Originally published October 29, 1984

Big Bad Business


George P. Brockway believes that he knows the lesson of Continental Illinois, Financial Corporation of America, Lockheed, and Chrysler. According to him, it is that “great size, in and of itself, is an economic evil” (“Big Is Ugly,” NL, September 3).

Brockway’s point is that big companies need big bailouts when they fail. True enough. But there are other, perhaps more important, economic evils. We ought to explore the proposition that corporate expansionism can have beneficial consequences, and examine all the effects of the corporate Balkanization he favors.

Consider the electronics industry. Japan competes against us through its handful of giant concerns. The United States, of course, has two that are even larger, IBM and AT&T. We also have a fair number of middling companies and a multitude of small ones. IBM is in fine shape. The telephone company certainly is not, though its difficulties result from its emasculation, rather than from its size.

Many of our other firms are in trouble, too. The basic reason is that in the competitive and mercurial high-tech marketplace, businesses must spend fortunes to create popular new products, yet have to replace them almost immediately with still newer ones. In a situation of this kind it is very difficult indeed to make money.

Of the American companies, only IBM and AT&T clearly have the resources to finance and carry out the kind of research and development that will be needed in future. Japan’s monoliths are smaller, but it has more of them. To compete, we may or may not have to concentrate our economy to the extent that Japan has. But our romantic preference for small, independent businesses is likely to be compromised; at the very least, we will have to permit cooperative R&D, financing and production.

Houston                                                                                                           TEDDY GONZALES

Rich Man’s Bluff

George P. Brockway may be a careful reader, but his amended rich man’s dodge of borrowing money, deducting the interest expense from income tax, and investing the principal in tax-exempt bonds (“Between Issues,” NL, September 17) is still wrong. Unfortunately for Brockway’s analysis, and fortunately for the American taxpayer, the Internal Revenue Service has ruled that if one borrows money to purchase tax-exempt securities, the interest on the borrowed funds is not tax deductible. This makes Brockway’s revised scheme either unprofitable or illegal.

Edwardsville, III.


Economics Department,

School of Business
Southern Illinois University

George P. Brockway replies:

Not exactly. As I said in the original piece, you’ve got to have some money to begin with. Let’s say you have $100,000 in loose cash and a hankering for a vintage model Rolls Royce. You buy some tax-exempts with your own money, and sometime later you borrow $100,000 to pay for the jalopy.

The New Leader

Originally published September 17, 1984

Between Issues

PRAISING Anthony Burgess’ A Clockwork Orange in THE NEW LEADER of January 7, 1963, Stanley Edgar Hyman declared: “Perhaps the most fascinating thing about the book is its language. Alex [the protagonist] thinks and talks in the ‘nasdat’ (teenage) vocabulary of the future, a remarkable invention by Burgess …. It has a wonderful sound, particularly in abuse, when ‘grahzny bratchny’ sounds infinitely better than ‘dirty bastard.”

Before the issue had been out a week, the phones were humming and the letters were pouring in: Didn’t Hyman know that the “amazing vocabulary” he was so taken with consisted largely of adaptations from Russian? At the NL, readers rarely write to praise; they seem to feel (rightly, in our view) that good or even excellent pieces should be the norm. But a goof will soon bring guffaws. And among those who could not resist at least a smile was Burgess’ publisher, George P. Brockway of W. W. Norton-who nonetheless thought so highly of Hyman’s essay that an emended version became the Introduction to the paperback edition of Clockwork.

We were reminded of all this when the phones began ringing and the letters started arriving about a blooper by Brockway- now an NL columnist-in “Big is Ugly,” his cover piece for our September 3 issue. One representative letter, from Lloyd McAulay Esq., will suffice to illustrate: “George Brockway’s original comments on the economic scene are interesting to read, for they certainly make one think. However, one would like to believe that he presents his proposals with some care. His example of financial alchemy in the 50 per cent tax bracket is amiss. He suggests that borrowing $100,000 from Bank Aat 15 per cent interest, and investing it in Bank B at 13.6 per cent interest, will provide an annual after tax net of$ 3,050. That is just not careful arithmetic. True, the $15,000 interest on the loan from Bank A will only cost the borrower $7,500 after taxes. But the $13,600 interest on the Bank B deposit is taxable income. At the 50 per cent bracket’ this will mean net earnings of $6,800. Since the loan cost $7,500, the taxpayer would have a net loss of $700.”

Apparently Brockway remains a careful reader, because we had not yet had a chance to get in touch with him when he sent along the following:

“Oops! I of course slipped in my column of September 3 when I parenthetically outlined a rich man’s scheme for borrowing money and buying CDs. For the dodge to work, you have to buy tax-exempt bonds and take your chances on the market. In other words, you have to do a little laundering, but it’s so simple that you don’t even have to go to Miami for the purpose. Sorry.”·

Readers may reasonably wonder why the editors were not more careful readers. To that we can only reply, rather lamely, that the games the rich play are Russian to us.

OUR COVER drawing of Israel’s Prime Minister Shimon Peres is by Claudia Fouse.

The New Leader

Originally published August 6, 1984

Dear Editor


I have regularly read George P. Brockway’s column on economics, “The Dismal Science”- albeit without great enthusiasm, but recognizing it as a serious attempt to educate himself and then us in a very difficult subject. The glorious reward for Brockway and for us has now come!

I refer to his “Civility and Labor Relations” in your June 25 issue. Brockway has there managed in a few paragraphs to give us an understanding of the quite deliberate way in which capitalism in general, and U.S. capitalism in particular, not in the dead past but today, creates unorganized and disorganized armies of the unemployed in order to drive wages down and keep workers out of unions. With extraordinary brilliance, Brockway has culled a series of passages from Marx’ Capital and shown that they express the present ideas of big capital in America. The living part of Marx – his profound grasp of the process of capitalist accumulation – is thus as it were rescued by Brockway, while he happily and correctly consigns the rest of Marxism to the grave it has dug for itself in the Soviet Union, China, Cuba, and the dreary wastes of Eastern Europe.

Big capital is armed with this understanding of the living part of Marx. The trade union movement here and in Europe is disarmed by its sodden failure to understand this process. More accurately, of course, I mean the trade union leadership. When Brockway concludes that whatever will happen will be our doing, each of us chooses his place in making the future. But some of us are better placed to affect the future, and it is in this sense that the trade union leadership bears responsibility for the terrible decline of the labor movement. In this darkness, Brockway has lighted a candle of hope.

New York City                                                                                      FELIX MORROW[1]

[1] Editor’s note:  We can’t know if we’ve linked to the correct Felix Morrow but, given the Wikipedia entry, it appears to be a reasonable guess…

Originally published May 14, 1984

Between Issues

…..Back on these shores, George P. Brockway exposes the “productivity scam,” in his upcoming “Dismal Science” column. Small wonder he has been sticking close to home. He has just completed Economics for the Living, to be published as a Cornelia and Michael Bessie Book by Harper and Row. Having had an opportunity to read the marvelously provocative and lucid manuscript, we suspect he’ll be doing a lot of traveling to talk shows when the book appears next winter…..

            The New Leader

Originally published September 5, 1983

Dear Editor


The Great Communicator had the right words for George P. Brockway’s Rereading Galbraith” (NL, June 13): “There you go again.” Yes, “much of what passes for economics” is a waste of time; the timewasting proportion of the total may be exceeded only in magazine nonfiction. What’s wrong with economics, however, is not what Brockway in this column (or in any other) says is the problem. Brockway claims that, “If there is no way of judging relative wants,” there is no way of making things either better or worse. Not so: We don’t have to weigh individuals’ preferences to assert that, if more of some wants can be satisfied without reducing the resources devoted to other wants, things are better. A good many of us economists (usually microeconornists) devote ourselves to just this kind of positive-sum game, the quest for policies and institutional changes that involve few and inconsequential losers and losses and substantial gains to the rest of us. We don’t have to sneer about advertising-induced tastes (like packaged holiday tours that may crowd Gstaad) to do something worthwhile.

The Affluent Society is an important book, one that changed our way of looking at things, as Brockway maintains. Yet Galbraith, like Brockway, can be wrong on critical points. There is no evidence whatever that advertising increases aggregate consumer spending (except for the trivial increases represented by the consumer spending of those employed in advertising). What advertising does is to increase spending for particular products or brands, at the expense of other products or brands. From this it follows, as Brockway would put it, that the existence of advertising does not tell us that American consumers as a whole spend too much, nor that their choices lack legitimacy. But rather conventional economics tells us that we can’t leave all choices to consumers because the economy left to its own devices will undersupply public goods. It may make unexciting copy; still, the fact is that the mainstream of the dismal science is not hostile to government per se.

New York City

                                                                       DICK NETZER
Urban Research Center
New York University

Editor’s Note:  Dick Netzer’s first letter re: The Dismal Science can be found here:

Dear Editor

‘Dismal’ Pleasures

George P. Brockway has been one of the most enjoyable writers in THE NEW LEADER lately. The installments of “The Dismal Science” demonstrate wit, erudition – not that I always agree with him – and a refreshing willingness to question the assumptions that lie behind the experts’ arguments.

Brockway’s appreciative comments on John Kenneth Galbraith, for example, were excellent. (“Rereading Galbraith,” NL, June 13). They reminded me of the wrangling that greeted the publication of The Affluent Society. Much of the controversy centered on Galbraith’s observations about advertising, about “the contriving of wants” in order to increase production.

Galbraith’s case is convincing, and yet even the people who agree with his conception of the role Madison Avenue plays in our economy continue to wrongly believe that consumer choices guide production. This myopia simply shows the need for more of the kind of illumination that is shed by Brockway’s columns.

Dayton, Ohio                                                                                                                  RONALD LAMBRETH

Originally published February 21, 1983

Between Issues

IT IS NOT uncommon for NEW LEADER writers who have something penetrating to say, and a gift for saying it well, to find themselves pursued by publishers bearing book contracts. The most energetic chase we were responsible for setting off, if memory does not deceive, occurred some two decades ago when we presented a piece by a young man who was then a Congressional fellow. The biographical note accompanying the article mentioned that it was adapted from a chapter of a book the author was working on, and no fewer than five major houses quickly expressed their interest. Viking won the prize – Ronald Steel’s The End of Alliance.

More typically, an individual publisher or senior editor will come upon a piece in the magazine that sparks an idea for fuller treatment. Early one morning, to cite a random example, an excited Alfred A. Knopf telephoned. He had been reading THE NEW LEADER at 3 A.M. as was his wont, he explained, when he came across an article that especially appealed to him and he wanted to talk to the writer about doing a book related to the subject. The piece was on Brazil; the author was John Mander, actually our man in London at the time who happened to be doing some traveling. Soon an agreement was reached that culminated in dinner at the Knopf “farm” in Purchase, New York, and Mander’s well received The Unrevolutionary Society: The Power of Latin American Conservatism.

Among other publishers who have kept a sharp eye on these pages over the years, one is Knopf’s neighbor in Purchase,

Roger W. Straus J r. of Farrar, Straus, Giroux. Another is George P. Brockway of W. W. Norton and Company. So we couldn’t resist a few thoughts on things coming full circle upon hearing the news that is the occasion for our comments here: Harper and Row has signed Brockway to do a book inspired by his column appearing in alternate issues of the NL, “The Dismal Science.”

As readers of this space know, Norton’s Chairman of the Board came to his present avocation out of frustration with inflation, high interest rates and Federal Reserve policy. That started his “reading everything I could get my hands on” in an area previously of little formal interest to him. His new preoccupation also resulted in a spate of pieces that drew unusual attention, and led-in the NL of January 11, 1982 – to the launching of the column that has consistently attracted even greater response.

An item in Publishers Weekly reports that Brockway’s book will be published under the Cornelia and Michael Bessie imprint, and continues: “Mike Bessie says the work is ‘intelligible economics’; the author says it’s ‘quirky and offbeat.'” We would say both are right, as Brockway’s thoughts on “Frictional Unemployment,” coming up in our next issue, will again demonstrate.

OUR COVER drawing of Michael Straight, whose new book happens to published by Norton, is by Claudia Fouse.

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