Book Reviews

Book Reviews Finance & Development, September 2015, Vol. 52, No. 3

Paradise Lost?David Kotz

The Rise and Fall of Neoliberal Capitalism

Harvard University Press, Cambridge, Massachusetts, 2015, 270 pp., $39.95 (cloth).

The worst kind of nostalgia is pining away for a time that never was. The Bible kicked it off with its account of Eden. Hollywood kept it going with films about the Wild West. Economist David Kotz contributes to the genre with The Rise and Fall of Neoliberal Capitalism. The book is an economic history of the period after World War II, when—according to Kotz—capitalism was gentler, more humane, and much better regulated.

The form of capitalism Kotz thinks held sway between the end of the war and the early 1980s was fraught with contradictions. He asserts that even though taxes were higher then, people did better and the economy grew faster. Even though trade was more restricted, companies thrived. Even though prices for many goods were not allowed to float freely (they could be set under “fair trade” rules), people saved more. Even though Wall Street’s commissions were fixed and higher than today’s averages, the financial sector accounted for a much smaller share of GDP and of profits than it does now.

Kotz says there was harmony between employees and employers, with unions granted a seat at the table. (However, somewhere under a parking lot or football stadium lies disappeared labor union leader Jimmy Hoffa, who can confirm or deny just how harmoniously labor and business interacted.) The economic geniality and harmony of the 1950s, 60s, and 70s was a hallmark of post–World War II capitalism, Kotz suggests.

In Kotz’s history, every group was better off yesterday than today, except the 1 percent. But Kotz doesn’t mention how the environment fared or how safe workers were in the workplace before the U.S. Occupational Safety and Health Administration and Environmental Protection Agency. Nor does he talk about health care or today’s medical, pharmaceutical, and scientific breakthroughs. Kotz also bypasses innovation. This book is about economics; it is not a business book.

He also passes rapidly over finance. And when he glances at it, Kotz does so mostly in negative terms—for example, in his examination of mortgages, especially the saga of Countrywide, the largest provider of home mortgages before the housing crisis.

A problem with Kotz’s book is that no one knows for certain whether his counterintuitive view that when capitalism...