Voodoo economics.

The Soul of Capitalism

Opening Paths to a Moral Economy

William Greider

Simon and Schuster, $28, 366 pp.

After the New Economy

Doug Henwood

The New Press, $24.95, 269 pp.

The Divine Right of Capital

Dethroning the Economic Aristocracy

Marjorie Kelly

Berrett-Koehler Publishers, $24.95, 231 pp.

Contours of Descent

U.S. Economic Fractures and the Landscape of Global Austerity

Robert Pollin

Verso, $21, 160 pp.

It was the Age of Clinton and the "New Economy," when, from 1991 to 2000, the U.S. economy looked as though it had repealed the law of the business cycle. From GE Chairman Jack Welch to New York Times columnist Thomas Friedman, the lords of enterprise and their media minions had beatific visions surpassing the most utopian of socialisms. We heard millennial celebrations of "globalization" and "synergy"; saw cyber-dreams of the existential promise of the Internet; entertained fantasies of "empowered" workers; watched the flowering of democracy around the world from the seeds of consumer goods; and cheered the spread of capitalist ownership through millions of new stockholders.

After the binge came the hangover. In a matter of months, $3 trillion in stock-market value vanished. For a while, pundits attributed the losses to "September 11." But when New York Times columnist and economist Paul Krugman concedes that something is "rotten in the state of American capitalism," and that the scandals at Enron and WorldCom are not mere exceptions, it's time to ask what some were thinking when they raved about the New Economy.

Some, like these authors, never inhaled the ideological helium that inflated the 1990s boom. The New Economy, they demonstrate, was the latest chapter in the old story of accumulation and its discontents. Both Doug Henwood (After the New Economy) and Robert Pollin (Contours of Descent) supply invaluable correctives to New Economy palaver about what "we" experienced in the 1990s. (That "we," Henwood writes, is "first-person spurious.") In New Economy lore, "we" witnessed unprecedented growth, prosperity, and social equity, as more and more Americans became owners of stock and consumers of abundance. Pollin and Henwood refute every bit of this mythology.

First, the "boom" was hardly spectacular in historical perspective. Looking at six growth periods in the last century, both note that the 1990s come in fifth, and that the longest wave after 1945 was marked by all the horrors decried by true believers: sizable government spending, strong unions, and firm regulation of labor and financial markets.

Second, contrary to the ubiquitous encomiums to "small business," "most product innovation," Henwood establishes, "comes from large firms, not perky start-ups." Moreover, Henwood emphasizes that in finance, business services, and communications--the most computerized, college-educated, and hyped-up industries--productivity growth relative to manufacturing was "under-whelming." The Old Economy lives.

Third, and most important, all the authors show how profoundly undemocratic this supposed era of prosperity was. The wealthiest 10 percent of households hold 90 percent of all financial wealth, and the wealthiest 1 percent have doubled their share of that wealth, from 20 percent in 1976 to 40 percent in 1997. Marjorie Kelly (The Divine Right of Capital) notes that even in pension funds--supposedly the most powerful force for economic democratization--62 percent of all value is held by the same wealthiest 10 percent of families. William Greider (The Soul of Capitalism) indicates that the median wealth of American households actually declined in the 1990s, and that the primary investments of most Americans still reside in family homes and low-interest savings accounts.

Most other inhabitants of the planet weren't well served by the New Economy, either. As Pollin details, "privatization" schemes indentured debtor nations to foreign investors (usually private creditors and multinational corporations) and tied them to the volatile capital markets. As for the alleged "decline of the nation-state" brought on by globalization, Henwood and Pollin assert forthrightly that governments have been prime actors in the creation of corporate-friendly trade rules, labor laws, environmental policies, fiscal practices--and military interventions. What's more, they even doubt the extent of globalization, since 80 percent of American workers are exempt from international competition. "Job export," they suspect, has been a specter used to frighten workers into wage and benefit concessions.

This was the real significance of New Economy discourse: labor discipline and cultural hegemony. On the one hand, it expressed widespread hopes for democracy, worker self-management, pleasurable and meaningful work, and global harmony. On the other, it concealed the real costs: the cheapening of labor through outsourcing; the enrichment of bosses, creditors, and stockholders; and the weakening of employee power through union busting, wage and benefit reductions, and other attacks on workers' capacity to challenge management.

How do we--that's first-person, democratic--fight back? Henwood dismisses lecture-circuit localists who "rack up the frequent-flier miles" while "telling the masses they should stay home and tend to their lentils." He berates moralistic critics of "consumerism" who evade that nettlesome matter of "the ownership and organization of production." Consumers and workers have few real choices. At the same time, Henwood and Pollin reject tariffs and import quotas, considering them "a poor substitute for direct forms of social protection."

Pollin's reform agenda, rooted in an "employment targeted" conception of economic policy, is a revitalized New Deal order. Among other measures, he calls for a living hourly wage of $8 to $11 minimum, and a sales tax on stock, bond, derivative, and foreign-currency transactions, designed to raise the costs of speculative trading and to garner $100 billion in revenue for spending on education, infrastructure, and health care. And he urges a revitalization of the labor movement as the primary (if now severely weakened) vehicle for a genuinely democratic workplace and economy.

I doubt that these reforms will inspire any political movement until "we" dispute the moral legitimacy of corporate capitalism. Greider and Kelly see an auspicious moment for such a challenge, heralding a progressive capitalism that subordinates accumulation to social purposes. "American capitalism," Greider writes, "is ripe for reinvention."

Reform depends, in their view, on a rejuvenated moral and political imagination, especially about property and the "corporation." Our imaginative paralysis on this score stems, Kelly writes, from a notion of property that bestows semidivine status on "owners," and from our "assumption that corporations are objects, not human communities"--objects, moreover, which have had the legal fiction of "personhood" conferred upon them, but which are nonetheless "owned" by stockholders. Furthermore, as "factors of production" or "human capital," the people who actually do the work "are simply part of the property," Kelly reminds us. Regardless of all the mission statements about "corporate responsibility," the legal status of American corporations (together with our uncritical reverence for the "rights" of property) permits them to enforce what are, for the Western world, remarkably authoritarian workplaces.

What's more, Kelly reminds us, stockholders are functionally irrelevant to contemporary capitalism, anyway. Stockholders do not provide significant amounts of corporate capitalization (1 to 2 percent, according to Kelly and Henwood). Most of it comes from retained earnings. Stockholders aren't "creating" abundance through risky investment; rather, they're "buying the right to extract wealth" by purchasing stock.

After interviewing dozens of "socially responsible" businesspeople, labor leaders, and economists, Greider formulates a "social trust" conception of the corporation (akin to Kelly's "economic democracy") that redefines property rights and transforms corporate power relations. His charter (like Kelly's) includes ecological sensitivity; "participatory" internal governance that embraces and even privileges workers; "covenants" with local communities; and a commitment to real wealth creation--not "shareholder value"--as the corporation's raison d'etre. Both Greider and Kelly emphasize that these reforms will not arise from our current political system. Rather, small cooperative ventures, pioneering new relationships within and without business firms, are and will be the wellsprings of transformation.

I'd sign on to all these measures, but I also think that Greider and Kelly aren't daring enough. If workers are the real creators and innovators, why not call for full workers' ownership and control of enterprise? Why not erase the line between "management" and "labor," by democratizing technical expertise and managerial responsibility? These were the sort of demands that syndicalists and guild socialists were making a century ago, and they arguably represent the most tantalizing roads not taken in the history of political and moral economy.

Americans, and especially Catholics, have not asked such questions about the nature of capitalism for two generations, but economic justice is the most important moral, political, and religious issue of our time. The rage to accumulate has raised a range of evils to a new level of visibility: imperial ambition; our tawdry deference to money; the inclination to think of the human person as a factor of production or as an object of biotechnical investment; a regime of work in factories, offices, and sweatshops that undermines the moral and spiritual integrity of individuals, families, neighborhoods, political and religious institutions.

As Greider reminds us all too briefly, these concerns were once taken up with vigor and intelligence in the Social Gospel movement. And indeed, that Western social-gospel tradition--from Rauschenbusch, Figgis, Scudder, and Tawney to Day, Tillich, Weil, and Maritain--merits a forceful and imaginative restatement. These critics opposed industrial capitalism, not with pabulum about "values," "compassion," and "consumerism," but with formidable economic and historical erudition. Taking the imago Dei as a reality and not as an ideal, they proposed that work honor our human dignity, not diminish it. Now there would be a new economy and an end to the same old story.

Eugene McCarraher teaches humanities at Villanova University. He is the author of Christian Critics: Religion and the Impasse in Modern American Social Thought (Cornell). He is writing a history of corporate capitalism and the American moral imagination.