Published by EH.NET (October 2002)

Frederic L. Pryor, The Future of U.S. Capitalism. New York: Cambridge

University Press, 2002. xiii + 447 pp. $35 (hardback), ISBN: 0-521-81358-1.

Reviewed for EH.NET by Robert Higgs, The Independent Institute.

The Future of U.S. Capitalism, by Frederic L. Pryor, is an odd book,

and I doubt that many economic historians will find it useful, either in

research or in teaching. Pryor’s objective in the book is to forecast the

future development of various economic, social, and political aspects of U.S.

“capitalism.” (His choice of terms would not be mine. In my view, anything

properly described as capitalism in the United States came to an end no later

than 1933. To retain the term “capitalism” contributes to misunderstandings of

how a predominantly market-oriented system works, and thereby fosters further

inroads into what little remains of the market system.) In Pryor’s own words,

he intends to consider: “What have been the key trends in the U.S. economic

system in the second half of the twentieth century and what causes underlay

them? If current trends will not continue, what will replace them, and why? At

what points do we lack sufficient knowledge, either theoretical or factual, to

make responsible predictions about the future?” (p. 1).

After an introductory chapter, the author considers “internal influences on the

economic system,” with chapters on saving and economic growth, economic

fluctuations and financial crises, economic inequality, and globalization. Next

he takes up “external influences on the economic system,” with chapters on

natural resources and the environment, social factors, and political factors. A

final set of chapters deals with “changes in crucial economic institutions and

organizations,” giving attention to the evolution of business enterprises,

market competition, government regulation and ownership, and government

spending. The conclusion considers, “Whither U.S. Capitalism?” Besides

including more than thirty pages of appendices on data and statistical

relationships, the author directs the interested reader to an extensive

collection of “external appendices and accompanying tables and charts” that can

be viewed at his web site.

Pryor declares that the book “is not about the economy per se” (p. 2) but

“about the institutions and organizations through which economic activity is

channeled. [I]t is an exercise in positive, not normative, economics” (p. 3). A

reader who expects to find an analysis deeply informed by the new institutional

economics, however, will be disappointed. No coherent overarching theory or

model guides the analysis. Instead, Pryor calls on various theoretical

rationales in an ad hoc manner as he proceeds from one topic to another. A

great deal of the econometric analysis amounts to little more than data mining.

On the spectrum from optimism to pessimism, Pryor definitely stands closer to

the darker terminus, concluding that “the U.S. economic system faces some very

serious problems in the coming decades” (p. 23).

No brief review can even list all the specific issues Pryor considers in this

book. Suffice to say, he takes up hundreds of separate matters large and small,

spends considerable time assessing data problems, and presents countless

regression equations as well as many tables, graphs, and charts. His analysis

is, if anything, data-intensive, a reflection no doubt of his seeming faith

that if we crunch enough numbers, we will put ourselves in a position to

forecast future developments accurately. Time and again, however, he finds

himself immersed in a “welter of conflicting results” (p. 96), or confronting

an empirical association for which “the nature of [the causal] mechanism

remains unclear” (p. 97), or up against empirical findings that “raise some

serious problems of interpretation,” and because “the evidence is fragile,”

“robust conclusions cannot be drawn” (p. 107), or confessing that “this kind of

calculation is fraught with uncertainty” (p. 170). To resolve conflicting

theoretical and empirical considerations, Pryor often simply judges on the

basis of his “subjective impression” (p. 359). At one point, he writes that

“the rate of technology advance is the key, and this is difficult to predict”

(p. 171). In fact, it is impossible to predict, as past prognosticators have

demonstrated repeatedly. What Pryor says in a particular context might well

have been said of the entire enterprise: “Given the nature of the data, the

results of the statistical experiments … should be considered only as

suggestive” (p. 188). What he observes about cultural trends might have been

observed equally about nearly everything discussed in the book: “the analysis

of current culture and values may tell us little about the future” (p. 199).

Looming over the hodge-podge of micro-level examinations Pryor makes, one great

problem threatens to demolish any value the analyses might have. The author

himself acknowledges this threat, but he forges ahead anyhow. The great

difficulty arises because “the impact on the U.S. economic system of a severe

financial crisis or an adverse production shock would be great. Like a major

war, however, such events cannot be easily predicted” (p. 81). (Translation:

cannot be predicted.) “If such a depression occurs, its impact would probably

outweigh most of the other factors discussed in this book.” Yet, “in order to

analyze systematically these other factors impinging on the future of U.S.

capitalism, I assume … that an extremely serious downturn will not occur. …

that the U.S. will really have such a lucky break” (p. 81). Has the system

avoided big shocks such as major wars and financial collapses in the past?

Certainly not for any extended period. We would be hoping against hope to

suppose that whereas in the past the system has always been troubled

episodically by big crises, in the future it will be free of them. Yet when

they occur, all bets are off. This fact of historical life is just one of

several reasons why no science of history is possible, and therefore why no

long-range predictions deserve to be taken seriously. Trends exist, to be sure,

but the long-term development of any socio-economic system consists more

decisively in a series of contingencies laid end to end, with the realization

of each major contingency setting in train a new path-dependent process.

At the end, Pryor pulls together his expectations about the nature of U.S.

capitalism in 2050 — a sort of semi-fascist distopia, or “a capitalism with an

inhuman face” (p. 367) — as follows:

Along the political dimension, the overall level of governmental intervention

will be roughly the same, but with a different composition: public expenditures

will be higher, regulation of industry will be lower, government intervention

into the economy will be less effective, and repression of the population will

be harsher. Along the economic dimension, markets will be less competitive. And

along the social dimension, solidarity will probably be less, and, despite

increased affluence, the quality of our lives will deteriorate and economic

life will be more pitiless.

These results, combined with the ever-larger size of enterprises, point toward

a greater oligarchical control of both the state and the economy. That is,

economic and political elites will continue to fuse, government intervention in

the economy will be less aimed at raising the general welfare of the population

than at ameliorating certain economic problems faced by particular segments of

the elite. The decreasing progressivity of the tax structure and rising income

inequalities will be telling indicators of these developments. These trends

will be reinforced by declining political participation and mounting distrust

toward the government, in major part because more people will feel powerless to

influence policies and events. Expenditures on internal security, pensions, and

health will increase, primarily to palliate political discontent that might

erupt into serious domestic strife (p. 364).

The good news is that one can place hardly any weight at all on these forlorn


Having plowed through Pryor’s big, dense book, the reader who has retained his

sympathy for the author may wish that the labor theory of value were valid. If

it were, then one could be sure that Pryor, who must have labored long and hard

over this project, had created a work of considerable value. Alas, the labor

theory of value is bunk; and, sad to say, the product of Pryor’s labors is not

likely to find a high place in anyone’s subjective value ranking.

Robert Higgs is senior fellow in political economy at the Independent

Institute, editor of The Independent Review, and author of many articles

and books, including Crisis and Leviathan: Critical Episodes in the Growth

of American Government (New York: Oxford University Press, 1987). His

current research includes further investigations in the political economy of