism
The outcome in 1997 does look odd, but
perhaps that is because I have been looking only at Whig landslides. There is
such a thing as a Tory landslide,
although in a country whose heart is
left of centre, they are rare and usually
O Th< Poiinol Quulirly Publlahlng Co Lid 1997
occur only when the left is divided, as it
has been during most of this century. The
result of 1931 immediately comes to
mind, not only because it was a massive
Tory landslide, returning 472 Conservative members to Labour's 46, but also
because the so-called National Government which it supported had been
formed by an immensely popular leader
of the Labour Party, who asked only for a
'doctor's mandate'. Any personal comparison of Tony Blair with Ramsay MacDonald would be not only unkind but
also irrelevant. These events are instructive rather because they display so
vividly the profound discontinuities
between the Labour Movement of that
day and Tony Blair's New Labour, as
well as, no less, between the Conservatism of then and now. I will look first
at the Conservative transformations.
The 1931 election produced an innovating parliament of historic proportions
demonstrating that the Conservatives
can be a party of change, indeed, a
party of radical, programmatic reform.
During the interwar years generally,
and above all under the National Government, which was only in name a
coalition, that party was the agent of a
reassertion of state control over the economy, which not only broke with British
policy of the previous hundred years, but
also laid the foundation for the managed
economy established by the bipartisan
consensus of the 1950s. In 1931 'the
great policy', as it was termed by its
chief architect, Neville Chamberlain,
was based on protection oriented to
imperial preference, but branched out
into corporatistic initiatives in the
rationalisation of industry and agriculture and inaugurated in public finance a
policy of low interest rates which,
although originally aimed simply at
saving money, actually provided a stimulus for a recovery comparing favourably with the record of other countries in
that era of the Great Depression. The key
element, 'a complete tariff scheme'.
O The PoUttnl Quaittfly PublbMnt Co Lui 1997
which had been worked out within the
party under Chamberlain's direction by
the early months oi 1931 while the Conservatives were still in opposition, after
the election provided the Government
with a thorough and programmatic preparation for its major innovations
Although MacDonald made no specific
pledges during the campaign, Baldwin
and Chamberlain proclaimed 'the
supreme value of the policy of tariffs',
as did countless other Conservative candidates. As for the long-run effects, when
one looks at the instruments of economic
planning and control utilised by postwar
British governments, one sees again and
again the contributions of prewar Conservatism, such as a managed currency,
import quotas, subsidies, controls on the
location of industry, and those first initiatives in nationalisation, the British
Broadcasting Corporation, the London
Passenger Transport Board and the Central Electricity Board.
Margaret Thatcher, like her predecessors half a century before her,
showed that the Conservatives can be a
party of radical change. She displayed
that capacity, however, in a fierce, persistent and highly ideological attack upon
their interventionism, reversing so far as
she was able just about every major
achievement of interwar and postwar
Conservatism in domestic affairs. Her
ideological ancestry excludes Harold
Macmillan, Rab Butler, Neville Chamber
lain, Stanley Baldwin, Disraeli, Peel and
Bolingbroke. Her true ideological fore
father, as she emphatically proclaimed,
is William Ewart Gladstone Which, to
anticipate my story, means that the Conservatism to which Blair has converted
Labour was also some brand of Libera]
ism Thatcher's demolition of not merely
Tory interventionism but also Tory
paternalism appears more clearly as a
companion tale of the sad and compli
cated story of Labour's vicissitudes
BRITAIN APTBI BLAIR
3V
1
�The age of faith
Hiat story has three chapters In view of
the distance Labour has travelled from its
origins, it is necessary to recall in some
detail the age of socialist faith That term,
with its religious overtones, is no exaggeration Its relevance comes home to me
when I think back to the evening of the
lirst day I spent in England in August
1V32 on my way to a scholarship in
Oxford Still wobbling a bit from the sea
voyage, I directed my steps to the fabled
Hyde Park Comer There, amid minor
competitors for public attention with
their makeshift platforms, was George
Lansbury, recent successor to Ramsay
MacDonald as leader of the Labour
Party, holding forth to a large audience
of supporters I recall especially one
point of emphasis, stated pretty much
in these words: 'Our class has shown
that it can govern as well as their class.'
I had never before heard the word 'class'
used in that manner in political discourse, nor had 1 often sensed so heartfelt
a response, apart from the gatherings of
the evangelical sects of my Midwestern
boyhood.
This faith was informed by an ideology
which was at once a damning analysis of
capitalist society and a Utopian vision of
the Socialist Commonwealth of Britain. It
called for revolutionary change: the substitution of common ownership for private property, public administration for
the free, competitive market, and, above
all, fellowship for self-interest as the
governing value. Common ownership,
which in practice came to mean nationalisation, was the key concept, for, as
spokesmen for the cause had long
preached, this change in economic structure would produce that corresponding
cultural transformation of incentives and
motivation In 1918 the party, breaking
with the Lib-Lab alliance, had declared
its independence and its commitment to
that ideology In 1931, it showed that it
meant what it said on both counts. Not a
3(
21
SAMUEL H BEBR
single constituency party or trade union,
and only a tiny handful of MPs and
leaders, followed MacDonald. In this
campaign, although the Labour Government of 1929-31 had shown its total
incapacity to deal with the economic
crisis, the party proclaimed that no
reform of capitalism would help and
only its policy of 'public ownership'
could provide a solution.
Decline and fall
The breach with that orthodoxy did not
wait on the challenge of Thatcher and the
repeated defeats of the 1980s. A more
fundamental reversal—the second chapter in this story of decline and fall—took
place in the 1950s, as the result not of an
election but of confrontation with economic reality. In the first years of the
Attlee Government the old ideology still
flourished, lending momentum and
coherence to the massive programme of
Let Us Face the Future. It was sincerely
believed, for instance, that once the coal
mines had been transferred from private
to public ownership under the flag of the
National Coal Board, the ancient strife
between miners and managers would
cease. As late as 1946, as sensible a man
as Clement Attlee could declare before
the party conference that 'the distinctive
side of Labour's programme' is 'our
socialist policy, the policy of nationalisation'.
In the next few years, as nationalisation
and planning failed as instruments of
economic control, administrators tumed
more and more to the mechanisms of the
market. This collapse of the old ideological premises created problems not only
for managers trying to increase production, but also for party leaders trying to
write a manifesto and for socialist intellectuals trying to restate their beliefs so
that they would fit the facts and give
coherent direction to party and government. A leading example of that intellectual crisis and the effort to cope with it
O Tht PoUttcil Quuttfly PvMMito^ Co Ltd 1W7
was the volume New Fabian Essays published in 1952 under the editorship of
R. H S. Grossman, with a foreword by
Attlee.
I vividly recall its reception by the
Harvard liberals. Much as we sympathised with the programmes of economic management and social services
being pioneered in Britain, we were disappointed by the confusion and sense of
drift in the Essays and expressed our
opinions in some highly critical reviews
as well as in our private conversations
with the socialist dons and journalists
with whom we exchanged visits. The
sticking point was common ownership
as the central principle of industrial
policy, in contrast with what we
regarded as the superior New Deal
approach of regulation, trust-busting
and other forms of countervailing
power. One Sunday afternoon in the
American Cambridge, after the rural
walk obligatory when our visitors were
British, we got into a long wrangle with
them on this question. Finally, Arthur
Schlesinger Jr exploded: 'Do you really
think that everything should be nationalised, even newspapers, magazines, book
publishing? How could you maintain
freedom of the press under these conditions?' Needless to say, that was a clinching argument among a bunch of
aspiring authors.
Revisionism, however, triumphed—
and in a remarkably short time. The
essence was to drop control, exemplified
by common ownership, as the means for
achieving economic equality. Instead,
this traditional objective would be
achieved by the redistributive spending
of the expanding social programmes of
the welfare state, which would now
depend on a managed economy admittedly capitalistic and embracing private
property and self-interest. In my 1955
article I took note of this concession by
the revisionists, but failed to see its
momentous effect. The collateral help of
a hubristic Keynesianism had a good
O Th. PoUttnl Quifltrly PubUihlni Co Ltd. IW7
deal to do with the wide and rapid
acceptance of the new methodology. In
the Essays of 1952, Anthony Crosland
could only hope that national income
would 'rise annually by more than the
l j % which was the norm before the war".
Four years later, his Future of British
Socialism, which became the bible of revisionism, set forth the full doctrine of
growth-based social democracy. By 1964
the new Labour Government of Harold
Wilson had raised the forecast to 4j per
cent, an increase which in prospect justified its vasdy ambitious plans for ever
bigger social programmes.
The same over-optimistic interpretation of Keynes also facilitated the Conservative move towards acceptance of
Labour's revolution. The main difficulty
which Butler had confronted when working towards that end had not been the
objection to nationalisation, but rather the
very reasonable fear of heavy spending
on social programmes on a Beveridgean
scale. That difficulty seemed to be greatly
eased when Mr Butskell appeared, his
presence being noted for the first time in
The Economist for 13 February 1954. The
new methodology facilitated not only the
arrival of the new socialism of Labour but
also the revival of the old paternalism of
the Conservatives. Rejecting the radical
egalitarianism of Labour for the graded
paternalism of One Nation Toryism, the
Conservatives could now compete with
the socialists in promises of future benefits. Toryism', as Harold Macmillan had
once said, 'has always been a form of
paternal socialism.'
Making and keeping their party electable was a powerful and continuing
reason for Conservative adaptation. It
would be inaccurate, however, to think
that electoral considerations alone were
the cause. Subordinate to the priority of
order, a concern for 'the condition of the
people' also had roots in the Conservative tradition. Mr Attlee, who was not
unduly disposed to give Tories credit for
good intentions, admitted as much.
BRITAIN AFTER BLAIR
321
�When I ,\skt'<l him about 'Disraelian ron• ••rv.itism', he agreed that it was real, and
iflcr mentioning several people, from
''lialtrslmrv to Salisbury, who shared
tins ideal of a patriarchal nation', he
• om eded that the lories have a better
tecord in social reform in some respects
than Ihe I iherals '
I rom the 19.S()s to the WOs, policy
• onvergence did bring political peace, if
we compare those years with the succeeding period of harsh and ideological
Mriie extending into the l^HOs Convergem e. however, did not reduce party
i ompelition on the contrary, it converted
il into an ultimately ruinous escalation of
expensive promises New programmes
created new lobbies From the 1950s in
Hnlain a spectacular increase in the
mimher of pressure groups was accomI'amed by a surge in social spending.
Ihis bipartisan loss of budgetary control
• ontrihuted substantially to the inflation
which plagued the British economy and
greatlv helped to put Mrs Thatcher in
old, e
ever, the Lloyd George of the 1909
budget, social insurance and the Limehouse speech is far more radical than
Tony Blair
The contrast within the liberal tradition
turns my thoughts back to that dinner
with the parliamentary Liberal Party on
16 March 1954. Among the members of
the PLP at that time, the diversity of
views was such that the half-dozen MPs
could on some votes divide three ways.
Aye, No and Abstain The principal positions of American politics were represented in the one party, ranging from
views rather to the right of Senator Taft
to other views rather to the left of Senator
Humphrey. As historical background for
the present party configuration, I find
most relevant the reflections of Sir Rhys
Hopkin-Morris, QC, bom in 1888, an MP
from Wales since 1923 and Deputy
Speaker for the Standing Committees.
'No one,' he said when stating his political ethic, 'is to tell anyone else what is
good for him.' He rejected the claim to
such authority, whether asserted on 'the
aristocratic principle' or on behalf of 'the
community'. In the economy, as in opinLiberalism divided
ion, individual freedom must prevail.
Ihe election of 1997 is a watershed event When some fanners in his constituency
m that it confirms the double discontinu- had recently asked him if he supported
ity consisting of Tony Blair's final purge guaranteed prices', he replied that the
of socialism from the Labour Party as a very concept was 'a contradiction in
nice supplement to Margaret Thatcher's terms'. 'You can have a guarantee, or a
demotion of Tory paternalism among the price, but not both.' When my host Joe
Grimond reminded him that Adam
( onservatives.
litis double discontinuity did not Smith himself thought government
hring ideology to an end It left British should provide roads, bridges, docks
politics dominated by liberalism— and the like. Sir Rhys conceded that in
divided sharply, however, as it had some respects the father of laissez-faire
I'ccn historically when the laissez faire was a bit too interventionist.
liberalism of the nineteenth century
So nourished on what I recorded in my
C.ave way to the social liberalism of the notes as 'the pure milk of Gladstonian
twentieth. Rather too broadly, one could liberalism'. Sir Rhys cogently identified
personify the contrast as Gladstone v
1906 as the moment when the Liberal
I loyd George. Surely, the Gladstonian Party deserted its old faith. He could
passion for 'the saving of candle ends' not bear any mention of Lloyd George
is reflected in Williai.i Hague's fixation and admired Asquith only because he
on reducing the size of government and thought the Prime Minister did not
i utting back social spending So far, how- really approve of LG's social reforms.
i?2
SAMIIEI H. BEER
O The Political Quaitorlr FS4>brivlng Co. Ud 19*7
How radically the direction of economic
and social policy had been changed by
the new social liberalism appears when
one considers that momentous record of
half a dozen years: financial empowerment for trade unions, the eight-hour day
for miners, minimum wages, labour
exchanges, old-age pensions, sickness
and unemployment insurance and, most
explosive, heavier taxation of the rich
and especially of landowners. While the
fiscal constraints which Tony Blair, like
Bill Clinton, has felt obliged to accept
prevent him from aspiring to so grand
an achievement, he can find a rationale
for such reforms as are financially feasible in that model of social liberalism. Yet
is there no prospect of greater accomplishments for a Blair Government than
this admirable and necessary but piecemeal refinement of the welfare state?
Constitutional reform v. the
elective dictatorship
Although Mrs Thatcher spumed the
interventionism and paternalism of her
predecessors, she retained the quintessentially Tory belief in strong government, sharply centralising political
power while at the same time labouring
to decentralise the economy. If Tony Blair
is looking for an advance which would
leave footprints in the sands of time, why
should he not find it in an all-out attack
on this 'elective dictatorship'? Constitutional reform to enhance 'government by
the people' has been a hallmark of liberalism from its earliest days. Could not
Tony Blair make 1997 a great Whig landslide for constitutional reform comparable to the Reform Act of 1832 and the
Parliament Act of 19117
Opinion among the political elite and
the general public promises wide support and indeed pressure for such a bold
initiative. Denouncing 'the most centralised government of any large state in the
western world', Blair has promised, both
0 Tht PoUUcal Quuttrly PublitWnj Co Ltd. 1997
before and since taking office, major
institutional reforms, including decentralisation and devolution, a Bill of Rights,
freedom of information, reform of the
Lords and consideration of proportional
representation. While I am strongly in
favour of participatory reforms, as I
have argued in these pages, some of
the proposed measures are unnecessary,
dangerous and, I am happy to add,
unlikely to be adopted by this Prime
Minister. I will emphasise only three
points put forward in that critique.
First, I repeat my warning, based on
American experience, that a Bill of
Rights empowered by judicial review
may well end up making the supreme
constitutional court in effect a superlegi8La hire. Like the American Supreme
Court, for instance, it might well discover
that spending one's money is a form of
free speech which the British legislature
may not abrogate in an effort to reform
campaign finance.
Secondly, among all the proposals, the
most dangerous is proportional representation. I am greatly influenced by the
terrible example of how PR in its purest
and fairest form helped to plunge the
Weimar Republic into the gridlock that
prepared the way for dictatorship. This
danger can be averted if the threshold for
proportionality is high; for instance,
10 per cent, which in Britain would
meet the complaints of the Liberal Democrats but keep the way closed to the
multitude of parties which might arise
on ethnic, religiotis, regional or idealistic
bases. The rationale of representative
government is not only fairness in its
transmission of the people's interests
and opinions; it must also provide a
political base for effective governance.
Finally, I would support further authority for the select committees,
enabling them not only to criticise existing legislation but also to exercise real
power in amending and proposing Bills.
Already there has been a strong drift of
action in the House away from plenary
2
BRITAIN ARTS* BLAIR
323
�sittings to the select committees, as Philip
Norton has recently reported. Frank
Field's move up shows that an MP can
forward his political career by his activity
as a member of a select committee.
Many, I know, hope for a 'new era' of
participatory democracy in Britain
thanks to fundamental constitutional
reform. But on the basis of common
sense and his record I do not believe
that Tony Blair, who as party leader has
done so much to centralise power in the
leadership—indeed, in the Leader—will
as Prime Minister tum around and dissipate that andent and formidable monopoly which has made possible the great
liberal achievements of the past. Surely
he could not accept a fixed term for
parliament, entrenched in a written constitution, thereby surrendering one of the
sturdier weapons of holding together a
majority by the threat of dissolution.
In his resistance to such pressure, Tony
Blair will also be recognising the continued need for strong government. The era
of Big Government is not over, even
though Tony Blair said so at the party
conference of 1995 and Bill Clinton, in
almost exactly the same words, told Congress so a few months later. Blair cannot
do more than Thatcher did to cut back the
huge public sector. Despite her best (or
worst) efforts she failed to reduce government spending—as William Hague fully
recognises. In a recent comparative study
Paul Pierson has shown how, from a
financial point of view, the welfare state
in Britain has survived more than a
decade of Conservative hostility virtually
intact.* As a percentage of gross domestic
product, total outlays on social programmes for merit goods and income
transfers, which stood at 27.5 per cent in
1979, remained at 27.4 per cent in 1990.
Total government spending, including on
3
324
SAMUEL H. BBBK
defence, likewise was stable, falling
slightly from 44.9 per cent to 43.2 per
cent of GDP. In the Amencan case,
while the totals are smaller, the change
is also negligible. For the decade 1978-89
our social spending rose slightly from
20 per cent to 21 per cent of GDP and
our total governmental outlays from
33.2 per cent to 36.9 per cent. Subject as
it is to the pressures of an interdependent
world for continual adjustment, this huge
public sector will need firm and coherent
direction from its political centre.
The 1997 poll was a watershed election
consolidating the transition from a Tory
and socialist Britain to a liberal Britain.
Now British liberals, like American liberals—more specifically, Tony Blair and
Bill Clinton—must define the ends and
devise the means to control the unruly
pluralism and to direct the vast public
sectors of their respective modem, democratic, capitalist welfare states. Their task,
in short, is to fit Big Democracy to Big
Government. The landslide of 1997 has
put Tony Blair in the position to lead the
way.
Notes
1 Samuel H. Beer, "The Future of British
Politics: An American View', Political Quarterly, January-March 1955.
2 Samuel H. Beer, 'Government by the
People?', Political Quarterly, April-June
1993.
3 Philip Norton, 'Greater Institutionalization,
Less Public Support: The British House of
Commons', Extensions: A Journal of the Carl
Albert Congressional Research and Studies
Center, Spring 1997.
4 Paul Pierson, Dismantling the Welfare State?
Reagan, Thatcher and the Politics of Retrenchment, Cambridge, 1994, and The New Politics of the Welfare State', World Politics,
January 1996.
© Tht Politic i l Quarterly Publishing Co Ltd. 1997
�RadcIiffe-FIeet Project
Team Report
Radcliffe Team;
Lotte Bailyn and Paula Rayman, Co-Principal Investigators
Manreen Harvey, Robert K r i m , Robert Read,
Fran^oise Carre, Jillian Dickert, Pamela Joshi, Alina Martinez
RadcllfTe Public Policy Institute
© 1997 Paula Rayman
�Introduction
As we approach the end of the 20th century, American workers and their
employers confront a number of pressing challenges. How can we build economic
secunty for ourselves and our families in the midst of turbulent economic change? How
should American business best respond to the demands of an increasingly competitive
global market? How can we meet the ever-increasing demands of our jobs and careers
and still fulfill the needs of our families and our communities?
A prevailing myth is that the struggle to meet business goals and the struggle to
achieve a high-quality work and family life and community are mutually exclusive.
According to this myth, success in the business world necessarily comes at the expense
of—and leaves no time for—caregiving, community service, personaJ reflection, and
creativity. Since the dawn of the industrial revolution, work has been organized
according to this idea, pitting people's work commitments and options for livelihood
against their families, communities, and personal lives.
Across the nation, employers and employees alike are realizing that holding on to
this myth is destructive to family life and communities, but also to business. Randy
Tobias, the chief executive officer of Eli Lilly, has said, "it is the business of business" to
organize work in a way that supports family life. John Parkington of Watson Wyatt
Worldwide explains: "No company can lead the market for long with disaffected workers.
A company can only succeed over the long haul if workers and management alike are all
pulling in the same direction."
1
Workersreporttheir frustration. In running to stay in place, they say, there seems
to be less and less time to live a fulfilling life. Recently, the President of the United
States held a Summit for America's Future, which called for Americans to take more
active roles in their children's education, to better care for the elderly, and to devote more
time to community service. Recent studies demonstrate that the most important predictor
of children's success in school is parental involvement and that the most rapidly growing
sector of our population is people over 80 (a group often requiring the most extensive
caregiving). Scholars and civic leaders worry that the fabric of American democracy is
threatened by the unraveling of civic institutions.
It is time to replace the dominant and destructive myth that depicts full
involvement in work and devotion to family and community as mutually exclusive; it is
time to replace a win-lose scenario with a win-win reality for employers and for
employees. The results of the Radcliffe Fleet Project (RFP), as described in this report,
show that work can be reorganized to enhance both business success and the quality of
work life and family and community life. The RFP's most important finding is that even
in the midst of ongoing change, often turbulent and unrelenting, attention to quality-of-
1
Quoted in National Report on Work and Family, Volume 10, No. 8, p. 179.
�life issues can be beneficial to a company's bottom line. Indeed, the evidence suggests
that businesses that work constructively to integrate work organization with the realities
of family and community life will be better positioned to create the innovative
organizations that will compete successfully in the Twenty-first Century. While parts of
the story have unique meaning for Fleet and the banking industry, most of this project's
lessons can inform the larger universe of workplaces across our country and beyond.
They can aid us in moving beyond the myth of win-lose struggles and toward a better
quality of life for American businesses and workers.
Paula Rayman, PhD
RadcllfTe Public Policy Institute
December, 1997
�THE BOSTOK GLOBE « MONDAY.3EPTEMBER 1,1997
A Labor Day l o at w r m men and w mn
ok
ok g
o e
Our civic passion
for fairness...
PAULA M. R Y A
AMN
L
abor Day lignils tbe end of aonwier, tnd for
many of us it is »igra£ca/it nMatty u. a time to
J»ui funiiiea and fhendsat barbecues ind uvor tke last of the season's aunrfiine before
eadiig tack to the grind of worij and school.
Its also a good lime toreflecton what Labor Day
i really all about - and to take a bng, hard took at the
ves tf Araerica's uorldag men aad women in 1997.
LaaJdog back, we set a thriving ecottomy whose gaina are not beig shared with all workers - Wall Street'a bull market ta fattening
umy a portfolio, but the infhtion-a^jisted earnings of workere jn the
otton half of the economy hav e dropped since (he lite ISSOs. Child
od taitioa erwiita in the new tax hill will ease the burden on many
trking parents and help thousands of atiidenca get educatioiK, but luehHke the economic loom - the tax bill'* benefits are not being
iatrihutedfairly:'Hioseat the top of the econonic ladder reap the
lost benefit, while the pooreit of the workiig p«or will see little gain,
torewer, man}' worken arefindingit harder ts do Iheir jobs, make
ids meet, and atoll give their families the bme and attention thev
•ed.
Take the caje of Joanna Upton. The Massackusetts Supreme i t
dal Court recently upheld therightof Upton's emplo}'er, JVrP Binesedand in Dedham (now of Purchase, NAM, to terminate this sine mother because she couldn't work £0 hours a week, commute 90
InuUs a day, and take <are cf her young sm.
When hired by JWP aa a product manager, Uptoa aaid, she was
Id that her hours vould befia.m. to &30 pm., but that she would be
.pected tc shcxr up at work at 8:15 and toforgolunch breaks. Most
tys she atayed in tie office veil pastfc30.But that wasn't enough,
'eparing for an uptomiag merger, the compan; demanded that all
anagerial staff xnvk until 9 or ICeack nigkt Upton asked to take
)richome instead. The
taid no. She ttayed home with her
'k wn one day, mused a meeting, and wasfiredsoon after.
In a case that should aend chills down the spine ol every at-will
iplojee everywhere (tint's all of ua witboat a contract), the SJC
led that tbe Commonwealth's stated intertst in protecting families
ea not prevent an employerfronEring ac at-will employee for resing to mrk O'erlame to attend to family tbligitiom.
We are all left wondering vhat Joenna Upton could possibly have
en enpected to do? Leave her son alone, rak his health and safety,
d spend time in a different Massachusetts oouitraofli brought up on
gleet charges!
Upton is notalone. Last year, the journal Pedatrra reported that
ire than one-quarter of all wortdng mothers tack akk leave that
uld enable them to lake care of their sick children
across the csuntry, tHs summer has had a happier ending.
A/la- a IS-da; Teamsters strike, thousands of Lf nifed Parcel Service workers returned totetter-payingJobs, vith ognifieanUy increased opportnnities for pait-iime workers to get full-time jobs
In Boston, the recent passage ofa living-wage orduanoe by May
cr Thoiaas Henino means that moat employeea of companies doing
businesi with the citj'or receiving city grants and aubsdrea will be
gnirajiteed a wage of $7.49 an hour - no pricely sun, but enough to
boost a family of four jost over the federal porerty level. Opponents
have argued that the hill trill hurt workers by dampenlig the local
butineM climate, but a study ofa aimQarordiaance in Baltimore
showed no significant detrimental fuealor economic impact
Ama-ica, it is aaid, is a land of opportnnity. But as a sotietv we
also valae fairness. The UPS strike, the Ivtng-wage delate, and the
Upton case go to the heart of oar chic passion for both.
Despite inconveniencing so manj, the UPS strike received tremetidou popular support. Why? Because it cMn't seem fair that thousands of part-time workers could work dXgently and loyally for yean
and still be paid a substantially smaller wage than their full-tirne colleagues - with no real hope of achieung the elusive, prinleged fulltime status. It didnt seem fair that a profitable company couldn't
share morerfttsproaperity with the people who make it possible.
The liviag-wage debate strikes the same chords. How fair is It for city
contractors - funded by the taxpayers, often benefiting fron tax
breaks and aabaidies - not to pay their employeeB enough to Uve on?
What does it say about fairness and opportuniy in our jodety that a
man or voman can work 40 hours a week pushing a mop and not
make enough to pay for electricity, which was the taaefcrjanitors in
Baltimore before that aly enacted its living-wage ordinance?
In the case of Joanna Upton, how fair is it for a company to demaid exorbitant amounts of overtime and io force a woman to choose
between leaving her sick child unattended or baing her livelihood?
These are some things lo think about aa we lake the last long gulp
of summer aad celebrate the aduevemenla of our natioi's workers.
Paula Af. Raynuu is Vie dinrctor of tlutttWicPolieu Iraf itvie ai Rod-
�^ Radcliffe
JMFteet
Radcliffe and Fleet Join in Work/Life Integration Project
The Radcliffe Public Policy Institute and Fleet Financial Group are collaborating on a pilot
project to explore new approaches to work that can achieve better work/life integration. The goal
of the project is to develop solutions that can enhance both business goals and employees'
well-being.
Mission of Radcliffe Public Policy Institute
The Radcliffe Public Policy Institute works to engage women and men as equal partners m
shaping policy on important economic, social, and political issues. By bringing together a
variety of constituencies, the Institute creates new strategics and contributes effective solutions
for selected public policy problems. Currently, the Institute focuses on work and the economy
The collaboration with Fleet is a continuation of the Institute's work on "The New Economic
Equation: Redefining the Economy, the Workplace, and the Family."
Radcliffe's New Economic Equation
Introduced in 1995, the New Economic Equation project includes a broad research and policy
agenda. By exploring various new ways of organizing work, the Institute seeks to alleviate some
of the stress on families and individuals that results from economic and workplace changes. The
complexity of today's economy and the variety of factors that affect employees and their families
mean that no one solution will work for everyone. The Institute looks to all segments of society
for innovative answers, and promotes flexibility, debate, and openness to new ways of working
as essential to finding effective solutions.
Fleet's Role
The Institute will work with the managers and employees at two fleet sites to devise new ways
of working that can enhance business goals and employees' well-being. The study will focus on
how work is accompliahed, its impact on employees' personal lives, and how changes in the way
work is done can positively affect employees' home and work lives. The Institute's prior
experiences with other organizations indicate that the most successful solutions are not based
only on individual accommodations - such as four-day work weeks or flex time - but on more
general workplace changes. Part of the project involves the creation of better measures of both
business outcomes and employees' ability to integrate their work with their lives outside of work.
Fleet recognizes that a crucial factor in its continued success is the ability to attract, retain, and
recognize a workforce that commands the skills necessary to meet the challenges inherent in
today's workplace. Fleet has grown rapidly during the past ten years and is currently the nation's
eleventh largest bank holding company. To become an employer of choice, Fleet must be
willing to employ a variety of traditional and nontraditional workplace solutions to meet the
needs of the business and the well-being of its employees.
Both Radcliffe and Fleet are enthusiastic about the opportunity to work together to address
important concerns in the Fleet community, as well as in society as a whole. Results will be
communicated in the fall of 1997.
�j futiA. Ajjruri
Want
to K n o w
More?
Tn reaJ further on rlus subjeLt requires cor\s»derable selectivity, as rhe
amount ol literature on democracy has expanded evfn faster in recent
years than the trend toward democracy itself. An excellent starting
point ii the new Uxik by political scientists Juan J. Linz and Alfred
Stepan, who address the difficult question of how societies can go
beyornl initial denmxratic openings to the actual consolidation of
democracy: Problms of Democraoc Tnvuition and ComMadm: Souihrm
Europe, South America, and Post-Coxnmurust Europe (Baltimore: Johns
Hopkins University Press, 1996). Political scientist Philippe Schmitter
seeks to go beyond "tiansitology" to "corsolidology" in his Transitolpgy: The Science or the Art of Democratcarionr in Joseph S. Tulchin,
ed., TTte ConsoWooon of Democracy m Latin Amrrica (Boulder: Lynne
Rienner, 1995). Larry DiamonJ, coeditot of the journal af Democracy,
offers a realistic, thorough exploration of whether the global JeinocnTic trend has come to an end in "Is the Third Wave Over?" JowmaJ af
Demoaacy 7, no. 1 (July 1996). The swte of democracy in the world
and the proper place d democracy pinmotioii in rhe Clinton administration's foreign policy are exaimncd in Thomas Carothers, Democracy Withotii Illusions," Foreign Affairs 76, no. 1 (January/February 1997).
Political scientists Adam Pneivonki and Fernando Limongi present a
sysienutic, eye-opening analysis of the relationship between economic
development and Jetiuxracy in their .irtide "Modemizalion: Theories
and Facts," Woihl Mtcs <\9, no. 2 (January 1997). Former French Foreign Ministry strategic nrfnire ad\ iser Philippe Delows, nn jca>mpli>hed
French realist, ir.isb a pix un tbe denuxiraty house in his new boii, The
Rosy Future of War (New York: The Free Press, 1997), arguing that
strunt;, stable state?, and not democraric states, aic the key to inteniational peace and sccurir^'.
For links rn Web sites rhar offer itill more useful ard iiiteiesting
infurnution. visit
KOKtir.N
POLICY'S
Weh •site at
www.fofeignpolicY.com
Sense and
N ne s in the
o s ne
Globalization
Debate
byDmiRairik
lobalization, Thomas Friedman of
the New York Tunes has observed, is
the next great foreign policy
'debate/Yet as the debate expands, it
gets more confusing. Is globalization
u
a source of economic growth and prosperity, as most economists and
many in die policy communitv believe? Or is it a threat to social stability and the natural environment, as a curious mix of interests ranging
from labor advocates to enviionmentalisc^and including the unlikely
trio of Ross Perot, George Soros, and Sir James Goldsmith-argue? Has
globaliation advanced so far that national governments are virtually
powerless to regubte their economies and use their policy took to further social ends? Is the shift of manufacturing activities to low-wage
countries undeim.ning gbbal purchasing power, thus creating a glut in
goods ranging from autos to iircrafr?Or is globalization no more than a
D*Nl RODRIX
iteRafoHmpmfrwcjinirruMndpokaai*^
«rrf IWvrniry. Tfus arncl* is baed on tht mtfWi book. Has Global.ation Gone Too hi
(liuoniK /OT ln(«naoonal Ecorwmici. 1997).
IS
Foil EI ON
Poiirr
S u M v i H I 9 "> 1 19
�( Aihutraur.'n
tnurworJ and its impact greatly exaggerated?
There are good reasons to he concerned about the quality of the
globalization debate. What we ate witnessing is more a dialogue of the
deaf than a rational discussion. Those whofevorinremattonal integration dismiss globaliiation's opponents as knee-jerk protectionists
who do not understand the principle of comparative advantage and
the complextdes of trade laws and institutions. Globaliiation's critics,
or the other hand, fault economists and trade specialists foi thtir narrow, technocratic perspective.
They argue that economists
are too enamored with their
fancy models and do na have
a good handle on how the real
world works. The result is chat
there is too much opponent
bashing—and too little learning—on each side.
Both sides have valid oomplaints. Much of the popular discussion about globalization's
effect on American wages, to
pick one imponant example,
ignores
the
considerable
research that economisa have
undertaken. A reasonably
— - — ^ — — — — ^ — informed reader of the nation's
leading op-ed pages couid be
excused for not realizing that a substantial volume of literature on the
relationship between trade and inequality exists, much of which contradicts the siniplistic view that Americans or Europeans owe their deteriorating fortunes to low-wage competition from abroad. The mainstream
academic view actually is that increased trade with developing countries
may account for at most 20 per cent of the reduction in the earnings of
low-skilled American workers (relative to highly skilled workers) but not
much more. One has to look elsewhere—to technological changes and
deunionitarion, forexample—to explain most of the increase in the wage
gap between skilled and unskilled workers.
It is also true, however, that economists and proponents of trade
have either neglected or pooh-poohed some of the btoader coniplica-
The ideological
onslaught against the
welfare state has
made many
governments unable
to respond to the
domestic needs of a
more integrated
economy.
JO
FOKUI.N
Poiri:i
tions associated with international economic integration. Consider tlie
following questions: To what extent have capital mobility and the cutsourcirg of production increased the suiudnoaWiry of domestic labor
across national boundaries, thereby aggravating the economic insecurity confronting workers (in addition to exerting downward pressare on
their wages)? Are the distributional implications of globalization—and
certainly there are some—reconcilable with domestic concepts of distributive justice? Does trade with countries that have different noims
and social institutions clash with and undermine long-standing domestic social bargains? To what extent does globalization undermine the
ability of national governments to provide the public goods that their
citizenries have come to expect, including social insurance against economic risks?
These are serious questions that underscore the potential of globally expanding markets to come into conflict with social stability, even as
these markets provide benefits to exporters, investors, and consumers.
Some of these questions have not yet been seriously scmtinued by economists Others cannot be answered with economic and statistical analysis alone. But the full story of globalization cannot be told unless these
broader issues are addressed as well.
T H E L I M I T S OF G L O B A L I Z A T I O N
Even with therevolutionin transportation and communication and the
substantial progress made in trade liberaliiatton over the last three
decades, national economies remain remarkably isolated from each
other. This isolation has a critical implication, which has been repeatedly emphasized by economist Paul Krugman: Most governments in the
advanced industrial world arc not nearly as shackled by economic globalization as is coramcnly believed. Theyretainsubstantial autonomy in
regulating their economies, in designing their social policies, and in
maintaining institutions that differ from those cf their trading partners.
The supposition that domestic economies are now submerged in a
seamless, unified world market is belied by various pieces of evidence
Take the case of North America Trade between Canada and the United States is among the freest in the wotld and is only minimally bam
peredby transport and communications costs. Yet a study by Canadian
economist John McCallum has documented that trade between a
Canadian province and a U.S. state (that is, intemicional trade) is on
S u vi M f k
I W 7
Jl
�(Slrihalizautn
average 20 times smaller than trade benwen two Canadian provinces
(that is, mtraraitiOTUiI trade). Clearly, rhe VS. and Canadian markets
remain substantially delinked from each other. And if thii is true of
U S -Canadian trade, it must be all the more true of other bilateral
trade relationships.
The evidence on the mobility of physical capital also contradicts current thought. Popular discussions take itforgranted that capital is now
enbrdy free ro cross national boniets in its search for the highest
rerumsi. As economists Martin Feldstein and Charles Horioka have
pointed our, if this were tnre, the level of investment that is undertaken in France wotild depend only on the profitabUity of investment in
France, and it would have norelationshipto the available savings in
France. Actually, however, this turns out to be false. Increased savings
in one country translate into increased inwstments in that country
almost one for one. Despite substantial cross border moneyflows,different rates dreturnamong countries pereist and are not equalized by capital moving to higher-return economies.
One can easily multiply the examples. U.S. pottfblios tend to be
remarkably concenttated in U.S. stocks. The prices of apparently identical goods differ widely from one country to another despite the fact
that the goods can be traded In reality, national economies retain a
considerable degree of isolation from each other, and national policymakers enioy more autonomy than is assumed by mostrecentwritings
on the erosion of national sovereignty,
Tlie limited nature of globalization can perhaps be better appreceted by placing it into historical context. By many measures, the world
economy was mote integrated at the height of the gold standard in the
late 19th century than it is now. In the United States and Europe, trade
volumes peaked before World War [ and then collapsed during the
intenvar yean Trade surged again after 1950, but neither Europe nor
the United States is significantly more open today (gauging by ratios of
trade to national incone) than it was under the gold standud. Japan
actually exports less of its total production today than it did during the
interwar period.
GLOBALIZATION
MATTERS
It would be a mistake to conclude from this evidence that globalization
is irrelevant. Due to rhe increased importance of trade, the options
21
F<IK EK;N
f o i ic \
available to national policymakers have narrowed appreciably over the
last three decades. The oft-mentioned imperative of maintaining 'international competitiveness" noiv looms much larger and imparts a definite bias to policymaking.
Consider labor market practices. As France, Germany, and other
countries have shown, it is still possible to maintain labor market policie< that increase the cost of labor. But globalization israisingthe overall social cost of exercising this option. European nations can afford to
have generous minimum wages and benefit levels if they choose to pay
the costs. But the stakes—the resulting unemployment levels—have
been raised by the increased international mobility cf firms.
The consequences are apparent everywhere. In Japan, large corporations have started to dismantle the postwar practice of providing lifetime employment, one of Japan's most distinctive social institutions. In
France and Germany, unions have been fighting govemmer.t attempts
to cut pension benefits. In South Korea, labor unions have taken to the
streets to protest the government's relaxation of firing restrictions.
Developing countries in Latin America are competing with each other
in liberalizing trade, deregulating their economies, and privatizing (xiblic enterprises.
Ask business executives oi govemmenl officials why these changes
are necessary, and you will hear the same mantra repeated over and over
again: "We need toremain(or become) competitive in a global economy." As some of these changes appear to violate long-standing social
bargains in many countries, the widespread populist reaction to globalization is perhaps understandable.
T l * anxieties generated by globalization must be seen in the context
of the demands placed on national governments, which have expanded
radically since the late 19th century. At the height of the gold standard,
governments were not yet expected to perform social-welfare functions
on a large scale. Ensuring adequate levels of employment, establishing
social safety nets, providing medical and social insurance, and caring for
the poor were not parts of the government agenda. Sucb demands multiplied during the period following the Second World War. Indeed, a
key component of the implicit postwar social bargain in the advanced
industrial countries has been the provision of social insurance and safety nets at home (unemployment compensation, severance payments,
and adjustment assistance, for example) in exchange forthe adcption of
freer trade policies.
SLMMER
{9<}7
�ijlohulijauui)
Forms of Social Insurance
AH societiesraajntamptoTisions for social insurance to counter large
drops in workers' and families' living itandards, bur that insurance takes
different forms. In Europe and North America, income transfer! paid out
by the government are the piedotninant form of social insurance. Oldage pensions, unemployment compensation, disability insurance, and
famiy sif>fX3rt constitute the bulk of such trarsfen. The effect of these
programs is twofold: They establish an income minimumfoithe citixnry
rcgardless of employroent status, and they reduce uncertainty regarding
lifetine earningsforworkers,fathe United States, the Trade Adjustment
Assiitance (TAA) program cargrts wortcen who lose their job due to
import comptrition. The TAA provides additional unemployment benefits, traimng subsidies, and relocation assistance. Comparatively few
workers have benefited from TAA.
In Japan and other East Asian oom trie*, income tianstera are small
compared with those in European nations. Many of the social insurance
functions provided by the state in Western nations are in fact supplied by
large enterprises in East Asia These come in theformof lifetime -employment gwarantees and employer-provided social services, ranging from
housing and medical care to family suppon.
Many developing countries lack the administrative capacity to run
irKome-transfei prugnrm, and only a small share of the laborforceis
employed in the formal sector. In such cotntries, social insurance often
takes yet anotherform:public works programs and employment in the
public sector, where jobs are typically more secure than in the private sector.
Government pcograms are not tht only mechanism for teducing
income risk. Private insurance, community support, and household trarufm are also unportant. As markets spread and mobility increases, however, some of the informal mechanisms for alleviating income
insecurity—4uch as community-based social services—will become harder to sustain.
This baiBain is clearly eroding. Employer are less willing to provide
the benefits of job security and stability, partly because of increased
competition but also because their enhanced global mobility makes
them less dependent on the goodwdl of iheir local workforce.Governments are less able to sustain social safety nets, because an iniporant
part of their tax base has becomefootloosebecause of the increased
mobility cf capital. Moreovet. the ideological onslaught against the welfare state has paralyzed many governments and made them unable to
respond to the domestic needs of a more integrated economy.
MORE
TRADE,
MORE
GOVERNMENT
The postwar period has witnessed two apparently contradictor, trends:
the growth of trade and the growth of government. Prior to the Second
Worid War, government expenditures averaged around 20 per cer.t oj
the groes domestic products (CDPS) of today's advanced induanaliied
countries. By the m i d - i m , thatfigurehad more than doibled to 47
per cent The increased role of government is particularly stnkingin
ajuntries like the United States (from 9 to 34 per cent), Sweden {bom
10 to 69 per cent), and the Netherlands (from 19 to 54 per cent). The
dnvit« force behind the expansion of government during this period
waa the increase in social spending-and income transfers in paniculat
It is not a coincidence that social spending increased alongside international trade. For example, the small, highly open European
economies like Austria, the Netherlands, and Sweden have large govemments in part as a result of their attempts to mimmue the social
impact of openness to the international economy. It is in the most open
countries like Denmark, the Netherlands, and Sweden that spending or
income transfers has expanded the most.
Indeed, there is a surprisingly strong association across countries
between the degree of exposure to international trade and the importance of the government in the economy. The chart on page 26 shows
the relationship between trade and spending on social protection
(including unemployment insurance, pensions, and family benefits) in
21 countriesforwhich the Otganiration for Economic Cooperanonand
Development (OECD) publishes crossnationally comparable data. The
chart reveals an unmistakably positive correlation between a nations
openness to trade and the amount of its spending on social propan^ At
one end of the distribution we have che United States and japan, uhich
SL'MMER
24
FOUEICN
FOLIC t
19»7
2?
�•fiohalfjiicim
have the lowest trade shares in GDP and some of the lowest shares ci
spending on »cial protection. At the other end. Luxembourg, Belgium,
and the Netherlands have economies with high degrees of openness and
large income transfers. Thsrelationshipis not confined to OECD
oonomtes: Developmg nations also exhibit this pattern. Rirthermore
the extent to which imports and exports were important in a countrv's
economy in the early 19605 provided a good predictor of how big io
^vemment »ould become in the ensuiig three decades,regardlessof
how developed it was. All the available evidence points m the same
unavoidable conclusion: The social welfare state has been the flip side
ot the open economy
RBIATIOINSHIP BETWEEN TRADE AND SPENDING
Oi* SOCIAL PROTECTION (1980)
35 r
30
23
SrmlfWm, 20
(pacta of CSF)
tradeoffs facing governments in increasingly open economies: Tlie
demands for social programs are being balanced against the need to
reduce the tax burden on capital, which has become more globally
mobile.
By any standard, the postwar social bargain has served the world
economy extremely well. Spurred by widespread trade liberalization,
world trade has soared since the 1950s. This expansion did not caise
major social dislocations and did not engender much opposition in the
advanced industrial countries. Today, however, the process of international economic integration is taking place against a backdrop of
retreating governments and dimuushed social obligations. Yet the need
for social insuranceforthe vast majority of the population that lacks
international mobility has not diminished. If anything, this need has
grown.
The question, therefore, is how the tension between globalization
and the pressure to mitigateriskscan be eased. If the vital role that
social insurance played in enabling the postwar expansion of trade is
neglected and social safety nets are allowed to dwindle, the domestic
consensus infavorof open markets will be eroded seriously, and protectionist pressures will soar.
15
T H E
GLOBAL
TRADE
IN SOCIAL
VALUES
10
*
SA
100
Sim of bporu ud jnpom [pa « u ol CW|
150
;
200
Sovu. AtiKr
Internationa! economic integration thus poses a serious dilemmaOlobalization increases the demand for social insurance while simultaneousfr constraining the ability of governments torespondeffectively
to that demand Consequently, as globaliation deepens, the social consensus required to keep domestic markets open to international trade
erodes.
Since the early 1980s, tax rates on capital have tended to decree
m the lead^g industry nations, while tax rates on labor have continued generally to increase. At the same time, social spending hasstabilued mrelationto national incomes. These outcomesreflectthe
l(>
Fo«e;cf<
POLICY
In the markeu for goods, services, labor, and capital, international trade
creates arbitrage—the possibility of buying (or producing) in one place
at one price and selling ac a higher price elsewhere. Prices thus tend to
converge in the long nm, this can veigence being the source of the gains
from trade. But trade exerts pressure toward another kind of arbitrage as
well: arbitrage in national norms and social institutions. Thisformof
arbitrageresults,indirectly, ai the coits of maintaining divergent social
arrange ments go up. As a consequence, open trade can conflict with
long-standing social contracts that protect certain activities from the
relentlessness of the free market. This is a key tension generated by
globalization.
As the technologyformanufactured goods becomes standatdked and
diffused internationally, nations with different sets of values, notms,
institutions, and collective preferences begin to compete head on in
markets for similar goods. In the traditional approach to trade policy,
this trend is of no consequence: Differences in national practices and
SVMMER
1997
�('ItibiiliruiK
^ . a J ^ i n i n o n , are. in effect, treated ju,, hke any other differences
rtai_ determme a country comparative advantage (such as endowments
of physical capital or skilled labor).
s
In practice however, trade becomes content.ous when it unleashes
forces that undermine the social norms unplkit in domestic practices.
£nerample not all residents of adv^ced industnalcountr J a t e com^
wtth ihe ^ e n i n g of domestic ^titut^ns thmugh the fo^es
ix,u* Carolmao, when cuts m pension benefits in France are called for
•nresponse to the requirements of the Treaty on European Union. This
sense of unease is one way of
U p e i l trade Call
interpreting the demands for
^
«. .
..,
. _
"fairtrade'MuchofthediscusCOIUllCl W i t h SOCial
>n surrounding the new issues
sit
contractsihaiprotect l J & T Z £ j £
certain activities from Z Z T £ ? 3 Z Z
the relentlessness of ^ pf ^^ 0
ii
»
Trac
,
we tree market This
•o n
i
•
p
IS d k e y t e n S l O n O f
plahaYlJtlitnn
"'
1 feirness
l e usually redistributes
incon,e
amo
n« i d sre,
n uti s
regions, and individuals. Therefore,
a principled defense of ftee
^ constructed
of tbe fairness and legitimacy of
t r a d e
c a n n o t
*«.**--- w ^ c^ts^ Sir
ten. U. -wageforeigncompettion arisingfroman abundance of workers « d.ffcren, from compet.t.on that is created by foreign labor
practices that violate notms at home. Low wages that resdt fcm
demography orh.sto^ are very differentfromlow wages that result from
governmentrepressionof unions.
From this perspective .t is easier to understand why many people are
often , 1 a ease with the consequences of mtemational econornkTme1
gratton Automatically branding all concerned groups as self-mterested
protecnonwsdoes not help much. T h . perspective abo prepares us not
to expect broad popular support for trade when trade involves
exchanges tha, clash with (and erode) prevailing domestic social
w
t
£8
FotticN
FOLICY
arrangements.
Consider labor rules, for example. Since the 1930s, U.S. laws have
recognized that restrictions on "free contract" arc legitimate to counteract the effects of unequal bargaining power. Consequently, the
employment relationship in the United States (and elsewhere) is subject to a multitude of restrictions, such as those thatregulateworking
hours, workplace safety, labor/management negotiations, and so forth.
Many of theserestrictionshave been put in place toredressthe asymmetry in bargaining power that would otherwise disadvantage workers
vis-i-vis employers.
Globalization upseo this balance by creating a different sort of asymmetry: Employers can move abroad, but employees cannot. There is no
substantive difference between American workers being driven from
their jobs by theirfielbwdomestic workers who agree to work 12-hour
days, earn leas than the minimum wage, or be fifed if they join a
union—all of which are illegal under U.S. law—and theit being similarly disadvantaged by foreign workers doing the same. If society is
unwilling to accept theformer,why should it countenance the latter?
Globalization generates an inequality in bargaining power that 60 years
of labor legislation in the United States has tried to prevent. It is in
effect erodng a social understanding that has long been settled.
Whether they derive from labor standards, environmental policy, or
comiption, differences in domestic practices and institution have
become matters of imerrational controversy That is indeed the common theme that runs the gamut of the new issues on the agenda of the
World Trade Organization (WTO). Conflicts arise both when these differences create trade—as in the cases of child labor or lax environmental policies—and when theyreduceit—as industrial practices in Japan
are alleged to do. As the New Yoik Tunes editorialized on July 11, 1996,
in connection with the Kodak-Fuji dispute on access to the photographic film market in Japan, "the Kodak case asks the WTO, in effect,
to pass judgment on the way japan does business."
The nations of "fair trade" and "leveling the playing field" thai lie
behind the pressures for putting these new issues on the trade agenda
have beenridiculedby economists. But once it isrecognizedthat trade
has implicationsfordomestic norms and social arrangements and that
its legitimacyrestsin pan on its compatibility with these, such notions
arc not so outlandish. These sentiments are ways of addressing the concerns to which trade gives rise. Free trade among countries with diffetSUMMER
1997
29
�RuWt
'j'uucuitiiiim
«nt domestic practices requires an acceptance of either an erosion of
domestic structures or the reed for some degree of harmonization or
convetgence.
If this is the appropriate context in which demands for "fair trade" or
leveling the playingfield"must be understood, it should also be clear
that policymalcers often take too many liberties in justifying theit
actions along such lines. Most of the pricing policies chat pass as "unfair
trade'' in U.S. antidumping proceedings,forexample, are standard business practice in the United States and other countries. While there may
not be a sharp dividing line between what is fair and unfair in international trade, one clear sign that pure protectionism is at the root of a
trade dispute, is the prevalence of practices within the cbmtstic economy that are identical or similar to those being protested in the international arena. Fairness cannot be eliminated from thinking about trade
policy; but neither can it be invoked to justify traderestrictionswhen
tbe practice in question does not conflict with domestic noons as
revealed by actual practice.
l e a d
social safety nets, and the repression of pobtical
« »««
^
exporters like China and Indonesia^re indeed valid Howevet; the
disregard for sound economic analysis and systematic empimalI evidencTthat characterires Greideri book makes it both a very unreliable
gmde to undemanding what is taking plaa and afaultymanual for set^ L j w h c y P^pe-ted in works like Greidees * that low
waees aTthe drivingforcebehind todays gbbal trade. If that were so,
theworld's mostformidableexporters would be Bangladesh "^asma^
rering of African countries. Some Mexican or Malays'^ expottjng
planumay approach U.S. levels in labor producovity. while
fallfa,short Yet what is true for a small number of plants doesnot
extend to ecoootmes as a whole and therefore does not have much bearing on the bui of world trade.
LABOR PRODUCTIVITY AND LABOR COSTS, 1985
100,000
an
MISUNDERSTANDING
TRADE
The tensions created by globaliiation are real. They are, however, considerably more subtle than the terminology that has come to dominate
the debate. "Low-wage competition," "leveling the playingfield,"and
"race to the bottom" are catchy phrases that often muddle the public's
understanding of the real issues. A more nyanced debate and more
imaginative solutions are badly needed.
A broader approach to this debate, one that takes into account some
of the aspects discussed here, provides more credibility to the defenders
of free trade in their attempts toclear up the misunderstandings that the
opponents of trade often propagate. Journalist William Gretder's recent
book, One World, Ready or Not—The Manic Logic of Global Capitakm,
illustrates the appeal that many of these misundentandingsretainin the
minds of popular commentators on trade.
Ont of the mam themes of this book—that the gbbal expansion of
markets is undermining social cohesion and is inexorably leading
toward a major economic and political crisis—could be viewed as a
more boldly expressed version of the potential danger that is highlighted above. Many of Gretder's concerns—the consequences for lowskilled workers in the advanced industrial countries, the weakening of
30
FOREIGN
Poucr
ni.
MS
10,000
. * at
oa.
rm'tta
ZWE
rut
•ecu
cn,
M . MIS
'sat
m
1
i
1.000
fawrr A i d -
ID.OOC
COP per worker (UW»
lao
ooo
Ikqulel
The above chart shows the relationship between economy-wide
labor productivity (CDP per worker) and labor costs in ^ ^ " ^
, W J T M V of countries. There is almost a one-to-one relat^hip
between these two, indicating that wages are ^
^ t e d to Productivity. Low-wage economies are thc^e in which levels of labor picduo
tivity are commensurately lo* Th* tendency is of coune no strpnse to
anyone with common sense. Yet much of the d^coune on trade preSuMmm
1 9*7
Jl
�t iubaiiraiMin
s.umes a huge gap between wages and productivity in the developing
countty exporters.
Similarly, it is a mistake to attribute the U.S. trade deficit to the
restrictive commercial policies of other countries—policies that Gieider
calk the "unbalanced behavior" of U.S. trading partnera. How then can
we explain the large U.S. deficit with Canada? If trade imbalances werc
determined by commercial policies, then India, as one of the world's
most protectionist countnes until recently, would have been running
latge trade surpluses.
Another misconception is that expon-oriented industrialization has
stmehowfailedto improve the livelihood of workers in East and Southeast Asia. Contrary to the impression one getsfromIwening to the
opponents of globalization, life issignificandy betterforthe vast roaiority of the former peasants who now toil in Malaysian or Chinese factories. Moreover, it is generally not the case that foreign-owned
companies in developing countries provide working conditions that arc
inferiot to those available elsewhere in the particular country; in fact,
thereverseis more often true.
Perhaps the most baffling of the antigfobalizatior arguments is that
trade and foreign investment are inexorably leading to excess capacity
on a gbbal scale. This is Greider's key argument and ultimately the
main reason why he believes the system will self-destruct. Consklerhis
discussion of Boeing's outsourcing of some of its components to the
Xian Aircraft Company in China:
Wken new production work was mcrveJ to Xian trom place* like
the United Stalet, tht glotal syMcm wu, in eflect. swippiog hlrfily paid iiuiiatruf worfiers for very cheap ooea. To put Ae point
more cmddy, Boeug vm achinging a $50,000 American
machinist fcr a Chinese machinist who earned $600 or $700 >
year. Which one could buy the worid's foods? Tius, even though
incomei and purchasing power were enpandingrobustlyamong
the new couumert of China, ihe overall effect waa an erouon of
the worid's potential rurchaiing power. If one muhipted the Xian
example acrox many faclwies and industral sccton, as weN as
other aspiring countries, one could begin to vitualix* whf global
consumption was uiuMe C keep up with global pcodncticn.
o
An economist would rightly point out that the aigument makes little sense. The Chinese worker who earns only a tiny fraction of his
American coumerpart is likely to be commensurately less productive.
Even if the Chinese worker's wages are repressed below actual producM Foatinsi Poi ICY
trvity, theresultis a transfer in purchasing power—to Boeing's shareholders and the Chinese employers—and not a diminution of global
purchasing power. Perhaps Greider is thinking that Boeing's shareholders and the Chinese employm have a lower propensity to consume than
the Chinese workers. If so, where is the evidence? Where is the global
surplus in savings and the secular decline inrealinterestratesthat we
would surely have observed if income is goingfromlow savers to high
savers?
It may be unfair to pick on Greider, especially since some of his other
conclusions are worth caking seriously. But the misunderstandings that
his book displays are commonplace in the globalization debate and do
not help to advance it.
SAFETY
NETS,
NOT THADE
BARRIERS
One need not be alarmed by globalization, but neither should one take
a Panglossian view of it. Globalization greatly enhances the opportunities available to these who have the skills and mobility to floursh in
world markets. It can help poor countries to escape poverty. It does not
constrain national autonomy neatly as much as popular discussions
assume. At the same time, globalization does exert downward pressure
on the wages of undenkilled workers in industrialized countnes, exacerbate economic insecwity, call into question accepted social arrangements, and weaken social safety netsThere are two dangersfromcomplacency toward the social consequences of globalization. Thefirstand more obvious one is the potential for a political backlash against trade. The candidacy cf Patrick
Buchanan in the 1996 Republican presidential primanesrevealedthat
protectionism can be a rather easy sell at a time when broad segments
of American society are experiencing anxieties related to globalization.
The same can be said about the political influence of Vladimir Zhirinovsky in Russia or Jean-Marie Le Pen in France—influence that was
achieved, at least in part, ir response to the perceived effects of globalization. Economists may complain that protectionism is mere snake oil
and argue that the ailmentsrequireakogether different medicine, but
intellectual arguments will not win hearts and minds unless concrete
solutions are offered. Trade protection, for all of itsfaults,has the benefit of concreteness.
Perhaps future Buchanans will ultimately be defeated, as Buchanan
Su.MMia 1 9 9 7
JJ
�Kuifnfc
\ fiiiftijlo.riii.i
7
Sons of Globalization.
Patrick Buchanan, Agence Francc-Presse/Coibis-Benmann
VlaJimir Zhirinovsky, Rfucets/Jacky Naegfltn/Archive Photos
J « n Marje LePen. Ciifbis BeJtmann
H
i i •f f n N
f i • I. 11 >
himself was, by the public s common sense. Even so, a second and perhaps more serious danger remains: The accumulation of global nations
side effects could lead to a new set of class divisions—between those
who prosper in the globalized economy and those who do not; between
those who share its values and those who would rather not; and
between those who can diversify away its risks and those who cannot.
This is not a pleasing prospect even for individuals on the winning side
of the globalization divide: The deepening of social fissures harms us all.
National policymakers must not retreat behind protectionist walls.
Protectionism would be of limited help, and it would create its own
social tensions. Policymakets ought instead to complement the external
strategy cf liberalization with an internal strategy of compensation,
training, and social insurance for those groups who are most at risk
In the United States, President Bill Clinton's education initiatives
represent a move in the nght direction. However, the August 19% welfiarereformact could weaken social safety nets precisely at a time when
globalization callsforthe opposite. In Europe, as well, the pro rung of the
welfare state may exacerbate the strains of globalization.
Contrary to widespread belief, maintaining adequate safety nets for
those at the bottom of the income distribution would not break the
bank. Currently, old-age insurance is the most expensive income-nansfer item for the advanced industrial countries. Areorientationof public
resources away from pensions and toward labor-market and antipoverty
programs would be a more appropriate way to address the challenges of
globalization. This shift could be achieved whilereducmgoverall public spending. Broad segments of the population in the industrial countries are understandably nervous about changing basic social-welfare
arrangements. Therefore, political leadership wil! be required to render
such changes pabtable to these groups.
At the global level, the challenge is twofold. On the one hand, a ser
of rules that encourages greater harmomration of social and industrial
policies on a voluntary basis is needed. Such hamnoniration coukd
reduce tensions that arise from differing national pracrxies. At rhe same
time, flexibility sufficient to allow selective disengagement firom multilateral disciplines needs to be built into the mles chat govern international trade.
Currently, the WTO Agreement on Safeguards allows member states
to impose temporary traderesrricrionsfollowing an increase in imports
—but only under a stringent set of conditions One could imagine
S l MM F.S
I
7
�Rivhk
expanding the scope of the agreement to include a broader range of circumstances, reflecting concerns over labor standards, the environment,
and even ethical norms in the imponing country. The purpose of such
an expanded "escape clause" mechanism would be to allow countries—
under well-specified contingencies and subject to muldlaterally
apptoved procedures—greater breathing room to fulfill domestic
requirements that conflict with free trade. If this flexibility could be
achieved in exchangefora tightening of rules on antidumping, which
have a highly corrosive effect on the world trading system, the benefits
could be substantial.
Global imion is not occurring in a vacuum: It is part ofa broader
trend we may call marketizaticm. Receding government, deregulation,
and the shrinking of social obligations are the domestic counterputs of
the intertwining of national economies. Globaliation could not have
advanced this far without these complementary forces at work. The
broadei challenge for the Zlst century is to engineer a new balarce
between the market and society—one that will continue to unleash the
creative energies of private entrepteneuiship without eroding the social
bases of cooperation.
*
FOHEIGN
PoilUf
Want to Know More?
A classic work an the relationship between markets and social stability
is Karl ?u\anyi,TheGreatTrarafonmakm (Boston, Massachusetts: Beacon Press, 1944). The argument isrestdtedin the context ot the postwar multilateral international economic order in John Ruggie, "At
Home Abroad, Abroad at Home: International Liberalization and
Domestic Stability in the New World Economy," Kiiiknnaun, Journal of
fmeoumonal Studies, no. 3 (1995). Thecloserelationshipbetweenexpo
sure to foreign trade and government size in the i>dvanced industrial
countries was fust pointed out by David Cameron in The Expansion of
the Public Economy," American Political Science Review 72 (December
1978). A morerecentstudy that is also more comprehensive in scope is
Dani Rodrik, "Why Do More Open Economies Have Bigger Governments?" Working Paper no 5537 (Cambridge, Massachusetts: National
Bureau of Research, 19%).
An excellent historical petspective on the debates surrounding trade
policy is provided injagdish Bhagwati, Protecbomsm (Cambridge, Massachusetts: MIT Press, 1988). An exrended populist critxjue of globalization can be found in William Greider, One Woiid, Ready or Not—The
Mawc Logic of GIoW Cdpuafem (New Yoik: Simon & Schuster, 1997).
Paul Krugman and Robert Lawrence, in 'Trade, Jobs and Wages," Science American 270, no. 4 (April 1994), provide a succinct essay arguing that foreign competitujn is not responsible for the cutrent ills of the
U.S. economy. The recent academic debates on trade and wages ate
reviewed in William Cline, Trade and W^ge Ineqiu&ty (Washington,
D.C: Institute for International Economics, 19V7, Forthcoming) and
Susan Collins, ed.. Trade and tlie AmCTican Wbrfurr (Washington, D.C:
Brookings Institutinn, 1997, torthcoming). Fur links to Websites related to globalization, see FOREIGN POUCV'S home pay at www.foreignpolicy.com.
SUMMER
1991
�The People's Flag Is Deepest Red
Richard Rorty
I
F YOU GO to Britain and attend a Labour Party rally, you will
probably hear tbe audience smg "The Red Flag." That song
begins: "The people'sflagis deepest red. It shrouded oft our
martyred dead. And ere their limbs grew stiff and cold, their hearts'
blood dyed its e>ery fold."
You may find this song maudlin and melodramatic, but it will
remind you of something that tnaoy people have forgotten: the history of the labor unions, in Britain, America, and everywhere else in
the world, is a blood-drenched history of violent struggle. Like the
civil rights movement, the labor movement owed its successes to
repeated and deliberate criminal acts — acts tkat we nowthiok of as
heroic cml disobedience, but that were brutally punished. To obstruct scabs front entering a workplace into which they are invited
by the owners of that workplace is a criminal aa, just as it is a
enmiaal act to sk in at a lunch counter after the proprietor asks you
to leave. The police who brutalized the strikers thought of themselves as preventing criminal actsfromtaking place, and they were
right.
But, of course, the strikers were alsorightwhen they teplied that
the police were acting as the agents of employers who refused to give
their workers a decent share of the ralue those workers produced. To
persuade the American people to see strikes, and violence against
strikers, in this alternative way took a long time. Only after an enor-
�58
Richard Rorty
mous amount oi suffering, and very gradually, did it become polincally impossible for mayors, governors, and sheriffs to send in their
men to brealc strikers' skulls. Only in recent years has this strategy
once again become politically possible.
We are accustomed to seeing labor leaders photographed with
Presidents, and officials of CM and of the UAW jumping up and
shaking hands at ihe end of a successful bargaining session. So we
think of labor unions asfineold American institutions, buik into the
fabric of the country. We think of a stnke as an accepted and perfectly reasonable method of bringing about a slightly fairer distribunon of profits. But we should remember that the eady yean of labor
unions in Amenca, as in the rest of the wodd, were a history of tlie
skulls of strikers being broken by truncheons, decade after decade.
We should also rtalire that those truncheons have recently reappeared As John Sweeney reminds us in his book, America Needs a
Raise, during the last few years they have been used on striking
janitors in Los Angeles and striking coal miners in Virginia.
We should also remember that the history of the labor movement
is one of heroic self-deprivation. Only after a great many striking
mothers had seen their children go hungry were the unions able to
accumulate enough money to set up strike funds and to provide a
litde help. Only because millions of workers refused to become scabs
by raking jobs that would have meant food for their families did the
strikes eventually succeed. You would never guess, from William
Bennett's and Robert Bork's speeches about the need to overcome
liberal individualism, that die labor unions provide by far the best
examples in America's history of tbe virtues these writers claim we
must recapture. The history of the unions provides the best examples
of comradeship, loyalty, and self-sacrifice.
Sometimes American unions became corrupt and were taken over
by greedy and cynical crooks. In this respect, their record is no better or worse than that of American churches, American law firms,
American businessfirms,and even American academic departments.
B-Jt at tbeir best, the labor unions are America at its best. Like the
civil rights movement, the union movement is a paradigm case of
Amencans getting together on their own and changing society from
The People's Flag li Deepert Red
59
the bottom up — forcing it to become more decent, more democratic, and more humane. The strikers who braved the wrath of the
police and the National Guard created a moral atmosphere in wheh
no one was willing to be seen crossing a picket line, be caught
wearing clothes that did not bear a union label, or be known to have
scabbed. This unwillingness was an expression of the sort of human
solidarity that made the year 1989 possible in Eastern Europe and
made the Founding Fathers willing to risk their lives, their fortunes,
and their sacred honor The fact that people are once again willing to
cross picket lines, and are unwilling to ask themselves who makes
their dotbes or who picks their vegetables, is a symptom of moral
decline.
Most American schoolchildren learn something about the martyrs of rhe civil rights movement. They at least know how Marrin
Luther King died. Perhaps tbey have also heard of Medgar Evers or
of Andrew Goodman. But these children usually have no idea of
how it came about that most American workers have an eight-hour
day and afive-dayweek. They are unlikely to be taught about the
conditions in tbe sweatshops and factories in which their greatgrandparents worked, or about how the unions made those conditions a little bener for their grandparents and parents. They know
nothing of the blood that had to be spilled, and the hunger that had
to be endured, in order that unions could be transformed from
criminal conspiracies intofineold Amencan institutions.
We should help our students understand that social justice in
America owes much more to civil disobedience than to the use of the
ballot. Tbey need to know that tbe deepest and most enduring injustices, like the unending humiliation of African Americans and the
miserable wages paid to unorganized workers, are always played
down by the polidcal parties and by most of tbe press. They need to
remember that the same argument now used against raising the
minimum wage — that doing so will discourage economic efficiency
and productivity — was once used against the eight-hour day. They
need to be able to spot the resemblances between what the politicians were indirectly and gently bribed to ignore at the beginning of
this century and what tbey are being indirectly and gently bribed to
�60
Richard Rorty
ignore now. They need to realize that the last hundred years of our
country's history have witnessed a brutal struggle between the corporations and the workers, that this struggle is still going on, and
that the corporations, are winning. They need to know that the deepest social problems usually go unmentioned by candidates for political office, because it is not in the interests of the rich to have those
problems discussed in public.
Today our country, like the other industrialized democracies,
faces a problem that few politicians, except for scurrilous fascists
like Fat Buchanan and Jean-Marie Le Pen, seem willing lo talk
about: the wages of European and American workers are ridiculously high by world standards. There is less and less need to employ
any of these workers, since the same work can be done elsewhere for
a fifth of the cost. Furthermore, the globalization of the markets in
capital and labor means that no nation's economy is sufficiently
self-contained to permit long-term social planning by a national
government. So the American economy is passing out of the control
of the American government, and thus out of the control of the
American voters.
This new situation is fine with the i percent of Americans who
own 40 percent of their country's wealth. Their dividends typically
rise when jobs are exported from Ohio to South China and from
North Carolina to Thailand. The strength of the dollar does not
matter to them, because investment advisers can flip their money
into other currencies at the touch of a button. They have less and less
ai stake in America's future, and more and more invested in an
efficient and productive global economy — an economy made ever
more efficient and productive by tht constant expansion of the
global labor maiket into the poorer countries. There is httle reason
to believe that what is good for CM or Microsoft is good for America. The economic royalists whom FDR denounced sell had a lot invested in America's future. For today's super-rich, such an investment would be imprudent.
There is much too little public discussion of the changes this
globalized labor market will inevitably bring to Amenca in the coming decades. Former senator Bill Bradley is one of the few promineni
The People's Flag is Deepest Red
61
politicians to have insisted that we prevent our country breaking up
into hereditary economic castes. Writers like Michael Lind and Edward l.urtwak have sketched plausible scenarios of an Amenca in
which the top fifth of the country, the well-educated professionals,
carry out the orders of the international super-rich. These people
will get paid between $75,000 and $500,000 a year to do so. The remaining fourfifthsof the country, the ponion that now has a median
family income of $30,000, will get a little less in each successive year,
and will keep on doing all the dirty work. America, the couiury rhar
was to have witnessed a new birth of freedom, will gradually be
divided by class differences of a son that would have been utterly
inconceivable to Jefferson or to Lincoln or to Walt Whittnan.
Unless the politicians begin to talk about long-term social planning, Lind and Luttwak argue, economic inequality, and the formation of hereditary economic castes, will continue unchecked. Maybe
these authors are too pessimistic, but we shall never know unless the
questions they pose are taken up by candidates for public office. The
most imponant single reason for hoping that American labor unions
will become much bigger and more powerful than they are now is
that they are the only organizations that want to get these questions
on the table— to force politicians to talk about what is going to
happen to wages, and how we are going to avoid increasing economic injustice. If a revived union movement can get out the vote in
the old mill towns, in the rural slums, and in the inner cities, instead
of letting the suburban vote set the national political agenda, those
questions would be on the table.
The whole point of America was that it was going to be the
world's first classless society. Ir was going to be a place where janitors, executives, professors, nurses, and salesclerks would look each
other in the eye and respect each other as a fellow citizen. It was
going to be a place where their kids all went to the same schools, and
where they got the same treatment from the police and the courts.
From the days of FDR to those of Lyndon Johnson, we made enormous progress toward the creation of such a society. In the twenty
years between World War II and Vietnam the newly respectable labor unions made their presence feh on the national scene and accom-
�62
Richard Rorty
plished a great deal. Those were the years in which academics like
Daniel Bell, Arthur Schlesinger; Jt, and John Kenneth Galbraith
worked side by side with labor leaders like Walter Reuther and A.
Philip Randolph.
The Vietnam War saw the end of the traditional alliance between
tbe academics and the unions — an alliance that had nudged the
Democratic Parry steadily to tht left during the preceding twenty
years. We are still living with the consequences of the anti-Vietnam
War movement, and in particular with those of the rage of tbe manic
student protesters of the late t ?6ctt. These protesters were absolutelyrightthat Vietnam was an unjust wai; a massacre of which our
country will always be ashamed. But when the students began to
bumflagsand to spit at returning soldiers, they did deeper and more
long-lasting damage to the Amencan leh than ihey could ever have
imagined. When they began to spell "Amenca* with a k, they lost
the respect and the sympathy of the union members. Until George
McGovern's defeat, in 1971, tbe New Left did not realize that it had
unthinkingly destroyed an alliance that was central to Amencan
leftist politics.
Since those days, leftists in the colleges aad universities have
concentrated their energies on academic politics rather than on national politics. As Todd Gidin put it, we academics marched on
the English department while the Republicans rook over the White
House. While we had our backs turned, the labor unions were being
steadily ground down by the shift to a service economy and by the
machinations of the Reagan and Busb administrations. The best
thing that could happen to tbe American left would be for the academics to get back inro the class struggle, and for tht labor union
members to forgive and forget the stupid and self-defeating anbAmerican rhetoric thatfilledthe universities in the late 1960s.
Tho is not to say that those twenty-five years of inward-looking
academic politics were in vain. American campuses are much better
places — morally better places — than they were in 1970. Thanks
to all those marches on the English department and other departments, the situation of women, gays and lesbians, African Americans, and Hispanics has been enormously unproved. Their new role
The People's Flag Is Deepest Red
63
in the academy is helping to improve their situation in tht rest of
American society.
Nevertheless, leftist academic politics has run its course. It ts time
to revive the kind of leftist politics that pervaded American cam
puses from rhe Depression through the early 19605 — 3 politics
centered on the struggle to prevent the rich from ripping off the resr
of the country. If the unions will help us revive this kind of politics,
maybe the academy and the labor movement can get together again
and help bring our country closer to the goal that matters most: the
classless society. That is the cause for which the AFL CIO organizers
are nowfighting,and for which some of their predecessors died.
�Democracy's Discontent
i
=i
America in Search of a Public Philosophy
Michael J. Sandel
T H E BELKNAP PRESS OF
H A R V A R D UNIVERSITY PRESS
Cambridge, Massachusetts
London, England
1996
�Global Politics and Particular Identities
But suppose the civic aspirations that roil our present politics did find
fuller voice and succeeded in reorienting the terms of political discourse.
What then? What is the prospect that a revitalized politics could actually
alleviate the loss of mastery and the erosion of community that lie at the
heart of democracy's discontent? Politics is an unpredictable activity, so it
is difficult to say with certainty. But even a politics that engaged rather
than avoided substantive moral discourse, that attended to the civic
consequences of economic inequality, that strengthened the mediating
institutions of civil society—even such a politics would confront a daunting obstacle. This obstacle consists in the formidable scale on which
modem economic life is organized and the difficulty of constituting the
democratic political authority necessary to govern it.
This difficulty actually involves two related challenges. One is to devise
political institutions capable of governing the global economy. The other
is to cultivate the civic identities necessary to sustain those institutions, to
supply them with the moral authority they require. It is not obvious that
both these challenges can be met.
In a world where capital and goods, information and images, pollution
and people, flow across national boundaries with unprecedented ease.
�In Search of a Public Philosophy • 339
politics must assume transnational, even global forms, if only to keep up.
Otherwise, economic power will go unchecked by democratically sanctioned political power. Nation-states, traditionally the vehicles of selfgovernment, will find themselves increasingly unable to bring their
citizens' judgments and values to bear on the economic forces that govern
their destinies. The disempowering of the nation-state in relation to the
global economy may be one source of the discontent that afflicts not only
American politics but other democracies around the worid.
If the global character of the economy suggests the need for transnational forms of governance, however, it remains to be seen whether such
political units can inspire the identification and allegiance—the rrjoral and
civic culture—on which democratic authority ultimately depends. In fact
there is reason to doubt that they can. Except in extraordinary moments,
such as war, even nation-states find it difficult to inspire the sense of
community and civic engagement self-government requires. Political associations more expansive than nations, and with fewer cultural traditions and historical memories to draw upon, may find the task of
cultivating commonality more difficult still.
Even the European Community, one of the most successful experiments in supranational governance, has so far failed to cultivate a common European identity sufficient to support its mechanisms of economic
and political integregation. Advocates of further European integration
worry about the "democratic deficit" that arises when expert commissioners and civil servants rather than elected representatives conduct most
of the Community's business. Such an "attenuated political scene," Shirley Williams observes, misses "the anger, the passion, the commitment,
and the partisanship that constitute the lifeblood of politics. It makes for
a "businessman's Europe," not a "citizens' Europe." Czech president
Vaclav Havel emphasizes the absence of shared moral purpose: "Europe
today lacks an ethos
There is no real identification in Europe with the
meaning and purpose of integration." He calls upon pan-European institutions "to cultivate the values from which the spirit and ethos of European integration might grow." *
In certain ways, the challenge to self-government in the global economy
resembles the predicament American politics faced in the early decades of
the twentieth century. Then as now, there was a gap, or lack of fit.
M
5
�C nl so • 5 0
o cui n 4
between the scale of economic life and the terms in which people conceived their identities, a gap that many experienced as disorienting and
disempowering. Americans long accustomed to taking their bearings
from small communities suddenly found themselves confronting an economy that was national in scope. Political institutions lagged behind,
inadequate to life in a continental society. Then as now, new forms of
commerce and communication spilled across familiar political boundaries and created networks of interdependence among people in distant
places. But the new interdependence did not carry with it a new sense of
community. As Jane Addams observed, "the mere mechanical fact of
interdependence amounts to nothing.
Addams' insight is no less apt today. What railroads, telegraph wires,
and national markets were to her time, satellite hookups, CNN, cyberspace, and global markets are to ours—instruments that link people in
distant places without necessarily making them neighbors or fellow citizens or participants in a common venture. Converting networks of com
munication and interdependence into a public life worth affirming is a
moral and political matter, not a technological one.
Given the similarity between their predicament and ours, it is instructive to recall the solution they pursued. Confronted with an economy that
threatened to defy democratic control. Progressives such as Theodore
Roosevelt and Herbert Croly and their New Deal successors sought to
increase the powers of the national government. If democracy were to
survive, they concluded, the concentration of economic power would
have to be met by a similar concentration of political power. But this task
involved more than the centralization of government^ it also required the
nationalaation of politics. The primary form of political community had
to be recast on a national scale. Only in this way could they hope to ease
the gap between the scale of social and economic life and the terms in
which people conceived their identities. Only a strong sense of national
community could morally and politically underwrite the extended involvements of a modem industrial order. The "nationalizing of American
political, economic, and social life," Croly wrote, was "an essentially
formative and enlightening political transformation," America would
become more of a democracy only as it became "more of a nation . . . in
ideas, in institutions, and in spirit."
58
�Jj] ^arch of a Public Philosophy • 341
It is tempting to think that the logic of their solution can be extended to
our time. If the way to deal with a national economy was to strengthen the
national government and cultivate a sense of national citizenship, perhaps
the way to deal with a global economy is to strengthen global governance
and to cultivate a corresponding sense of global, or cosmopolitan citizen
ship.
Internationally minded reformers have already begun to articulate this
impulse. In 1995 the Commission on Global Governance, a group of
twenty-eight public officials from around the world, published a report
stressing the need to strengthen international institutions. Global interdependence was growing, they observed, driven by powerful technological
and economic forces. But the world's political structures had not kept
pace. The Commission called for new international institutions to deal
with economic and environmental issues, a "people's assembly" that
might ultimately be elected by the people of the world, a scheme of
international taxation tofinanceactivities of global goverance, and greater
authority for the World Court. Mindful of the need to cultivate an ethic
adequate to its project, the Commission also called for efforts to "foster
global citizenship," to inspire "broad acceptance of a global civic ethic,"
to transform "a global neighborhood based on economic exchange and
improved communications into a universal mora) community."
Other commentators of the 1990s saw in international environmental,
human rights, and women's movements the emergence of a "global civil
society" that might serve as a counterweight to the power of global
markets and media. According to political scientist Richard Falk, such
movements hold promise for a new "global citizenship... premised upon
global or species solidarity." "This spirit of global citizenship is almost
completely deterritorialized," he observes. It has nothing to do with
loyalty to a particular political community, whether city or state, but
aspires instead to the ideal of "one-world community." Philosopher
Martha Nussbaum argues, in a similar spirit, for a civic educadon that
cultivates cosmopolitan citizenship. Since national identity is "a morally
irrelevant characteristic," students shouid be taught that their "primary
allegiance is to the community of human beings in the entire world."*
The cosmopolitan ideal rightly emphasizes the humanity we share and
directs our attention to the moral consequences that flowfromit. It offers
59
0
�a corrective to the narrow, sometimes murderous chauvinism into which
ethnic and national identities can descend. It reminds wealthy nations that
their obligations to humanity do not end at the water's edge. It may even
suggest reasons to care for the planet that go beyond its use to us. All this
makes the cosmopolitan ideal an attractive ethic, especially now that the
global aspect of political life requires forms of allegiance that go beyond
nations.
Despite these merits, however, the cosmopolitan ideal is flawed, both as
a moral ideal and as a public philosophy for self-government in our time..
The moral defect of the cosmopolitan ethic is related to its political defect.
For even as the global economy demands more universal forms of political identity, the pull of the particular reasserts itself. Even as nations
accede to new institutions of global governance, they confront rising
demands from ethnic, religious, and linguistic groups for various forms of
political recognition and self-determination. These demands are
prompted in part by the dissolution of the empires that once contained
them, such as the Soviet Union. But the growing aspiration for the public
expression of communal identiries may also reflect a yearning for political
identities that can situate people in a world increasingly governed by vast
and distant forces.
For a time, the nation-state promised to answer this yearning, to
provide the link between identity and self-rule. In theory at least, each
state was a more or less self-sufficient political and economic unit that
gave expression to the collective identity of a people defined by a common
history, language, or tradition. The nation-state laid claim to the allegiance of its citizens on the ground that its exercise of sovereignty expressed their collective identity.
In the contemporary world, however, this claim is losing its force.
National sovereignty is eroded from above by the mobility of capital,
goods, and information across national boundaries, the integration of
world financial markets, the transnational character of industrial production. At the same time, national sovereignty is challenged from below by
the resurgent aspirations of subnational groups for autonomy and selfrule. As their effective sovereignty fades, nations gradually lose their hold
on the allegiance of their citizens. Beset by the integrating tendencies of the
global economy and the fragmenting tendencies of group identities, nation-states are increasingly unable to link identity and self-rule. Even the
�In Search of a Public Philosophy • 345
most powerful states cannot escape the imperatives of the global economy; even the smallest are too heterogeneous to give full expression to the
communal identity of any one ethnic or national or religious group
without oppressing others who live in their midst.
Given the limits of cosmopolitan politics, the attempt to save democracy by globalizing citizenship, as Progressives once sought to save democracy by nationalizing citizenship, is unlikely to succeed. The analogy
between the globalizing impulse of our time and the nationalizing project
of theirs holds to this extent: We cannot hope to govern the global
economy without transnational political institutions, and we cannot expect to sustain such institutions without cultivating more expansive civic
identities. This is the moment of truth in the cosmopolitan vision. Human
rights conventions, global environmental accords, and world bodies governing trade,finance,and economic development arc among the undertakings that will depend for public support on inspiring a greater sense of
engagement in a shared global destiny.
But the cosmopolitan vision is wrong to suggest that we can restore
self-government simply by pushing sovereignty and citizenship upward.
The hope for self-government lies not in relocating sovereignty but in
dispersing it. The most promising alternative to the sovereign state is not
a one-world community based on the solidarity of humankind, but a
multiplicity of communities and political bodies—some more, some less
extensive than nations—among which sovereignty is diffused. The nation-state need not fade away, only cede its claim as sole repository of
sovereign power and primary object of political allegiance. Different
forms of political association would govern different spheres of life and
engage different aspects of our identities. Only a regime that disperses
sovereignty both upward and downward can combine the power required
to rival global market forces with the differentiation required of a public
life that hopes to inspire the reflective allegiance of its citizens.
In some places, dispersing sovereignty may entail according greater
cultural and political autonomy to subnational communities—such as
Catalans and Kurds, Scots and Quebccois—even while strengthening and
democratizing transnational structures, such as the European Union. Or
it may involve modes of devolution and subsidiarity along geographic
rather than ethnic and cultural lines. Arrangements such as these may ease
�Conclusion • 346
the strife that arises when state sovereignty is an all-or-nothing affair,
absolute and indivisible, the only meaningful form of self-determination.
In the United States, which never was a nation-state in the European
sense, proliferating sites of political engagement may take a different
form. America was born of the conviction that sovereignty need not reside
in a single place. From the start, the Constitution divided power among
branches and levels of government. Over time, however, we too have
pushed sovereignty and citizenship upward, in the direction of the nation.
The nationalizing of American political life occurred largely in response
to industrial capitalism. The consolidation of economic power called
forth the consolidation of political power. Present-day conservatives who
rail against big government often ignore this fact. They wrongly assume
that rolling back the power of the national government would liberate
individuals to pursue their own ends instead of leaving them at the mercy
of economic forces beyond their control.
Conservative complaints about big government find popular resonance, but not for the reasons conservatives articulate. The American
welfare state is politically vulnerable because it does not rest on a sense
of national community adequate to its purpose. The nationalizing project that unfolded from the Progressive era to the New Deal to the Great
Society succeeded only in parr. It managed to create a strong national
government but failed to cultivate a shared national identity. As the
welfare state developed, it drew less on an ethic of social solidarity and
mutual obligation and more on an ethic of fair procedures and individ
ual rights. But the liberalism of the procedural republic proved an
inadequate substitute for the strong sense of citizenship the welfare state
requires.
If the nation cannot summon more than a minimal commonality, it is
unlikely that the global community can do better, at least on its own. A
more promising basis for a democratic politics that reaches beyond nations is a revitalized civic life nourished in the more particular communities we inhabit. In the age of NAFTA, the politics of neighborhood
matters more, not less. People will not pledge allegiance to vast and
distant entities, whatever rheir importance, unless those institutions are
somehow connected to political arrangements that reflect the identity of
the participants.. , .
�Beyond Sovereign States and Sovereign Selves
The global media and markets that shape our lives beckon U to a world
S
beyond boundaries and belonging. But the civic resources we need to
master these forces, or at least to contend with them, are still to be found
in the places and stories, memories and meanings, incidents and identities,
that situate us in the world and give our lives their moral particularity.
The public philosophy by which we live bids us to bracket these
attachments, to set them aside for political purposes, to conduct our
political debates without reference to them. But a procedural republic that
banishes moral and religious argument from political discourse makes for
an impoverished civic life. It also fails to answer the aspiration for self-
�Conclusion • 350
government; its image of citizens as free and independent selves, unencumbered by moral or civic ties they have not chosen, cannot sustain the
public spirit that equips us for self-rule.
Since the days of Aristotle's polis, the republican tradition has viewed
self-government as an activity rooted in a particular place, carried out by
citizens loyal to that place and the way of life it embodies. Self-govern
ment today, however, requires a politics that plays itself out in a multiplicity of settings, from neighborhoods to nations to the world as a whole.
Such a politics requires citizens who can think and act as multiply-situated
selves. The civic virtue distinctive to our time is the capacity to negotiate
our way among the sometimes overlapping, sometimes conflicting obligations that claim us, and to live with the tension to which multiple loyalties
giverise.This capacity is difficult to sustain, for it is easier to live with the
plurality between persons than within them.
The republican tradition reminds us that to every virtue there corresponds a characteristic form of corruption or decay. Where civic virtue
consists in holding together the complex identities of modem selves, it is
vulnerable to corruption of two kinds. Thefirstis the tendency to fundamentalism, the response of those who cannot abide the ambiguity associated with divided sovereignty and multiply-encumbered selves. To the
extent that contemporary politics puts sovereign states and sovereign
selves in quesrion, it is likely to provoke reactions from those who would
banish ambiguity, shore up borders, harden the distinction between insiders and outsiders, and promise a politics to "take back our culture and
take back our country," to "restore our sovereignty" with a vengeance.
The second corruption to which multiply-encumbered citizens are
prone is the drift to formless, protean, storyless selves, unable to weave the
various strands of their identity into a coherent whole. Political community depends on the narratives by which people makc sense of their
condition and interpret the common life they share; at its best, political
deliberation is not only about competing policies but also about competing interpretations of the character of a community, of its purposes and
ends. A politics that proliferates the sources and sites of citizenship complicates the interpretive project. At a time when the narrative resources of
civic life are already strained—as the soundbites, factoids, and disconnected images of our media-saturated culture attest—it becomes increas70
�In Search of a Public Philosophy - 351
ingly difficult to tell the tales that order our lives. There is a growing
danger that, individually and collectively, wc will find ourselves slipping
into a fragmented, storyless condition. The loss of the capacity for narrative would amount to the ultimate disempowering of the human subject,
for without narrative there is no continuity between present and past, and
therefore no responsibility, and therefore no possibility of acting together
to govern ourselves.
Since human beings arc storytelling beings, we are bound to rebel
against the drift to storylessness. But there is no guarantee that the
rebellions will take salutary form. Some, in their hunger for story, will be
drawn to the vacant, vicarious fare of confessional talk shows, celebrity
scandals, and sensational trials. Others will seek refuge in fundamentalism. The hope of our time rests instead with those who can summon the
conviction and restraint to make sense of our condition and repair the
civic life on which democracy depends.
�•
FREE
MARKETS
and
SOCIAL
JUSTICE
•
CASS R- SUNSTEIN
New York
Oxford
Oxford Univerifty Press
1997
Introduction
We are in tire midst of a period of mounting enthusiasm for free market]. This
is erf" course true in mmy of the fbnner Comnuiflist aations. It is true for much
of tie Vest as well, promkeady including England and tbe Uciied Stares.
Free tmrkecs are ofun defended as aa engine of ecoromic pnxlucdvity,
and properly so. But tiey ue also said to be required for sodal justice, and
here things become far more compkx. CtrtairJy there are connections bitwecn
free markm and iocial justice. A ryittm aspiring to social justice aspires to
liberty, and a system of free markets seems to promise liberty, because
it aJlows people to trade goods and sen-ices as they wish. Ln fact, a system
of free maxkecs seems to promise cot merely liberty but equality of an importani sort as well, unce everyone in a free marXtt is given an equal right
to tramact and panicipate in market amngemeDts. Thii form of equality
should ao: be trivialized or disparaged. For eyamplcj race nul tex discjixoiaalioc hat often consisted, of exclusions of certain classes of people from the
market domain. In both South Africa and the United Slates, discriminatory
praedces frequently took the form, of incursions on free markets in employment.
An appreciadon of the virtues of free markecs has been an important pm
of the economic analysis oi law, perhaps che most influenual development in
legal education Ln the bst quancr-ccntury, and a development with growing
effcas on public policy in tbe United States and abroad. As it operates in law
schools, econontic analysis is concerned above all with the conscqueaccs of
legal rules. Often its practiiiouers bavc asked whether intrusions oa free markets have desirable consequences. If the minimum wage is increased, what,
eaactiy, will happen? What are the real-world consequences cf bins on discrimination, legal rules foi coatiolling air pollution, and rent cooirol kws?
There are limiu to how much economic theory can say on such issues; empirical evidence is necessary. But by looking it the efFects of law on incentives,
ecooomics can pokt in the right direction. Often it can show that the conscquenccj of incrusions on markets will be unfcminate or even perverse. The
economic analysis of lav has produced tigoihcanl advances, many of which are
discussed in this book. MtKh remains to be learned.
�Inlroduclion 5
4 Introduction
This book is VOL, however, a ample celebration offreemarkets, and it
raises a Dumber of qeestions about economic analysis of law in iu cocveational
form. Free markets can produce economic uefficieacy and (wone) a great deal
of injustice. Even weli-fimctioning economic markets should not be identified
with, fret dom itself. Freedom is a complex notion, to say the least, and free
markets can sharply limitfreedomas that tern is usually understood. In fact,
free markets depend on a range of coercive legal interventions, induding the
law of property, which can be a serious intrusion on the freedom of people
who lack own en hip rights. And it should not be necessary to tmpdasize that
important forms of equality—induding race and sex equality—can be undermined, not promoted, byfreemarkets. Race disctimimdon is cften fueled by
market forces.
Moreover, ecoDomics—at least as it is used in che eonrentionai economic
inaiysis of law—often works with tools that, while iliminating, mey be crude
or lead to important errors. Coosider, for example, descriptive or "posime"
economics. The economic analysis of law has been built on a certain concepdon of human rationality, in which people are seen as "radonal profitmaximkers." For some purposes, this is a helpful foundation. Certainly it is
true that most people cry, most of the time, to find ways of promoting their
own ends. But it is not always dear in vhat sense human beingi can be said to
be "rational" or "ptofit-nmunizers." The motivational foundation! of human
behavior have enormous complexity. Sometimes people do not seem at ail rational. Sometimes they axe ignorant and sometimes they seem to defeat their
OWD goals. People rely on rules of thumb, or heuristic devices, that cause them
badly to misunderstand probabilities and facts; this can lead to irrationality for
individuals and societies alike. Sometimes people undervalue thtir own futures, or suffer fron weakness of will, or choose what they know, on reflection, tbey ought not to choose. Sometimes people care not just about social
outcomes, but also about the "meaning" of such outcomes, that is, tht values
expressed in and by the outcomes. This point very much bears on law, in such
areas as cnviionmental proiection, race and sex equality, and occupational
safety and Itealth (chapter 2).
Above all, social corns are an unportant determinant of behavior, and
they have received Ear too Utile auentim from those interested in free markets,
economic analysis of law, and wcial justice. A number of puzzles and anomalies underlie human decisions. Analysis of law, economic or otherwise, would
do well to incorparate an understanding of these pu2zles and anomalies (chapten 2 and 4-}.
Thus far, J have been discussing descriptive or positive economics. If we
turn to the evaluative side—to questions about what the law should be or do—
economic analysis of law encounters equally serious problems. In its usual
form, economics offers an inadequate underslanding of social welfsre. Often it
is concerned with the satisfaction of existing preferences. This is far from an
unworthy goal; the frustration of peoples' prefereaces can lead to misery and
injustice. But in any society, existing preferences should DOT be taken as nam-
ral or sacrosanct They are a function of context. Sometimes they are a product
of dtprivation, injustice, or excessive limits in available oppartunities.
Moreover, the ecanolnists conception of social welfare is too "flat," insafar as ic evaluates diverse social goods along the same metric. People care about
things mt just in terms of amounts, but also in diffierent ways. Some human
joods, like cash, are simply for use. But people value things for reasons other
than use. They respect other people; sometimes the? love esch otheri they see
some things, like a painting or a beach, as objects of awe and wonder (ctiapter
}). A well-functioning legal system attempts to make space for people's diverse
valuation of diverse human goods. This point bears on the uses and the limits
of free markets.
Mote particularly, this book develops seven basic themes;
1. The rnylk of laissez-faire. The nodoa of "laissez-faire" is a grotesque
misdescription of what free markets actually require and entail. Free markets
depend for their existence on law. We cannot have a system of private property
without legal rules, idling people who owns what, imposing penalties for trespass, and saying who can do what to whom. Without the law of contract,
freedom of contract, as we know and live it, would be impossible. (Pe<iple in
Easteru Europe are learning this lesion all too well.) MiKcover, the law that
underlies free markets is coercive in tbe sense that in addition to facilitating
individual transactions, it stops people from doing many things that they
would like to do. This point is not by any means a critiqiie of free mtrkets.
But il suggests that markets should be understood as s legal construct, to be
evaluated on che basis of whether ihey promote human inierests, rather than
as B part of nature anil the nacural order, or as a siniple way of promoting
voluntary inieractioas.
2. Prefertntt fomarion and social turms. It is important not only to knaw
what choices and preferences are, but also to know how they are formed, and
whether they are really connected with human well-being. Unjiist institudons
can breed preferences that produce individual and collective harm. Severe deprivation—including poverty—can be an obstacle to the development of good
preferences, choices, and beliefs. For eiample, a society in which people "prefer" to become drug addicts, or violent crimmaJs, has a serious problem. Such
preferences are likely to be an artifact of easting social norms, and those
norms may disserve human freedon or well-being.
In this light a society should be concerned noi simply and not entirely
with satisfying che preferences due people already have, but more broadly
with providing freedom in the pwcesi of preference-fomatioa. Sociil practices, including law, will inevitably affect preferences. There is no way for a
legal system to remain neutral with r«pect C preference formation. In these
o
circtumtances it is fully legitimate for government and law to try to shape
preferences in the right way, not ouly through education, but also (for example) through laws forbidding racial discriminathn, eoviromnental degradation,
and sexual harassment, and through efforts to encourage atteotioo tu public
issues and to diverse paints of view.
,
�6 IrtioORtfon
3. Tht contexttud character of choice. Choices are a function of context. If
someone takes a job that includes a certain danger, or chooses not co recyde
on a Tuesday in March, or discriminates against a certain female job candidate, we cannot infer a great deal about what he "prefos" ot "values." All of
tbese chokes might be different in a different context. Our discriminator may
suppon a law banning discriminatian; people who do not recycle in March
may recycle in May or June, aad they may well support laws that mandate
recycling. Economists and economically oriented inalysts of law sometimes
think that they can derive, from particdar choices, large scale or acontextual
accounts of how much people value various goods. This is a mistake, involving
extravagant inferences from modest findings.
+. The mpanatxt af far diitribuliox. It is necessaiy to know not simply
whether a society is rich in economic tenas, but also how its resources are
distributed. Thus a problem with gross domestic product, as a measure of
social well-being, is its obliriomness to distributional concerns. Free markets
can help fuel economic growth, and. economic growth can improve people's
lives. But many citizens are not benefited by growth, and at a minimum government should take steps to combat human deprivation and misery in the
midst of growth. In any case, it is imponant to develop standards for measuring social well-being that allow people, in tbeir capacity as citizens and voters,
to focus co the issue of distribution.
5. The diversity of human pods. I have noted thai human beings value
things noc just ki different amounts, but also in diifertnt ways. Tbey value a
Mend in one way; a pork in anothet; a species io another; a spouse in another;
in heirloom in another; a large check in another; a pet in still another. The
way ihey value a funny movie is qualitatively differentfromthe way chey value
a tragedy, a mountain, a beach, or a cat. Insofar as economics uses a single
metric or scale of value, itflattensqualitative differences. For some purposes
theflatteningis very useful, but for other purposes it is harmful. Such qualicauve differences can be crucial to private life, public life, and social sdence.
These points help show the inadequacy, in some settings, of social ordering through markets. Some goods should not be sold on markets at all; consider the right to vote cr the right to be free from discriminatian on the basis
of sex. Markets work best when (wbat werightlytreat as) consumption choices
are at issue. In a liberal society, some choices should be understood not to
involve consumption chokes at all. For example, the choice to vote, and the
decision how to vote, are not best understood as iniolving mere coosumption.
How a. person votes should depend not on anyone's "willuigness to pay," but
on ihe reasons offeredforand against B certain candidate. Therightto vote is
debased if it is undersiood as simply a matter of "buying" something.
This claim bears on a range of issues involving the use of markets far
distributing such goods as reproductive capacity, sex, endangered species, and
environmental amenities in general. Some goods are best allocated on tie basis
of an uquiry not into ecooomic value, but into thereasonsoffered for any
particular allocation.
Inlroductlon 7
6. Law tan shape ptifereaces. We hare seen that no market can exist without legal rules. Legal rules must also dlocate entidcmenls. In a lystcm of
private property, it is necessary to say who awns what, at Least in the first
instance. It is also necessary to create rules of tort law, saying who can do
wbat to whom, and who must pay for injuries and barms. As a great deal of
empirical work has. shown, tbese legal rules, allocating basic ^otiriements, have
effects on choices and preferai ces. Someone who has been given a legal eiiitlement —to chocolate bars, dean air, freedom from sexual harassment, en/iroamental goods—may well value the relevant good more than he would if the
good had been allocsted to someone else in thefirstinstance. The preferenceshaping effects of the initial illocatian via law raise in port ant questions for the
analysis of law and free markets. They tuggest that govemment and law may
not be able to leave preferences "as they are."
7. Puzzles of human rawnaiity. Are human beings rational? Wbat criteria
should we use to answer that question? These questions have become ill the
more urgent in light of recent work attempting to apply economic models of
rationality lo race and sex discrimination, family choice, pollution problems,
aging, even sexual encounters (and hence to the problem of AIDS). Such work
has been highly illuminating, but ic is important to know in exacdy vhat sense
people might be said to be (or not to be] "rational" when they choose spouses,
recycle garbage, reject employees of certain kinds, or engage in sexual or risky
activity. Any views on such nmiecs may well depend on a controversial account of what it means to be ratioml,
[ an especially inierested in the consequences for law and policy of recent
experimintal iod theoretical work on niionality, sodal norms, and individual
valuations. This work suggests that people's choices and judgments are quite
different from what traditioial economiits predict. People's choices are a function of ihe distinctive social role in which they ind themselves, aod we may
aa irrationalJy or quasi-rationally. In particular, this work points C the imo
portant role of social norms involving fairness, reciprocity, and cooperation in
producing individual choice. If we da not uncover the relationship between
rationality and social aonns, we will make major mistakes in designing policies
to accomplish our goals.
This book invesugaces these points in many different contexts, involving
property, protection of nature, race and se* discriminadon, broadcasting, occupational safety, and mucb more. I do not uke these points to pose acrossihe-boaid challenges to die use of free markets On ihe contrary, I argue that
in some situations, consurutioni themselves should protect free markecs (chapter 7), and also that market-oriented policies are far better in the areas of
health, safety, and tbe environment than is generally recognized (chapters 13
and 14). But fcee markets are a tool, to be used when they promote human
purposes, and lo b« abandoned when ihey fail to do so. Moreover, economic
analysis of law should be based on an understanding of how human beings
actually behave. Ar inquiry into these topics has a iuhstantial empirical direction, and 1 shall refer to empirical matters—involving smoking, polluiing, dis-
�4 Inkoducllor
crinunaliug, and other issues—at many points. But it is also important to be
clear oa our underlying judgments about social justice.
The book comes in three basic parts. Part I deals with fouadatioas—with
the appropriate role of existing "preferences," the importance of social norms,
the question whether human goods are commensurable, and issues of dis crib uuonal equity. I claim that the arm "preference" is highly ambiguous and thai
people's "ptefertncts," as they are expressed in the market domain, should not
be deemed sacrosanct. On the camrary, market "preferences" are sometimes a
product of background injustice or of social norms that people do not really
like. Acting as citizens, people shoald be permitted to change those norms. I
also argue that human goods are not commensurable; there is no metric by
which we cut assess such goods as envkonmental quality, employment, more
leisure time, less racial discrimination, and so forth. My discussioo of "measuring weU-behg" is designed to respond to this problem; my general aeatment of incommensurability shows bow ±e absence of a unitary metric plays
a largerolein both law and daily life.
Part n deals withrights.Tie basic goal is to show that markets haw only
a partial and instrumentalrolein the protection ofrights.In a claim of special
relevance to current dispute] in the United Slates, I argue that free markets
are not likely to stop discriminartioa on the basis of race and sex. On the
contrary, markets often promote discriminatioc. I also claim that in recent
years, the free speech prindple has been wrongly identified withfreespeech
mariets— as in the striking claim by a recent chairman of the Ftderal Conunuoications Commission that television "is just another appliance," cr "a toaster
with pictures." Agtinat this new, I argue that the free speech principle is
inostiy ibout democratic deliberation, not about free markets. This idea has a
range of consequences for how we think about (for example) radio, the Internet, and cable television. This ctaim certainly bears on the subject of campaignfinanceregulation, to which a chapter is devoted.
But Pan II shows that markets can play an important role in a regime of
rights. Thus I argue that corwiirudons, at least in Eastern Europe, should
anempt to protect private property and market ordering. This argument depends on the claim that constitutions should be "countercultuiai," in the sense
that they should protect against those aspects of a country's culture and traditions that are most likely to produce harm. In Eastern. Europe, there is a
pressing need to establish the institutions of a civil society, including a degree
of market eichange.
Pan III deals with regulation, especially in the context of risks to life and
health. \ comnion theme is that reliance on "tree tnarkcts" would be a huge
mistake for regulatory policy and that deregulation wwitd often be a foolish
solution. On the other band, many if tbe problems in federal regulation in the
United States stem from Soviet-style coramand-and-contrd regulation, which
produces billions of dollars in wasted money and laws that are far too ineffectual in improving health and saving lives. American government does not set
sensible priorities; it does not use the best regulatory tools; risk regulation
scrmetimes increases risks. Regularion is also an ineffecuve tool for redistribut-
IMtoduction 9
ing wealth. Thus, the essays in Part III try to develop approaches chat would
promote both economic and democratic goals. A particular theme is the uses
and Smits ci coat-bencfit analysis. Balancing of costs and benefits is Sir better
than absaluiism. But everything depends on how "costs" and "benefits" are
specified I snggest ±ai many statutes have goals other than economic efficiency, and that such statutes are entirely legitimate. With respect to slacutes
noc based on economic gmunds, we ihould try to promote social conunitmercs
in the most cosl-elfective manner.
1 also suggest dial it is time to move beyond the increasingly tired and
decrrasingly helpful question whether we should have "more" or "less" government or "more" or "less- in the way of free markets. These dichotomies
are fir co crude. As ve have seen, markets depend on government. Sometimes
government can improve existing markets by creating good incentives for socially desirable behavior. Sometimes markets should be supplemented by govenoment services, like education, job training programs, and health care
There is no inconsistency in urging greater reliance on market instruments in
some areas while insisting on a larger role for the public sector in others. In
any case, future problems are not usefully approached by asking whether there
shodd be "mart" or "less" regulation. The real question is what kinds of
regulauons (emphatically induding those that make markets possible) promote
human well-being in different contexts.
In a book of this sort it would be far too ambitious to attempt to announce
a theory af justice. But debaies that seem intractable at the most abstract levels
may admit of soluiinns when che question is narrowed and sharpened, and
hence an inquiry into the relation between markeis and justice may be most
productive when we draw close attention to the setting in which market remedies are proposed. To the seven points f have listed above we may therefore
add one more: Achievement of social justice is a higher value than the protection of free markets; markets are mere instruments to be evaluated hy tbeir
effects. Whetherfreemarkets promote social justice is an irnpossibk question
to answer in the abstract. Far more progress can be made by examining the
contexts in which markets, adjustments of markets, and aliematives tc markeis arc proposed as solutions.
�Alterwrd 385
Afterword
Wbat, then, is the rdationship between free maiket! and social justice? In answering that quesrion, we shouldleoognize that markets, free or otherwise, are
not a product of Daaue. On the contrary, markets are legally constructed instrumcnts, created b; human beings hoping to produce a successful system of sodal
ordering. As I have emphasized thmighout, there is no opposition between
"maikecs" and "govenuscnt intervention." Markets are (a particular form of)
government intervention. Hence tbe interactions promoted by markets include
coecdon as well as voluntary choice. Markets should hardly be iientiEed with
freedom. The law of property, for example, coerces people who want access to
things that they do not own. And like all instruments, markets should be evaluated by asking whether tbey promote our sodal and econonic goals.
Often markets da promote tbe basic goals of a weU-functiodng social order, and a social order that aspires to be well functioning will not dispense
with markets. In the area of free speech, markets are very important, since
they fiadlitate the exchange and the production of information—sdemific, pobtical, medical, and much more (chipter 7). In constitutional Jaw generally,
propertyrightsand market ordering can diminish uiLwarranted political intetfereiue with the production of social wealth (chapter B). Environmental protection in the United States has abandoned markets loo readily; it should take
far more advantage of market thinking than it now docs. Li the area of risk
regulation, economic incentives an promote environmental and safety goals in
a cost-effective way. They can do this by channeling private behavior in the
right directions (chapters 13 and 14).
For all these reasons, American and indeed Western goreroments should
enlist markets more regularly than they now do. In the aftennath of the New
Deal, American, government has been much too willing to userigid,bureaucradzed solutions to economic and social problems. It should turn instead io
flexible incentives, allowing private adaptatitm for the sake of public goals.
Indeed, this step ranks among the most promising routes for reforms in the
twenty-first century. Many creative possibilities can be imagined.
These are important points; but they are not really points about justice.
We have seen that markets typically reward people on the basis of factors that
384
are irrelevant from, the moral point of view. These morally irrelevant factors
include noi simply nee and gender, which can play a large role in markets,
but many other factors that account for market success. Achievements within
markets come from the innumerable accidents that allow people to develop the
characteristics that markets reward—or that prevent people from developing
those characteristics.
These accidents are pervasive. If, for example, you are born to an average
fiamily on S7th Screet and Dorchester Avenue in Chicago, your life prospects
will be very good, and altogether dilferent from whit they will be if you arc
bora to most families ten blocks south. If yon are bom into some families, you
will be unlikely lo be healthy, strong, well mannered, hard working, or well
educated, and these are the characteristics that you may need in order to do
well in markets. People from a diverse range of theoretical positions ought to
agree that markets will not promote justice unless they are made part of a
system that offers minimally decent opportunities to all. In existing societies
that use markets, the ideal of equal or even decent opportunities is violated on
a daily basis.
Markets are also accompanied by a large network of social norms, and
existing norms—involving self-desiructivt or uncooperative beha/ior, discrimination, pollution—may produce inefficiency or injustice (chapter 2). Much of
our conduct is a product of norms, for whicb we are not responsible and which
we may wish, on reflection, to change. Collective and even govcrtunental action may be necessary to improve norms or generate new ones. Far too little
attention has been given to the bannful effects of social oorms on individ ual
freedom and well-being. This poini bears very much on the role of government. Democratic efforts ta promote well-being by improving norms—and
changing choices—are fully legitimate. Of course,rightsshould operate ss constraincs on this process, and institutions must be developed to reduce the risk
of abuse erf government power.
As I have emphasized throughout this book, a just sodety should be
dosely alt end ve to the background conditians against which markeis proceed.
Existing distribcticms and preferences should not be taken as inevitable or as
given. Extreme deprivation is unjust in large part because it denies people the
opportunity to form preferences and bdiefs that lead to good lives. It is thus
important to attend to eiisdng distributions of entitlements—distributioos that
sre a fuaction not cf nature but of law—and lo the effects of those distributions on the development of pe«ple's hie prospects and even their desires and
beliefs. Many of the chapters in this book challenge market thinking on the
ground that it is inruffkienlfy attuned to the harmful effects of unjust background conditions. This is true not only in the context of eitreme poverty and
deprivation, but also in the area of discriminatioo on the basis ofreceand sex
(chaptei 6), where people's preferences can be formed by background injustice, and even in the area of euviroameatal protection (chapter 10).
To say this is not to say that societies thai reject or try to reject markets
are just. Usually they are especially uniusi, because they use especially unfair
mechanisms—various forms of political favoritism—for producing sodal re-
�384 Afteiwofd
wards. But vc need not enter into deep philasopbucal territory in order to
recognize th«t much of the time, markets help or hurt people for reasons that
are unfair, in the sense that they are ill connected with any plausible conception of justice.
IdentifiaticL of injustice does nut, of course, lead to any particular set of
proposals for change. Disruption of markets may be futile or counterproductive. Maikets, rearrangements of markets, and alternatives to markets should
be assessed pragmatically and in terms of their actual consequences for those
who live with them. We have seen many areas in which the effects of markets
are good. We have seen other areas in which government interferences with
market ordering, especially through command-and-control regulation, make
tilings worse rather tian better. Here there is enormous room for more empuidl work andforsubstantive reforms. It is possible to imagine a wide range of
programs that would improve human lives—in part simply by lengthening
them—and do so largely through attending to public uses of market incentives.
Thus a gpvemment attentive to the existence of background injustice ihnuid
refuse to take esisting praedces, norms, and distributions as given; but it
might well invoke market incentives in the support of social aspirations.
Through this possibility we may begin to see the place of market ordering
in a system committed to social justice. Such L system is likely to favor a
particular concepdoa of democratic deliberation, one ±at embodies t belief in
political equkity and in reason -giving in che public domain. If that system is
also committed to social justice, it will see tree markets is instrumental goods
to be evaluated by their effects. This is hardly areasonto abandon markets.
Buc it is a reason to insist on che priority of democratic goals, including social
justice, to market ordering—while enlisting, much of the time, the latter in
the service of the former.
Index
povertyrate,114
Abramsv.tfnitrfStfltw,169
smafcing, adclesonts, 33, 57
Acid tain, 3 +
2
sodd auanirg of kbd, 4
<
Arkeman, Bruce, 2J9
AIDS
Acomenual prefetecoe, enviroiunentaL
compxruuveriskissessnieau, 137
law and, 246, 264
FDA effarta to control spread of, 301
Aciioo, social meaning and, 46
govtrnmcnt: efforts to control, 56
ADA v. Mertin.in n.3
mfonnation. an, provisLan of, 341
Addinwe behavior See ilw Akchol
abuse; Drug addicnon; Smokhg Airline deteguUcion, 322
Akerlof, George, 257
govenunem rtgukiioos, M, 29-30
Akrasm, 3D, 258
inttcpeisanal collective action
Albania, oonsdrmicaalitm, 212
problemi, 255
Alcohol abuse, Native Americans, 29-30
Adminisuaiive Procedure Act (APA)
Altniism, socul aonns ind, 53-54
ancilkry risks and, 312
AiMrican Ttxtiit Mmujuaatn Imnaae v.
arbumy, defined, 2tS
Douxyin, 291
changes cn, 3 8
+
A oca, 373
m
generic r form, 360-64
e
AncillaryrisM,health-lealth tTids-ocfi,
proposed ameadmenn, 299, 315
299-302, 307-3M, 312-14
Administrative Subnancc Act, 356, 3 1
8
Anderson, Eliiabeth, IM n.l
Adolesoenti
"Just Say No" todrujs campsipa,M, Anglo-America legal Eyuem, 99, WE,
14
0
56, M
Animal rights movement, 7S
Dam coaununkks, high school, 4*-41
Anudiscriininatian tneasure* by
mnlrirg,racedilfetiacrs, 33, 57
gprenunent
Adverusint
adiicu« behavior and, 1
9
canpaigafinancereform, conteniinjustice and, 2
7
oeutral rules, 24L n.3
markeu and, 161-62
cyberspace and, 13$-M
pervtrse effects of, 283
Af&mauvt acdon, 283
private enceiprise, nondiscrirainatioD
African-Americans. Su alsa Race
against, 220
disccimiikatka
APA. See Adminutrative Procedure Act
cbildren, poverty raw, 110
Apartheid
human development Lndrt (United
aasxa bandwagon*,
Nauaas), 120
norm casoules, 38
fost-Woild War II period, 1 8
5
?
387
�Women and t h
Future of
Fatherhood
by Barbara Dafoe Whitehead
M
uch of our contempotBiy debate over fatherhood is governed
by the awumption that men can solve the fatherhood problem
on their own. The organizers of last year's Million Man March
asked women to stay home, and the leaden of Promise Keepers and other
grass-rootsfetherhoodmovements whose members gather with considerably less fanfare simply do not admit women.
There is a cultural rationale for the exclusion of women. The fatherhood movement sees the task of reinstating responsiblefatherhoodas an
efforttoalter today's norms of masculinity and correctly believes that such
an effort cannot succeed unless it is voluntarily undertaken and supported
by men. There is also a political rationale in defining fatherlessness as a
men's isaue. In the debate about marriage and parenthood, which women
have dominated for at least B yean, the fatherhood movement gives men
O
a powerful collective voice and presence.
Yet however effective the grass-roots movement is at stirring men's consciences and raising their consciousness, thefatherhoodproblem will not
be solved by men alone. To be sure, by signaling their commitment to
accepting responsibility lor the rearing of their children, men have taken
the essential fint step. But what has not yet been acknowledged is that the
success of any effort to renewfatherhoodas a social fact and a cultural
norm also hinges on the attitudes and behavior of women. Men can't be
fathers unless the mothers of their children allow i t
Merely to say this is to point to how thoroughly marital disruption has
weakened the bond betweenfather*and children. More than half of all
American children are likely to spend at least part of their lives in one-parent homes. Since the vast majority of children in disruptedfamilieslive
with their mothers,fathersdo not share a home or a daily life with their
children. It is much more difficultfermen to make the kinds of small,
routine, instrumental investments in their children that help forge a good
relationship. It is hard tofixa flat bike tire or run a bath when you live in
another neighborhood or another town. Many afather'sinstrumental contribution is reduced to the postal or electronic transmission of money, or,
all too commonly, to nothing at all. Without regular contact with their
children, men often make reduced emotional contributions as well.
Fathers must struggle to sustain close emotional ties across time and space,
to "be there" emotionally without being there physically. Some may pick
30 WQ Spring 1996
�up die phone, send a birthday card, or buy a present, but for many fathers,
physical absence also becomes emotional absence.
Without marriage, men also lose access to the social and emotional
intelligence of women in building relationships. Wives teach men how to
care for young children, and they also encourage children to love fheir
fathers. Mothers who do not live with the father of their children are not as
likely as married mothers to represent him in positive ways to the children;
nor are the relatives who are most likely to have greatest contact with the
children —the mother's parents, brothers, and sisters — likely to have a high
Opinion of the children's father. Many men are able to overcome such
obstacles, but only with difficulty. In general, men need marriage in order
to be good fathers.
I
f the future of fatherhood depends on marriage, however, its future is
uncertain. Marriage depends on women as well as men, and women
are less committed to Tnan-iage than ever before in the nation's history. In the past, women were economically dependent on marriage and
assumed a disproportionately heavy responsibility for maintaining the
bond, even if the underlying relationship was seriously or irretrievably
damaged. In the last third of the 20th century, however, as women have
gained more opportunities for paid work and the availability of child care
has increased, they have become less dependent on marriage as an economic arrangement. Though it is not easy, it is possible for women to raise
children on their own. This has made divorce far more attractive as a remedy for an unsatisfying marriage, and a growing number of women have
availed themselves of the option.
Today, marriage and motherhood are coming apart. Remarriage and
marriage rates are declining even as the rates of divorce remain stuck at
historic highs and childbearing outside marriage becomes more common.
'4
-tf^ :
A n«w btginnfngr All-male groups tueh at tht Chrittian Promist Keepert promote muwtd
commitmmti to family. Bu* m«n itill n**d to rtckon with what woman want.
�Many women see single motherhood as a choice and a right lo be exercised if a suitable husband does not come along in rime.
The vision of the "first stage" feminism of the 1960s and 70s. which
held out the model of the oareer woman unfettered by husband or children, has been accepted by women only in part. Women want to be fettered by children, even to the point of going through grueling infertility
treatments or artificial insemination to achieve motherhood. But they are
increasingly ambivalent about the ties that bind them to a husband and
about the necessity of marriage as a condition of parenthood. In 1994, a
National Opinion Research survey aslted a group of Americans, "Do you
agree or disagree: one parent can bring up a child as well as two parents
together." Women split 50/50 on the question; men disagreed by more
than two to one.
•And indeed, women enjoy certain advantages over men in a society
marked by high and sustained levels of family breakup. Women do not
need marriage to maintain a close bond to their children, and thus to
experience the larger sense of social and moral purpose that comes with
raising children. As the bearers and nurturers of children and (increasingly) as the sole breadwinners forfamilies,women continue to be engaged in
personally rewarding and socially valuable pursuits. They are able to
demonstrate theirfemininevirtues outside marriage.
M
en, by contrast, have no positive identity asfathersoutside marriage. Indeed, the emblematic absent father today is the infamous "deadbeat dad." In part, this is the result of efforts to stigmatize irresponsiblefatherswho fail to pay alimony and child support But
this image also reflects thefactthat men are heavily dependent on the
marriage partnership to fulfill their role as fathers. Even those who keep up
their child support payments are deprived of the social importance and
sense of larger purpose that comesfromprovidingforchildren and raising
afamily.And it is the rare father who can develop the qualities needed to
meet the new cultural ideal of the involved and "nurturing"fatherwithout
the help of a spouse.
These differences are reflected in a growing virtue gap. American popular culturetodayroutinely recognizes and praises the achievements of single motherhood, while the widespreadfailureof men asfathershas resulted in a growing sense of cynicism and despair about men's capacity for virtuous conduct infamilylife. The enormously popular movie Waiting To
Exhale captures the essence of this virtue gap with its portrait of steadfast
mothers and deadbeatfathers,morally sleazy men and morally unassailable women. And women feelfreeto vent their anger andfrustrationwith
men in ways that would seem outrageous to women if the shoe were on
the otherfootIn Operating Instructiont (1993), her memoir of single
motherhood, Ann LaMott mordantly observes, "On bad days, I think
straight white men are so poorly wired, so emotionally unenlightened and
unconscious that you must approach each one as if he were some weird
cross between a white supremacist and an incredibly depressing T. S. Eliot
poem."
Women's weakening attachment to marriage should not be taken as a
> BARBARA DAFOE WHITEHEAD, H former Wilton Cmttr Cuttt Scholar, » <U author of Tht Divorce
Culture. tobtpublithtdbyAijniAL Knopf in oariy 1097. Cepyritht © 1996 bf Barfwra Da/b. mibhtad.
12 WUSfirint 1996
�lark nf interest in marriage or in a husband-wife partnership in child rearing. Rather, it is a sign of women's more exacting emotional standards for
husbands and their growing insistence that men play a bigger part in caring for children and the household. Given their double responsibilities as
breadwinners and mothers, many working wives find men's need for ego
reinforcement and other forms of ^moHonal and physical upkeep irksome
and their failure to share housework and child care absolutely infuriating.
(Surveys show that husbands perform only one-third ofall household tasks
even if their wives are working full-time.) Why should men be treated like
babies? women complain. If men fail to meet their standaids, manv
women arc willing to do without them. Poet and polemicist KathaPollift
captures the prevailing sentiment: "If single women can have sex, their
own homes, the respect offriendsand interesting work, they don't need to
tell themselves that any marriage is better than none. Why not have a
child on one's own? Children are a joy. Many men are not"
For all these reasons, it is important to see the fatherhood problem as
part of the larger cultural problem of the decline of marriage as a lasting
relationship between men and women. The traditional bargain between
men and women has
broken down, and a new
bargain has not yet been
struck. It is impossible to
predict what that bargain
vvill look like—or
whether there will even
be one. However, it is
possible to speculate
about the ta king points
that might bring women
to the bargaining tabic.
First, a crucial proviso:
there must be recognition of the changed
Boy on Roof (1967), by Hughie Let-Smith
social and economic status of women. Rightly or wrongly, many women fear that the fatherhood
movement represents an effort to reinstate the status quo ante, to repeal
the gains and achievements women have made over the past 30 years and
return to the "separate spheres" domestic ideology that put men in the
workplace and women in the home. Any effort to rethink marriage must
accept the fact that women will continue to work outside the home.
^
T
'
^hereforc, a new bargain must be struck over the division of paid
work and family work. This does not necessarily mean a 50/50
split in the work load every single day, but it does mean that men
must make a more determined and conscientious effort to do more than
one-third of the household chores. How each couple arrives at a sense of
what is fair will vary, of course, but the goal is to establish some mutual
understanding and commitment to an equitable division of tasks.
Another talking point may focus on the differences in the expectations
men and women have for marriage and intimacy. Americans have a "best
friends" ideal for marriage that includes some desires that might in fact be
more easily met by a best friend—someone who doesn't come with all the
Fatherhood 33
�complicated entanglements of sharing a bed, a bank account, and a bathroom. Nonetheless, high expectations for emotional intimacy in marriage
often are confounded by the very different understandings men and
women have of intimacy. Much more than men, women seek intimacy
and affection through talking and emotional disclosure. Men often prefer
sex to talking, and physical disrobing to emotional disclosing. They tend to
be less than fully committed to (their own) sexualfidelity,while women
viewfidelityas a crucial sign of commitment. These are differences that
the sexes need to engage with mutual recognition and tolerance.
In lenegotiating the marital bargain, it may also be useful to acknowledge the biosocial differences between mothers and fathers rather than to
assume an androgynous model for the parental partnership. There can be
a high degree of flexibility in parental roles, but men and women are not
interchangeable "parental units," particularly in their children's early
years. Rather than struggle to establish identical tracks in career and family
lives, it may be more realistic to consider how children's needs and wellbeing might require patterns of paid work and child rearing that are differentformothers and fathers but are nevertheless equitable over the course
of a lifetime.
F
inally, it may be important to think and talk about marriage in
another kind of language than the one that suffuses our current
discourse on relationships. The secular language of "intimate relationships" is the language of politics and psychotherapy, and itfocuseson
individualrightsand individual needs. It can be heard most clearly in the
personal-ad columns, a kind of masked ball where optimists go in search of
partners who respect their rights and meet their emotional needs. These
are not unimportant in the achievement of the contemporary ideal of marriage, which emphasizes egalitarianism and emotional fulfillment. But this
notion of marriage as a union of two sovereign selves may be inadequate to
define a relationship that carries with it the obligations, duties, and sacrifices of parenthood. There has always been a tension between marriage as
an intimate relationship berween a man and a woman and marriage as an
institutional arrangement for raising children, and though the language of
individualrightsplays a part in defining theformer,it cannot fully
describe the latter. The parental partnership requires some language that
acknowledges differences, mutuality, complementarity, and, more than
anything else, altniism.
There is a potentially powerful incentiveforwomen to respond to an
efforttorenegotiate the marriage bargain, and that has to do with their
children. Women can be good mothers without being married. But especially with weakened communities that provide little support, children
need levels of parental investment that cannot be supplied solely by a good
mother, even if she has the best resources at her disposal. These needs are
more likely to be met if the child has afatheras well a« a mother under
the same roof. Simply put, even the best mothers cannot be good fathers.
54 WQ Spring 1996
�i MO .NXt 1011.
September 22. 199T
PATRICIA J. WILLIAMS
The World Beyond Words
I cccntly I participated in what was advertised
frequently diverge quite dramatically fro" what
I as a Conversation on Race. A fundiaiscr for the
most minorities may feel or believe. Thi? is not to
W.E.B. Du Bois Institute at Harvanj, moderated
censor anyone, just to caution that too often what
by Henry Louis Gates Jr., the event took place
white people believe to be the Voice of Min'onty
I on Martha's Vineyard and overlapped with the PROFESSOR
People is little more than wishful thinking, generPresident's visit. Clinton did not show up. but the
ously endowed with majoritv interest.
entire media world converged on Edgartown's Old
It is particularly misleading when the »-inner is
Whaling Church on the chance that he might. Thus
so consistently the most conservative black person
it was that 1, a good worrier under the least of
for miles around. This, again, is not to impugn those
circumstances, found myself so overwrought that
views but simply to remind ourselves that, despite
I turned to the twentieth-century equivalent of
the enormous diversity of opinion otherwise, there
smelling salts: 1 opened a file in HyperCard and made a list of seems sufficient uniformity of experience with the farrightto
my anxieties, neatly ranked and thoroughly cross-referenced.
convince most black people that their interestsremainover time
It must be said that the actual panel went swimmingly: The
with liberal, left-of-ccnter Democrois.
other conversant—Kathleen Cleaver, Christopher Edley, Anita
It is also misleading when, in other contexts, the winner is the
Hill, Randall Kennedy, Charles Oglctrec, Orlando Patterson, Anna most "authentic" black person in a group, authenticity measured
Dcavere Smith and Cornel West—werc diverse yet respectful,
by monolithic stereotypes of black pereonality. The ebonies
opinionated yet thoughtful. Nevertheless, as wc chug through a speaker par excellence, for example, or the most divisive person
year supposedly dedicated to national reflection on race, pcihaps
imaginable, like Leonard Jeffries or Louis Farrakhan or maybe
this random,relativelyquiet moment offers an occasion to exa rap singer. Someone guaranteed to provoke a cockfight, and for
amine precisely what it is about media reportage that makes the
whom the rest of us —he's "our" leader, after all—will be colled
prospect of even a fairly unfreightcd discussion about race such
upon to apologize eternally and then apologize some more.
an inherently anxiety-provoking one. Perhaps, in other words, we
Sometimes it's the most "arhculaie" person around who gets to
could do with a road map to get us through to the other side of
be the oracular black voice. WTio'd have ttronk it Not an ebonies
our seemingly cyclicalj over-the-top race spectacles—that next
speaker! Why can't more of them 5pcak like that nice Colin
O.Jadcd moment, whatever it may be.
Powell? Let us beware of using admittedly fine orators like
The first thing 1 always worry about is how peculiarly weight- Powell as justification for not listening to more of those who
may be twice as insightful but a little more colloquial. Even in
ed are the words of black speakers Rarely arc wc assessed simply
listening to all that vaunted articulation, moreover, there's often
for the internal logic or expertise of what ie said; too often there
the failure *till to hear anything bin the marvelous physical
occurs instead a public musing about whether there is any duty
feat—will you look at those large mouths rounding out those
to listen at all, measured by arbitrary and stifling attributions—
too middle class? too many baubles and braids? too few? Under- enormous polysyllahles!—rather than listen to the substance. One
of Ralph Ellison's characters in fmisible Man introduces the
girding this, 1 think, is the tendency to compress a multiplicity of
black narrator with just such patronizing joviality: "I'm told he
black voices into the soundbitten convenience of one telegenic
knows more big words tban a pocket-sized dictionary."
True Black Spokesperson who will pronounce on behalf of the
purportedly Singular Black Mind.
One of the things that makes me most nervous about our national conversing is the degree to which "race" is compressed to
Therefrequentlyensues from this an intense competition
mean "black" alone. Race, after alL implicates not just blacks
among blacks not just to voice one Is opinion but to be the one
but those who ere called white people. East and South Asians.
whose voice is graced with credibility. In media forums beholden
to majoritarian taste, the victor is too often the one who sounds pan-Pacific peoples, indigenous, tribal and nomadic poop les. Yet
while black people have been talkinfi about the diversity and
most like what the larger society wants to hear. This is not necnuance within both black and white communities for generarions
essarily a matter of conscious manipulation but of simple manow, lined up on stages, marching ttaougb streets, telling our
joritarian politic? in a culture that has not come to tenns with
clorieK in book after book after book—race seems to have rethe degree to whichraceat this point coincides with fairly spemained essentially an object of voyeurism for most white* And
cific social and economic consequences rather than being just,
if we Americans continue toritualizerace as a kind of one-way
or principally, a fluid bundle of shifting ideologies -of ordinary
theater, it will not be Clinton who will have failed, but the most
portisan politics, in other words.
democratically inspired hopes of the civil rights moy emeu L I
Thus, the anointing of so-called black leaders, particularly by
very wealthy entities like the American Enterprise Ia<!titute or the worry that if we do not talk to one another— aerott bowxiary,
through anger, past fear, despite blindness—about all the just'
Heritage Foundation or Hollywood, for that matter, means that
plain-human histories swallowed up in the disguise of both tbekincreasingly the winners of the spokesperson sweepstakes arc
those who please, entertain, shock or otherwise speak best to white ncss" and "whiteness," we will never reach the rich and varied
terrain that is the great promised land beyond race.
•
audiences; and so these same so-called spokcspersonls views
DIARY OF A
MAD LAW
�August ZS/September
1, 1997
The Nation.
PATRICIA J. WILLIAMS
Big Words, Small Divisions
ill Nelson tells a rich little story in her new book.
Straight, No Chaser. She's sitting in a bar, chatting with a black man who suddenly tells her
U
that he would never consider dating a black
woman. Why? she asks as nondefensively as
possible. Too bossy, too strong, a host of other
stereotypes fall from this man^ lips. "Well, here's
DIARY OFA
MAD LAW
PROFESSOR
forcibly, given slave masters' economic, shall we
say, interest in "breeding" more slave property.
Similarly, there have always been some interracial
marriages—the earliest between blacks and Native
Americans, as well as Irish indentured servants, and,
since the 1870s, with each new wave of immigration.
After world War n, a significant number of black
my date," says he. Jill turns her head and sees "a
men brought home Italian wives Ditto the Korean
woman approximately the color of milk chocolate
and Vietnamese wars.
with shoulder-length straightened hair walking toIt is thus that I wonder at the sudden and voluble
ward us." What about not dating black women,
optimism of analysts who opine that intermarriage
asks Jill. "She's not black. She's West Indian." says the man.
is the political solution to our racial worries. The rate of interracial
marriage has increased by only about 1 percent (since 1980, from
I like this story because it illustrates the complicated way
1.3 percent to 2.4 in 1995. Isn't it a touch premature to hail it as
ethnicity traditionally has been used by some African-Americans
as a bulwark against the terrifying psychic messages of stereo- our path to salvation—particularly as we do away with affirmatypes about one Is blackness. It's a much too familiar script to most tive action and other measures that increased integration in the
blacks, if not to many whites. I'm notreallyblack—l m Moorish schools and workplaces where people often meet iheir mates?
with a touch of Choctaw. Well, O.K.... Ut > put it this vwy, I'm not
only just black—b*fon> the slave master my family was descended
from an uninterrupted line of Egyptian priestesses and fearless
Asian warriors. O.K., OK., so I'm kind of black—but if you tilt
your head and squint your eyes and gimme some credit for the
red in those skin tones, I could be Something More.
It is against this backdrop that 1 am suspicious of what, since
Tiger Woods, has been labeled a new "interraciaUsm." I hate to
find myself so queasy about a concept that boasts of its potential
to move us "beyond race." But in fact the push to inicrracialism
is not as new as it purports and bears a lot of complex historical
baegage that perhaps ought to be unpacked before we can get
very far with that box on the census form.
The first confusion seems to be that many argue about multiculturalistn and Interracialism aa though they arc the same thing.
But multicultundinn connotes many cultures- multiple languages,
mores, customs,religioustraditions and pigheaded perspectives
all rattling around or melting together, overlapping, battling for
space. Interracialism, on the other hand, means "between race."
God knows that "race" has at least as much contested meaning as
culture or ethnicity. But in general race implicatesreverentlyheld
"scientific" taxonomies that sort us out according to jumbled but
nevertheless paradigmatic models premised on the length of our
hair, the bulk of our booties, the width of our noses, the concentration of ow melanin and the (God-given? genetically endowed*?)
accuracy of our hoop shots. Furthermore, much of the current
interracialism seems to draw on popular beliefs that there exist
clear lines between each of "the" various races, and that these pure
strains are mixing for the first time. Dinesh D'Souza.forexample,
write* of his marriage to Dixie Brubaker. a woman culturally
designated as white; they have a child whose lineage is apparently such a shock to both sides of the family that the babe is heralded as the harbinger of a new order. I mean be goes on about It.
But for as long as this nation has existed, there have been
unioas between blacks and whites. No black descendant of slavery in the United States is unmixed, albeit illicitly and often
Here's my worry: An uncomfortable part of our history is that
while some groups have tried to assimilate by asserting ethnicity
as a way of resisting the racial identity of "blackness," other
groups have buried their ethnic differences by assuming the
racial identity of "whiteness." I grew up on a street that had only
six houses. At No 1 lived a Portuguese family: No. 2, Russian:
No. 3, Irish; No. 4. Italian; No. 5, German. No. 6 was us, the
"colored" family. Since the tum of the century, our families had
waged low-level, neighborly battles over ethnicity. But in the early
sixties two other black families moved in. Suddenly the neighborhood "tipped": The fvc other families healed centuries of division
as they all decided they were "white" and fled to the suburbs.
This phenomenon is why I think it must not be only blacks,
Asians and Hispanics scrambling to define themselves as
"mixed," while whitonesa, categorically unchallenged, stands
back as though this were a spectator sport. We must guard against
replacing a two-story system of racism ("white" top and
anyone with "one drop" or more of black on the bottom) with a
multilevcled caste system. Wc will end up only with something
like what plagues parts of Latin America: whole skyscrapers of
racial differentiation, with "white" still living in rhe penthouse,
the "one drops" just below and those with buckets of black
blood in the basement or out on the street.
I have told tlie story before of the womanfromMississippi
who told my aunt that Boston was more racist than the Deep South
because "they don't give you any credit for having some white
blood." A hundred years ago, the Louisiana codes measured that
"credit" in halves and quarters and thirty-seconds. Let us hope wc
o n
are not revisiting the days of quadroons and octoroons and tragic
mulattas in the cwise of claiming our various parts. It would be
nice if this exercise in rootsremindedus of how related we have
been, and for how long. But if ethnicity becomes either an "escape" ftoni blackness or a color-coded way station on the ascent
into "whiteness," then wc have not torn down the wall between
black and while but merely provided new building blocks with
which to maintain that divide.
•
�10
i. lie Nation.
May 19, 19$:
PATRICIA J. WILLIAMS
The Theft of Education
| otne years ago in Chicago, I saw a local tele' vision report about a particularly poignant
phenomenon labeled "theft of education." It
J bris'led with middle-class anxiety that poor
' blacks were escaping from the inner city and
such constraints on subjectivity are "racial disci-
quotas," teaching children
DIARY OF Aplinaryof racial enUtlements." "an unedi tying
lesson
MAD LAW
As for the heart of the lawsuit, the racial tracking
system, Posner puts it this way. "The decree also
invading schools where they did not belong. Do- PROFESSOR perversely limits minority enrollment in compenmestic servants had apparently been using their
satory education (that is,remedial)programs to the
employers' addresses to enroll their children in
percentage of minority students in the school as
schools in suburbs like Winnctka. They were lying!
a whole. These programs are designed largely alwas the gist of this report. They were stealing tax
though not entirely for minority students, because
dollars! They were raiding the Chicken Coop of
they have on average more educational deficits. To
Knowledge! It was sad, the images of those children at the train fotbid these students access to these programs on the ground
station, their books scattered, their way blocked as guards dethat it would foster unfavorable stereotypes is the kind of 'bemanding proof of residence pressed them back onto the trains. nign discrimination' thinking (illustrated by Bmdwell v. IlliNot long after that, I remember seeing news about a scandal in nois...) that the courts have long rejected."
Rockford, Illinois, a mostly white woridng-class town just west of
Talk about pervose: Bradmll v. Wlnois is an 1873 case denyChicago, where in recenttimes,black and Hispanic families have ing a woman admission to the Illinois bar on the grounds that the
moved in search of better lives. The school board was accused "civil law, as well as nature herself, has alwaysrecognizeda wide
of intentional systemic racial segregation. A lawsuit was filed, difference in the respective spheres and destinies of man and
People Who Care v Rockford Board of Education, and in 1993
woman." and that it was not among Myra Bradweil * "fundamena magistrate found that black students were assigned to separate, talrightsand privileges to be admitted into every office and posiunequally equipped fadltttes; that regardless of test scores and tion, induding those which require highly special qualifications."
grades, white students (some "below the national mean") had been
The upshot ofall this is that Posner permits the board to entracked into separate "gifted" and honors programs and blacks gage in tracking that results in segregation and simultaneously
(some "who scored in the ninety-ninth percentile") tracked into disallowsremediationfor the victims of such policies—even
"remedial" and basic programs. Even ostensibly "integrated"
striking down that part of the decree mandatingre-evaluationof
schools maintained segregated classrooms, entrances, bathrooms black students shunted intorigidlyinescapable (i.e., twelve-year)
and lunchtimes. The magistrate ordered a variety of remedies, in- remedial tracks. Saying that "(fjorty-eight years after it had first
cluding that schools be integrated; that gifted classes admit black been init^ated,' Bmwn v. Board ofEducation was still "generating
students whose test scores quality them; and that the racial com- 100-page judicial opinions" he complains that "affirmative deposition ofregularclassesreflectthat of the school at large.
crees are a formula for protracticra" He counsels against "ambitious schemes of social engineering" and wains that "children,
The school board appealed and on this past April 15, the
the most innocent of the innocent occasionally brushed by dracoSeventh Circuit Court of Appealsreversedkey parts of the magistrate's remedial order. The opinion, written by Judge Richard man decrees, should not be made subjects of Utopian projects."
This last would be more touching if it weren'tfroma judge
Posner. says a number ofremarkablethings: As for the order to
desegregate, he writes that "making it more difficult to identify whose most controversial scholarship to date urges a "free" adopparticular schools as 'white' or 'black' (or Hispanic)" is of but tion market in which baby prices are aligned with pricing systems
"conjectural benefit" to minority students. He throws out a study for "soybean futures" and in which "a racial ranking of these
purporting to show that regardless of socioeconomic status, white prices would be evident, with white baby prices higher than nonstudents outperformed black students, ostensibly as a consequence white baby prices " Draconian? Not according to the dystopian
of the board's discriminatory educational policies. Saying that Judge Posner. "By obtaining exclusive control over the supply of
the study failed to consider other salient variables—"the well- both "first-quality'adoptive children and 'second-quality'children
residing infostercare but available for adoption, agencies are able
documented scholastic achievements of the children of poor
immigrants would have to be ascribed to discrimination in favor to internalize the substitution possibilities between them."
One of the innocent children touched by the Rockford school
of immigrants," he writes with no apparent irony—Posner goes on
board's policies was Clifford Williams, an A student who was
to rule that it has "no value as causal explanation and is therefore inadmissible." Indeed, he says that the study is "implausible." nevertheless put in a mostly black program for those with "behavioral disorders " Luckily, his motherrefusedto accept that
His insistence on sucK objectivity breaks down completely,
however, when he comedo that part of the decree forbidding the assessment and insisted that he be tested for the'gifted program.
school district to "refer a higher percentage of minority students Williams scored in the ninetieth percentile and became one of
than of white students for discipline unless the district purges all only two black children in Ae gifted class. He isa pre-mod student
'subjective' criteria from its disciplinary code." Posner declares these days. Observes his mother, "I wonder how many people
•
that disciplinary criteria "are unavoidably judgmental" and that just gave up."
1
,
�ALSO
BY D A N I E L
YERGIN
DANIEL YERGIN
and
THE PRIZE:
The Epic Quest for Oil. Money, ami Power
RUSSIA 2010 (coauthor)
JOSEPH STANISLAW
SHATTERED PEACT::
The Origins of the Cold War
J
ENERGY FUTURE (coauthor)
GLOBAL INSECURITY (coauthor)
JJ
n
y
The Battle Between Government
and the Marketplace That Is
Remaking the Modern World
�ATT'TJf i
n
rKUiNii.rJil
Introduction
BOOKS BEGIN in unexpected places. This book began in part on a summers
day on the outskirts of Moscow. The Izmailovo outdoor market sprawls over
acres on the southwest edge of the city, almost at the very end of the subway
line. Its transformation—from a park for exhibiting painting and crafts into a
vast bazaar—was one of the earliest and most visible signs of communism's
collapse and the transition to an economy that was no longer state controlled
but responded to the demands of the marketplace.
The past and future were simultaneously on sale. Oil paintings of snowy
villages and religious icons, many of dubious origin, were commingled with
South Korean electronics and cheap videoeassettes. Stalls competed to sell
old dishes and stained uniforms, czarist mementos, and pins decorated with
Lenin's face. There were carpets from Central Asia, swords from the Caucasus, and military souvenirs from both czarist and Red armies. And everywhere were the matrioshki, wooden dolls within dolls, but of endless
variation—not only the traditional peasant women but also a host of other
characters, from Soviet leaders and American presidents to the Harlem
Globetrotters. The favored mode of payment for all of this was the dollar
the same dollar whose possession only a few years earlier could have resulted in a stiff prison term.
The market drew all sorts of people, including, on this particular day
Sir Brian Fall, the then British ambassador. As a career diplomat in the
Foreign Office, Fall had dealt with Soviet and Russian affairs for thirty
years, going back to the cold war days of George Smiley. In between, he had
held a number of other positions, including senior adviser lo three foreign
secretaries as well as high commissioner io Canada. This day, however, hewas at Izmailovo with his wife and daughter not for diplomatic purposes
but, like everybody else, to shop Ihey were looking for a painting ofa rural
village scene, an evocation of traditional Mother Russia. But Sir Brian, every
now and then, still had lo stop to remind himself tliat the diamaiic changed
in modern Russia were really happening. Fwiy stall at l/inailo\o hiouuln one
�face-to-face with that change. The market was a metaphor for a society
disjointed and confused, but also reenergized experiencing a transition more
wrenching and more rapid than Russians could comprehend, having passed
through a revolution they had not anticipated—and were certainly not prepared for.
"How much easier it would have been for the Russians," he said as we
wound down one of the aisles, " i f the Soviet Union had collapsed in the
l%0sor 19705."
Why?
"Because that was when government intervention loomed large in the
West, and national planning and state ownership were the methods of the
day. That would have made it much more acceptable for Russia to hold on
to its huge state-owned companies and keep pumping money into them, no
matter how big the losses. And then the move to a market economy would
not have been so severe and traumatic."
His observations brought into sudden and sharp focus how much has
changed around the world since the 1970s in thinking about the appropriate
relationship between state and marketplace. What was the conventional,
indeed the dominating, wisdom of that time is now widely criticized, and in
some cases discredited and abandoned. What seemed to be ideas on the
fringe, or even beyond the fringe, discussed only around a few seminar
tables, have now moved into the center. As a consequence, economies almost
everywhere are being reordered in some cases radically, with immense and
far-reaching effects.
All around the globe, socialists are embracing capitalism, governments
are selling off companies they had previously nationalized and countries are
seeking to entice back multinational corporations that they had expelled just
two decades earlier. Marxism and state control are being jettisoned in favor
of entrepreneurship; the number of stock markets is exploding; and mutual
fund managers have become celebrities. Today, politicians on the left admit
that their governments can no longer afford the expansive welfare state, and
American liberals recognize that more government may not hold the solution
to every problem. Many people are being forced to reexamine and reassess
their root assumptions. These changes are opening up new prospects and
new opportunities throughout the world. The shift is also engendering, for
many, new anxieties and insecurities. They fear that government will no
longer be there to protect them as they become increasingly intertwined in a
global economy that seeks to ignore national borders. And they express
unease about the price that the market demands of its participants. Shocks
and turbulence in international capital markets, such as those that roiled
Latin America in 1995 and Southeast Asia in 1997, turn that unease into
fundamental questions about the danger and even legitimacy of markets. Bul
all these viewpoints need to be set in context.
tVhy the Shift?
Why the move to the market? Why, and how, the shift from an era in which
the "state" — national governments—sought to seize and exercise control
over their economies to an era in which the ideas of competition, openness,
privatization, and deregulation have captured world economic thinking?
This question, in turn, begets others: Are these changes irreversible'.' Are
they part of a continuing process of development and evolution? What
will be the consequences and prospects —political, social, and economic
—of this fundamental alteration in the relationship between govemmenl
and marketplace? These are the basic questions that this book seeks to
answer.
Where the frontier between the state ami market is to he drawn has
never been a matter that could be settled, once and for all. at some grand
peace conference. Instead it has been the subject, over ihe course ol this
century, of massive intellectual and political battles as well as constant
skirmishes. In its entirety, the struggle constitutes one of the great defining
dramas of the twentieth century. Today the clash is so far-reaching ami so
encompassing that it is remaking our world and preparing the canvas for
the twenty-first century.
This frontier defines not the boundaries of nations but the division ol
roles within them. What are the realm and responsihihiy ol the slate in the
economy, and what kind of protection is the state to afford its citi/eiis? What
is the preserve of private decision-making, and what are the responsibilities
of the individual? This frontier is not neat and well defined. It is consiantly
shifting and often ambiguous. Yet through most of the century, the state has
been ascendant, extending its domain further ami further into what had been
the territory of the market. Its victories were propelled by revolution ami
two world wars, by the Cireat Depression, by the ambitions of politicians and
governments. Il was also powered by the demands of the public in the
industrial democracies for greater secunty. by the dine for progress ami
improved living conditions in developing countries ami by the quest for
justice and fairness. Behind all this was the conviction thai maikets went to
excesses, that they could readily fail, thai there were too many needs and
services they could not deliver, that the risks and the human and social costs
were too high and the potential for abuse loo ureal In the al'iermaih of the
traumatic upheavals of the first half of the twcniicih century, goveinmenis
expanded their existing icsponsibihiics and obligations io iheir populaces
and assumed new ones. "(iovei nnieiil knowledge" the colleclnc intelligence of decision makers at the eeniei was regarded as superior lo "maikei
knowledge" the dispersed intelligence of private decision makers aiul eon
sumers in the marketplace.
Al the extreme, the Soviet t .uion. the People's Republic ol t lima, ami
�other communist states sought to suppress market intelligence and private
property altogether and replace them with central planning and state ownership. Government would be all-knowing. In the many industrial countries of
the West and in large parts of the developing world, the model was the
"mixed economy," in which governments flexed their knowledge and played
a strong dominating role without completely stifling the market mechanism.
They would reconstruct, modernize, and propel economic growth; they
would deliver equity, opportunity, and a decent way of life. In order to
achieve all that, governments in many countries sought to capture and hold
the high ground of their economies—the "commanding heights."
The term goes back three quarters of a century. In November 1922, half
a decade after leading the Bolsheviks to victory, the already ailing Vladimir
lllyich Lenin made his way to the platform of the Fourth Congress of the
Communist International in St. Petersburg, then called Petrograd. It was his
penultimate public appearance. The year before, amid economic breakdown
and out of desperation, Lenin had initiated the New Economic Policy, permitting a resumption of small trade and private agriculture. Now, communist
militants were attacking him for compromising with capitalism and selling
out the revolution. Responding with his old acerbity and sarcasm, despite
his physical enfeeblement, Lenin defended the program. Although the policy
allowed markets to function, he declared, the state would control the "commanding heights," the most important elements of the economy. And that,
Lenin assured any who doubted him, was what counted. All this was before
collectivization, Stalinism, and the total eradication of private markets in the
Soviet Union.
the West, governments were shedding control and responsibilities. Instead of
"market failure," the focus was now on "government failure" the inherent
difficulties that arise when the state becomes loo expansive and too ambitious and seeks to be the mam player, rather than a referee, in the economy.
Paul Volcker, who conquered inflation as chairman ol the U.S Federal Reserve System, explained the reason lor the change in simple lei nis: "Governments had become overweening."
The Greatest Sale
The phrase found its way to Britain, via the Fabians and the British
Labour Party, in the interwar years; it was then adopted by Jawaharlal Nehru
and the Congress Party in India, and spread to many other parts of the world.
Whether or not the term was used, the objective was one and the same: to
ensure government control of the strategic parts of the national economy, its
major enterprises and industries. In the United States, government exerted
its control over the commanding heights not through ownership but rather
through economic regulation, giving rise to a special American brand of
regulatory capitalism.
Overall, the advance of state control seemed to be inexorable. In the
immediate post-World War II years, only governments could marshal the
resources necessary to rebuild devastated and dislocated nations. The 1960s
seemed to prove that they could effectively run, and indeed fine-tune, their
economies. By the beginning of the 1970s, the mixed economy was virtually
unchallenged and government continued to expand. Even in the United
States, the Republican administration of Richard Nixon sought to implement
a massive program of detailed wage and price controls.
Yet by the 1990s, it was government that was retreating. Communism
had not only failed, it had all but disappeared in what had been the Soviet
Union and, at least as an economic system, had been put aside in China. In
Today, in response to the high costs of control and the disillusionment with
its effectiveness, governments are privatizing. It is the greatest sale in ihe
history of the world. Governments are getting out of businesses by disposing
of what amounts to trillions of dollars of assets. Fvcryihmg is going from
steel plants and phone companies and electric utilities to airlines and railroads to hotels, restaurants, and nightclubs. It is happening not only in the
former Soviet Union, Eastern Europe, and China but also in Western Europe,
Asia, Latin America, and Africa- - and in the United Stales, where federal,
state, and city governments are turning many of then traditional activities
over to the marketplace. In a parallel process thai is more far-reaching anil
less well understood, they are also overturning the regulatory apparatus that
has affected almost every aspect of daily life in America for the last six
decades. The objective is to move away from govcinmenlal control as a
substitute for the market and toward reliance on competition in the marketplace as a more efficient way to protect the public.
This shift does not, by any means, signal the end of government. In
many countries, governments continue lo spend as large a share of national
income each year as the year before. The reason, in the industrial countries,
is social spending—transfer payments and enlillemenls and almost everywhere, government remains the solution ol last resort for a host of societal
demands. Yet the scope of government, the range of duties il lakes on in ihe
economy, is decidedly receding. The world over, govcrnmcnis have come to
plan less, to own less, and to regulate less, allow ing mslcad the troniieis ol
the market to expand.
The decamping of the stale from the commanding heighis marks a great
divide between the twentieth and iweniy-liist ceniuncs. Il is opening the
doors of many formerly closed counlnes to trade and investment, vastly
increasing, in the process, the effective size of the global maiket Manv new
jobs are being created. Still, il is capital and leehnology iliai. in this new
mobile economy, easily move around the world in search of new opporluni
ties and markets and more favorable business cm iionmenis Labor, which
does not travel as easily, could he Iell behind. I lie result loi workcis is a
double anxiety about global compctilion and ahoul the loss ol ihe social
safety net.
12
I i
1
�The word globalization, minted not much more than a decade ago, has
become the all-too-familiar description for the process of integration and
internationalization of economic activities and strategies. Yet the term has
already been overtaken by events. A new reality is emerging. This is not a
process but a condition—a globality, a world economy in which the traditional and familiar boundaries are being surmounted or made irrelevant. The
end of the Soviet Union and communism has redrawn the map of world
politics and subdued ideology as a dominating factor in international affairs.
The growth of capital markets and the continued lowering of barriers to
trade and investment are further tying markets together—and promoting a
freer flow of ideas. The advent of emerging markets brings dynamism and
opportunity on a massive scale to the international economy. National firms
are turning themselves into international operators; and companies, whether
long experienced in international business or newcomers, are hastening to
generate global strategies. Paralleling and facilitating much of this is a
technological revolution of momentous but uncertain consequences. Information technology—through computers—is creating a "woven world" by
promoting communication, coordination, integration, and contact at a pace
and scale of change that far outrun the ability of any government to manage.
The accelerating connections make national borders increasingly porous—
and, in terms of some forms of control, increasingly irrelevant.
The Power of Ideas
Underlying all this has been a fundamental shift in ideas. In 1936, in the
concluding pages of his famous General Theory of Employment. Interest
and Money, the eminent British economist John Maynard Keynes wrote that
ideas "are more powerful than is commonly understood. Indeed, the world
is ruled by little else. Madmen in authority, who hear voices in the air, are
distilling their frenzy from some academic scribblers of a few years back.
. . . Sooner or later it is ideas, not vested interests, which are dangerous for
good or evil."
The dramatic redefinition of state and marketplace over the last two
decades demonstrates anew the truth of Keynes' axiom about the overwhelming power of ideas. For concepts and notions that were decidedly
outside the mainstream have now moved, with some rapidity, to center stage
and are reshaping economies in every corner of the world. Even Keynes
himself has been done in by his own dictum. During the bombing of London
in World War II, he arranged for a transplanted Austrian economist,
Friedrich von Hayek, to be temporarily housed in a college at Cambridge
University. It was a generous gesture; after all, Keynes was the leading
economist of his time, and Hayek, his rather obscure critic. In the postwar
years, Keynes' theories of government management of the economy ap-
neared unassailable. But a half century later. .< is Keynes who has been
S e d anT. ayek, the fierce advocate of free markets, who is preemmenr
Z
Syncsian "new economics" from Harvard may have
Kennedy and Johnson administrations in .he 1960s, but ,. is the U. i crs„>
S c a g o * »ree-market school that , globally influen.ia, m .he 99
But if economists and other thinkers have the uleas
.s 1 ' u
o implement them; and one of the ^
^ ^
^ ^ ^
^
Thift is the importance of leaders and leadership. Keith Joseph I Uam
e "appomted "minister of thought." and lus iscple Margate 1hau
seemed to be embarking on a quixotic projec. when thev sc. on t o . v
n
Britain's mixed economy. Not only did .hey prevail, but they m hienced the
1 1 Z br a good par. of the res, of the world It w as a dedicate revoh,no. a^ o U X,aop4. who, while genullcc.ing to Marx, rcsohi.e y lorced tlu.
world's itrges. cotm.ry .o d.sengage from commumsm and ni.eg,, , i
Tnto the world economy. And m the United S.a.cs. .he v.cor.cs ot Ronald
Reagan forced the Democralic Party to redehne Used.
The vocabulary of this march .oward .he ma, ke.ph.ee requires a |
of clarification. For Amencans, the global battle between . c sta e
n . •ke. can be puzzling, lor il appears to pit "hhciahsm agamsi hbualism.
\l
Um.ed S.a.cs.
means .he embrace ol an aenvis,. in.e, ve om t governmen., expanding i.s involveme,.. and responsib,lily m .he
omy n the rest of the world. /,7H,«/,.V»/ means almost exae.ly the oppos, e
wh an American liberal would, m lac,, desenhc as ^ r u . n s n ,
his
kind of hbera.ism supports a reduced ,o,e lo, ,he suae, tlie niaxumza,,o
of individual liberty, economic Ireedom and -chance on e m
and
decemrahzed decision making. Il has its intellectual roots in sue , .hmke.s
J ^ U K k e , Adam Smith, and John S.uar. Mi... h cmp has.zcs . K nnp. tance of property rights and sees government s role as the taeili.alion and
ad udicLion of X i . t o c e . y . Thus, m th.s book, when I M w ,s discussed
outside the Um.ed States, whether ,. is m the lor.ner SOMC, Union o, I .a..,.
America or elsewhere, it means less government, not mo.e.
m
m
s
• How was „,
m
...".his ^
^ • n c s . " D u n n , ,hc «,,.> ^
alK-a-..
^
MOJIH-M H . H ^ T :
.ok- 11 iho ivonoim
1
Is
14
n
w h
.....
^
^
^
I
Z
^
,
, ...
�Relinking Past and Future
The reassertion of this traditional liberalism represents a rebirth—indeed, a
reconnection—for it had its heyday in the late nineteenth century. Indeed,
the world at the dawn of the twenty-first century bears resemblance to the
late-nineteenth-century world—a world of expanding economic opportunity
and ever-diminishing barriers to travel and trade. Then, as now, new technologies helped foster the change. Two innovations in the nineteenth century
decisively broke the bounds of the natural rhythms of winds and tides, that
had, from the beginning of civilization, defined commerce. In the early part
of the nineteenth century, the steam engine made possible rail and ship
transportation of people and goods that was safer, faster, and more expedient
than any method known at the time. As early as 1819, the American ship
Savannah crossed the Atlantic using a steam engine to augment its sails. By
the middle of the nineteenth century, steam was beginning to supplant wind
power altogether. When the first telegraph cable was laid across the floor of
the Atlantic in 1865, after three failed anempts, markets were connected.
The spread of these technologies powered a dramatic expansion of world
trade. Moreover, they provided outlets for private investment capital. European funds were poured into the construction of railroads in North and South
America and in Africa and Asia, and into the mines and plantations they
connected to the ports. With British money financing so much of America's
railway development, the United States became the champion emerging
market of the nineteenth century. In the late nineteenth century and early
twentieth century, the world economy experienced an era of peace and
growth that, in the aftermath of the carnage of World War 1, came to be
remembered as a golden age.
Critical Tests
What powered the return toward traditional liberalism around the world?
The previous embrace of the state as modemizer tumed into disillusionment
with state ownership and intervention, owing to the unexpectedly heavy
costs and consequences. The financial burden had gone beyond the ability
of governments to manage: Debts and deficits had grown too big. Inflation
had become chronic and embedded. As the perceived gap between intentions
and actual performance grew, confidence turned into cynicism. The implosion of the Soviet system—the great lodestar for central planning—discredited statism of all kinds, while the rise of prospering East Asian economies
pointed toward a different balance between state and marketplace and underlined the virtues of participation in the global economy.
Will the apparent triumph of the market endure? Or will government's
role expand once again? The response will depend, we believe, on how the
answers unfold to several key questions: Will the market economies deliver
the goods in terms of economic growth, employment, and higher standards
of living, and how will they redefine the welfare state.' Will the results be
seen as fair, equitable, and just? What will happen to national identity m the
new international economy'.' Will the public be sure that the environment is
sufficiently secured? And how will maiket economies cope with the cost ol
demographics—the burgeoning of the young in developing countries and
the growing proportion of the elderly in the industrial countries ' These
questions, and the themes they represent, will be integral to the pages that
follow.
How does the plot of our narrative proceed .' The fu st three chapters set
out how governments took control of the commanding heights in Europe,
the United States, and the developmg world, achieving what seemed by
the 1970s to be an invincible position. Chapter 4 describes the first majoi
counterattack, the Thatcherite revolution in Britain m the 1980s. Chapter 5
explains the forces that led the world m the l9X()s and I'WOs to change its
"mind" about the balance between government and maiket Chapters 6
through 8 focus on Asia—the dynamics of the East Asian countnes and the
forces transforming them after the "miracle," the twenty-year turnaround
from communism to capitalism in China, and the efforts to dismantle India's
"Permit Raj" and reorient that nation to the world economy L atin America s
wrenching move from dependent ia to shock therapy is the subject of Chapter 9. Chapter 10 explains how Russia's and Eastern Europe's "ticket to the
market" got punched, and the bumpy journey to the world after commumsm
that has followed. Europe's struggle to create a single maiket and slim down
governments—and come to terms with the predicament of the welfare stale
— is the subject of Chapter 11. Chaptei 12 looks at the United States through
the framework of the overall process of global change, exploring the impact
of fiscal rectitude on expansive government and the contrary directions in
economic and social-value regulation. And finally. Chapter 13 looks to the
future. What are the essential economic, political, and social issues that are
to be confronted in different parts of the world'.' Will there be a sw ing back
from the market, or are more fundamental and permanent changes in place '
Who, after all, will occupy the commanding heights in the next century
government or market?
This, then, is our story, a narrative ol the individuals, the ideas, the
conflicts, and the turning points that have changed the course ol economies
and the fate of nations over the last half cenlury. The scope ot the story
imposes its own discipline. A multitude of volumes could be wntten on the
United States alone, or on any of the oilier regions and countries, here,
instead, we paint them all as parts o f a larger camas the luibulem haitle
over the commanding heights, the slakes and the consequences, and the
prospects for the next century.
Bul we begin with a pe.iee conl'ereiwe whose locus was. in laci. on
traditional political frontiers. I heyeai was I'Mv I he place. Berlin
3
17
�III. CREATING A BRIGHT
ECONOMIC FUTURE
19
�III.
CREATING A BRIGHT ECONOMIC
FUTURE
There is no doubt that the economic strategy we put in place in 1993 created the conditions for
the extraordinary private sector growth we have all witnessed... Four straight years of deficit
cuts have produced the economic expansion as well as real benefits for ordinary Americans: lower
car payments, lower mortgage rates, lower credit card rates. This balanced budget will close a
chapter in American history: years—decades in fact—when our people doubted whether Government could work for them and questioned whether our Nation could set and meet goals.
President Clinton
August 1997
For five years, the President has pursued
a fiscal and economic policy that has shown
remarkable results. Due largely to his 1993
economic plan, the budget deficit, which had
hit a record $290 billion in 1992, is not
only lower than even the Administration
had expected, it's also at its lowest level
in a quarter-century. The publicly held debt
not only has stopped rising as a share
of the economy, but actually has begun
to decline. Now, this budget will finish the
deficit-cutting job and mark a true milestone
in American economic history—the first balanced budget in 30 years.
The President's commitment to lower deficits
bore fruit right from the start. Long-term
interest rates fell in 1993 and have remained
relatively low, helping to spur record levels
of business investment. Unemployment and
inflation have both continued to fall, bringing
the so-called "misery index" to its lowest
level in 30 years. The current economic
expansion, already the third longest in U.S.
history, shows no signs of ending, putting
it on track to become the longest in the
Nation's history.
1
Continuing its practice of using conservative
economic assumptions, the Administration
projects that growth will continue at a steady
1
Over 20 years ago, economist Arthur Okun developed the concept of a "misery index," calculated by adding together the unemployment rate and the rate of indation, as measured by the
Consumer Price Index.
pace without inflation. Unemployment and
interest rates will remain relatively low.
Due both to a strong economic outlook and
to the 1997 Balanced Budget Act (BBA),
the President now proposes a balanced budget
for 1999, three years earlier than expected.
The economic and fiscal outlook for the
longer term, until 2050, also has improved
since last year.
Nevertheless, the coming retirement of the
baby boom generation points up the need
for long-term structural changes that will
support the financial health of Social Security
and Medicare and ensure that future generations share in the retirement and health
security that senior citizens enjoy today.
Budgetary Performance
By the time President Clinton took office,
the deficit for the previous year, fiscal 1992,
had hit a record $290 billion. For the 12
years up to then, annual deficits totaled
$2.3 trillion. Never before had the Nation
witnessed such an explosion of public debt.
Moreover, without changes in policy, public
and private forecasters projected that the
deficit would keep rising, potentially pushing
total public debt, future interest costs, and
deficits into an upward spiral without limit
(see Chart I I I - l ) .
The Administration set out, first and foremost, to cut this massive deficit and to
put the budget and economy on a sound,
21
�22
THE BUDGET FOR FISCAL YEAR 1999
Chart III-l. FINISHING THE JOB:
BALANCING THE BUDGET AFTER DECADES OF DEFICITS
SURPLUS (•> / DEFICITS (-) IN BILLIONS OF DOLLARS
-700-
I
1980
1982
I I I I I I I I I I I I I I I I I I I
1984
1986
1988
1990
sustainable footing. To that end, the President
proposed, and Congress enacted, the Omnibus
Budget Reconciliation Act (OBRA) in 1993
as a solid first step toward fiscal responsibility.
It has proved to be much more. In the
last four years, cumulative deficits and accumulating debt have fallen more than twice
as much as the Administration had conservatively projected.
Still, OMB and the Congressional Budget
Office (CBO) agreed that the deficit would
begin rising again without further action.
Consequently, the President worked with Congress to finish the job, enacting the BBA
in mid-1997 with the goal of reaching balance
in 2002. The Administration now proposes
a balanced budget in 1999. In addition,
the Administration projects that, together,
OBRA and the BBA will reduce the total
deficits from 1993 to 2003 by $4.0 t r i l l i o n more than the deficits that the Government
accumulated from 1981 to 1992.
The Administration has Exceeded Its
1993 Deficit Reduction Pledge: Upon
1992
1994
1996
1998
2000
I
2002
OBRA's enactment, the Administration projected that i t would reduce the accumulated
deficits from 1994 to 1998 by $505 billion.
Clearly, it will exceed that goal. (In fact, in
the five years from 1993 to 1997, total deficits
are $811 billion lower, as shown in Chart I I I 2). Each year, the deficit has been lower than
the Administration had forecast before the
year began. For 1997, the actual deficit of $22
billion was over $150 billion lower than what
both OMB and CBO had forecast after OBRA
was enacted. All told, the Administration now
expects that, combined with a healthy economy, OBRA will reduce the accumulated deficits from 1994 to 1998 by more than twice
the projected $505 billion.
The Administration has Ended the Debt
Buildup of the 1980s: The Government finances its deficit by borrowing from the public,
thereby accumulating its publicly held debt.
As a share of Gross Domestic Product (GDP),
�III.
23
CREATING A BRIGHT ECONOMIC FUTURE
Chart III-2. REDUCING THE DEFICIT: THE CLINTON RECORD
DOLLARS IN BILLIONS
-350-$310
-300-
-$347
PRE-OBRA BASELINE
-$305
\
-$302
-"
9 8
-$290 ^»---r"'
"air-.'" • ; . *
_
-250-
TOTAL DEFICIT
-$255
X.U^V
- !
^ X i " " ' ' " ' """^
REDUCTION
•
$811 BILLION
i
-200-
*
-$20^^^^-
"
i
'
*
/
CLINTON
ACHIEVEMENT
-150-100-
-SlOTN^'"
•'.. "jr^
-. . - *
-500
-S22
1
1
1
1
1
1
1992
1993
1994
1995
1996
1997
2
Federal debt held by the public reached a
post-World War I I peak of 109 percent in 1946.
Because the economy grew faster than the
debt for the next few decades, the debt gradually fell to about 25 percent of GDP in the
1970s. But the exploding deficits of the 1980s
sent it back up as a share of GDP. In dollar
terms, publicly held Federal debt quadrupled,
rising from $710 billion at the end of 1980
to $3.0 trillion by the end of 1992. As a percentage of GDP, it doubled, from about 25 percent to about 50 percent—wiping out all the
progress achieved since 1956.
Had this Administration done nothing, the
debt would have approached $7 trillion, or
70 percent of GDP, by 2002. Instead, working
with Congress, the Administration reversed
the debt build-up as a share of GDP, and
it now projects that debt will fall below
40 percent of GDP in 2002 (see Chart
III-3).
C7.S. Budgetary Performance Is Among
the World's Best: Counting all levels of government, the total U.S. budget deficit is smaller as a share of GDP than in all other G-7
countries except Canada (see Chart III-4).
The reason is not high taxes; the share of GDP
devoted to taxes is lower in the United States
than in any other leading country. Rather, the
reason is relatively low public spending—even
though this Nation has a much larger defense
establishment than the other G-7 countries.
3
The Administration has Reduced the
Federal Claim on the Economy: By 1992,
Federal spending had reached 22.5 percent of
GDP, topping its average of 21.2 percent from
1969 to 1997. But, in every budget year under
this Administration, spending has equaled a
smaller share of GDP than in any year of the
2
This measure excludes debt held in Federal trust funds At the
end of 1997, the trust funds held over $1.5 trillion of debt that the
Federal Government owes to itself. Thus, such debt is both a Government asset and a liability.
'The G-7 comprises the world's seven largest industrial powers:
the United States, the United Kingdom, Germany, France, Japan,
Italy, and Canada.
�24
THE BUDGET FOR FISCAL YEAR 1999
Chart III-3. DEBT HELD BY THE PUBLIC
PERCENT OF GDP
SOTOPRE-OBRA BASELINE
60504030-
o-_1
r -I
lyju
1
18
96
1
liiss
1
ma
1
iw:
1
19
94
1
1V
96
1
19
9s
1
1
:(«KI : > >
<<:
-
Chart III-4. 1997 GENERAL GOVERNMENT DEFICITS
PERCENT OF GDP
4.03.02.01.00.0
0.0-0.4
-1.0-
JZ.
CANADA
U.S
U.K.
Source: OECD. Economic Outlook. December 1997.
JAPAN
GERMANY
ITALY
FRANCE
�III.
25
CREATING A BRIGHT ECONOMIC FUTURE
previous two Administrations. The Administration now projects that, by 1999, spending will
fall to 20.0 percent of GDP, its lowest level
since the early 1970s.
Federal Receipts are Higher than Projected, Mainly Due to Economic Growth:
In the past five years, spending has been
lower, and receipts higher, than the Administration had projected, leading to lower deficits
than projected. With regard to the most recent,
and quite extraordinary, fall in the deficit from
$107 billion in 1996 to just $22 billion in 1997,
the answer lies in a continuing surge in receipts and in spending that came in below expectations. That surge is rooted in an especially strong economy. Tax rates have remained constant since 1993.
Some economists predicted that the 1993
targeted tax rate increases on the top 1.2
percent of Americans would slow the economy
and actually lead to lower tax collections,
particularly among the well-to-do. In fact,
tax revenues have soared since 1993—and
the largest increases have come at the top.
Total Federal receipts have risen nearly eight
percent a year since 1992. Federal income
tax revenues rose by nearly 25 percent from
1992 to 1995 (the last year for which we
have data), but by nearly 50 percent for
those with incomes above $200,000.
The President's balanced budget for 1999
results from a drop in spending of 2.5
percent of GDP since 1992 and an increase
in revenues of 2.3 percent of GDP over
the same period, driven by economic growth.
Thus, 52 percent of the total deficit reduction
has come from spending cuts, 48 percent
from higher receipts.
Economic Performance
By reducing the Federal Government's demand for capital in the financial markets,
a falling deficit has freed capital for private
investment. At the same time, the promise
of future budgetary stability has promoted
business confidence. The fiscal improvement
has enabled the Federal Reserve to maintain
low, stable interest rates that, in tum, have
helped prolong and strengthen the economic
expansion. The surge in business investment
of the last five years shows that these
policies are working, and as the budget
reaches balance, prospects for continued economic progress are excellent.
The Current Expansion Is the Third
Longest: In January 1998, the economy recorded its 82nd straight month of growth,
marking the third longest expansion in U.S.
history (and the second longest in our peacetime history). If the economy continues to grow
through the end of 1998, the current expansion
will become the longest in peacetime history,
surpassing that of the 1980s. I f it continues
to grow until February 2000, as most private
forecasters expect, the expansion will become
the longest of all time, surpassing the 106month expansion of the 1960s.
4
The Administration's Fiscal Policy Has
Promoted a Sound Expansion: Unsustainable Federal deficits, in part, stimulated both
of the longer post-war expansions—the first in
the 1960s, the second in the 1980s (see Chart
III-5). The economy expanded because the
Government expanded, dragging the private
sector along; when the Government removed
its stimulus, the economy faltered.
In these earlier expansions, the fiscal stimulus came at different times. In the 1960s,
the deficit was quite restrained early in
the decade, but grew sharply after 1965.
In the early 1980s, the "structural deficit"
soared to almost five percent of GDP. That
large deficit helped pull the economy out
of the deep recession of 1981-1982, but
the Government's subsequent failure to curb
it held up real interest rates, led to the
financial problems that marked the end of
the decade, and helped bring on the recession
of 1990-1991.
5
In contrast, during the current expansion,
the deficit has been shrinking and private
investment has propelled the economy forward.
This Expansion is Led by a Strong Private Sector: Under this Administration, the
economy has grown at a healthy, inflationadjusted 3.0 percent a year. But, at least as
important, private demand for goods and services has grown even faster than the economy
as a whole—3.6 percent a year compared to
4
According to the December Blue Chip survey.
'The structural deficit is the deficit that remains after accounting for cyclical changes in the economy as well as purely temporary
factors, such as the annual costs and receipts from resolving the
thrift crisis.
�26
THE BUDGET FOR FISCAL YEAR 1999
Chart III-5. CHANGE IN STRUCTURAL DEFICIT
AS A PERCENT OF POTENTIAL GDP
(During four longest postwar expansions preceding cyclical peak fiscal year to seventh following fiscal year)
0.6
-1-2-
-2.1
-3-41960-1969
1974-1980
z.
z
1981-1990
1990-1997
Increase in CBO standardized-employment dcficii as a share of potential GDP. Structural deficit is adjusted for deposit insurance, allied
contributions to Desert Storm and specturm auctions. Potential GDP is an estimate of a high, standardized level of output over time.
3.0 percent from 1981 to 1989 and 1.3 percent
from 1989 to 1993. The Federal Government's
direct claim on GDP (mainly, defense and
other discretionary spending, excluding transfer payments) has shrunk by 2.6 percent a
year. Of the more than 14 million jobs created
under this Administration, 93 percent have
been in the private sector. In the 1980s, by
contrast, the Federal Government's direct
claim on GDP grew faster than the private
sector's claim.
the sudden swings that can arise from a
single policy decision.
Why is the contrast important? Because
when Federal demands spur economic growth,
the economy is more vulnerable to sudden
changes in Federal policy—as in the late
1980s when the Government shifted from
a defense build-up to a build-down. Though
appropriate as the Cold War ended, this
shift prompted a painful economic adjustment
in many regions. But, when an expansion
is led by the investment decisions of thousands
of firms and millions of people across the
country, the economy is less vulnerable to
• Investment adds to the economy's productive capacity, and a larger economy generates more income, leading to higher
average living standards. In the final analysis, a stronger economy is a prerequisite
to meeting the retirement costs of the
baby-boom generation without unduly burdening future workers.
A Surge i n Business Investment Fueled
the Expansion: Since 1992, real business investment in equipment has expanded at an
11.8 percent average yearly rate—more than
triple the 3.5 percent annual rate from 1980
through 1992.
Investment growth is important for two
reasons:
• New equipment embodies advanced technology, making workers who use the
equipment more productive. Higher productivity permits larger wage increases
without threatening higher inflation.
�III.
27
CREATING A BRIGHT ECONOMIC FUTURE
The "Misery Index" Has Dropped to its
Lowest Level in 30 Years: Falling unemployment can "overheat" the economy, leading to
higher inflation. In the current expansion,
however, both unemployment and inflation
have continued to fall, even after the expansion entered its seventh year. In November
of last year, unemployment fell to 4.6 percent,
its lowest level since 1973. Meanwhile, the
core inflation rate (measured by the Consumer
Price Index, or CPI, excluding volatile food and
energy items), was running at a 2.2 percent
annual rate, its lowest since 1966. At the end
of 1997, the "misery index"—the sum of inflation and unemployment—was at its lowest
level in 30 years (see Chart III-6).
The Near-Term Economic Outlook,
1998-2008
The Administration expects the economy
to continue to expand at a healthy rate
without inflation. But, growth should moderate
from its recent pace. In 1996-1997, real
GDP grew at a 3.5 percent average rate,
much faster than the economy has been
able to sustain in recent decades without
higher inflation. Even allowing for somewhat
more moderate growth, general macroeconomic
conditions would remain very favorable, with
both unemployment and inflation remaining
near their lowest levels in decades.
Though the economy remains strong, one
potentially troublesome development is the
financial dislocation in Asia. To maintain
growth in the United States and to support
stability in Asia, the Administration expects
to propose a supplemental appropriation to
replenish International Monetary Fund (IMF)
resources and, as it did last year, to again
propose to provide a contingent credit line
to the IMF.
This budget relies on conservative economic
assumptions that are close to the consensus
among private forecasters, as well as to
those of CBO. The Administration is confident
that, as the budget reaches balance, the
economy could perform even better. Under
this Administration, the economy has consistently performed better in virtually all respects
Chart 111-6. MISERY INDEX
(Unemployment rate plus inflation rate)
PERCENT
20-
•
CORE CPI, 12-MO. PERCENT CHANGE
isie
•
UNEMPLOYMENT RATE
14-
12
10
8
6
4
.2
0
Tr
1961
1964
1967
I
1970
1^
1973
1
1976
"T"
1979
1982
1985
1988
1991
1994
1997
�28
THE BUDGET FOR FISCAL YEAR 1999
than the Administration or CBO had projected.
But, for budget planning, the Administration
continues to believe i t is prudent to use
conservative economic assumptions, the highlights of which include:
been larger i n the past, narrows due to
recent and expected methodological improvements in both indexes. Without these improvements, measured inflation would rise slightly
more.
Real GDP: Real GDP growth averages
2.0 percent on a fourth-quarter-over-fourthquarter basis through 2000. For 2001 to
2007, growth averages 2.4 percent a year,
the Administration's estimate of potential
sustained real growth. Starting i n 2008, projected economic growth slows due to the
shifting composition of the population. As
Americans age, a smaller portion of them
will likely be i n the workforce. The Administration expects the resulting slowdown i n
the growth of hours worked to lower real
GDP growth.
Interest rates: Interest rates, already lower
than a year ago, remain below levels of
recent years as the budget approaches balance.
The yield on 10-year Treasury notes reaches
5.7 percent by 2001; on a discount basis,
the 91-day Treasury bill rate drops to 4.7
percent.
Unemployment: The civilian unemployment
rate rises gradually, from 4.9 percent i n
1998 to 5.4 percent in 2001, which is the
Administration's conservative estimate of the
threshold level of unemployment consistent
with stable inflation in the long run.
Inflation: The CPI rises 2.2 percent in
1998-1999, then 2.3 percent a year in the
following years. These projections include technical improvements in measuring the CPI.
The price index for GDP rises 2.0 percent
in 1998, 2.1 percent i n 1999, and 2.2 percent
in the following years. The gap between
the two measures of inflation, which has
The Administration does not try to project
the business cycle beyond the next year
or so. The expansion will surely end at
some point, though no signs of a downturn
have emerged. But even allowing for future
recessions, projected economic growth averages
2.4 percent from 2001-2007, and projected
unemployment averages about 5.4 percent.
In some years, growth will be faster and
unemployment lower, while in others, growth
and employment will fall short of these
projections. But, because the Administration
expects the growth and unemployment assumptions to hold on average over this period,
they provide a sound, prudent basis for
projecting the budget. Similarly, the Administration expects inflation and interest rates
to average near the projections shown i n
Table I I I - l , although year-to-year fluctuations
surely will occur.
Investing i n Economic Statistics
Our democracy and economy demand that public and private leaders have unbiased, relevant,
accurate, and timely information on which to base their decisions. But rapid changes in the
economy and society, and funding levels that do not enable statistical agencies to keep pace with
them, increasingly threaten the relevance and accuracy of America's key statistics.
Economic data, in particular, are not only key indicators for fiscal and monetary policy; they
also underlie Federal, State, and local income projections, investment planning, and business
decisions. In recent years, active public debate has focused on the measuring of GDP, CPI, and
many other indicators that are widely used, explicitly and implicitly, in public and private
decision-making. Small but essential investments to address these measurement issues will
allow our statistical system to track the economy more accurately and, in the process, help both
Government and the private sector better allocate their limited resources.
The budget proposes such carefully targeted investments, ranging from improvements in data
(including statistics on service industries, construction, and State and local government), to the
development of more accurate summary statistics from those data (such as GDP and the
National and Personal Income estimates), to greater public access to Government data (including electronic distribution). These initiatives are documented in greater detail in Chapter 11 of
Analytical Perspectives, "Strengthening Federal Statistics."
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Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
Michael Waldman
Description
An account of the resource
<p>Michael Waldman was Assistant to the President and Director of Speechwriting from 1995-1999. His responsibilities were writing and editing nearly 2,000 speeches, which included four State of the Union speeches and two Inaugural Addresses. From 1993 -1995 he served as Special Assistant to the President for Policy Coordination.</p>
<p>The collection generally consists of copies of speeches and speech drafts, talking points, memoranda, background material, correspondence, reports, handwritten notes, articles, clippings, and presidential schedules. A large volume of this collection was for the State of the Union speeches. Many of the speech drafts are heavily annotated with additions or deletions. There are a lot of articles and clippings in this collection.</p>
<p>Due to the size of this collection it has been divided into two segments. Use links below for access to the individual segments:<br /><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0469-F+Segment+1">Segment One</a><br /><a href="http://clinton.presidentiallibraries.us/items/browse?advanced%5B0%5D%5Belement_id%5D=43&advanced%5B0%5D%5Btype%5D=is+exactly&advanced%5B0%5D%5Bterms%5D=2006-0469-F+Segment+2">Segment Two</a></p>
Creator
An entity primarily responsible for making the resource
Michael Waldman
Office of Speechwriting
Date
A point or period of time associated with an event in the lifecycle of the resource
1993-1999
Identifier
An unambiguous reference to the resource within a given context
2006-0469-F
Extent
The size or duration of the resource.
Segment One contains 1071 folders in 72 boxes.
Segment Two contains 868 folders in 66 boxes.
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
Clinton Presidential Records: White House Staff and Office Files
Publisher
An entity responsible for making the resource available
William J. Clinton Presidential Library & Museum
Format
The file format, physical medium, or dimensions of the resource
Adobe Acrobat Document
Text
A resource consisting primarily of words for reading. Examples include books, letters, dissertations, poems, newspapers, articles, archives of mailing lists. Note that facsimiles or images of texts are still of the genre Text.
Original Format
The type of object, such as painting, sculpture, paper, photo, and additional data
paper
Dublin Core
The Dublin Core metadata element set is common to all Omeka records, including items, files, and collections. For more information see, http://dublincore.org/documents/dces/.
Title
A name given to the resource
Leaders/Thinkers
Creator
An entity primarily responsible for making the resource
Office of Speechwriting
Michael Waldman
Is Part Of
A related resource in which the described resource is physically or logically included.
Box 40
<a href="http://clinton.presidentiallibraries.us/items/show/36404"> Collection Finding Aid</a>
<a href="https://catalog.archives.gov/id/7763296">National Archives Catalog Description</a>
Identifier
An unambiguous reference to the resource within a given context
2006-0469-F Segment 2
Provenance
A statement of any changes in ownership and custody of the resource since its creation that are significant for its authenticity, integrity, and interpretation. The statement may include a description of any changes successive custodians made to the resource.
White House Staff and Office Files
Publisher
An entity responsible for making the resource available
William J. Clinton Presidential Library & Museum
Format
The file format, physical medium, or dimensions of the resource
Adobe Acrobat Document
Medium
The material or physical carrier of the resource.
Preservation-Reproduction-Reference
Date Created
Date of creation of the resource.
6/3/2015
Source
A related resource from which the described resource is derived
7763296
42-t-7763296-20060469F-Seg2-040-007-2015