After “After the New Economy”

by Henry Farrell on February 2, 2004

A little belatedly, some thoughts on _After the New Economy._ Other Timberites are still in the throes of writing their posts, so we’ll do a linkage post pulling the various responses together (as well as the responses of non-CT people such as Brad DeLong), when we’ve all reported. First take – this is a very good book indeed. It provides a trenchant response, not only to the New Economy hype, but also to the political project that it implies. Most importantly (and unusually, for a book about the US economy) it’s solidly based in a comparative framework, examining not only the relationship between the US and the world economy, but also showing that the experience from other countries (European social democracies) suggests that large welfare states aren’t necessarily a drag on growth. Brad DeLong notes somewhere or another on his blog that the economic success of the statist Scandinavians is a real puzzle for economic theory; this is something that should give pause to gung-ho US advocates of unfettered free markets, but rarely does. It’s nice to see the lesson being drawn out in a book that isn’t aimed at an academic audience. Furthermore, as Kieran has already “noted”:, _After the New Economy_ avoids falling into the trap of bucolic communitarianism; Henwood makes a guarded – but thoughtfully argued – case for the potential benefits of globalization for societies in both the West and the developing world. He’s right on all fronts, I think – but there’s still something missing in the book, which reflects a wider absence in the political debate. Not only is there not much in the way of a pro-globalization left; what there is doesn’t have much in the way of a positive alternative vision to offer. This means that Henwood is able to make a strong case for the prosecution, but doesn’t have very many positive arguments to defend his own vision of globalization.

This is important, because “After the New Economy” isn’t merely an effort to debunk. Henwood believes that many of the stated aspirations of New Economy evangelists are worthwhile, but rightly resents how they’ve stolen the imagery of social revolution, without any intention to deliver on the concrete reforms that would make such a revolution possible. Still, it’s evident that the myths of democratization of ownership, of non-hierarchical workplaces and the like have real appeal – which suggests to Henwood that there is a real appetite for social change that the left can build upon. But it’s not clear to Henwood (or indeed to me) how best the left can do this, precisely because there isn’t a clearly articulated alternative political program that builds on the good bits of the globalized economy and information technology revolution, while avoiding some of the pitfalls.

Perhaps the best illustration of this is Michael Hardt’s and Toni Negri’s book, _Empire_. Henwood acknowledges that the book has flaws, but sees it as a good starting point for left-wingers who want to take globalization seriously. However, the weaknesses of Hardt and Negri’s vision not only weaken, but perhaps even cripple their argument. _Empire_ proposes that there’s a confrontation between the Empire (roughly speaking, the forces of global capitalism) and the Multitude of workers, who are empowered as well as disempowered by globalization. It’s a nice story – but like the political program of the “autonomous Marxist movement”: that Negri founded in the 1970’s,^1^ it’s remarkably scant on detail. As Henwood more or less acknowledges, it’s a celebration of agency that shows no particular interest in the actual social agents that are involved in globalization. Nor does it have any concrete political proposals to offer beyond a couple of pie-in-the-sky aspirations towards global citizenship.

The same is true of what Henwood describes as the “utterly wonderful” growth in activism over the last few years, which has been associated with the fight against the MAI, Seattle etc. Henwood is right in pointing to these activists, and the international social movement that they’re creating, as evidence that globalization and communications technologies can cut both ways, facilitating not only the advocates but the opponents of neo-liberalism. Skeptics for their part can point to the pronounced lack of a coherent set of ideas uniting these activists; their principal (and perhaps only) point of agreement is what they’re against. “Teamsters and Turtles: Together at Last” will only go so far without a concrete vision of why it is that Teamsters and turtle-lovers should be cooperating in the long run, and what sort of global society it is that they should prefer over the neo-liberal alternative.

There are real dangers in celebrating the counter-movement against neo-liberalism without spelling out a clear alternative vision of what globalization and the New Economy should involve. First, it’s all too easy to fall into Hardt and Negri’s trap – fetishizing resistance and counter-power as an end in itself rather than as a means to an end. Second, it obscures the very difficult task of constructing a realistic and coherent vision of global politics that more closely matches the egalitarian priorities of the left. Henwood’s dissection both of right-wing New Economy boosterism, and of the back-to-the-Stone-Age inanities of some anti-globalization activists is lovely to behold. But I suspect that he would agree that it’s only a first step – the second, and far more difficult one, is to construct an alternative. As Henwood correctly points out, it’s hard to continue to maintain the argument that socialism can be maintained in one country. However, the difficulties in creating a global alternative are enormous and obvious – for better or worse, there are few of the same solidaristic feelings on the global level that there are at the national. But that, I suppose, is the matter for another book.

^1^ Negri’s life history reads like a bad novel; political science professor and founder of autonomist Marxism; arrested for the kidnap and murder of Italy’s Prime Minister, Aldo Moro, and also charged with being the ‘secret leader’ of the Red Brigades; release from prison after his election to Parliament as a Radical deputy; flight to France when Parliament decided to revoke his immunity; a decade of exile followed by a voluntary return to prison in 1997 as part of a deal that the Italian government then went back on.



Jeremy Osner 02.02.04 at 3:15 am

I am reading the book; my own thoughts on it (as they develop) will be found at this link.

Here is a question about the need for globalization: what do the countries that are not currently “developed” stand to gain? I think I have seen it presented as a shortcut to developed status; but I don’t know if that makes any sense. A letter writer in the NY Times today (or yesterday) suggested that outsourcing client countries would be able to develop middle classes thanks to outsourcing — thanks to money pumped into their economies by transnationals — and that this would further the goal of universal democracy and stability. But here is where I get hung up: it seems to me like there can’t be a “middle class” that consists exclusively of factory employees — insofar as such a class is to contribute to democracy and stability it has to be a bit more diverse and entrepreneurial. Can outsourcing encourage entrepreneurial behavior among the population of client states?

Take my 2 cents for what they are worth; I am neither an economist nor an entrepreneur. If any of my questions are meaningful please go ahead and expand on them.


Russell Arben Fox 02.02.04 at 3:48 am


“Henwood believes that many of the stated aspirations of New Economy evangelists are worthwhile, but rightly resents how they’ve stolen the imagery of social revolution, without any intention to deliver on the concrete reforms that would make such a revolution possible.”

I’ve been enjoying these reviews immensely, since Henwood’s book appears to be exactly the sort of argument I’ve been hoping someone would commit to paper for years now. Your summary of Henwood’s attitude towards globalization (or more specifically, the language by which it has been promulgated) expresses far more succinctly than I ever have my basic unhappiness with the whole New Economy-Ideopolis-Creative Class thesis. Bravo.

Regarding positive directions or solutions that social democrats can actively pursue, I’d just like to suggest that Kieran (and perhaps Henwood too) may be doing the search for real alternatives a disservice by too quickly lumping together all “bucolic communitarian utopias” and “self-imposed cultural isolation” as wholly the intellectual property of fanatics like Shiva or Sale. There are a great many other ways to address and consider the role and viability of various communitarian projects besides sliding into xenophobia, or a nostalgia for feudalism. As you note, Henry, the majority of solidaristic attachments exist on the national rather than the global level; it would seem then that the best way to begin articulating a different, more egalitarian globalization would be to start with the attachments we have on hand, and see how (and whether) they can be preserved and expanded (thus providing a ground for transformed economic relations) through or in conjunction with different readings of “nationality” or “sovereignty,” ones not tied to or dependent upon the four-centuries-old centralized state. Too many people assume that anyone who tries to talk about communal concerns while also talking about the polity must simply want to reify the former into the latter. I think this is unfair; on the contrary, I suspect that people like Charles Taylor, Jim Bennett, and others (whether you fully agree with them or not, whether you consider them “conservative” or not) who think about the future of sovereignty through a “communitarian” lens are likely doing more to provide us with the resouces for developing ways of expanding economic opportunity and markets without undermining the premises of egalitarian solidarity than Hardt and Negri ever will.


davdi 02.02.04 at 4:15 am

I don’t find much of use to Hardt and Negri either, and I don’t think they provide Henwood much with which to bash nationalists and localists.

I agree with RAF above that Henwood may dismiss localism too quickly. You don’t need to be a luddite or a utopian to think that the relationships developed through local communities provide a framework for solidarity, even at the international level. I like Henwood’s book very much, and his takedowns of the localists are fun and smart. But he seems to overlook both the chance to reduce inequality by supporting local producers in the fair trade model, and the chance to develop ethical claims on people through local interactions that might reduce their willingness to exploit others in far away places.


Brad DeLong 02.02.04 at 4:41 am

Re: “Brad DeLong notes somewhere or another on his blog”

Is that like Hegel saying somewhere or other that everything in world history happens twice?


Kieran Healy 02.02.04 at 6:23 am

Is that like Hegel saying somewhere or other that everything in world history happens twice?

Henry plays Marx to Brad’s Hegel. Appropriately, the Owl of Berkeley flies only at dusk, usually when America’s Silliest Dog is being taken for a walk.


Henry 02.02.04 at 6:36 am

Russell – I’ve a fondness for Charles Taylor’s work that I don’t have for Hardt and Negri’s – I find him thoughtful and intellectually stimulating (unlike Kieran, my copy of _Sources of the Self_ hasn’t slipped down the side of my bedroom dresser :) ). But I don’t find him convincing. Nor do I buy into the arguments of say, David Miller, that socialists have to build on national identity as the only available strong source of solidarity. It’s a difference of social tastes – the leftie arguments that I find intuitively appealing are those of people like Sennett and Iris Marion Young, who prize diversity and a relatively “thin” sense of belonging. I’ve great respect for the people who you cite – but at the end of the day, I’m on the other side of that philosophical fence. That said, I think that your suggestion of somehow extending national identities is an interesting one – even if it doesn’t conform to my theoretical druthers.


Henry 02.02.04 at 6:40 am

Brad – I want to correct my post, but after reading your comment and Kieran’s, I feel it would be cheating.


Bob 02.02.04 at 12:21 pm


“There are real dangers in celebrating the counter-movement against neo-liberalism without spelling out a clear alternative vision of what globalization and the New Economy should involve.”

You may be interested to know of a relating paper on: Globalisation and Social Spending, co-authored by Paul De Grauwe, the distinguished Belgian economist, and Magdalena Polan, both at the Center for Economic Studies, KU Leuven:

The Scandinavia countries are unusual on several counts, not least because they rank as having low levels of perceived corruption by European standards on the index of Transparency International, which perhaps reminds us that there are many ingredients in the broth. Sweden is often upheld as a unique recipe and it certainly is. With a population a bit larger than that of the Greater London Area (although not metropolitan London’s), Sweden’s land area is just over 80% larger than the United Kingdom’s. On comparative Tax Systems in European Union Countries (2002), this by Isabelle Joumard of the OECD is illuminating:


jdsm 02.02.04 at 1:27 pm

I’m always a little irked by people who argue that the success of the Scandinavian countries in delivering prosperity and very good welfare can be discounted because they are a)small and b)have low population densities. It always strikes me as a little ad hoc. The matrix of factors that go into the successes and failures of any country can be interpreted to explain anything.

That said, bob’s point about corruption is in my view one of the important factors. The culture of the Nordics plays a very important factor and a central part of that culture (in as much as they can be lumped together) is a commitment to honesty, hard work and social democracy. When people justify great inequalities of wealth on incentive grounds, they fail to take account of the fact that people come from different starting points. In America’s individualist culture, it may well be true that they need huge incentives to put in the hard work. In the Nordic countries it is not. It’s just what you do because that’s the way it’s always been.

Living and working here after having come from the UK I have been struck by how negative an attitude they have to “taking a sicky” here. It was par for the course in the UK.

This is only one aspect of course, but if I’m right in the importance of culture, it shows that the economic system must fit the culture. It may well be that the US and Britain could not function as social democracies, while the Nordics can.


Bob 02.02.04 at 2:14 pm

jdsm – I accept admonitions respecting Post hoc ergo propter hoc. However, there is persuasive evidence for believing it is easier for governments in countries with small populations to generate a consensus in support of national incomes policies than it is for large country governments. And it seems to me inconceivable that the high sales tax levied on new car purchases in Denmark could be applied in the larger European countries without an electoral backlash. High population densities in east Asian countries have been invoked to account for the fast diffusion of innovative technologies there and with good reason. About 40% of Japan’s population is distributed along the coastal plane between Tokyo and Osaka making easier and less costly to trial market new consumer products.

Taken together, it seems that the population size and density of a country are not factors to be dismissed out of hand in considering the extent of popular support for government policy. At various times in the last several decades, there have been national media debates in some European countries as to whether country X has become “ungovernable”. Admittedly, there was likely much froth to media debates and “ungovernability” is an elastic term but there could also be something substantive at stake, such as a fracturing of social consensus.


Henry Farrell 02.02.04 at 4:23 pm

Re: the literature on ungovernability, Philippe Schmitter’s opinion in “Interest Intermediation and Regime Governability in Contemporary Western Europe and North America” is close to my own. His take (summary from my notes) – much of the literature on ungovernability was _événementielle_, overextrapolating or overreacting from short term trends. Another chunk of it was the predictable reaction of “spokesmen for decadent political elites and the declining social classes. …Although intellectuals and even academics in the past often were found in the front ranks encouraging and celebrating the declining governability of decadent regimes and ruling principals, today most have retreated to the back ranks of passive mourners, leaving the actual pallbearing to politicians and economists” (209) If one eliminates overreactors and reactionaries, not much is left of the existing literature.


Bob 02.02.04 at 4:56 pm

Henry – There may not be much left of the literature but the series of public sector strikes in France, not least over reform of pension entitlements to meet valid sustainability concerns, may nevertheless indicate a substantive reality.


zizka 02.02.04 at 5:31 pm

I think the tundra with its abundant reindeer supplies should be discounted as a factor in the Scandanavian economy. (Well, tundra worked for Canada too, but not Russia.)

With Scandinavia I think that the ethnic homogeneity combined with these countries’ histories of virtually uninterrupted independence (except from each other) means that there’s a lot more trust and also a lot less tolerance of cheaters. My understanding is that Scandinavians are sexually fairly loose but pretty stodgy about graft and fraud — exactly the opposite of American conservatives, especially from the South.

Foreign occupation, especially for long periods, leads to cynicism and suspicion of government and validates all sorts of cheating and fraud. (That might even be part of the story in the American South). And ethnic heterogeneity is colorful and fun, but it makes people less willing to pay taxes which are percieved to be spent on The Other.

If economics is a historical science, then outliers and exceptions like Sweden and (much more) Japan are really very important. But if the attempt is to establish general theoretical laws, especially if your “laws” are intended to lead to The Moral Of The Story, you end up sweeping the exceptions under a rug. Japan seems to be the big anomaly for any economic theory or theory of development, which to my mind should mean that everyone is studying Japan — but it doesn’t work that way.

Japan’s present stagnation, of course, allows us to say that Japan Has Failed, but (even granting that) the Japanese story 1850–1990 is one of the most amazing in history.


Bob 02.02.04 at 8:33 pm

Zizka – The Scandinavian economies are not the only “unusual” small economies in western Europe. Like the Scandinavian countries, the Netherlands also rates low on political corruption. It is arguably the most libertarian in Europe on drug control, it is certainly socially permissive and, in contention with Britain, the least religious country in Europe. For all that, through the 1980s, the Netherlands managed to sustain an incomes policy by consensus of a severity that would not have been feasible in the large economies had their respective governments attempted one:

“[In the Netherlands] real wages increased only very slowly, at less than 1 per cent a year on average between 1979 and 1990. Wage differentiation between various sectors remained very low compared to other countries. . . In 1979 Dutch gross wages were 44 per cent higher than in the three neighbouring economies. However, because of the high productivity performance in Dutch manufacturing, the level of labour cost per unit of output was only sightly above the average for France, Germany and the UK in 1979. The very successful moderation of the rise in in hourly compensation in the Netherlands during the 1980d led to a remarkable improvement in the unit labour cost performance of Dutch manufacturing. At the end of the 1980s, the Dutch unit labour cost position compared to France, Germany and the UK was even better than during the 1950s or 1960s.” – from “Economic Growth in the Netherlands” in N Crafts and G Toniolo (eds): Economic Growth in Europe Since 1945 (CUP, 1996).

Economics is not (just?) a “historical science” as there are common processes at work in market economies but the parameters of the behavioural functions differ as between different economies. And the Dutch have a very strong tradition in economic modelling. With the outstanding performance of the Dutch economy, that helps to explain why the “Poulder Model” is sometimes upheld in Europe as an example other European countries might emulate. It perhaps also explains why the Dutch government has been the most incensed in the EU at the breaches of the Eurozone’s Stability and Growth Pact by France and Germany. The Dutch seem to be a little impatient with those whom they regard as slow learners. The trouble is that the governments of large economies have a far more challenging task generating a political consensus than the Dutch do in spite of their libertarian ways in other directions. Perhaps the sociologists can explain the paradox.


jdsm 02.02.04 at 9:08 pm


If I may say, I think you have a slightly charicatured view of Scandinavians. Interestingly, Norway, Sweden and Finland could all attribute their success to different things. Finland, it should be noted, has had nothing like the uninterrupted independence of the others and of course Norway and Denmark were occupied during WW2. Finland only became independent from Russia in 1917 and fought its own costly battle again with Russia during WW2. Sweden has benefitted from neutrality and Norway from oil. Finland really is the big success story, though the poorest of the bunch. They only finished paying reparations to Russia in the ’60s.

In my view the Nordics have honesty on their side as I mentioned before. What they also have is a far more progressive outlook than some other countries. Finnish businessmen are forever complaining at the conservatism and tired working methods of their colleagues in Germany and Britain imparticular.


clew 02.02.04 at 10:39 pm

Well, the more trustworthy a society is, the less risky it should be to be innovative and progressive. Mutual distrust jams everyone into deadlock; cf. US labor/management relations.


zizka 02.03.04 at 6:49 am

This is one of my pet ideas and it gets little respect. I’ll stick with it though.

It traces back to a time when I conceived of a map of the world colored according to how many different ruling groups each area had had in known history. Then I imagined a similiar map showing how many ethnic groups an area had been populated by during recorded history.

Malta and the Crimea, for example, have been ruled by almost everyone. Almost the whole third world has been dominated by foreigners for long periods. Change of population is harder to describe, but England used to be essentially Welsh.

Except for Finland, Scandinavia remained ethnically constant and self-governing during the whole period. Japan is the nearest other example. Switzerland might be another (an entirely different exceptionalism). What are the others? Maybe Ethiopia.

A different way of saying this is to ask whether a given area has had foreign armies marching around and plundering during extensive periods. Again, Scandinavia, including Finland, really hasn’t. (Much of Germany was almost depopulated during the 30-years war, for example).

I’ll keep bouncing this one around even in the face of unanimous rejection.


Andrew 02.03.04 at 12:56 pm


By this line of reasoning, the USA should be a basket case (being ruled by the Amerinds, the French, The Spanish, the Mexicans, the English, the Russians and of course the native born of European descent). As to the number of ethnicities…well.


Jeremy Osner 02.03.04 at 1:30 pm

Zizka — I had the idea Scandinavia was historically populated mostly by Lapps until they were invaded and subjugated by Vikings in the early middle ages. I have no idea how close to or far from the truth this is… a Swedish friend has described Lapps as “the gypsies of Scandinavia” and indicated that some ethnic strife exists there.


jdsm 02.03.04 at 1:59 pm

“a Swedish friend has described Lapps as “the gypsies of Scandinavia” and indicated that some ethnic strife exists there.”

Your Swedish friend is a twit. The Sami people are not numerous enough to cause strife and there’s no racism towards them. There are some disputes with farmers over reindeer grazing rights but it’s not like anyone cares very much. The vast majority of the populations of the Nordics live a long way from Lapland. The gypsies on the other hand are the rightly called gypsies of Scandinavia and they meet the same prejudice here as they do everywhere else.


zizka 02.03.04 at 4:49 pm

The boundaries of Sweden, Norway, and Finland, by the conventions of international law and the facts of power, include the Sami. But their displacement from the other areas, if it happened, happened prehistorically.

Andrew — the US isn’t a basket case? A lot of the intense hatred of the welfare state comes from racism. The standard racist objects of hatred — Hispanics, African-Americans, and Native Americans — are all conquered peoples. (And hatred of Native Americans is intense near reservations). I think that the American tolerance of fraud and cheating is a function of ethnic diversity — as well as Southern resentment of the Yankee occupiers, and immigration from nations who had learned to cheat at home.

Contrasting the US and Scandinavia was one of my goals in what I said.

The free-rider problem supposedly destroys the welfar state. In Scandinavia that doesn’t seem to be happening. Why?

By extension some adapted form of my argument can cover most of the Northern European nations (mostly-Germanic, ultimately) who have not usually been victims, so that for them The Government is Us rather than Them. It’s a bit stronger in Scandinavia perhaps. Perhaps I overstated my original case, but I think I’m onto something.


Jeremy Osner 02.03.04 at 6:14 pm

Jeez, I gotta take a CT-comment hiatus, find some other way of embarassing myself…

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