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4.0 ★★★★★
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★★★★★ 4
Marx had the proletariat, Mao had the farmers, America has the owners of financial capital
Format: Kindle
What makes Jonathan Levy’s book so informative is that it is truly a parallel history of its politics and its economics. And only by viewing these two intertwined paths side by side can you truly understand the myth of the American free market.
America’s politics and its economics have never, since the country’s founding, been separated. The state has been an integral part of everything economic to an extent that would make the most rabid socialist gasp in horror. The only difference is that while the Marxist state stood side by side with the proletariat, and Mao built the number two economy in the world on the support of farmers, America built its economic marvel on the backs of, and for the benefit of, the owners of financial capital.
That’s not all bad, mind you. It takes workers, farmers, and the owners of capital to build a modern economy. The tension comes when there is a lack of balance between the importance the state attaches to each.
And there can be little surprise that America’s politicians have put the owners of financial capital at the top of their list of priorities. Politicians, after all, can do nothing without power, and power comes via the electoral process, a process that is today fueled by obscene amounts of money. And who has all that money?
The American economic narrative is a misleading tale of meritocracy and free markets. The Horatio Alger-based myth is that you are only limited by your skills and your ambition. And like most enduring myths there is a thread of truth to it. Many successful people truly deserve what they have achieved.
But does anyone really possess $150 billion of personal merit? Can we statistically accept that the wealthiest nation in the world is also one of the most financially unequal without seeing a pattern of bias?
Perhaps the most selectively quoted book in history is Adam Smith’s “Wealth of Nations”, published, strangely enough, in 1776. Often credited with being the father of capitalism, Smith argued that markets free of excessive regulation would be more efficient than markets that were overly regulated, although Smith “made no categorical separation between the political and the economic, or state and market.”
Smith did, however, warn against the socially destructive power of monopolies, which unregulated markets will not protect against, and he correctly predicted that the excessive division of labor would lead to a degree of labor and wealth inequity that would destroy society.
At the time when US Steel, General Electric, and General Motors, among many others, were the power behind America’s global economic hegemony, most Americans earned a living through wages. And those wages were made possible by long term fixed investments that created jobs.
They were generally big bets that took a long time to earn a return but that aligned with the jobs-first priorities of most companies. (Employees first, communities second, shareholders a distant third.) And while not every employee enjoyed the same salary, the differences between the top earners and the average earners was a fraction of what it is today.
That era, of course, is long over. The current economy is geared toward the creation of wealth through the short-term investment in assets that will appreciate rapidly and are highly liquid. At the moment that is the stock market and synthetic financial tools pedaled by hedge funds, banks, and the like.
The problem is that the wage market encompassed much of America. The asset appreciation market encompasses only a tiny sliver of the richest among us. There is spillover, of course. The lawyers, analysts, consultants, bankers, and sales people who serve the asset appreciation market are doing quite well. But the man or woman who has less education and who might have made a decent living in a steel mill or car assembly plant, has lost out. And despite what the politicians will tell you, the gap is getting wider.
(I spent a career in corporate industry, have a college degree in economics, have been a CEO, and have served on four public company boards. I know enough to know that Levy knows what he’s talking about.)
The second important point to come out of all this is that economics is not really a “science” as most people think of that term. There is a shared jargon and there are commonly accepted principles. The very idea that there is an economy that is distinct from all other aspects of human existence, including the state, however, is a relatively recent concept.
The weakness of the distinction, in fact, is clearly demonstrated by the remarkable reality of just how diverse the history of the American economy is. The sun doesn’t always rise in the east in the world of economics. In each of the economic eras Levy describes it is stunning how few people actually formulated the thinking that defined them.
I will join some of the other reviewers in suggesting that the author could have spent more time explaining some of the jargon inevitably found in a treatise on economics. The layman obviously wasn’t his target audience but the book, I believe, could have read more smoothly and been much, much shorter. (The editor and publisher have to take some of the blame for this.)
Even if you have to slog your way through the more tedious sections on global capital flows and such, however, you’ll get something from the book even if you’ve never set foot in an economics classroom. If you get no more than the fact that the free market is a myth and that most long term capital that actually creates jobs and income for the average American is actually provided by you, the taxpayer, not the Wall Street capitalist, you will better understand why there is so much division in our country right now.
We don’t have a democratic economy. The young wonders of Silicon Valley would have nothing if it wasn’t for your tax dollars and your pension plan, if you’re still lucky enough to have one.
We can do better. We have to. The economic inequity we have now is simply not sustainable.
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Reviewed in the United States on August 19, 2022
★★★★★ 5
Good value for the money.
Format: Hardcover
Book in excellent condition, delivered promptly.
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Reviewed in the United States on May 20, 2025
★★★★★ 5
Great read.
Format: Paperback
Gives a great perspective of how technology has developed and shaped the economy.
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Reviewed in the United States on January 21, 2024
★★★★★ 5
How Capitalism Shaped America
Format: Hardcover
Very impressive analysis. Unfortunately the author ended his analysis in 2010. Wish he had offered some thoughts on what should be done as opposed to what is being done in this age of economic chaos.
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Reviewed in the United States on August 19, 2021
★★★★★ 3
Some good footnotes to other histories
Format: Audiobook
This book is impressive in two key ways: first it re-surfaces recurring elements in the political/economic intersect over time (the on-again off-again use of "the gold standard," the company invasion into the intimate life of the laborer) and second it gets into the gory details of policies and logistics that shaped or limited major historical events (like the availability and movement of gold going into WWII). That said, it's pretty massive for providing just those two things.
It comes up weaker from Nixon on to today which undermines its contemporary relevance: it stamps everything from 1980 on as "chaos" and tries to back away slowly. It spends some time on the change in stock ownership of the 1980s (prefer Ho's Liquidated or Nace's Gangs of America; the pivot from pensions to 401ks is lost, Supermoney is not mentioned), spends time on Enron (see also McLean's The Smartest Guys in the Room) but seems to mostly ignore terror and catastrophe (consider Klein's The Shock Doctrine), spends time on the 2008 meltdown (prefer Lewis's The Big Short and Foroohar's Makers & Takers) but comes up short of Occupy Wall Street, VC-fueled gig economy corporations and cryptocurrencies.
I'm suspecting that the "Chaos" isn't so much chaos but rather "Distributed Tactical Illegibility" (to borrow from Scott's Seeing Like a State): where the control of information can be used to cultivate socioeconomic advantage, then powerful people within a state will maintain their privilege through obfuscating the information they're using to create and maintain that advantage -- this is why insider trading is illegal as an abuse of power and trust *but also legal for members of the US legislature*.
It's also a bit weak (at least in Audible form) of noting which bits of economic history would be echoed or reversed over time; tracing the evolution of a social construct through a twisting maze of legal decisions to current incomprehensibility does have this effect.
I did find its larger position interesting, if perhaps a bit lost in the larger prose, that capitalism is about pricing the future into the present and it's gone off the proverbial rails because informational ubiquity compounds short-termism to collapse the future into the present in both public and private enterprise. Or, to put it another way, money can't escape the gravity of our economic expectation for near-horizon growth to invest in a future that our larger society wants and might reasonably expect and while legislators need to govern for the long term they're only elected for the short term and judged by people's everyday-experiences of the social-economy.
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Reviewed in the United States on September 20, 2021