8/10/2019 ‘Mass Flourishing’ - FT

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8/10/2019 ‘Mass Flourishing’ - FT

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producers and professionals for a share of government contracts and a place in government-sponsored enterprises”. Corporatism is a

matter of degree; but Phelps has no difficulty in showing that, compared with the more primitively capitalist Anglo-Saxon economies, the

relatively corporatist continental European ones have done worse rather than better. They failed to deliver, argues Phelps, because they 

“lacked something needed to enable, stimulate and spur experimenting, exploring, and trying things out. Therefore their economies were

missing the ingredients required for operating at the productivity frontier and thus for having high mean levels of employment.”

These are brave words when the world is still struggling to emerge from a banking crisis; but a comparison between the evidence of US

recovery and European struggles to maintain, at vast cost, the top-down euro project suggests that he is likely to be vindicated.

I could not entirely sympathise with Phelps’s orthodox abhorrence of budget deficits, although with a mass of macroeconomic studies to

his credit, I should hesitate to take him on in public debate. But if I tried to reconstruct his underlying argument in Keynesian terms it

 would be that such policies are often used, not just to stimulate consumer spending, but to justify a wholesale intrusion of dubious public

projects that are supposed “to create jobs”.

There is nothing in sensible demand management to justify what the author describes as “an explosion of regulations, grants, loans,

guarantees, taxes, deductions, carve-outs, and patent extensions intended mainly to serve vested interests, political clients, and cronies”. It

certainly does not help to create jobs that anyone deciding to set up an innovative company would have his property right diluted “as it

copes with an array of figures – its own workforce, interest groups, advocates, and community representatives – who ardently believe they 

have a legitimate ‘stake’ in the company’s results”.

Phelps obviously realises that Americans cannot go back to their founders’ vision of political leaders as “persons pausing for an interlude

from their private endeavours, primarily businesses ranging from large farms to urban factories, offices, and shops”. But this still does not

ustify “subsidies for growing soy for biofuels, for the purchase of solar panels, for profitless green energy companies, and for the ventures

of [government mortgage agencies] Fannie Mae and Freddie Mac”. The core message of this book is the need to minimise special-interest

legislation.

Phelps does not disdain conventional reformist proposals such as the restoration of “relational banking”. Banks should have a narrower

mission, leaving risky assets to financial markets with the appropriate expertise. More fundamentally, he rages against mutual funds that

threaten a chief executive with dumping his company’s stock unless he fixes his attention on the next quarter’s earnings figures. He points

to restrictionist practices such as the lawsuit of the US government against Boeing for opening a plant in a “right-to-work” state that

prohibits closed-shop agreements between employers and unions; and to a reorganisation of General Motors that puts the union trust fund

ahead of the claims of bondholders.

 What Phelps and those who think like him have still to demonstrate is that the more lethargic, who do not want to be fiercely innovative

either in their work or in their leisure, will still benefit more from a competitive capitalist economy than from any of the alternatives

proffered so far. This applies, after all , to some of us all of the time and to most of us some of the time.

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 Samuel Brittan is an FT columnist 

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 Letter in response to this article:

‘Corporatist’ Germany beats UK on all metrics / From Mr Matthew Wesley 

iew: ‘Mass Flourishing’ - FT.com http://www.ft.com/intl/cms/s/2/ad7dd9c0-069a-11e3-ba04-00144feab7...

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