Published by EH.NET (December 2003)

Wyatt Wells, American Capitalism, 1945-2000: Continuity and Change from Mass Production to the Information Society. Chicago: Ivan R. Dee, 2003. ix + 210 pp. $24.95 (cloth), ISBN: 1-56663-537-3.

Reviewed for EH.NET by Richard Vedder, Department of Economics, Ohio University.

Wyatt Wells, a historian at Auburn University, Montgomery, has written a very nice survey of economic change in America in the fifty-five years from the end of World War II to the beginning of the twenty-first century. This is a tour de horizon of the entire economic landscape — macroeconomic changes, sectoral developments (e.g., agriculture, manufacturing, financial services). Albeit, it is a short tour — this is a fast-paced, concise survey of about two hundred pages. Accordingly, this is no encyclopedic account — individuals wanting lots of statistics and detail on, for example, international trade patterns, changing labor market composition, or income distribution, should go elsewhere. But people wanting a good read that well describes the essence of the important changes in the American economy and gives a good “feel” of America’s changing role in the world will find this an excellent choice.

Wells is generally upbeat, decidedly optimistic about the American economy, but he is no uncritical cheerleader for American capitalism. He is extremely balanced and objective in his presentation, usually presenting alternative interpretations of issues, such as the impact of globalization, the trade deficit, or declining labor productivity after 1973. Unlike the last few books I have reviewed for EH.NET, the author is scrupulously objective in his presentation; I could not guess with confidence whether Wells is a conservative Republican or a liberal Democrat.

Wells argues that American capitalism changed over time from an economy that depended on expansion of mass production techniques for rising productivity to one in which information technology is the leading edge of economic change. Without overwhelming readers with technical details, the book is filled with nice examples of shifts in resources towards the new technologies and forms of capital.

The book has an above average emphasis on monetary and international financial developments. The author clearly believes, for example, that interest rates are a key economic variable. He generally presents all sides in debates over macropolicy, and for a person grounded in history, seems to have a pretty good feel for economic theory and the implications of scarcity. His reading of the economics literature is not perfect, however. For example, on page 114, talking about the Laffer curve, he says “Laffer … never explained adequately why a 30 percent reduction in income taxes would necessarily increase gross income by 30 percent.” If by “gross income” he is referring to government tax revenues, I very much doubt that Laffer ever claimed that tax reductions would lead to tax revenue increases of precisely the same amount. As a bit player in the tax cut battle myself (I was working for Congress when the Reagan tax cut was approved), even the most gung ho supply-siders never predicted huge revenue increases from tax cuts, a point made before by others, notably Martin Anderson. Also, I think Wells’ claim (p. 173) that productivity increases after 1995 reflected loose monetary policy and tight fiscal policy is, at the very least, debatable.

There is one thing about the book that does irritate me a bit, though, and that relates to the carelessness and inaccuracy with respect to the dating of historical events, and small errors of facts. The errors here are always small, but they are errors nonetheless. Perhaps they arise from the fact that the author wrote much of the book from coffee shops in Hong Kong and Alabama (an eclectic set of locations), where reference books to check dates were not always available. Examples: the Taft-Hartley Act was passed in 1947, not 1948; the first federal budget surplus in a generation came in fiscal year 1998, not 1999; patents are issued for 17 years, not 19 years; NAFTA was approved in 1994, not 1993, the European Coal and Steel Community was set up in 1951, not 1950, the Interstate Highway program began in 1956, not 1955. Also I doubt, contrary to Wells’ assertion, that DVD players had even been invented by 1990, or that the Boeing 707 began flying for airlines in the mid-1950s (better: late 1950s). Some other statements are, at best, half-truths. On page 29 we learn that the “government created savings and loans.” While it is true that government policy favored savings and loan associations, and an apparatus was created to permit their creation, the government itself did not create savings and loans. The errors, while small, are numerous enough to turn off serious scholars from what is generally a fine book.

Moreover, I would be out of character not to say that I personally disagree with some of Wells’ historical interpretations. He claims (p. 39) that “farm programs expedited an extraordinary advance in farm productivity.” It is possible, of course, but most economists are suspicious of claims that subsidies are efficiency-enhancing. On p. 178, he claims rising minimum wages led to greater income equality, something my own research, as well as that of some others, seriously questions.

In short, this book has its flaws. For the fastidious reader interested in precise historical accuracy, these flaws are very substantial. Yet at the same time the book has much to commend it: it is generally balanced, generally well written, and very good at capturing trends and moods in the economy and its actors. I like the book, and will consider it as a supplemental reading to the standard American economic history textbook in the future.

Richard Vedder is Distinguished Professor of Economics at Ohio University. His next book, for the American Enterprise Institute and due out in 2004, is tentatively titled Crisis in the Academy: The Restructuring of American Higher Education.