Capitalism in America

Greenspan and Wooldridge, an editor at The Economist, wrote a history of American economic growth from the colonial period to the present, organised around the argument that creative destruction is the source of American prosperity.

The historical narrative covers the standard sequence: colonial agriculture, the transport revolutions of canals and railroads, the industrial expansion after the Civil War, the corporate consolidation of the late nineteenth century, mass production and the consumer economy, the Depression and the New Deal, the postwar expansion, the productivity slowdown of the 1970s, the deregulation and computing-driven revival, and the crisis.

The interpretive frame is Schumpeterian. The authors argue that America grew faster than Europe because it permitted and even encouraged the destruction of existing firms, industries and jobs, and because its legal, financial and cultural arrangements made entry easy and failure survivable. They treat bankruptcy law, the absence of aristocratic restrictions, immigration, and the willingness to move for work as the enabling conditions.

The contemporary argument follows: the authors hold that American growth has slowed because entitlement spending crowds out investment, because regulation has accumulated to the point of blocking entry, and because political resistance to disruption has increased. Their prescriptions are entitlement reform and deregulation.

Greenspan's role complicates the book. He chaired the Federal Reserve during the period preceding the crisis, opposed derivatives regulation, and acknowledged after 2008 that his assumption about financial firms' self-interested risk management had been mistaken. The book's treatment of the crisis assigns primary responsibility to housing policy and to global savings flows rather than to monetary policy or to regulatory choices, which readers should weigh against the author's position. The historical narrative is competent and conventional; the interpretive argument is a position rather than a finding.