No-Frills Socialism

Has the economy become a zero-sum game?

The Zero-Sum Society, by Lester C. Thurow, New York: Basic Books, 1980, 230 pp., $12.95.

Lester Thurow wants to abolish minimum wage laws, rent controls, tariffs, price supports, antitrust witchhunts, corporate taxes, antipollution regulation, energy price controls and—just in case you were thinking about it—gasoline rationing. All in the name of what socialists call "economic justice."

Thurow's new tome, The Zero-Sum Society, is an ambitious attempt to (a) reformulate the political debate in post-welfare state America and (b) make the best-seller's list. He may, in fact, have already accomplished b and may yet advance to objective a. If so, the American debate will center on how to streamline statism.

Thurow's manuscript may have well been entitled "Socialism's Last Stand"; for the concessions Dr. Thurow, a practitioner of economic science at the Massachusetts Institute of Technology, is willing to make to the "forces of reaction" are monumental indeed. In relentlessly attacking federal protectionism, environmental elitists, counterproductive "trust-busters," inept price controllers, evil special-interest subsidizers, and the rest, Thurow makes an entire generation of market-oriented economists reach for their best celebration brandy. See! Even Lester says "the market works."

SOCIALISM A LA CAPITALISM

We don't need Jeanne Dixon tuned in to deduce that this book will be quoted all over the place. See for yourself.

To adjust to a rapidly changing pattern of energy supplies, the energy industry needs to be deregulated. But eliminating regulations, protection and subsidies is also one of the essential ingredients in any successful program for stimulating economic growth. Because of its value elsewhere in the economy and because it involves the fewest net costs, the elimination of regulations, protection, and subsidies becomes the preferred route to controlling inflation. Upward price shocks are deliberately counterbalanced with planned [by deregulation] downward price shocks.

Creeping capitalism?

Thurow does indeed dump the claims of last semester's socialists: that central planning was more efficient than wasteful competition, and the empirical boast that the Age of Abundance had arrived and the machinery that had produced it (capitalist tools) could be done away with at no cost. Thurow moves his cause to higher ground in devising a no-frills socialism. It would eliminate the evils of price control, protectionism, and overregulation—so that the Internal Revenue Service could have oodles more to play with. While free-market advocates see interventionism as the great club by which consumers, workers, and entrepreneurs are deprived of ever-greater fruits, Thurow sheds his tears for the tax collector. Government-induced inefficiency has hurt the US economy, and that leaves less wealth for bureaucrats (and MIT professors) to redistribute.

How Thurow is able to exercise such concerns for economic efficiency in the last part of his book is not at all clear, however, in its beginning. He digs in with an analysis long on conclusions but rather skimpy on facts. He notes that the United States now trails Switzerland, Denmark, West Germany, and Sweden in per capita income, with fast-running Japan only seven percent behind us. Thurow believes that our drop in the standings creates a perceived problem but that history belies any real problem. He calmly observes that US "per capita income growth since the advent of government intervention has been more than twice as high as it was" previously. And our current growth rate is still healthy—a 16 percent real per capita growth between 1972 and 1978. He does not deal with federal government statistics which today show the average American worker's real, after-tax paycheck smaller than it was a decade ago.

Here Thurow must skate on thin ice. He wants to address the severe—possibly terminal—maladies that infect the political economy of 1980 America. But he decidedly does not want to admit any correlation between them and the last generation of Lester Thurows—the very economists and policymakers who have produced the very crisis that Thurow frets over as a zero-sum society (modeled on a zero-sum game, in which the gains of the winners are precisely equal to the losses of the losers; in the economic realm, it means that one person's prosperity is another's poverty). And it's only zero sums that lie ahead: While "our economic problems are solvable,…all these solutions have the characteristic that someone must suffer large economic losses. No one wants to volunteer for this role, and we have a political process that is incapable of forcing anyone to shoulder this burden." Thurow's mission is to find a way to force them.

In this he clearly fails—he all but forgets it, in fact. Decrying the way special-interest unions and corporations manipulate the legislature to deal out regulations whose primary effect is not to regulate but to transfer wealth in their direction, Thurow "resolves" our dilemma by advocating across-the-board deregulation and free trade, allowing wealth redistribution to be achieved only by virtue of honest, straight-out welfare checks. In other words, if we want to subsidize truckers, let's first abolish the Interstate Commerce Commission and then send them all a monthly T-bill. (That distortion of prices in the labor market—that is, wealth redistribution—can foul up the process whereby resources are used the way consumers want them just as surely as will the ICC's current regulations—this is not a problem Thurow chooses to ponder.)

Now, if the purpose of America's welfare state were to subsidize the poor, why then Mr. Thurow would not only be taken seriously; he would be on the waiting list for Mt. Rushmore. Yet he will only remain a humble economist and computer jockey, for the raison d'être of the Washington, D.C., tax-a-thon has never been and will never be to get the poor out of poverty. The bureaucrats and the poor are often on good terms, of course; they do need each other, so far as the power-brokers are concerned, anyway. But if the poor were the bona fide object of Washington's concern, you would not find regulations that raise energy prices, nor licensing laws that prohibit upward mobility, nor upper-class subsidies for education and the arts, nor trade barriers that are designed to raise consumer prices, nor minimum wages, nor any of the other countless oppressive bylaws that lay the heaviest karate-chops ever fashioned on the necks of the ghetto entrepreneur, worker, and consumer.

PLUSES AND MINUSES

If socialism could itself be taken seriously, it would, as Thurow suggests, rely on capitalism to achieve the means whereby the ends of prosperous equality could be realized. That what we have, from the New Deal to Richard Nixon, is the politics of private advantage in the name of public good, might be a tip we should examine more closely.

In the end, our society has not become a zero-sum game. What we have always had are two sides to the coin: the positive-sum game of the voluntary marketplace; the negative-sum game of the government trough. Just as Adam Smith's brilliant Wealth of Nations set our sights upon the fortuitous gains accruing when two people trade and simultaneously both become better off, it may as clearly be shown that government's "trades" are less than zero sum. If in period one Mr. A. is taxed $100, which is given to Mr. B., in period two Mr. A. will work less to produce, and Mr. B. will work more to take (or to beat out the newly formed competition for welfare—perhaps from Mr. A. himself!).

In short, there are very few zero-sum games in real life. They inevitably turn out to have consequences beyond that quarter's scoreboard. People are not just reactors but thinkers and schemers, and they will figure out a game plan to their best advantage in the next round. As F.A. Hayek warned so presciently in The Road to Serfdom, economic security can only be gained by some through government—by making economic life less wealthy and more risky for others who are not so protected. How Professor Hayek must be purring to see even socialists recognizing the trade-offs of state largesse in the 1980s.

In pouncing on the Disneyland delusions of the "antigrowth" lobby, Thurow concludes:

While some see a no-growth society as a happier, less competitive society, this is hardly an outcome that is foreordained. With few opportunities for advancement the economy might become less competitive. But the reverse is probably more likely. Where at least some of our energies were previously used to enlarge the economic pie, all of our energies can now be devoted to dividing a pie that has stopped growing. We know from other zero-sum areas of life that they can be some of our most competitive activities. Sporting events and gambling are zero-sum activities, yet they are marked by intense cutthroat competition. 'Kill, kill, kill' is a not unknown sporting cheer."

As inflation, taxes, and regulation ravage our pie with ever-bigger bites, and as the private sector's positive-sum game continues to be devoured by Washington's negative sum, those cheers can only get louder. But the roar should not be allowed to drown out those voices who, like Smith and Hayek, could see that the world of dog-eat-dog need not be.

Thomas Hazlett is a doctoral candidate in economics at UCLA. teaches economics at California State College at Fullerton, and does free-lance writing. In REASON, he is responsible each month for Brickbats.