DOCSLIB.ORG

The Puzzle of Hayek

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The Puzzle of Hayek SUBSCRIBE NOW AND RECEIVE CRISIS AND LEVIATHAN* FREE! “The Independent Review does not accept “The Independent Review is pronouncements of government officials nor the excellent.” conventional wisdom at face value.” —GARY BECKER, Noble Laureate —JOHN R. MACARTHUR, Publisher, Harper’s in Economic Sciences Subscribe to The Independent Review and receive a free book of your choice* such as the 25th Anniversary Edition of Crisis and Leviathan: Critical Episodes in the Growth of American Government, by Founding Editor Robert Higgs. This quarterly journal, guided by co-editors Christopher J. Coyne, and Michael C. Munger, and Robert M. Whaples offers leading-edge insights on today’s most critical issues in economics, healthcare, education, law, history, political science, philosophy, and sociology. Thought-provoking and educational, The Independent Review is blazing the way toward informed debate! Student? Educator? Journalist? Business or civic leader? Engaged citizen? This journal is for YOU! *Order today for more FREE book options Perfect for students or anyone on the go! The Independent Review is available on mobile devices or tablets: iOS devices, Amazon Kindle Fire, or Android through Magzter. INDEPENDENT INSTITUTE, 100 SWAN WAY, OAKLAND, CA 94621 • 800-927-8733 • [email protected] PROMO CODE IRA1703 REVIEW ESSAY The Puzzle of Hayek —————— ✦ —————— GERALD P. O’DRISCOLL JR. he Commanding Heights, the award-winning PBS series, chronicles the ideo- logical battles of the twentieth century. At the beginning of that century, T there was a liberal world order. Classical liberal ideas still prevailed in the West. With the advent of the Great War, the liberal world order crumbled, and liberal ideas were eclipsed. Communism, fascism, and Nazism flourished. The upshot was a second global conflagration, followed by the Cold War. By the end of the century, all the “isms” had been eclipsed in turn, and liberal ideas flourished once again. In many ways, the tale told by The Commanding Heights parallels the life and career of Friedrich A. Hayek. Born in 1899, Hayek grew up in a liberal world, adopted liberal ideas, and became one of the foremost classical liberals of his day. He was an advocate of free markets and free trade, the economic program of liberalism. His ideas would come to be scorned, however, as liberalism went into eclipse. Before he died, though, he saw many of his ideas vindicated. In 1974, he was awarded the Nobel Prize in economics. In the first volume of his trilogy Law, Legislation, and Liberty (1973), Hayek provided a succinct statement of liberalism’s credo. It is a message for our times: “That freedom can be preserved only if it is treated as a supreme principle which must not be sacrificed for particular advantages was fully understood by the leading liberal thinkers of the nineteenth century, one of whom even described liberalism as ‘the sys- tem of principles.’ Such is the chief burden of their warnings concerning ‘What is seen and what is not seen in political economy’ and about the ‘pragmatism that contrary to the intentions of its representatives inexorably leads to socialism’” (57). In Hayek’s Challenge: An Intellectual Biography of F. A. Hayek (2004), Bruce Caldwell synthesizes his life’s work on Hayek, methodology, and the history of eco- Gerald P. O’Driscoll Jr. is a senior fellow at the Cato Institute. The Independent Review, v. IX, n. 2, Fall 2004, ISSN 1086-1653, Copyright © 2004, pp. 271–281. 271 272 ✦ G ERALD P. O’DRISCOLL J R . nomic thought generally. Caldwell is an accomplished historian of thought, and he has written a comprehensive reassessment of Hayek and, indeed, of the Austrian school of economics more broadly. Hayek’s Challenge is a demanding a book. No primer, it would be suitable for use in a graduate-level seminar on Hayek and twentieth-century economic thought. In order to set the stage for presenting Hayek’s contributions, Caldwell begins with a 130-page history he calls “The Austrian School and Its Opponents—Historicists, Socialists, and Positivists.” In it, he examines Hayek’s intellectual precursors and the debates that formed the background to economic thought in the early twentieth cen- tury. This introductory material constitutes nearly 25 percent of the length of the book, so readers skip it at their peril. After setting the historical scene, Caldwell sys- tematically presents Hayek’s ideas on economics, politics, and philosophy. Here I begin, as Caldwell does, with Hayek’s precursors. The Austrians It all begins with Carl Menger in 1871. As Caldwell observes, “Menger’s Principle of Economics is the founding document of the Austrian School of Economics, yet, as its name implies, it is basically a textbook” (p. 19). But what a textbook! In it, Menger developed what became “fundamental Austrian tenets: the connection between time and error; the causal-genetic or compositive methodological approach; and the notion of unintended consequences” (p. 47). We meet all these ideas again in Hayek. Caldwell identifies four reviews of Menger’s Principles. In one of them, Gustav Schmoller, the leader of the Younger German Historical School, rejected Menger’s efforts to present a theoretical account of economic phenomena based on a subjective theory of value. Schmoller insisted that a historical-statistical approach was the “sole legitimate way to study economic phenomena” (37). (Caldwell’s appendix A consists of an English translation of the review.) Schmoller’s review led to a rebuttal by Menger in the form of another book in 1883, which in turn launched the war over method, the Methodenstreit. Methodology deals with the principles, rules, and procedures for determining the truthfulness of propositions in a discipline. At the most general level, the war raged over the role of deductive theory and empirical investigation in economics. To simplify, Menger defended theory, and Schmoller defended statistical and histori- cal investigations (pp. 64–78). The debate has haunted the Austrian school throughout its own history. Gener- ally, the historical school (and successors, such as the American institutionalist school) sought to derive empirical laws of economics from history. The Austrians denied that any historical laws exist. We get knee-deep in these issues in Hayek’s work. In Caldwell’s assessment, with which I agree, the Methodenstreit created “a sep- arate Austrian school of economics” (p. 80). Two of Menger’s students, Eugen von Böhm-Bawerk and Friedrich von Wieser, were most responsible “for spreading the THE INDEPENDENT REVIEW T HE P UZZLE OF H AYEK ✦ 273 fame of the Austrian School worldwide, especially in the English-speaking world” (p. 80). Böhm-Bawerk gained fame for his work on capital theory and for his devas- tating attacks on Karl Marx (pp. 81–82). Caldwell deals with many other important figures, of whom Max Weber is only one of the most notable, in his presentations of economics in the last quarter of the nineteenth century and in the early twentieth century. Most noteworthy, however, is Ludwig von Mises. Mises remains a highly controversial figure whose work elicits strong opinions both pro and con. Caldwell is notable for the fair and even-handed manner in which he presents Mises’s ideas. Mises is best known for his presentation of economics as the science of human action. He argued that “all human action is rational” (pp. 122–23) and contended that economic theory is true a priori (pp. 124–26). Caldwell charita- bly observes that “Although Mises was always careful to explain in detail what he meant, his idiosyncratic use of terms made it much easier for him to be misread, espe- cially by those who disagreed with him or who sought to discredit his ideas” (p. 123, n. 18). Caldwell presents just enough of Mises to render intelligible the debates over apriorism and methodology more broadly that so heavily occupied Hayek. Hayek’s Achievement Caldwell began his project with an incident in which I was involved. While he was vis- iting New York University in the spring of 1982, I handed him a copy of Terence Hutchison’s new book and asked if he agreed that Hayek had done a U-turn on methodology as Hutchison claimed. Had Hayek moved from Misesian apriorism to Popperian falsificationism? I thought Hutchison’s claim to be facially false, but I respected Caldwell’s opinion. And so the present tale begins (p. 2). As I read Caldwell today, he maintains that Hayek’s views on methodology did change, but not in the way Hutchison posited. Hayek was never a Misesian apriorist—a point on which Caldwell, Hayek, and I are in complete agreement. Both Hutchison and Caldwell zeroed in on a famous essay by Hayek, “Economics and Knowledge” ([1937] 1948). Caldwell titles a critical chapter in his book “‘Econom- ics and Knowledge’ and Hayek’s Transformation” (pp. 205–31). He reinforces the idea of an intellectual break in Hayek’s thought in his further assessment of that essay (pp. 337–39). He is even more strident in advancing a “transformation” interpreta- tion in confronting a “continuity” interpretation by Jack Birner given in appendix B (pp. 409–18). There is, however, a kinder and gentler Caldwell with whom I agree. “We can discern a gradual change in Hayek’s views regarding the equilibrium construct from the late 1920s through the early 1940s. Of course, even in his earlier work there was a certain ambivalence” (p. 224). In other words, Hayek grew over time, as does any serious intellect. And his work always had tensions within it—“ambivalence,” if you will—as does the work of any interesting theorist. The latter point is very important. VOLUME IX, NUMBER 2, FALL 2004 274 ✦ G ERALD P. O’DRISCOLL J R . If the different strands of thought were simultaneously present in Hayek’s early work, then we can properly talk of “synthesis,” not “transformation,” in the later work.
Load more

Recommended publications
  • Van Der Waag 1
    Van der Waag 1 Georgetown University College of Arts and Sciences Theology Department Course Title: God, Power, and Money Course #: THEO 158-01 Location: Walsh 492 Time: TTH 4:15-5:30 PM Office Hours: and by appt. Office Location: Berkley Center 3307 M Street, Suite 200 Contact: [email protected] I. Course Description: Normative discussion about the basic institutional patterns for economic life remains a major point of debate today among both secular and religious groups throughout the world because of economic globalization and the persistence of wide-scale poverty. The desire to address the challenges of economic globalization and the problem of global poverty, as defined by The United Nation’s Millennium Development Goals, is a commitment shared by many within these groups. Although secular and religious organizations often share a common commitment to address the challenges brought about by economic globalization as well as meet the needs of the poor and marginalized, they often differ about the most suitable means to meet this challenge and their needs. The purpose of the course is to examine how religious groups, particularly Christian denominations, have thought about these issues – particularly the problem of eradicating poverty today. The first part of the course focuses on the teaching aspect of the Christian tradition regarding economic life and its basic institutional structures. The historical survey begins at the end of the nineteenth century at the height of the Industrial Revolution to the rise of economic globalization
    [Show full text]
  • (1899-1992) Born in Austria in 1899, Nobel Prize-Winning Economist Friedrich Von Hayek Was an Advocate of Free-Market Capitalism
    Friedrich von Hayek 1 (1899-1992) Born in Austria in 1899, Nobel Prize-winning economist Friedrich von Hayek was an advocate of free-market capitalism. He is known for his criticism of the prevailing economic theories of the 20th century, Keynesian economic models and socialism. Excerpt from The Commanding Heights by Daniel Yergin and Joseph Stanislaw, 1998 ed., pp. 141-144. In retrospect, it was the awarding of the 1974 Nobel Prize in economics that first captured, almost by chance, the great intellectual change. The Swedish academy wanted to honor Gunnar Myrdal, distinguished Keynesian, a father of development economics, and a great figure of Swedish socialism. But the grantors, worried about the appearance of choosing so local a favorite, decided that they ought to balance the ticket with a more conservative figure, and they awarded the prize to Myrdal jointly with Friedrich von Hayek. A good part of the economics profession was scandalized by the choice of Hayek; many economists in the United States, if polled, would have hardly even considered him an economist. He was regarded as right-wing, certainly not mainstream, even something of a crank as well as a fossil from an archaic era.... Yet the award documented the beginning of a great shift in the intellectual center of gravity of the economies profession toward a restoration of confidence in markets, indeed a renewed belief in the superiority of markets over other ways of organizing economic activity. Within a decade and a half, the shift would be largely complete. And the eventual victory of this viewpoint was really a tale of two cities—Vienna and Chicago.
    [Show full text]
  • THE COMMANDING HEIGHTS: the Battle Between Government and the Marketplace That Is Remaking the Modern World by Daniel A
    BOOK REVIEW THE COMMANDING HEIGHTS: The Battle Between Government and the Marketplace That is Remaking the Modern World by Daniel A. Yergin and Joseph Stanislaw (Simon & Schuster, 1998,457 pages including notes and indices). Reviewed by Ken Malloy* The Rt. Hon. Sir Winston Spencer Churchill (1874-1965) was reputed to have said: "If you are a conservative at twenty, you have no heart. If you are a liberal at forty, you have no brain." Drs. Daniel Yergin and Joseph Stanislaw's recently published book, The Commanding Heights: The Battle Between Government and the Marketplace that is Remaking the Modern World, convincingly demonstrates that the maturation of economic judgment at the core of this dictum applies to nation states as well as individuals. Given their prominence in the energy industry, however, there is less focus on energy than might have been expected. Following Churchill's adage and the thesis of Commanding Heights, the maturity of middle age is evident in much energy policy, both domestically and globally. Unfortunately, such maturity is not evident in retail energy restructuring policy which, while grudgingly approaching midlife, still clings nostalgically to its past predilection of making policy with its heart, not its brain. Yergin is best known to us in the energy industry for his remarkable, Pulitzer Prize winning book, The Prize: The Epic Quest for Oil, Money and Power. Less remembered is the fact that Yergin was one of the editors of Energy Future: A Report of the Energy Project at the Haward Business School, an important early contribution propelling energy's public policy dialogue.
    [Show full text]
  • Reform in Deep Water Zone: How Could China Reform Its State- Dominated Sectors at Commanding Heights
    Reform in Deep Water Zone: How Could China Reform Its State- Dominated Sectors at Commanding Heights Yingqi Tan July 2020 M-RCBG Associate Working Paper Series | No. 153 The views expressed in the M-RCBG Associate Working Paper Series are those of the author(s) and do not necessarily reflect those of the Mossavar-Rahmani Center for Business & Government or of Harvard University. The papers in this series have not undergone formal review and approval; they are presented to elicit feedback and to encourage debate on important public policy challenges. Copyright belongs to the author(s). Papers may be downloaded for personal use only. Mossavar-Rahmani Center for Business & Government Weil Hall | Harvard Kennedy School | www.hks.harvard.edu/mrcbg 1 REFORM IN DEEP WATER ZONE: HOW COULD CHINA REFORM ITS STATE-DOMINATED SECTORS AT COMMANDING HEIGHTS MAY 2020 Yingqi Tan MPP Class of 2020 | Harvard Kennedy School MBA Class of 2020 | Harvard Business School J.D. Candidate Class of 2023 | Harvard Law School RERORM IN DEEP WATER ZONE: HOW COULD CHINA REFORM ITS STATE-DOMINATED SECTORS AT COMMANDING HEIGHTS 2 Contents Table of Contents Contents .................................................................................................. 2 Acknowledgements ................................................................................ 7 Abbreviations ......................................................................................... 8 Introduction .........................................................................................
    [Show full text]
  • Ulf Zimmermann on the Commanding Heights: the Battle
    Daniel Yergin, Joseph Stanislaw. The Commanding Heights: The Battle Between Government and the Marketplaces That Is Remaking the Modern World. New York: Simon & Schuster, 1998. 457 pp. $26.00, cloth, ISBN 978-0-684-82975-3. Reviewed by Ulf Zimmermann Published on H-PCAACA (August, 1998) Lenin made his antepenultimate public ap‐ down to government regulation in the United pearance to defend his desperate readmission of States. private trade and agriculture in 1922, declaring India's independence from British rule as of that the state would, after all, retain control of 1947 marked the beginning of the end of colonial‐ what he christened the "commanding heights." ism, and all the newly emerging countries, like In‐ Yergin and Stanislaw are concerned to explain dia, saw state control as the only alternative. (It why the control of these heights has increasingly had, after all, worked in industrial latecomers like shifted from the state to the market in recent France and Germany, but, mutatis mutandis, years. They do this by giving not just a global many of these new nations did not let go of their gazetteer of twentieth-century politics and eco‐ industries when they could go it on their own-- nomics but also an equally insightful guide to the and ultimately strangled them.) Indian policymak‐ ideas and individuals behind this shift. ers, for example, eventually recognized the great With the failures of capitalism in the 1920s entrepreneurial successes Indians were achiev‐ and 1930s, and the initial successes of govern‐ ing, as in the U.S., were possible only once they ments east and west, both in the New Deal and in were out of India and its overregulated economy.
    [Show full text]
  • In 1918, the Labor Party Had Adopted a Constitution Containing What
    Labor Nationalizes the Heights 1 Excerpt from The Commanding Heights by Daniel Yergin and Joseph Stanislaw, 1998 ed., pp. 25-27. Copyright © 1998 by Daniel A. Yergin and Joseph Stanislaw. Reprinted by permission of Simon & Schuster, Inc., N.Y. All rights reserved. In 1918, the Labor Party had adopted a constitution containing what became the famous Clause IV, which, in language written by Sidney Webb, called for "common ownership of the means of production, distribution, and exchange." But what were these words to mean in practical terms? The answer came during World War II. One evening in 1944, a retired railway worker named Will Cannon, drawn back into the workforce to help in the marshaling yard, happened to drop by a local union meeting in Reading, not far from London. In the course of the meeting he decided to propose a motion calling for "nationalization," which was approved by the local. The motion won national attention, and the Labor Party ended up adopting it in December 1944. Will Cannon's motion would have a powerful global echo. In July 1945, Labor came into power totally committed to nationalization and determined to conquer the "commanding heights" of the economy, having borrowed the term from Lenin by the mid-1930s. In their quest for control of the commanding heights after World War II, the Laborites nationalized the fragmented coal industry, which provided 90 percent of Britain's energy at the time. They did the same to iron and steel, railroads, utilities, and international telecommunications. There was some precedent for this even in the British system; after all, it was Winston Churchill himself who, as first lord of the Admiralty in 1911, had purchased a controlling government stake in what became British Petroleum in order to ensure oil supply for the Royal Navy.
    [Show full text]
  • Privatization, Democracy, and the State in India
    Privatization, Democracy, and the State in India Alka Sapat Florida Atlantic University Paper prepared for the Anti-Essentialism Conference, March 2-3, 2007, Hollywood Beach, Ft. Lauderdale. Introduction Several countries underwent major transformations of their economies in the last two decades. The most important shift globally, particularly in developing countries has been to move towards a market-based economy and the phenomenon of globalization. From various treatises on the subject ranging from “Jihads to McWorlds” (Barber 1995) to “Lexuses and Olive Trees” (Friedman 2000) and ‘flat worlds’ (Friedman 2005), globalization has become a household word given the attention from scholars, journalists, and the populace at large. Apart from being the mot du jour, globalization, its causes and its consequences, evokes strong emotions and debate by both its proponents and opponents alike (Naisbitt 1994; Farazmand 1999). Lumped together, sometimes almost synonymously is the phenomenon of privatization. Privatization, like globalization, has also received its fair share of attention, from its supporters and detractors. On the one hand, privatization purports to unleash economic freedoms and allow private initiative and enterprise. On the other hand, however, privatization has been critiqued for its essentialist notions of efficiency and rationality and for undermining democracy and community (Farazmand 1999; Lindblom, 1977; Heilbroner 1990; Korten 1995). In particular, some scholars have argued that market forces in the form of multinational corporations frequently aid repressive regimes (Cottam 1979) and often cause local people to loose control of their communities (Mele 1997, Korten 1995). I add to this debate by examining in particular, the impact of privatization on democracy in India.
    [Show full text]
  • Communism and Economic Modernization
    July 2012 No.92 Communism and Economic Modernization Mark Harrison WORKING PAPER SERIES Centre for Competitive Advantage in the Global Economy Department of Economics Communism and Economic Modernization Mark Harrison* Department of Economics and CAGE, University of Warwick Centre for Russian and East European Studies, University of Birmingham Hoover Institution on War, Revolution, and Peace, Stanford University Abstract The paper examines the range of national experiences of communist rule in terms of the aspiration to ‘overtake and outstrip the advanced countries economically’. It reviews the causal beliefs of the rulers, the rise and fall of their economies (or, in the case of China, its continued rise), the core institutions of communist rule and their evolution, and other outcomes. The process of overcoming a development lag so as to approach the global technological frontier has required continual institutional change and policy reform in the face of resistance from established interests. So far, China is the only country where communist rule has been able to meet this requirement, enabled by a new deal with political and economic stakeholders. The paper places the “China Deal” on a spectrum previously limited to the Soviet Big and Little Deals. Keywords: Beliefs, China, communism, convergence, growth, institutions, modernization, policy reform, Russia. JEL Codes: B14, H56, N40, P20. * Mail: Department of Economics, University of Warwick, Coventry CV4 7AL, United Kingdom. Email: [email protected]. This paper is a preliminary draft for The Oxford Handbook on the History of Communism, edited by Stephen A. Smith in preparation for Oxford University Press. I thank Nick Crafts, Paul R.
    [Show full text]
  • 1 (1883-1946) John Maynard Keynes Was a British Economist During The
    John Maynard Keynes 1 (1883-1946) John Maynard Keynes was a British economist during the first half of the 20th century best known for his revolutionary theories on the causes of unemployment and recession, which came to be known as Keynesian economics. Excerpted from The Commanding Heights by Daniel Yergin and Joseph Stanislaw, 1998 ed., pp. 39-42. The most influential economist of the 20th century, John Maynard Keynes was a product of the late Victorian and Edwardian eras, a period when stability, prosperity, and peace were assumed and when Britain ruled the world economy. Keynes never lost the self-confidence, self-assurance, and indeed the optimism of that time. But his intellectual career, and his profound impact, arose from his efforts to make sense of the disruptions and crises that began with the first world war and continued through the Great Depression. Descended from a knight who had crossed the English Channel with William the Conqueror, Keynes was the son of a Cambridge University economist. Educated at Eton and Cambridge, he demonstrated from his early years a dazzling, wide-ranging intellect, along with an arrogance and what seemed to some a dismissive elitism. His establishment habits (including the signature homburg normally associated with a City of London stockbroker) and his pride in being a member of what he called the "educated bourgeoisie" were combined with chronic social and intellectual rebellion, orneriness, and the lifestyle of a Bloomsbury bohemian and aesthete. His daunting mathematical dexterity was complemented by a considerable literary grace, whether the subject was the subtleties of economic thought or his obsession with the hands of statesmen.
    [Show full text]
  • Failure of Labour Politics in Britain, 1964-79
    In Place of Liberation - Failure of Labour Politics in Britain, 1964-79 Shannon Ikebe 2011 Politics Honors Thesis Contents Introduction: Keynes’ Children in the 1970s - 3 Chapter 1: Post-Fordism That Never Was - 7 Chapter 2: Ideas and Political Economy - 25 Chapter 3: Welfare State and the Social Wage - 46 Chapter 4: Trade Unions and the Social Contract - 96 Conclusion: How Did the Lights Go Out? - 141 2 Introduction: Keynes’ Children in the 1970s “Objective conditions have never made socialism seem so necessary and so achievable. Capitalism’s self-justification as the natural means of meeting human needs and expanding human possibilities seems more obviously groundless than ever, with every structure of the economy out of joint with human needs… moreover, the means – or at least the groundwork – for achieving such a society, the organizations created by working people themselves, have grown… as the crisis has deepened.” – Hilary Wainwright, Beyond the Fragments (1979) In the midst of the Great Depression, John Maynard Keynes wrote a pithy tract envisioning an optimistic future in which the “economic problem” no longer exists.1 In Economic Possibilies for Our Grandchildren, he posited in 1930 that the generation of his grandchildren would be freed from the struggle for subsistence, because of the tremendous growth in productivity; the opportunity to transcend economic insecurity would be a world-historical moment, in which humanity overcomes what “always has been hitherto the primary, most pressing problem of the human race” and faces a delightful prospect of emancipation from economic imperatives.2 In the past centuries or even millenia, freedom from alienating labor was the privilege for the few, directly dependent upon exploitation of the mass of workers; because of technological transformations, Keynes posited, the realm of freedom could soon be universally accessible.
    [Show full text]
  • Managing Globalization and Anti-Globalization
    Managing Globalization and Anti-Globalization MGMT 208 Professor Mitchell A Orenstein [email protected] Office: 745 Williams Hall, REES [email protected] Office Hours: Anytime 8am-10pm Phone: 202-415-4066 (cell) Spring 2021 Synchronous Zoom Sessions Course Description: Why has globalization spread so rapidly, only to be over-taken by anti- globalization movements? Why are anti-globalization movements particularly powerful in the United States and the United Kingdom, the two countries most responsible for the rise of globalization? This course examines the macro-economic management of globalization, and why it rises and falls, in the sweeping context of the political economy of the last 150 years. After taking this course, students will better understand the management challenges posed by globalization, sources of anti- globalization reactions, what causes globalization and anti-globalization to rise and fall in importance, and how to deal with present-day challenges. Students will examine processes of globalization at University of Pennsylvania and how managers of the global economic system deal with challenges posed by new technologies such as crypto-currencies and global issues such as inequality and immigration. This course provides students with a worldview that will enhance understanding of — and ability to manage — our global economy. Course Requirements: This course requires a lot of reading and students should be prepared to jump right in to a history of the global economy (Frieden). A short introduction (Steger) and a PBS documentary (Commanding Heights) enable students without much background in global political economy to ease into the material. The midterm exam tests primarily on knowledge of the history of the global economy attained from the Frieden book, so make plans to read this book thoroughly prior to the midterm.
    [Show full text]
  • The New Commanding Heights
    The New Commanding Heights Arnold Kling and Nick Schulz n the early 1920s, the Russian economy was flagging, having been Iravaged by years of war and political turmoil. In an attempt at revival, Vladimir Lenin initiated a series of controversial reforms, including per- mitting a bit of profit-making enterprise in some areas of the economy. This move naturally shocked many Bolsheviks, who had risked their lives in the Russian Revolution in order to advance communist principles. Eager to alleviate their concerns, Lenin addressed the communist-party faithful at a convention in 1922. He told them not to worry: The reforms were relatively modest, and the new Soviet state would always retain its control over what he called the “commanding heights” of the economy. By “commanding heights,” Lenin meant the critical sectors that dominated economic activity — primarily electricity generation, heavy manufacturing, mining, and transportation. Because these industries were the foremost drivers of employment, production, and consumption in Russia — and because they were the essential growth sectors in any economy of that era that sought to be called “modern” — ­government control of these particular sectors meant government dominance over the economic life of the nation. A communist government could af- ford to permit relatively free markets in less significant sectors, Lenin thought, because as long as it controlled those industries that formed the heart of the economy, it effectively controlled the whole. Throughout much of the 20th century, communist and socialist parties around the world continued to see government dominance of these industries as a key goal. The commanding heights of the economy Arnold Kling is an adjunct scholar with the Cato Institute and a member of the Financial Markets Working Group at the Mercatus Center at George Mason University.
    [Show full text]