Book Reviews

What united the numerous strains of left ist radicals, says Walter, is not their vision of an alternative society but their uncom promising opposition to free market capital ism and, consequently, the United States. The primary reason that intellectuals, seri ous artists and writers as well as many in academe, harbor such resentment against American society, the author claims, is that, in contrast to, say, Europe where intellec tuals are at least respected if not hand somely compensated, they see themselves as being neglected and even derided by the American mass media which, in its quest for profit, panders to the lowest common de nominator. The irony is that while the anti American mindset of some intellectuals stems from their feeling of being unjustly ignored, they actually have a significant, long-run impact on American attitudes and beliefs emanating from their strategic posi tion as educators.

It is mainly for this reason, believes Wal ter, that a stable, prosperous, and open nation such as the United States finds itself beset with chronic, fundamental, and gen eral opposition. What most disturbs the author is the radical leftists' unscrupulous, even Machi avellian, tactics, which Walter does a su93 perbjob of documenting. As Walter puts it, a moral principle' 'was hired like a cab to get the radical leftists to the destination they desired . . . and dismissed . . . when it would take them elsewhere. The destination was all that mattered." The radical leftists hated America because it was capitalist, and thus intrinsically immoral; they embraced the Soviet Union since it was "anti-capital ist and anti-American" and therefore mor ally sacrosanct. The task was to defend the Soviet Union by adopting whatever "moral principles" the situation called for. Walter examines the abuse of such terms as "liberty" and "democracy" running throughout radical leftist literature. Massive violations of civil liberties in the Soviet Union were rationalized by American left ists such as Roger Baldwin, founder of the American Civil Liberties Union, who claimed that there were two kinds of liberty, economic and civil. The latter was more important than the former and since some violations of the former were necessary to achieve the latter, they were justified.

America, by contrast, was a system based on the economic serfdom of capitalism. And Yale sociologist Jerome Davis con tended that although America may have political democracy, that was of little con sequence since it did nothing to prevent "industrial autocracy." By contrast, al though the Soviet Union was "politically dictatorial, " that was unimportant in light of its democratic economic institutions. By such sophistries, Walter shows, radical left ists were able to posture as champions of liberty and democracy while simultaneously justifying political tyranny. Walter appropriately describes the radical left's track record as "shameful." Stalin's liquidation of millions of kulaks, or middle class farmers, because they resisted agricul tural collectivization was justified as neces sary in order to eliminate the reactionary elements blocking the transition to Commu nism. A good end, pronounced Walter Dur ranty, Moscow correspondent for the New York Times, "justifies any means however cruel. " The treatment of tens of thousands who were executed or imprisoned during the tention to other matters, such as El Salva dor. The only explanation for such behav ior, believes Walter, is the radical left's hatred for capitalism and their desire to weaken U.S. foreign policy.

Walter is far from a mere cheerleader for America. He readily acknowledges that the United States made mistakes and at times these were serious. Vietnam is a case in point, and he is certainly no fan of McCar thy. But since policies are made by human beings and human beings are fallible, mis takes are to be expected in every society. What Walter stresses, however, is both the self-corrective character of liberal democ racy, where wrongs can be peacefully cor rected and the victims recompensed, and the fact that only societies in which free markets have flourished and natural rights have been respected have succeeded in improving the material positions of all its members. The Rise and Fall ofLeftist Radicalism in America provides the reader with engaging reinterpretations of the major events in twentieth-century America. Walter's inter pretations are compelling largely because, in contrast to the Machiavellian tactics of the leftist radicals documented in his book, his key terms are so carefully defined and consistently applied. D 94 THE FREEMAN • FEBRUARY 1994 Soviet show-trials of the 1930s was. de fended on the ground that the accused had not proven their innocence, thereby endors ing the legal principle that one is guilty until proven innocent. Moreover, radical leftists argued in a moral asymmetry of breathtak ing proportions, Americans had no right to take the Soviets to task since the convic tions of Sacco and Vanzetti in the 1920s showed that the United States was just as bad. And besides, said writers like Corliss Lamont, Soviet oppression was made nec essary by the imperialist threat of Western capitalism, thereby placing responsibility for Soviet police state tactics in American hands and conveniently exonerating the So viet Union.

Yet, radical leftists repudiated these prop ositions when it suited them. During the McCarthy period in the early 1950s, radical leftists like Lamont defended the First Amendment rights of free speech and press on the ground that they were categorical guarantees, repudiating their earlier utilitar ian position that an important end justifies the abridgment of rights. Congressional loy alty investigations were condemned be cause they violated the traditional presump tion that individuals "are not guilty until evidence proves their guilt." And the tra ditional American legal system, guarantee ing rights for the accused, was suddenly seen as not so bad after all. The late David Osterfeld was a professor of Walter convincingly demonstrates that political science at St. Joseph's College in Rensselaer, Indiana.both the abuse of language and the misuse of ethical principles have been hallmarks of leftist radicalism down to the present. Although far from commendable, the record of A Retrospective on the Bretton Woods the South Vietnamese governments during System-Lessons for International the Vietnam war was far superior to the Monetary Reform record of either the government of North edited by Michael D. Bordo and Vietnam during the war or the government .

that replaced it following the war. And while . Barry Elchengreen hardly admirable, the record of the Shah of The University of Chicago Press • 1993 Iran, by any reasonable reckoning, was 690 pages • $75.00 much better than that of the Ayatollah. Yet, ------------ in both cases, it was the former that was Reviewed by Robert Batemarco vilified and excoriated by the radicals while the latter was applauded and given every What constitutes the ideal international benefit of the doubt until there was no doubt monetary system? To this reviewer, left, at which time leftists turned their at-and presumably most readers of The Freeman, it would be a system which could not be manipulated by governments and central bankers, thus subject to neither inflationary expansions nor deflationary collapses. Its various currencies· would all be fully con vertible into a base money that would be free of exchange rate risks which might impede the free flow of goods and capital between nations. Indeed, under the ideal system, exchange between people in differ ent nations would be no more complicated than trade between people in different states.

A Retrospective on the Bretton Woods System makes obvious just how far we are from achieving this ideal and showcases many of the attitudes responsible for our current problems. The volume consists of twelve papers plus two panel discussions at a conference held under the auspices of the National Bureau of Economic Research on the twentieth anniversary of the breakdown of the Bretton Woods par value system. The standard interpretation of the inter national monetary system parallels the stan dard interpretation of Keynesian econom ics, which, as this volume often reminds us, inspired Bretton Woods. Just as Keynesi anism was thought to have "saved" capi talism by removing the balanced-budget constraint which had prevented govern ments from dealing with the otherwise in tractable problem of the business cycle, so the Bretton Woods system was seen as "restoring" the liberal international trading system by uncoupling international and do mestic policymaking. The rapid pace of growth of global output and trade in the postwar period through 1973 is usually trotted· out as evidence to this effect, al though several contributors at least consider the possibility that the Bretton Woods sys tem was not responsible for that perfor mance. In fact, the shortcomings of both Bretton Woods and the system's underlying Keynesian theories prevented either from lasting a whole generation. A large part of A Retrospective discusses the factors which led to the system's demise.

The book is divided into three main sec tions, dealing with Bretton Woods's origins, BOOKS 95 operations, and legacy, plus a conclusion. The initial article, written by editor Michael Bordo, traces the evolution of the Bretton Woods system from its initial arrangements through its inglorious replacement by float ing exchange rates in 1973. Bordo weaves a wealth of historical and statistical detail into a coherent narrative. He also compares the macroeconomic performance of the system with the classical gold standard, the inter war gold exchange standard which degen erated into a free-for-all offloating rates, and the post-Bretton Woods set-up. Bordo's characterization of Bretton Woods as exhibiting' 'the best overall macro performance of any regime," including the gold standard, rests on his judgment that price stability should be accorded lower priority than per capita growth of real GDP.

It also leads him to find it paradoxical that the Bretton Woods system was so short lived (the U.S. shut the gold window, effec tively ending the par value system, only thirteen years after the European currencies achieved de facto convertibility). He believes part of the solution to this paradox to be the occurrence of events particularly the rapid recovery of Europe from the war and the subsequent replace ment of a dollar shortage with a dollar glut-which the Bretton Woods planners could not foresee. He attributes the rest to either flaws in the system or inappropriate policies by member countries, especially the United States. He points, for example, to the built-in instability of any gold exchange standard plus the fact that capital mobility made it too costly for nations to adjust their exchange rates in the way permitted by the system. As inappropriate policies he cites America's inflationary course taken after 1965and the failure of countries with a dollar surplus to adjust. I question this dichotomy between systemic flaws and bad policies: a system which metes out no effective penalty for bad policies is for that reason a flawed system. Maurice Obstfeld makes this same point in his paper, noting that "a well designed system should provide incentives that ensure successful operation." Bordo himself admits that Bretton Woods was, in 96 THE FREEMAN • FEBRUARY 1994 some ways, a failure. Except for deflation, he writes, "the problems of the interwar system that Bretton Woods was designed to avoid re-emerged with a vengeance."

Despite providing some rather incisive analysis of the problems with Bretton Woods' attempt to devise a workable inter national monetary system, the book's au thors are by and large enamored of fiat money and the right of nations to inflate their currencies at their own pace. Among the most egregious examples of this viewpoint are Bordo's and Obstfeld' s citing as a prob lem the failure of countries with surplus dollars to adjust (Le., to inflate as rapidly as their trading partners), Genberg' s and Swo boda's calls for a world currency and central bank, and Garber's statement that "There need be no inherent problem with a fiat monetary system with one country's central bank providing the liquid funds. " The one common denominator of these views is that the international monetary system must never permit the slightest hint of deflation. Thus, any kind of true gold standard, in which gold actually circulates as money and constitutes reserves into which all other forms of money are convert ible, is anathema to the volume's contribu tors. Keynes himself described the system put in place at Bretton Woods as "the exact opposite of [a gold standard]. " The aversion to gold might be defensible if the uninter rupted inflation which has characterized the last sixty years (with gold demonetized for the last twenty) had freed us from the business cycle. The record, however, clearly shows that the business cycle has continued, with neither gold nor deflation anywhere in sight to shoulder the blame.