After the New Economy (review)

This book helps explain, among many other things, why it was so frustrating to be a historian during the New Economy moment. From a historical perspective it should have been obvious that the much-celebrated revolution amounted to little more than what Henwood calls "a manic set of variations on ancient themes" (p. 1). But a widespread, almost belligerent historical amnesia sustained both the techno-utopian vision of a friction-free economy and the insistence that it was all so very new and unprecedented. Since the bubble burst, this same amnesia has enabled many pundits, politicians, and tenured professors to disavow any connection to the New Economy whoppers they once passed off as irrefutable and any responsibility for the financial and other losses they helped cause.

Henwood works hard not to let them get away with it. His first chapter dissects the canonical New Economy discourse, its claims to novelty, enthusiasm for the democratization of the stock market, celebration of the increasing miniaturization of the microchip and pretty much everything else, and faith in the triumph of "intellectual capital" over boring, old capital as it was understood in the pre–New Economy. Henwood tracks how the wacky ideas of right-wing think tanker George Gilder came to resurface in the speeches of Alan "Small Is Beautiful" Greenspan, who celebrated what Henwood lampoons as "the near universal trend toward tininess" and "weightlessness" in congressional testimony and in the op-ed pages of the Wall Street Journal (p. 15). Henwood recounts a conversation with Wired editor Kevin Kelly, who said enthusiastically of the New Economy that there had never been a better time to be poor. And he takes a diverse range of academics to task for joining in the speculative loopiness, including New York University accounting professor Baruch Lev, "post Marxoid theorist" Manuel Castells (p. 26), cultural critic Frederic Jameson, and the late Massachusetts Institute of Technology economist Rudi Dornbusch (who declared in 1998, "This expansion will run forever" [p. 3]).

Subsequent chapters perform autopsies on New Economy articles of faith about work, income, globalization, and finance, in each instance contrasting the overblown rhetoric with the realities of the era. Those who complain that this is merely an exercise in ex-post debunking will be wrong on several counts. There is nothing "mere" about Henwood, a thoughtful critic who writes from a Marxist perspective but who always takes care to fathom and to fully explain the positions of right-wing ideologues and conventional economists, often incorporating the useful aspects of their arguments rather than dismissing them wholesale. He is the editor of the popular newsletter The Left Business Observer, a contributor to The Nation, and the author of Wall Street: How It Works and For Whom (New York, 1998). There's nothing wrong with debunking either, especially when it is done with such witty aplomb and backed up with Henwood's trademark, commonsense grasp of the complexities of finance and economics. Throughout the book's 269 pages Henwood employs this wit and skill to develop a consistent and compelling revisionist explanation for the New Economy phenomenon, one that does not hinge on a facile technological determinism or a casual disregard for basic facts and economic indicators.

Henwood's theoretical perspective leads him to look at all economic relations as social relations, and his knack for reporting leads him to follow the money, and the monetary policy. From this perspective he understands New Economy rhetoric primarily as a means of disciplining the labor force. He understands the 1990s market bubble as the by-product of Federal Reserve maneuvers to do the same by "curing" the problems created by the high wages and living standards that came along with the long post–World War II expansion. Federal Reserve chair Paul Volcker actually declared in 1979 that "the American standard of living must decline" (p. 211), Henwood notes, and then went on to make that happen by cranking up interest rates, which precipitated a deep recession, doubled the ranks of the...