History of Economics

After reading Looking Toward the Future chapter bellow please write on these topics:

• Pandemic Recovery
• Technological Advances
• Federal Debt will increase
• The Chinese Economy as a strategic competitor to U.S.
• Global Warming

Is the outlook for this single most important source of economic growth, therefore, a closed book? On the contrary, it means that we must look to the future with the eyes of a historian rather than a reporter.For then we see that three important aspects of this vital force can be foreseen with some degree of clarity.

Chapter 17 Epilogue: Looking Toward the Future Is it possible to write the history of what is yet to come? Of course not. But then we remember: What do we mean by "history"? Certainly it is not an account of everything that has happened-who can know all that has gone on in a small town, much less in a great nation? History is better likened to a "story" we construct to explain our past-an effort to illuminate how our society has moved from one point in its development to another. Can we not venture a similar effort about the future? No one would be so foolish as to attempt to foretell the headlines of tomorrow's news- papers. But what about the titles of history books written ten and twenty years from now? Is it not imaginable that we can anticipate, at least to some degree, ways in which the story line of the past will mani- fest itself in what the British novelist H. G. Wells called "the shape of things to come"? We think so, and with all its inescapable risk, that is what we shall attempt. Moreover, such an approach to the future does not start from pure imagination. From the first to the last chapters of this book, a story has run through our narrative-a story that has sought to give coherence and connection to the growth of towns into cities, of simple handicraft work into mass production, of small businesses into giant firms, of the appear- ance of great storms in what was originally a placid, if always uncertain, way of life. That story has been the economic transformation of America; and behind that story has been another: the pressures and energies devel- oped by the economic system we call capitalism. If we are now to look toward the future, that must be the theme of the story we will tell. The Drive for Capital Let us begin by reminding ourselves of that which gives capitalism its extraordinary vitality: the drive for capital. Oddly, capitalism is not a so- 358The Drive for Capital 359 ciety in search of wealth. The pharaohs of Egypt sought wealth, as did He lords of ancient China and India, the emperors of imperial Rome The kings of the new nation-states that appeared in Europe in the Ill teenth and sixteenth centuries. By way of contrast, the capitalists who begin to enter the history books in the 1700s were not in search of wealth , but capital . what is the difference? It is that wealth-typically in the form of gold, precious stones, and, of course, vast tracts of land-is valued be rule, to s cause of its symbolic power. It represents the capacity of its owners to to sustain armed forces, to maintain retinues of servitors, to hold one's own in the small, but vastly influential world of the powerful. For all these reasons, wealth is never for sale, except in great emergencies. Capital, on the other hand, is always "for sale"-that is, always ready to be spent for purposes unthinkable to a pharaoh, king, or lord, such as buying coal or cloth or wool or labor power. Why is a capital- ist's money used for such ordinary items? Because the items become "commodities" owned by the capitalist who will try to sell them on the marketplace for more money than he has laid out. But that is not the end of the process. The money the capitalist takes in will now be spent to begin the process again, and indeed to continue it as long as the capi- talist (or his firm) succeeds in making a profit. We call a successful capi- talist "wealthy," but it is a different kind of "wealth" than that of the aristocrat who is disdainful of "making money." Thus, the essence of capital is its continuous striving for economic expansion-a use quite unknown to holders of aristocratic wealth. That is why capitalism is a social system marked by growth-and by recur- rent economic problems also unknown to the earlier world of wealth. We have seen that process exemplified in the stories of Samuel Slater, Andrew Carnegie, Henry Ford, and others; in the merger waves, the business ups and downs, the Great Depression; and in today's turbulent globalization. Hence, our first line of sight to the future is plain: we must look into the prospects for the successful continuation of the ex- pansion of capital. The Role of Technology Just as growth is the life force of capitalism, so technology is the life force of growth. As we have seen throughout these pages, technology is the catalyst for new products, new methods of production, new forms of industrial organization. Thus, if we are to find a line of sight360 Chapter 17 Epilogue: Looking Toward the Future into the future, we surely must begin by looking into the prospects for this strategic aspect of our economic system. Does that mean that we must predict the advances that will play the role filled by the steam engine, the electric light, the jet plane? Alas, that would require the skills of a fortune-teller, not those of a historian. We know very little about the specific technological developments that lie ahead. To be sure, we can anticipate the further uses of the com- puter technology that is already a mark of our age, as well as anticipate a few lines of likely development-biotechnology, for example, which may considerably extend our life spans and well-being, or new man- made materials, such as ceramics, that may displace older materials such as metals. But the size, the speed or extent of technological change is no more available to us than tomorrow's headlines. Is the outlook for this single most important source of economic growth therefore a closed book? On the contrary, it means that we must look to the future with the eyes of an historian rather than a re- porter. For then we see that three important aspects of this vital force can be foreseen with some degree of clarity. The first of these is that technology is increasingly related to scien- tific progress rather than to inspired insights, dogged trial and error, or sheer luck. The computer is itself a case in point. The grandfather of today's computers were mechanisms that did not essentially differ from the adding machines of the late nineteenth century. But then science entered, and the "chip" was developed-the first piece of "machinery" that consisted of arranged electrons. The development of the chip was thus perhaps the first economically significant instance of scientific technology, leaving to one side the impressive but ambiguous effects of the harnessing of atomic energy. As technology becomes ever more dependent on science, its place within capitalism will change. It will emerge more and more from labo- ratories than from garages. Its successes will become a matter of na- tional-indeed, as we have already seen, even of global-importance, rather than just a means for competitive advantage. It will become a much more expensive process, likely requiring government underwrit- ing to support its development. The computer itself, we should note, arose from military research carried on during and after World War II. This does not promise the steady development of breakthroughs that will have strong positive effects on economic growth, as witness the case of atomic energy, at least up to this moment. It does, however, greatly deepen the involvement of technology with the larger well-The Drive for Capital being, as well as the purely economic prospects of society. All thing" 361 considered, that should be propitious for economic growth A second historic change arises from the globalization process. Here is a change that carries many troublesome consequences for the developed nations such as ourselves-primary among them the pred sure against jobs that will arise from imports from the increasingly Pro- ductive developing countries . From an historical perspective, however, the expansion of produc tivity to previously backward parts of the world seems likely to offer new and potentially important markets for the products of the advanced economies-India, Southeast Asia, China, and one day Africa are cases in point. Once again, a note of caution is necessary: the management of the delicate relationship between the advanced and the laggard areas of the world will present many difficult problems whose resolution is a matter for political, not technological skills. Yet in the globalization of modern technology there is certainly a historic change that has at least the poten- tial of opening new avenues for growth in the future. A third element is the most problematic of all-at once a possible source of large and long-lasting investment and, at the same time, a pos- sible major obstacle to it. This concerns a much discussed, still imper- fectly understood, but increasingly likely development of the next cen- tury and beyond: global warming. Global warming refers to a side-effect that accompanies much of the gas, or oil, or coal-generated energy that lies at the base of modern economic life, socialist as well as capitalist. The side-effect arises be- cause the carbon dioxide (CO2) generated by all fuel-burning combus- tion rises into the air where it forms an invisible screen that traps the heat normally arising from the earth's reflection of the sun, as well as that which comes directly from the use of fuel. Historian Paul Kennedy writes in Preparing for the Twenty-First Century:in hongh Atmospheric CO2 concentrations have risen by about 70 parts per million during the past century and now total about 350 ppm. More than half that increase has occurred during the past thirty years. .. . If the pre- sent growth rate . .. continues, some scientists predict [that] carbon dio- xide levels will be as high as 550 or even 660 ppm by the middle of the twenty-first century, leading to significant rises in the earth's temperature. We do not yet have a scientific consensus as to the many effects of the so-called greenhouse effect that comes from this invisible film of362 Chapter 17 Epilogue: Looking Toward the Future the col heat-trapping CO2 molecules. There seems little doubt, however, that can di the atmosphere is slowly heating up with potentially serious effects. In- consci deed, the three warmest years since reliable record keeping began in as a c 1866 took place in the 1990s with 1995 heading the list. Kennedy struct warns of such different consequences as rises in sea levels, depleted that agriculture, reduced water flows, increased health hazards (skin cancer, them respiratory problems), more turbulent weather. that Here is a new element in our historic future. The other problems we have mentioned-technology, globalization-have roots and, there- fore, antecedents in our past experience, but there is nothing in our his- No tory to which we could turn for guidance with respect to global warm- ing unless we looked back to the ice ages. The difference, however, is 1 pa that global warming is man-made. Its dangers will have to be coped 19 with by social policy, not left for nature to determine. 2 16 What will that social policy have to accomplish? The central neces- sity must be to move away from greenhouse-producing combustion to energy sources that do not release dangerous carbon dioxide molecules S into the air. These include the use of solar energy, gravity (such as water wheels), and electricity generated by safe processes. We can see now why scientific technology will become of global importance. This cannot be done immediately, but as global warming enters the public's awareness, we can expect a major effort to bring about the change es- sential for our environmental safety. These would, of necessity, require severe limitations on the use of coal, gasoline, wood, and other combustible materials, both in our homes and in all places of manufacture. The initial effect is almost cer- tain to be "antigrowth," as many combustion-using processes are forced to curtail output. On the other hand, there would certainly be a rise in combustion-free power sources that could be used to support suitably redesigned manufacturing operations. How long it would take to bring into being an ecologically stable economy no one can say, nor can we predict whether its level of output would be as high as its predecessor. In all likelihood, the growth process would be much different, regarded with ecological misgivings rather than greeted with economic enthusi asm. It is also possible, however, that a new feeling of communal re- sponsibility might enhance the overall quality of life. Thus, speaking as historians, our task is not to suggest policies for problems whose specific nature we can only dimly perceive. It is rather to suggest that a commitment to flexibility and far-sightedness, to social as well as technological innovation will be the key for all nations overSuggested Readings he coming centery and beyond. Our task is also to remind us that we 363 Un discover times in our own history in which that inventive, socially Conscious point of view has served us well-the extraordinary New Dear "a case in point-and other times when we have revealed a less com active national temper. Our point is not to moralize. It is to emphasize Sat the United States has great capabilities for adaptation if we mobilize hem and to suggest that the coming century is likely to be a time when that capability for mobilization will be tested as never before. Notes 1993 ) , 107 . I paul Kennedy, Preparing for the Twenty-First Century (New York: Random House, 2 1bid., 114. Suggested Readings In addition to many of the works cited in the previous chapter, see Robert Heilbroner, Visions of the Future (1995), and Paul Kennedy, Preparing for the Twenty-First Century (1993). On the environment, see William R. Cline, Global Warming: The Economic Stakes (1992); Ronald Bailey (ed.), The True State of the Planet (1995); Gregg Easterbrook, A Moment on the Earth: The Com- ing Age of Environmental Optimism (1995); James P. Bruce et. al. (eds.), Climate Change 1995: Economic and Social Dimensions of Cli- mate Change (1996); and Lester R. Brown et. al., State of the World: 1997 (1997)