Book Reviews

Today we are in the cybernetic revolu tion. Information knows no boundaries. The market is worldwide. Technology has en abled us to peIform the same tasks with many fewer people. This means a certain amount of unemployment. It also signals a new demand for entrepreneurs and new skills. Wriston recognizes intelligence and learning to be the most valuable capital of any business or government. Leonard Read wrote an essay, "I, Pen cil," which portrayed the interdependence of our modern market. Wriston does the same thing with automobiles. He shows up the fallacy of our modern mistaken demand for keeping all work, sales, purchases, jobs, and money within our own borders. No nation can control its own information 287 or its own money. When the market opens in New York it is open to the world at the same time. Information knows no borders. Tokyo, London, Paris, and Berlin are in volved in our market as we are in theirs. The market is global.

From his pinnacle of world finance as CEO of Citicorp, Walter Wriston was acutely aware of all of these global factors. His book understands our present predica ment, and suggests ways the market can operate if it is free from government domi nation. Governments and corporations alike are losing their sovereignty. Wise leaders will recognize this, and there will be a rebirth of individual liberty in a worldwide context. D Dr. Gresham is President Emeritus of Bethany College and a Trustee Emeritus of The Founda tion for Economic Education. The Coming Economic Earthquake by Larry Burkett Moody Press, Chicago, Ill.• 1991 • 230 pages $15.99 Reviewed by Leonard Gaston I n the last two decades, Keynesian de mand management economic theory has come under increasing attack. The most telling salvos have been leveled by econo mist James Buchanan, whose Nobel prize in 1986 for his critique of applied Keynesian theory set off a storm of protest in liberal academic circles ..Paul Craig Roberts, Jude Wanniski, and others have continued to question the wisdom of what had previously been almost unquestioned economic ortho doxy. Nevertheless, Keynesian theory con tinues to dominate the policymaking of the federal government.

In a book written for the layman, Larry Burkett has reviewed the accomplishments of a growing federal government busily applying demand-centered economic poli cies (growing federal deficits and debt, in creasing use of debt by business and house288 THE FREEMAN • JULY 1993 holds, and government regulation gone wrong), and concluded that severe eco nomic troubles lie ahead. He does not set dates, but like an observer sitting on a hill overlooking a large ice-bound river, he sim ply points out that the ice is piled up in abnormally high and massive ice dams, and that spring is inevitably on its way. It may be early, or it may be late, but as surely asthe seasons roll, the ice will eventually break up and flood down the river. Whoever stands in its path may be wiped out. Keynesian economic policies-with their explicit license for continuing federal defi cits and their implicit preference for higher levels of consumption, reduced saving, and a larger role for government in the econo my-are one of two things. They are, as mainstream economists have told college economics students since World War II, the means to continued, depression-proof pros perity. Or they are, as others like Mr.

Burkett insist, a prescription for disaster. A review of textbooks written by promi nent economists supporting the first position will turn up statements that now inspire less confidence than they did when first written. One author (the Chairman of President John F. Kennedy's Council of Economic Advis ers) had no doubts about the desirability of deficit spending when he wrote in his 1960s college text that the country faced the pros pect of deficits of choice (,'deficits of strength' ') incurred as necessary to sustain demand, or deficits due to low revenues ("deficits of weakness") incurred because the federal government lacked the will to _follow the dictates of Keynesian theory. Another text of the time insisted that the debt was not a real problem, because, al though larger year by year, it nevertheless was a smaller fraction of the nation's gross national product. (That was true at the time, but has not been true since 1974.) Still another insisted that the debt should not be a source for worry since ". . . technically there is never any question of the federal government going bankrupt. It can always manufacture money."

That, Mr. Burkett insists, is exactly the point. As the interest on the debt consumes a larger and larger portion of the yearly federal budget, and more money is bor rowed each year to pay the interest on what was borrowed in previous years, the temp tation will become overwhelming to "mon etize" the debt, first a little bit at a time, and then at an increasing rate. The possible result? Chaos, in the manner of post-World War I Germany. This book traces the path that other gov ernments have followed in reaching the brink and plunging over. It also describes the impact that hyperinflation has on a society. It even takes away the faint hope that those deeply in debt might entertain that they could payoff their debts in deval ued dollars. Mr. Burkett believes that laws would be passed to protect those banks still solvent, indexing all debts to the rate of inflation. Ordinary debtors, many without jobs because of the resulting depression, could then be faced with debts on homes, cars, and other goods many times the amount they initially borrowed.

Is this too gloomy a scenario? Perhaps. But Mr. Burkett builds a solid case for an impending economic earthquake. He also outlines actions that he believes necessary to prevent it (bring federal spending under control and restore fiscal discipline through a line-item veto or other actions). He doubts, as the reader may also, that such steps will be taken by our elected leaders·in time to prevent fiscal chaos. Although readers of this book mayor may not agree with the author's religious views, they are likely, in an age when values are something not much talked about, to findthe author's emphasis on values thought pro voking. If this book leaves the reader with a concern that Mr. Burkett may l;>e correct, he will find interesting the author's adviceJor minimizing the personal financial damage that may result from an economic earthquake. D Dr. Gaston is an assistant professor, College of Business Administration, Central State Univer sity, Wilberforce, Ohio.