It takes an unusual person to have served as press secretary to Steve Forbes's free-market-oriented presidential campaign and to have also been the subject of an admiring profile in the left-of-center Nation magazine. So when I heard that the person who fits that description, Gretchen Morgenson, the New York Times reporter and columnist, had a new book out titled "The Capitalist's Bible: The Essential Guide to Free Markets – and Why They Matter To You," I got my hands on one and started reading.
The book is a bit of an curious creature. It was released direct-to-paperback, which is the publishing version of what Hollywood calls direct-to-video. And while Ms. Morgenson's name is in big type on the cover, an inside page discloses that the book was "produced by Golson media," a company whose team includes a "staff writer" whose name is also included on the inside page. The copyright in the work belongs not to the author, as is usually the case in a work of serious literary nonfiction or fiction, but to the publisher. The service Ms. Morgenson provided is allowing herself to be listed as the editor, as in, on the cover, "edited by Gretchen Morgenson."
How much editing she provided is another question. But let's leave it aside and dive into the substance of the book, no matter who crafted it or how. We'll be paying the book more attention than did Ms. Morgenson's own newspaper, which, so far as we can tell, has totally ignored it.
Readers looking for a straightforward definition of capitalism will have to look elsewhere. An introduction by Robert J. Samuelson asserts, "capitalism is a vague concept," though he does go on to offer three "defining characteristics" of a capitalist society: "It settles most economic questions through decentralized markets and free prices," "it creates a motivational system because it allows people and companies to keep much of the reward from their own work," and it "establishes a permanent system of trial and error."
In the text of the book that follows, readers are told that "Capitalism is an ever-evolving concept."
The Nation article characterizes Ms. Morgenson as a "moderate Republican." If so, she certainly doesn't allow it to affect the book's text, which betrays a marked bias against Republicans. For example, there is a reference to, "the expansion of the Clinton years – the longest in U.S. history, running from March 1991 to March 2001." Funny, the first 23 months of "the expansion of the Clinton years" took place during the presidency of George H.W. Bush. In July of 1992, Mr. Clinton accepted the Democratic presidential nomination in New York by saying, "Tonight 10 million of our fellow Americans are out of work, tens of millions more work harder for lower pay. The incumbent President says that unemployment always goes up a little before a recovery begins, but unemployment only has to go up by one more person before a real recovery can begin. (Applause) And Mr. President, you are that man." None of these ironies and subtleties are clear from the account in this book.
Other times the account is just random, or incorrect, or sloppy, or confused, or oversimplified, or repetitive, or prone to sweeping generalizations that are inaccurate. A section on "stocks and the stock market" claims that "seats on exchanges are limited and expensive," noting that one New York Stock Exchange seat changed hands in 2005 for $3 million, without reporting that you can now get a one-year license to trade on the NYSE for $40,000. It is also claimed that "a company can only list its stock on one exchange," which is just flat out false. Deutsche Bank, for example, is listed on the Xetra, Frankfurt, and New York Stock Exchanges. A few page after the claim that ""a company can only list its stock on one exchange," a section on arbitrage says, in an apparent contradiction, "the price of a share of stock on the NYSE and the London Stock Exchange is usually almost identical."
Elsewhere, the book claims that "an entire class of people whose standards of living were higher than that of their parents is unheard of in world history prior to the 20th century," which is a pretty dark view of the history of progress, technology, and world civilizations. A chapter on "Capitalist Successes" dwells on Shell's human rights issues in Nigeria, Exxon's Alaska oil spill, and the history of British Petroleum when it was controlled by the British government. And the reference to the savings and loan crisis of the late 1980s and early 1990s as "the end of the generally prosperous era that had prevailed since World War II" manages to forget about the stagflation of the 1970s that is discussed later on in the book.
The book also has a tendency to veer off topic, as when it claims that "the spirit of Shariat in Islam is governed by a strong sense of social justice, fraternity, equality and cooperation." Tell it to the women or Shiites of Saudi Arabia. There's also a strange tangent about how "The Reagan presidency was marked by aggressive foreign policy actions and rhetoric," including "the unprovoked invasion of the tiny island of Grenada."
For all these flaws, there are some interesting facts in here, including some that put the current crisis in new light. Those vexed by the "too big to fail" problem may be interested to learn, for example, that in 1984, during the Reagan administration, when Continental Illinois Bank failed, the federal government bailed out all depositors, even the 75% of deposits that were above the $100,000 limit of the FDIC guaranty. There's an assertion – like nearly all the facts in the book, unfortunately no source for it is attributed – that black markets compose 65% of the GDP of Bolivia and 76% of the GDP of Nigeria.
Those favorably disposed to free markets may be challenged by the book's suggestion that IBM's growth was driven by contracts to serve the federal census, Social Security system, navy, and air force.
There's a useful little treatment of the Asian tiger economies, speculating, "Growth rates might have been even higher had entrepreneurs devoted all of their resources to innovation, rather than soliciting political favors."
More broadly, one can't help but come away from this book and its collection of anecdotes inspired by the speed at which innovation takes place and jobs and fortunes are created under capitalism. The book reminds us that Microsoft was first incorporated in 1981, and that Pierre Omidyar built his personal stake in eBay into $4 billion worth in four years. It makes sense that those hoping to follow and create capitalist success stories of their own would want to read a "Capitalist's Bible," but for one with the authority that the title implies, they will probably have to keep searching.
