After the New Economy

by Doug Henwood

Book Overview

Rarely a day went by in the dizzy 1990s without some well-paid pundit heralding the triumphant arrival of a "New Economy." According to these financial mavens, an unprecedented technological and organizational revolution had extinguished the threat of recession forever. Though much of the rhetoric sounds ridiculous today, few analysts have explored how the New Economy moment emerged from deep within America's economic and ideological machinery--instead,...

• Format: Paperback
• Language: English
• ISBN: 1565847709
• ISBN13: 9781565847705
• Release Date: July 2005
• Publisher: New Press
• Length: 269 Pages
• Weight: 0.95 lbs.
• Dimensions: 1.1" x 5.3" x 7.9"

Customer Reviews

excellent

This is the excellent kind of economic and business journalism that we expect from Doug Henwood. See his LEFT BUSINESS OBSERVER. It's all about the end of the dream -- or rather hype -- of the so-called "new economy." Henwood writes really well and this book is not for professional economists or business-types. It's readily available to anyone who is interested in the topic.

The Ironies of the Nineties

Henwood does a superb job of illuminating many of the ironies of the Ninties, whether simply quoting George Gilder (who Henwood notes, rivals Whitman as an exuberant list-maker) or pointing out that the phrase "New Economy" was first used by President Reagan in a speech at Moscow State University. Too good to be true--but it is. And Henwood underlines how, from the very beginning, the New Economy rested on a flight from the physical world. He quotes Reagan: "In the new eocnomy human invention increasingly makes natural resources obsolete." While the Bush admnistration's environmental policy could be read as an attempt to fulfill Reagan's dream, world markets are now telling us that natural resources are far from out of vogue. Copper, gold, silver, oil, wheat--today, this is where wealth resides. Demand for these resources is rising in parts of the world where higher productivity actually means higher standards of living for a significant number of people. By contrast, Henwood shows how, in the West,the productivity revolution of the Nineties produced more, always more, of things that, in many cases, we don't need and couldn't afford.The miracle? They were doing it with fewer people. Jobs vanish (though Henwood shows, low-wage jobs are growing at nice clip), debt mounts, the dollar declines. And, he notes, in some cases what we produce may even lower the standard of living: "The contribution of the brokerage industry to productivity was mainly web-based trading; how much it contributes to human welfare is debatable. The more people trade, the worse they do (though it makes their brokers happier.)" Henwood deconstructs GDP, and productivity numbers emphasizing the "statistical fetishism" surrounding both, asking important questions about the quality rather than just the quantity of what is produced (does it offer a gain for human possibilities or a loss?) and offering perhaps the clearest explanation I have seen of the fuzzy math involved in guesstimating both GDP and productivity growth. Finally, in just a few pages he offers a fine analysis of how "so much of the last twenty years comes together in the Enron story . . . Lay's assetless trading model was right in line with the celebration of postmateriality. The pension system was right in line with New Era pension thinking. And relying on the stock market to judget he company and pay senior managers was right in line with all of the trendy talk from professors and consultants. And it all went badly wrong." Here, Henwood makes what may be his most important point: "But instead of being read as a judgment on the idiocy of all these fashions, it's being read as a case of personal corruption . . . " Our obsessive focus on crime--and putting the perps in jail--may be emotionally satisfying for some, but it too-neatly dodges the heart of the problem. The real problem was not that individuals corrupted the system--the real problem was that the ideology of the new

When the Whip Comes Down

For years, Doug Henwood's newsletter -- "Left Business Observer" -- has served as a corrective to the triumphalist nonsense that passes for business journalism in the U.S., (and just about everywhere else for that matter). Now, with AFTER THE NEW ECONOMY, Henwood, pithily exposes the flashy mummery behind the bubble economy of the late 90s. Henwood's particularly good on the years leading up to the boom. He shows how the New Economy was whipped to a high froth with profits expropriated from American in the preceding two decades. Here's Henwood in his own words on the subject: "It's not hard to figure out what caused the fifteen-year profit boom (in the 80s and 90s) -- a reversal of the forces that produced the sixteen-year bust that preceded it. The conventional story is that excessively stimulative and indulgent government policies led to a great inflation, compounded by the oil-price shocks of 1973 and 1979." (Pg. 204) "There's some truth to the standard story, but it also needs to be translated into political language. The long post-World War II boom had fed the expansion of the welfare state. The sting of unemployment was lessened and workers became progressively less docile. Wildcat strikes were spreading and factory workers were smoking pot on breaks and sabotaging the line. Internationally, the U.S. had lost the Vietnam ware and discovered that is conscript army was an undisciplined horde that was not shy about shooting commanding officers. The Third World was in broad rebellion, demanding global wealth redistribution and a new world economic order, a point that OPEC made forcefully in 1973 and 1979" (Pg. 204).Henwood notes that it was at this time that the conservative movement, which had been fairly quiescent in the 50s and 60s, gained a new impetus as the ruling class began to feel the pinch and search around for an ideological tool to stem the rising democratic tide. It came to a head when the top 1% which had traditionally controlled about 40% of the wealth in the United States found their share reduced to approximately 20% in the early 70s (Pg. 121). The counterrevolution began in earnest. It was then that the Chicago School boys sharpened their neo-liberal apologia for capitalism, and their retooled 19th century theories were embraced by the denizens of the Business Roundtable, their friends in the Treasury Department and the White House. And so, in Henwood's words "...through benefit cutbacks by employers, outsourcing, speedup, permanent downsizing, cutbacks in regulation, the central-bank-led class war succeeded in more than doubling the profit rate for nonfinancial corporations between 1982 and 1997" (pg. 210).Henwood is a numbers guy, and he uses them to debunk the capitalism's cheerleaders as well as its undisciplined detractors. Particularly refreshing is his analysis of the wooly-headed maunderings of the weird left who wish the turn the clock back to some imaginary proto-capitalist time where the nation state was the

. . . Come the New Possibilities

Although this book is an "excercise in kicking the thing [the concept of the New Economy] while it's down, to make sure it won't get up again," Henwood is more interested in finding ways to think about recent economic history than in assaulting the proponents of the New Economy. He divides his analysis into 5 general themes: "novelty" (economics should be viewed historically so as to identify both the old and the new, both patterns and changes); "work" (productivity gains do not clearly show up in increased wages or increased profits and have not led to better jobs for most workers); "income" (income and wealth disparities continue to exist and inequality continues along racial, gender and national divisions; and workers are not as upwardly mobile as we would like to believe); "globalization" (a concept about as fuzzy as the "New Economy," whether used by its advocates or its enemies, that often obscures thoughtful consideration of the long-standing and long-increasing international reach of the economy); and "finance" (the increase in the number of financial assets and especially the increaed speed at which they trade in the financial markets may have less to do with smart investment in productive activities than in benefitting financial managers and top executives and in increasing profits of already-financed companies). Henwood suggests that the bursting of the New Economy bubble is likely to have long-term effects that will lead to continued polarization of income/wealth, insecurity, etc. However, he also sees reason for optimism because of continued calls that we can understand the world and the economy in ways that will allow us to move beyond misleading concepts such as "New Economy" and/or "globalization." To support his optimism, he points to Hardt and Negri's book, Empire; to his own belief in the power of unionized labor and domestic politics/policies to battle inequality/polarization; and even to the well-kicked New Economy's proponents' call for the democratization of ownership. Some readers may find this book most interesting for Henwood's pulling together far-ranging economic indicators and his ability to discuss them coherently without glossing them (with concepts such as New Economy or globalization). Whether these disparate indicators can bear much analytical weight when used in conjunction with one another is a different matter, of course, but Henwood's lead-by-example optimism that we can get into the nitty gritty details ourselves to look at what our economy is doing and find a way to improve things is compelling.

Henwood describes the state we're in

Doug Henwood announced this book (his follow-up to "Wall Street") back when the so-called New Economy was still around.Those of us who read his Left Business Observer newsletter waited impatiently for over five years.It was worth the wait. Henwood starts off just where you'd expect --- poking fun at the Internet revolutionaries, the intellectualfrauds who claimed the US economy had reached a new age.Then he gets into the numbers. Oh man, does he have numbers. Chapters two and three are all about productivity, income, andwealth. He gives you a few statistics, he explains what they mean, and then he tells you that the numbers can't be trusted. (He has a habit of saying, "What does this all mean? Honestly, no one knows. But I'll make an educated guess.") This kind ofhumility is rare among economists. He forces you to form your own opinion about the accuracy of the numbers and theirrelevance.Despite the constant caveats, a clear picture emerges. The US economy is deeply integrated into the world economy, with ThirdWorld patterns of wealth and worker control developing right here in the First World. Although the US is still more comfortablethan, say, Colombia, it's falling behind countries like Belgium and France. Divisions of wealth, a pathetic social safety net, and weak unions keep an overworked, low-paid, insecure workforce in their place.Then he turns to globalization. This chapter has a few problems. Henwood likes cosmopolitanism --- the social form ofglobalization. And he says the international economy has been around for over a century, so we shouldn't treat it like something new. Then he picks a handful of people who don't represent the anti-globalization movement --- people from Earth First and self-appointed experts such as David Korten --- and uses their crazy quotes. But it turns out that he agrees with theanti-globalization protesters on most issues. So why does he take this approach? Because the anti-globalization activists are using the wrong name for their movement.That might sound like a petty basis for a chapter in a book about the New Economy. And it is.Then he gets back on track. He finishes with a brilliant chapter on finance. Picking up where he left off in his previous book, heshows that economists don't care how international investment or the stock market *really* works. He describes crooked stockanalysts, corrupt CEOs, and disciples of the "broadband future." He quotes former World Bank economist Joseph Stiglitzsaying that the IMF can't avoid programs that bankrupt Third World countries because bankruptcy isn't in their computermodels.By the time you're done with this book, you'll want to read it again. It's packed with small, easily-understandable charts. Thewriting style is very good --- Henwood sounds like he's sitting next to you, talking to you about economics at your level. I highlyrecommend After the New Economy to anyone who cares about the current state of work and money in the world.