ONE WORLD, READY OR NOT: THE MANIC LOGIC OF GLOBAL CAPITALISM by William Greider Simon and Schuster 463 pp.
To write One World, Ready or Not William Greider travelled the world - a fact of which he ostentatiously reminds us by by using foreign-language phrases for many of his chapter titles. He talked to scores of people, and digested a mountain of books. He did everything, in short, except run his ideas and assertions past a competent economist, to make sure that he had not made any obvious errors.
The result is peculiar: this book evidently involved an immense amount of hard work, yet over and over again it gets easy things, facts that could have been checked in a few minutes in any good library, utterly wrong. At one point, for example, Greider makes the astonishing assertion that international comparisons of labor's share of the returns from production are difficult, and then quotes some misleading data that seem to show a massive redistribution from labor to capital in the United States and other advanced countries [p. 64]. I say astonishing, both because such information is very easy to find, and because anyone even slightly familiar with U.S. data knows that the share of wages and benefits in national income has been remarkably steady (at about 73 percent) for the past generation. At another point, Greider points to the near-tripling of imports as a share of manufacturing output between the 70s and the 90s, and asserts that "If America's trading position had held constant .. the level of its exports would not [have been] much different ... but the volume of its imports should have been two thirds smaller". [p. 186] But over those same years exports as a share of output more than doubled; the truth is that the net effect of growing trade on the number of manufacturing jobs in this country has been fairly small. And in some cases Greider's statistical naivete is mind-boggling - as when he attempts to impress the reader with the growing might of giant multinational companies by citing raw dollar numbers on their sales, unadjusted even for inflation, let alone for the growth of the market (in fact large companies have accounted for a steadily declining share of the U.S. economy over the last generation). [p.13]
These are not trivial slips. In each case Greider's alleged fact is central to his thesis - and this thesis is supposed to be the main point of the book. For One World, Ready or Not is not, essentially, a work of reportage. It tells many interesting stories, but they are there not for color but to support a grand vision of what is happening in the world. How strange, then, that Greider should have failed to check the simple things. But perhaps the problem was that anyone competent enough to correct Greider's facts would also have asked him embarrassing questions about that grand vision.
Greider believes that all of the difficulties and dislocations of the modern world economy can be traced ultimately to a single cause: supply is outstripping demand. As efficiency increases in the advanced nations and new industrial centers emerge in the developing world, demand simply cannot keep up, because of the "faltering ability of the world's consumers to keep up with the new production capacities being created" [ p. 211]. The result is persistent global excess capacity, producing ever-greater downward pressure on prices and above all wages.
This thesis may sound persuasive, but as soon as you think hard about it you realize that it doesn't hang together. To take just one of its problems: all of the increased production in the world has as a necessary counterpart increased income - every dollar of sales must also represent a dollar of wages or profits to somebody. And there are only two things you can do with income: save it or spend it. So if we are really suffering from global oversupply, we must be suffering from a global excess of savings compared with investment opportunities. Are we? On the contrary, if anything we seem to be suffering from declining savings rates in the advanced countries; while savings have been rising in the developing world, investment demand has surged even more.
The Victorian economist Alfred Marshall once warned that "the most reckless and treacherous of all theorists is he who professes to let facts and figures speak for themselves". Greider's book contains many facts, most though not all of them true; but they are selective facts, chosen to support a predetermined theory. We hear about China's trade surplus vis-a-vis the United States, but not about the massive trade deficits of Malaysia and Thailand, about plant closings but not about the labor shortages currently pervasive in America's heartland.
So read One World, Ready or Not for the stories; but remember that the stories are chosen to support a theory, and that as a theorist Greider is not only reckless but simplistic, and remarkably ill-informed.
Paul Krugman is a professor of economics at MIT.