The Magazine

Latin Labors Lost

The dismal science south of the border.

Nov 18, 2002, Vol. 8, No. 10 • By DAVID FRUM
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As Lindsey tells it, the great intellectual event of the first half of the twentieth century was something he calls the "industrial counter-revolution." This counter-revolution attempted to use the state to corral and control the industrial revolution of the nineteenth century. This counter-revolution took extremely different forms from place to place, some of them politically benign (such as American Progressivism), some horrific (fascism and communism), but all of them concerned to insulate society against the unpredictable shocks and jolts of entrepreneurial capitalism, and all of them ultimately unsuccessful.

What we call "globalization" is the global response to that unsuccess. It wasn't the Internet that convinced poor countries from Argentina to Singapore that exporting was the route to prosperity--and that barriers to imports made exporting impossible. Nor was it jet planes that forced Mexico, Hungary, and South Korea to acknowledge that they needed foreign investment. It was the failure of state control.

But while this failure discredited the industrial counter-revolution, it did not assuage the grievances and resentments that inspired the industrial counter-revolution in the first place. The story of the 1990s, then, is not the story of exciting new technologies smashing dreary old hierarchies. It is a story of societies and governments grudgingly adjusting to realities they would have preferred to avoid.

In careful studies of countries from Argentina to Thailand, Lindsey shows the tight grip of the dead hand of the past: countries that opened their markets to imports of goods, while trying to keep tight state control over their financial sector; countries that linked their currency to the dollar, while pursuing policies that made the link unsustainable; countries that sought foreign investment, while refusing to protect foreigners' lives and property.

"Against the Dead Hand" is a devastating critique of the 1990s fantasy that global economic reform was an unstoppable force, over which humans could exercise no control. (A popular joke in Central Europe in the early 1990s asked how many Poles or Czechs or Hungarians it would now take to change a light bulb. Answer: none. The market would do it.) Progress is never more than an option, and can always be thwarted by human folly, enviousness, or indifference. The Brazilians may be about to discover that lesson the hard way--again.

Very soon, it may be the United States that takes up the struggle against the dead hand, this time in the Islamic world, as an agent of reconstruction and redevelopment in Iraq and perhaps other countries as well. There is no shortage of experts eager to itemize all the difficulties that the United States and its allies will encounter. It's a pleasure then to plunge into the third volume of Robert Skidelsky's biography and spend some time (make that lots of time; the book is long) in the company of John Maynard Keynes, a man who saw difficulties as challenges to surmount, not excuses for passivity.

Over the more than twenty years Robert Skidelsky took to complete his monumental work, he grew much more politically conservative, and so, maybe not coincidentally, does his depiction of Keynes. This third volume was originally subtitled "Fighting for Britain," and while the book has been renamed for the American market, the original subtitle was more apt.

By the time this volume opens, Keynes, the onetime iconoclast, had matured into a stalwart of Cambridge University, Eton College, the House of Lords, and even the very Treasury Department he had once despised as the stronghold of blinkered orthodoxy; the onetime Bloomsbury scoffer (he wrote in 1917 that he worked for "a government I despise, for ends I think criminal") metamorphosed into a robust British patriot, determined not only to defeat Nazi Germany but to defend Britain's independent imperial strength against the encroachments of the United States. His battlefield was the complex negotiation that created the International Monetary Fund and the World Bank at Bretton Woods in 1944.

There Keynes and his American counterparts battled over the leeway that would be extended to countries (like Britain) expected to run trade deficits after the war by those (like the United States) expected to run trade surpluses. It is hard to read these discussions now without some sense of shame for the ungenerosity of the American negotiators who insisted that Britain entirely exhaust its own resources as a condition for help from the United States, and the story is not made prettier by Skidelsky's conclusive case that the lead negotiator, Harry Dexter White, was at a minimum a Soviet sympathizer and very probably a Soviet spy.