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about getting used to a lesser standard of living. Throughout the years 2006, 2007 and zoo8 Foster and Magdoff accurately forecasted the recent financial meltdown. \(Liberal economist Dean Baker, to his credit, predicted the housing bubble back limited to financeit reflects weaknesses in the overall economy. Building on the work of economists Paul Baran and Paul Sweezy, Foster and Magdoff focus on the astronomical growth of debtparticularly private debt, often ignored by mainstream economists, whose focus on the considerably smaller public debt understates the problem. They also track the unsustainable volume of mortgage borrowing and the mind-boggling profusion of new financial instruments like collateralized debt obligations and structured investment vehicles. If we accept the thesis of mature capitalist stagnation and an economy always in search of bubbles to blow up, a new policy prescription presents itself. It would seek economic bedrock equalization of incomes, investment in human capital and physical infrastructure, and extension of real opportunity to ignored segments of society, in President Obama’s vision. In other words, a sort of Americanized socialism. Although Beattie doesn’t have much to say about the current economic crisis, his book provides a sweeping historical overlook from which to view the situation. Beattie’s prism is individual choice, rather than Marxism’s material destiny. Even so, he recognizes that given enough poor choices by policymakers, a country could find itself permanently derailed into diminished economic growth. One case in point is Argentina, which at the end of the 19th century resembled few countries so much as the United States. Some thought Argentina would become a world power. From there, the two nations’ paths diverged radically. The Argentinian state was captured by rentiers who preferred to live off the land rather than invest in the infrastructure crucial to development and growth, as the U.S. went on to do. Given the current crisis, the question confronting America is whether it has already proceeded so far along the path of financialization that return is impossible. After all, great discrepancies in wealth distribution and access to opportunity have already skewed from the norms of American capitalism \(sometimes exceeding even the distoris that a return to a real economy is possible, though increasingly difficult as time passes and players like Europe and Asia bring their competitive creativity to market. For Foster and Magdoff, the very question is wrongheaded; capitalism’s recurrent “crises” are just the tips of the iceberg representing capitalism’s inability, if left to itself, to invest in people. Beattie’s investigations into why certain countries prosper despite apparent material disadvantages, while others languish despite material advantages, are relevant to the current crisis. Natural resource endowments such as oil and diamonds can be more trouble than they’re worth, since they can inhibit entrepreneurial creativity. We import our asparagus from as far away as Peru because farmers there have obtained unequal access to markets. Special interests get fat on state largesse and move entire economies in unproductive directions. Something similar has happened with the financialization of the American economy. Yet Beattie’s main thrust is to show that the economic fate of nations is not inevitable. Given the right policy choiceswhich in Beattie’s view amount to trusting the market and limiting government interventionany country can liberate itself from economic tyranny. Indeed, policies giving more rein to the market are often effective. But its all too easy to ascribe causation in retrospect, justifying the free-market perspective in hindsight. American development in the late 19th century had as much to do with control of the state by industrial, rather than agricultural, elites. Heavy import tariffs of precisely the kind that Beattie derides among today’s developing countries were common to both camps. During the last 3o years, the American economy has been managed according to the needs of an increasingly frenzied financial sector, as manufacturing declined. Why would financial interests give up their virtual monopoly? Beattie also fails to address the fact that America grew so phenomenally in the loth century in large measure because of war-making, the ultimate Keynesian stimulus, of which we’ve taken repetitive advantage during the postWorld War II period. Our wars have fueled bursts of “economic growth,” but have we reached a limit there, too? Kevin Phillips’ prescient 2008 book Bad Money, a necessary supplement to Beattie, connects the financialization of the American economy, very much as Foster and Magdoff describe it, with the demands of American empire. What, then, are the prospects for recovery? According to Foster and Magdoff, the reckoning has arrived. Debt has been too grossly inflated to fuel another recovery, and America has no choice but to deleverage its economy and return to those forms of real productivity still open to it. A decision must be taken to pursue greater equality, which would require lessened reliance on asset bubbles, else the foreseeable decline will be all the more painful. Beattie doesn’t believe in the permanent stagnation of mature capitalist economies. Yet his thesis converges with that of Foster and Magdoff in that departure from the norms established by narrowly interested elites becomes more difficult over time. The pragmatic realism so far displayed by President Obama, and very much in evidence in the books discussed here, is still sorely lacking in mainstream media accounts. These continue to harp on subprime lending and irresponsible borrowing as the wrecking balls that brought down the house. At best they advocate re-regulation of the financial sector as a means of preventing a recurrence, rather than asking why the house was built on sand to begin with. Anis Shivani is a fiction writer, poet, and critic in Houston. His collection Anatolia and Other Stories will be published by Black Lawrence Press in October. JUNE 12, 2009 THE TEXAS OBSERVER 27