The Commanding Heights: The Battle for the World Economy is a book by Daniel Yergin and Joseph Stanislaw first published as The Commanding Heights: The Battle Between Government and the Marketplace That Is Remaking the Modern World in 1998. In 2002, it was adapted as a documentary of the same title and later released on DVD.
The authors take the thesis that prior to World War I, the world effectively lived in a state of globalization, which they term the First Era of Globalization. The authors define globalization as periods in which free markets predominate and countries place few, if any, limits on exports, immigration, imports, or information exchanges. Overall, they see globalization as a positive movement that improves the standard of living for all the people connected to it, from the richest to the poorest. According to the authors, the rise of communism and fascism, not to mention the Great Depression, nearly extinguished capitalism, which rapidly lost popularity.
After World War II, the authors note that the work of economist John Maynard Keynes came to be widely accepted in Western economies. Keynes believed in government regulation of the economy, which the authors underline as Keynes' great influence and prestige. The authors consider that the so-called commanding heights were often owned or severely regulated by governments in accordance with Keynes' ideas.
In practice, Hayek's policies were applied only selectively, as Reagan's 1986 income tax reforms substantially increased taxes on the lowest quintile of wage-earners but dramatically decreased rates for the upper two quintiles. In contrast to Hayek's ideas, Reagan's policies also continued and expanded tax write-offs, rebates and subsidies for many large corporations. Friedman's monetarism was also abandoned in practice as government-issued debtas a percentage of GDP[where?] rose dramatically throughout the 1980s. While Thatcher, Reagan, and their successors made sweeping reforms, the authors argue that the current era of globalization finally began around 1991, with the collapse of the Soviet Union. Since then, they assert countries embracing free markets have prospered on the whole, and those adhering to central planning have failed.
While strongly in favor of this trend, the authors worry that globalization will not last. More specifically, they believe that if inequality in economic growth remains high and if Third World nations are not offered the proper opportunities and incentives to support capitalism, the movement will end just as the first era did. The authors place so much emphasis on narrowing economic gaps because they believe, contrary to many of the people who are interviewed, that there is no ideological support for capitalism, only the pragmatic fact that the system works better than any other, as they remark:
The market also requires something else: legitimacy. But here it faces an ethical conundrum. It is based upon contracts, rules, and choice—in short, on self-restraint—which contrasts mightily with other ways of organizing economic activity. Yet a system that takes the pursuit of self-interest and profit as its guiding light does not necessarily satisfy the yearning in the human soul for belief and some higher meaning beyond materialism. In the Spanish Civil War in the late 1930s, Republican soldiers are said to have died with the word "Stalin" on their lips. Their idealized vision of Soviet communism, however misguided, provided justification for their ultimate sacrifice. Few people would die with the words "free markets" on their lips.
International analysis
In the book, the authors examine briefly many different nations and regions and their economic development since World War II. (In the case of industrialized countries, they often begin before the war.) Admitting that the book cannot touch on every single aspect (Yergin remarks that the topic of their book constitutes an entire new academic discipline), the authors make many assertions.
The Great Depression caused massive unemployment and massive public distrust of corporations and wealthy individuals. In response, the New Deal of President Franklin D. Roosevelt went into effect with massive public support. Many lawyers and economists, influenced by Keynes, worked under the New Deal and believed that free markets would lead to disaster without proper regulation.
London was the center of the so-called First Era of Globalization because of the power and resources of the British Empire. However, World War I severely weakened Britain, causing massive unemployment. The United Kingdom successfully held out during World War II and emerged victorious, but the war effectively caused the dismantling of its empire.
Basic human services such as healthcare and university education were brought under government control and made available for free, while rents in the private housing market were regulated and council housing provided homes for around a third of the population by the late 1970s. Meanwhile, practically all occupations and wages were heavily regulated and unionized.
The practices became so prevalent that even Conservative governments elected after the initial wave of nationalisations in the late 1940s kept them. However, during the 1970s, massive strikes by unions (see the Three-Day Week and Winter of Discontent) and other economic woes, such as the 1973 oil crisis, almost ground the British economy to a halt. Thatcher, an ardent admirer of Hayek, began privatizatizing industries. While her results were initially mixed, the Falklands War brought on a nationalistic fervor that kept Thatcher in office long enough to keep her reforms in place. Even when the Labour Party later came back to power, it did not attempt to challenge the key principles of Thatcherism.
Soviet Union and Russia
Within a few years of the rise of the Russian Revolution, the Soviet economy went into a major crisis. Lenin responded with the New Economic Policy, a program that allowed limited capitalistic activity, which resulted in what he would call state capitalism, and the economy began to improve. Lenin's commanding heights speech was his attempt to defend himself against accusations that he sold out the principles of the revolution by implementing the new policy.
Under Joseph Stalin, the Soviet agricultural and heavy manufacturing sectors were largely centralized. During the 1940s to the 1970s, the Soviet economy grew at a rate that outpaced that of Western European nations.
By the 1980s, however, the Soviet economy was in shambles. Because of a lack of incentives and, ironically, a more tolerant central government, workers did not put much effort into their duties. Nonetheless, the Soviet Union continued to build the military even though at times such spending took up half the country's revenue. Mikhail Gorbachev tried to reform the economy, but he took only limited steps (see perestroika and glasnost). When he lifted the Brezhnev Doctrine and allowed Poland's Solidarity to usurp that country's communist regime, the entire Warsaw Pact collapsed, soon followed by the Soviet Union itself.
As had been predicted by Keynes, the hyperinflation caused by the Treaty of Versailles devastated the German economy and created political instability. In addition to widespread unemployment, the hyperinflation effectively wiped out the country's middle class. That environment made it easy for the Nazi Party to gain power. The authors also argue that the Nazis practiced central planning although industries were privatized en masse.
By the time of German reunification in 1989, West Germany was an economic power, and East Germany faced many problems because of the collapse of the central planning authority.
By the 1990s, the Indian government began to relax these stringent regulations mainly under the influence of Finance Minister and later Prime Minister Manmohan Singh. The Indian economy bloomed under the effects of exports and outsourcing, and political parties since then have continued to promote those changes. The free-marketer Singh was appointed prime minister when his party won the elections in 2004 although he was not the victorious United Progressive Alliance's stated candidate, and the general expectation was that Sonia Gandhi would take the seat.
South America
Under the influence of dependency theory, a Marxist approach to international economics, many Latin American countries attempted to industrialize by limiting imports of manufactured goods and subsidizing their own industries. However, companies had little incentive to become efficient or innovative in the absence of competition and in the presence of government subsidies. By the 1980s, the economic problems of the countries became obvious, and much of the West's investment was lost.
Bolivia was hit with hyperinflation as well. During the 1980s, economist Jeffrey Sachs was sent as a consultant and new PresidentGonzalo Sánchez de Lozada reined in inflation in the 1990s by severely cutting government spending. While Bolivia remained a very poor country, the authors argue that it is better off now because its inflation was curtailed. They also argue that Bolivia's example expunges the bad reputation that free-market economics acquired in Chile as Bolivia's reforms came after a democratic election.
Other countries
The authors argue that Africa's economic development was severely hindered by central planning, socialist ideas, and political dictatorships that promoted warfare and other conflicts.
While Japan was seen for many years as an economic success story as late as the early 1990s, the authors argue that its ongoing recession since then resulted from its governments refusal to stop subsidies to many of its industries and companies (the issue is ongoing).
In 2002, PBS aired a six-hour documentary based on the book. This documentary was later sold on DVD and is available to view for free at PBS's website.[3] The documentary is narrated by David Ogden Stiers.
The documentary series consists of three, two-hour episodes:
Episode 1: The Battle of Ideas Produced and Directed by William Cran.
Episode 2: The Agony of Reform Produced and Directed by William Cran, Co-Producer Peter Sommer, Co-Director Greg Barker.
Episode 3: The New Rules of the Game Directed, Written and Produced by Greg Barker.
Appearing several years after the book was released allowed the documentary film to address many of the items that Yergin and Stanislaw missed in their original book, including the collapse of Asian economies, the anti-globalization movement and the September 11 attacks. All told, two of the documentary's six hours (the entire final third) address things that happened since the original book was published. They also include free market solutions to international poverty that were not included in the book, and they interview economist Hernando de Soto, whose book on the subject was not published until after the initial printing of The Commanding Heights.
Like the book, the documentary attracted more support and criticism. One example is the anti-globalization movement, which argued they were portrayed unfairly. In the documentary, James Wolfensohn, then President of the World Bank, is interviewed and says that such protesters are attacking people "who are devoting their lives to addressing the very questions that these people claim to be addressing". The documentary includes a scene of Wolfensohn getting hit in the face with a pie by a protester.
In contrast to the book, the PBS documentary is more wary of the possible end of the current era of globalization. For example, they include a parallel between radio stocks of the 1920s and dot com stocks of the 1990s: both were industries built on new technology that had little capital, but fell prey to a market bubble. Likewise, the documentary makes a comparison between the terrorist attacks of September 11, 2001 and the terrorist assassination of Archduke Franz Ferdinand in 1914. Venture Capitalist Tim Draper appears in the third episode and speaks about his success at the time with Hotmail for email and other early internet investments. This was many years before Draper would go on to invest in many other successful tech companies of the 2000's, including Tesla, Coinbase, and even a large purchase of Bitcoin from a sale of the cryptocurrency after the fall of the Silk Road after 2013.
↑ Siegel, Fred. "The Harder They Fall". Democratic Leadership Council. Archived from the original on February 24, 2012. Lenin coined the phrase "the commanding heights" in 1922 when he temporarily relaxed government controls over Soviet agriculture even as he maintained a tight grip on big industry.
↑ Each of the chapters, ranging from about 1 to 9 minutes, is available in the Quicktime 5 format (extension .mov) and so it is necessary to have a player that supports that format. One can download them manually and then use a playlist to watch an entire episode without needing to switch for each chapter, or alternatively write a small script to automate the downloads. Episode 1 has 19 chapters, Episode 2 has 21 chapters, and Episode 3 has 23 chapters. The general URL is https://www-tc.pbs.org/media/commandingheights/ch_pPP_CC_qt_300.mov where PP is the episode number (01, 02, or 03) and CC (01-23) is the chapter number. It may not be necessary to have a playlist at all if the player automatically moves on to the next file in the directory in lexicographic order.
Free to Choose: A Personal Statement is a 1980 book by economists Milton and Rose D. Friedman, accompanied by a ten-part series broadcast on public television, that advocates free market principles. It was primarily a response to an earlier landmark book and television series The Age of Uncertainty, by the noted economist John Kenneth Galbraith.
Friedrich August von Hayek, often referred to by his initials F. A. Hayek, was an Austrian-British polymath, whose areas of interest included economics, political philosophy, psychology, and intellectual history. Hayek shared the 1974 Nobel Memorial Prize in Economic Sciences with Gunnar Myrdal for work on money and economic fluctuations, and the interdependence of economic, social and institutional phenomena. His account of how prices communicate information is widely regarded as an important contribution to economics that led to him receiving the prize.
In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any other external authority. Proponents of the free market as a normative ideal contrast it with a regulated market, in which a government intervenes in supply and demand by means of various methods such as taxes or regulations. In an idealized free market economy, prices for goods and services are set solely by the bids and offers of the participants.
Keynesian economics are the various macroeconomic theories and models of how aggregate demand strongly influences economic output and inflation. In the Keynesian view, aggregate demand does not necessarily equal the productive capacity of the economy. It is influenced by a host of factors that sometimes behave erratically and impact production, employment, and inflation.
John Maynard Keynes, 1st Baron Keynes,, was an English economist and philosopher whose ideas fundamentally changed the theory and practice of macroeconomics and the economic policies of governments. Originally trained in mathematics, he built on and greatly refined earlier work on the causes of business cycles. One of the most influential economists of the 20th century, he produced writings that are the basis for the school of thought known as Keynesian economics, and its various offshoots. His ideas, reformulated as New Keynesianism, are fundamental to mainstream macroeconomics. He is known as the "father of macroeconomics".
The modern history of Russia began with the Russian Republic of the Soviet Union gaining more political and economical autonomy amidst the imminent dissolution of the USSR during 1988–1991, proclaiming its sovereignty inside the Union in June 1990, and electing its first President Boris Yeltsin a year later. The Russian SFSR was the largest republic of the Soviet Union, but it had no significant independence before, being the only Soviet republic to not have its own branch of the Communist Party.
A mixed economy is an economic system that accepts both private businesses and nationalized government services, like public utilities, safety, military, welfare, and education. A mixed economy also promotes some form of regulation to protect the public, the environment, or the interests of the state.
The Washington Consensus is a set of ten economic policy prescriptions considered to constitute the "standard" reform package promoted for crisis-wracked developing countries by Washington, D.C.-based institutions such as the International Monetary Fund (IMF), World Bank and United States Department of the Treasury. The term was first used in 1989 by English economist John Williamson. The prescriptions encompassed free-market promoting policies such as trade liberalization, privatization and finance liberalization. They also entailed fiscal and monetary policies intended to minimize fiscal deficits and minimize inflation.
Daniel Howard Yergin is an American author and consultant within the energy and economic sectors. Yergin is vice chairman of S&P Global. He was formerly vice chairman of IHS Markit, which merged with S&P in 2022. He founded Cambridge Energy Research Associates, which IHS Markit acquired in 2004. He has authored or co-authored several books on energy and world economics, including the Pulitzer Prize–winning The Prize: The Epic Quest for Oil, Money, and Power, (1991) The Quest: Energy, Security, and the Remaking of the Modern World (2011), and The New Map: Energy, Climate, and the Clash of Nations (2020).
Criticism of socialism is any critique of socialist economics and socialist models of organization and their feasibility, as well as the political and social implications of adopting such a system. Some critiques are not necessarily directed toward socialism as a system but rather toward the socialist movement, parties, or existing states. Some critics consider socialism to be a purely theoretical concept that should be criticized on theoretical grounds, such as in the economic calculation problem and the socialist calculation debate, while others hold that certain historical examples exist and that they can be criticized on practical grounds. Because there are many types of socialism, most critiques are focused on a specific type of socialism, that of the command economy and the experience of Soviet-type economies that may not apply to all forms of socialism as different models of socialism conflict with each other over questions of property ownership, economic coordination and how socialism is to be achieved. Critics of specific models of socialism might be advocates of a different type of socialism.
Embedded liberalism is a term in international political economy for the global economic system and the associated international political orientation as they existed from the end of World War II to the 1970s. The system was set up to support a combination of free trade with the freedom for states to enhance their provision of welfare and to regulate their economies to reduce unemployment. The term was first used by the American political scientist John Ruggie in 1982.
Economic planning is a resource allocation mechanism based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources between and within organizations contrasted with the market mechanism. As an allocation mechanism for socialism, economic planning replaces factor markets with a procedure for direct allocations of resources within an interconnected group of socially owned organizations which together comprise the productive apparatus of the economy.
Joseph Stanislaw is a financial adviser on international markets and politics. He is also the co-founder and former president of Cambridge Energy Research Associates, an energy research consultancy that was acquired in 2004 by IHS Energy.
The history of economic thought is the study of the philosophies of the different thinkers and theories in the subjects that later became political economy and economics, from the ancient world to the present day.
Following the global 2007–2008 financial crisis, there was a worldwide resurgence of interest in Keynesian economics among prominent economists and policy makers. This included discussions and implementation of economic policies in accordance with the recommendations made by John Maynard Keynes in response to the Great Depression of the 1930s, most especially fiscal stimulus and expansionary monetary policy.
The Keynesian Revolution was a fundamental reworking of economic theory concerning the factors determining employment levels in the overall economy. The revolution was set against the then orthodox economic framework, namely neoclassical economics.
The post-war displacement of Keynesianism was a series of events which from mostly unobserved beginnings in the late 1940s, had by the early 1980s led to the replacement of Keynesian economics as the leading theoretical influence on economic life in the developed world. Similarly, the allied discipline known as development economics was largely displaced as the guiding influence on economic policies adopted by developing nations.
Keynes: The Return of the Master is a 2009 book by economic historian Robert Skidelsky. The work discusses the economic theories and philosophy of John Maynard Keynes, and argues about their relevance to the world following the Financial crisis of 2007–2010. In contrast to the 30 years he needed to write his prize-winning biography on Keynes, the author was able to write this 240-page book in only three months.
In Marxian economics, the "commanding heights of the economy" are certain strategically important economic sectors. Some examples of industries considered to be part of the commanding heights include public utilities, natural resources, and sectors relating to both foreign trade and domestic trade.
Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics is a 2012 book by barrister Daniel Stedman Jones, in which the author traces the intellectual development and political rise of neoliberalism in the United States and the United Kingdom. Originally a PhD thesis, the author adapted it into a book.
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