[Paleopsych] Commentary: Dan Seligman: Good and Plenty

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Good and Plenty

                          The Moral Consequences
                            of Economic Growth
                          by Benjamin M. Friedman
                           Knopf. 592 pp. $35.00
                                Reviewed by
                               Dan Seligman

    Booms are better than busts. When the good times roll, people have
    more money, more options in life, more fun, higher living
    standards. The material case for prosperity seems incontestable.
    And now, it appears, there is also a moral case. Max Weber told us
    that good character promotes economic growth. Benjamin M. Friedman,
    who has taught economics at Harvard for 33 years, turns this
    around. He argues that growth not only relies upon morality, but
    also has "positive moral consequences."

    What might these be? In Friedman's words: "Economic growth--meaning
    a rising standard of living for the clear majority of
    citizens--more often than not fosters greater opportunity,
    tolerance of diversity, social mobility, commitment to fairness,
    and dedication to democracy." Conversely, Friedman warns, periods
    of economic stagnation threaten a country's "moral character"--as,
    in his view, moral character is threatened right now in the United

    The rising intolerance and incivility and the eroding generosity
    and openness that have marked important aspects of American society
    in the recent past have been, in significant part, a consequence of
    the stagnation of American middle-class standards during much of
    the last quarter of the 20th century.

    In tackling the money-morality nexus, Friedman is venturing into a
    crowded field, and in one sense going against the grain. Many
    thinkers have emphasized the corrupting effects of wealth, and the
    tensions between our material interests and our moral
    sensibilities. Edward Everett, another Harvard sage (but in the
    early 19th century), argued that "palmy prosperity" was actually a
    threat to "public virtue." Egalitarians, who regard income
    inequalities as inherently immoral, worry that high growth rates in
    some developed countries, like the United States, appear to be
    associated with less equality. They tend to prefer the
    French-German-Scandinavian model, currently featuring far less
    growth but greater equality.

    By calling for high levels of growth as a means to a greater
    "commitment to fairness," Friedman is implicitly rejecting these
    familiar perspectives. In an opening chapter, he offers a kind of
    armchair summary of his reasons. His main point here is that
    citizens who feel confident about their own situation will be more
    generous in supporting those who are less well off. But Friedman's
    case does not really depend on this proposition, which seems
    intuitively plausible if not exactly airtight. Ultimately, it rests
    on a massive exercise in inductive reasoning--specifically, on nine
    historical chapters that comprise three-quarters of his book and
    that present numerous examples of moral progress that appears to
    have been associated with economic growth.

    This tour is prefaced by a chapter on the 18th-century
    Enlightenment thinkers who first began to conceive of morality in
    secular terms. Next, Friedman takes us through the moral
    consequences (mostly favorable) of the industrial revolution; then
    he offers four chapters that in effect make up an economic history
    of the United States; and then he serves up parallel chapters on
    Britain, France, Germany, and the developing world. With some
    exceptions, he finds both freedom and tolerance rising with the
    economy, and repression and bigotry on the march in times of
    stagnation. The book's final section, less directly relevant to the
    main thesis, has chapters on the problem of inequality, on the
    environment, and--finally and inevitably--on what needs to be done
    in the United States today.

    Friedman has, without question, an impressive command of worldwide
    economic/technological history, and this book is a treasure trove
    of arresting details. One is reminded, for example, that L. Frank
    Baum's The Wizard of Oz, published in 1909, was widely understood
    at the time as an allegory supporting the populist free-silver
    program. (Dorothy's magical shoes are silver in the book, even if
    not in the movie.) One learns that the invention in 1856 of the
    Bessemer process for steelmaking suddenly made possible steamships
    that were far lighter, and therefore able to travel much farther.
    Also that steel gave men razors to shave with at home. Also that,
    since 1869, successive generations of Americans have exceeded their
    parents' living standards by an average of 50 percent.

    Such historical vignettes make for compelling reading. Yet how well
    does Friedman's basic proposition about the link between economic
    growth and morality hold up? The answer hinges in part on his, and
    our, definition of morality.

    In his guided tour of morality as it has been conceived by great
    thinkers in the past, Friedman leans hard on the ethos of
    self-improvement propagated by the Puritans. He cites Lincoln's
    contention that in America, the only reason for a worker's failure
    to rise above wage labor would be his "dependent nature." He
    includes an intriguing commentary on Adam Smith's The Wealth of
    Nations. This work, Friedman reminds us, had a powerful moral
    subtext. In the past, national wealth had been created by war,
    plunder, slavery, and other forms of exploitation. Now the world
    had a model for creating wealth via transactions entered into
    voluntarily, and expected to produce advantages for both sides. For
    the first time in human history, national wealth creation might be
    an exercise in virtue.

    But in later chapters, where Friedman is searching out examples of
    economic growth encouraging moral behavior, he tosses all this
    overboard. Here he makes the concept of morality largely synonymous
    with government intervention on behalf of the underdog--whether or
    not the intervention has generated a positive result. In writing
    about recent German history, for example, Friedman speaks
    enthusiastically of the German chancellor Willy Brandt's economic
    reforms in the early 1970's, even while conceding that many of them
    proved counterproductive. It does not matter, says Friedman. The
    issue is not whether these measures "ultimately represented optimal
    policy"; what is important is that "they reflected [a] political
    desire to achieve both a fairer and a more democratic society."

    In the American context, Friedman takes morality to mean something
    even more narrowly defined: support for affirmative action,
    immigration, concern about endangered species, a belief in strong
    unions and in corporate social responsibility (as opposed to profit
    maximization). He identifies the federal welfare reforms of the
    mid-1990's as reverse morality, triggered by the bitterness and
    bigotry flowing naturally from years of stagnating wages.
    Friedman's unstated but obvious bottom line: morality is the
    liberal political agenda.

    It is worth noting in this connection that Friedman has never made
    a secret of his politics. A Democratic partisan, he has often
    advised the party's presidential candidates. His last big book, Day
    of Reckoning (1988), was a full-bore attack on Reaganomics that got
    a rave review from the New York Times ("Every citizen ought to read
    it") and a blast from the Wall Street Journal.

    Needless to say, political partisanship need not prevent a scholar
    from writing a convincing book with a controversial thesis. But in
    this instance, partisanship has clearly skewed the conclusions.
    Thus, the case can easily be made that egalitarian policies, by
    undermining the very values like thrift and independence that
    economic growth hinges upon, often end up injuring their intended
    beneficiaries and are therefore immoral.

    When trying to prove a generality by citing examples, it would seem
    essential that the examples be selected according to some unbiased
    principle. No such principle appears in the book. Nowhere does
    Friedman state how much living standards must rise in order to
    alter the moral climate, nor is it made clear how long a rise must
    be sustained. Friedman's formulations sometimes assume that decades
    of prosperity are required, yet he also cites changes brought about
    in the span of a few short years. Sometimes he uses gross domestic
    product as his measure of growth. At other times he uses per-capita
    income. At yet other times, he uses the earnings of the "average
    worker in American business." So, in making his basic case, he
    creates a lot of wiggle room.

    Yet even with all this flexibility, Friedman is obliged to note the
    existence of numerous exceptions to his rule. By far the most
    important--he devotes a whole chapter to it--is the Great
    Depression of the 1930's, when the economy was in tatters but New
    Deal labor laws, job programs, and welfare initiatives were judged
    to be scaling new heights of progressive morality. Friedman offers
    several possible explanations of this antithetical phenomenon, of
    which the likeliest reason, in his view, was the stark awfulness of
    the Depression experience. This, affecting people from all walks of
    life, and representing an unparalleled threat to the entire social
    structure, ultimately forced Americans to "pull together." But the
    Depression was equally awful, if not worse, in Germany, and the
    Germans did not choose progressive policies. They chose Hitler.

    Another major exception cited by Friedman is from late-19th-century
    Germany: Bismarck's introduction, after years of economic decline,
    of social benefits like pensions for the elderly and infirm. Still
    another is Britain's repeal of the infamous Corn Laws in the
    1840's; this step did wonders for ordinary working families, yet it
    came about as a "response to stagnation." And then there were the
    British electoral reforms of the mid-1880's, which broadly extended
    male suffrage--another example of moral deportment that followed
    fifteen years without significant growth.

    Our current political landscape would appear to present special
    difficulties for Friedman. As I noted above, he regards the present
    period as politically regressive, and relates our supposed moral
    setbacks to stagnating living standards in the years from 1975 to
    2000. In fact, median household income rose by 26 percent in that
    quarter-century, signifying rising living standards for a clear
    majority--and presumably passing Friedman's acid test.
    Nevertheless, and highlighting the wobbly nature of his criteria,
    he deems this increase insufficient, and attributes our present
    moral shortcomings to those 25 years of "stagnation."

    But this brings us back to Friedman's politically self-serving
    definition of morality. Given his blindness to the possibility that
    "progressive" polices (like affirmative action) might themselves be
    unfair, or (like unreformed welfare) positively harmful to the
    underdog, is it to be wondered that so many of his historical
    examples fail to uphold the argument laid out, engrossingly if
    tendentiously, over the 570 pages of this book?

    Dan Seligman is a contributing editor of Forbes.

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