Reviews of Progressive Capitalism are mostly favourable but tend to verge on the lukewarm.
Many people may be put off by the author's association with New Labour having been Minister of Science and Innovation from 1998 to 2006 under Tony Blair. However, he is now thoroughly distanced from Labour or any of the main parties.
This book is not an argument for a "middle way" for capitalism, as some reviewers seem to think. Rather it goes headlong against orthodox economic thinking. For anyone is prepared to read it attentively, it successfully destroys the current dominant neo-liberal agenda of deregulation and laissez-faire.
An indication of the essential radicalism of Progressive Capitalism lies in the quotation in the title pages. This is from the German economist, Friedrich List, dated 1841. But in fact List shines out of every single page. Progressive Capitalism must be the most thoroughly Listian tract in well over a century.
The fact that most people have never heard of this greatest of all economists is due to his being airbrushed out of economic thinking by the orthodox Adam Smith School. The neo-liberals to which Sainsbury constantly opposes his own views are merely the latest version of this school - the latest Smithians.
List, in his National System of Political Economy [Vol. 2 is the one to read] exposed, the Smithian classical economist thesis and its followers in Ricardo, Mill, and so on. He saw that it was a piece of abstract theory that assumed a "universal republic" where national boundaries and national interests did not exist. It was not based in reality.
List proposed "national economics" (I prefer to use the term "sovereign economics" for the economic policy of the CP) where each country should develop its own enterprises with the state taking a role in encouraging and supporting this. He favoured protection but only of "infant industries" so that they could get on their feet and then enter competition with other nations.
Meme of the day
Sainsbury explains exactly how since WWII the industrial nations of Asia followed Listian recommendations to make their economies as successful as they are today. Russia by contrast followed the Smithian liberalisation agenda with disastrous results.
Sainsbury talks about neo-liberalism rather that Smithianism and this is fine as he covers recent history. But to see the importance of this book it is helpful to put it in the longer term history of economics.
Smith (and his heroes the Physiocrats) turned what was had been a broadly based study of "political economy" into a determinist abstract science. In the 20th century, Keynes although he had some original ideas was still locked into this school's thinking. Because Smithian thought now dominates academia pretty well everywhere we tend to forget that before 1900 this was a British/French/Austrian phenomenon. The USA and Germany did not accept the dogma. The USAs greatest economist of the 19th century was Henry Carey, who knew List and had similar views.
Germany, in the way it runs its economy is much more Listian than Smithian and this is no doubt a great part of its success. It is probably to their competitive advantage to not let on about this and watch the others ruin their economies by following Smithian dogma.
Sainsbury clearly used his time as Minister of Science and Innovation to think and study deeply about how government can aid industry in becoming more productive. One of List's key concepts is that of "productive powers". He says it is the ability of a country to produce well and efficiently and in an innovative way that matters above all. Sainsbury sees this as the key in improving Britain.
He explains how as a Minister he made various initiatives to enable the state to perform this role. I see no reason to doubt his claims. The problem is that any good work he was doing, close to the operation of real industry, was completely overshadowed by the New Labour policy of financial liberation which wrecked vast swathes of the country's wealth.
Sainsbury has found support for his views in various contemporary economic writers and researchers and one of the benefits of this book for me was to bring to my attention some of which I was quite unaware, notably Ha-Joon Chang. It seems there are more Listians out there than I thought. It is just that they are buried under the weight of Nobel Prize winning Smithians. [There is no worse recommendation for an economist than being a Nobel Laureate.]
Some have criticised Sainsbury for not saying too much about the disastrous effects of finance on the economies of the Western world recently, but his position is made clear and he clearly identifies the malign role of finance. He sees banks performing the function of "wealth appropriation" not wealth creation. But he has not written a book on that subject of which there are already an enormous number.
I have only two points of mild disagreement which really amount to degrees of emphasis,
Firstly, I think he draws the separation between "Liberal Market Economies" (USA, Britain) and "Coordinated Market Economies" (Germany, South Korea) a little too tightly saying that we cannot import some good practices because we are a LME and always will be. In fact his own data shows that Britain and the USA do a lot to support innovation in the way he explains that CMEs do. The problem is that it is not coordinated because that would fly in the face of market fundamentalist dogma.
In my view the big difference between LMEs and CMEs is in the operation of finance. With finance managed properly in Britain we would start to converge with German good practice. Ultimately we do want we want to do. We are constrained by history, or course, but with will and leadership we can chose our direction.
Secondly, the focus is rather too heavily on the export markets and being competitive worldwide. The other essential aspect of List's ideas was that the development of a good national economy and that of a thriving culture go hand in hand. For List culture and society are as important as economics - they are all part of the same thing. So you develop the country's wealth and then it can afford to develop its society and culture beneficially. New internal markets for culture and welfare can be created and so the economy can be boosted from within. In this way growth can come from within.
The contrary effect of concentrating too much on industry and exports can be seen in Japan which has virtually destroyed its rich culture reducing it to sporadic lifeless heritage.
But as I said these are differences of emphasis and could be incorporated into the existing thesis supporting it without changing it.
I have spoken about what I see as the historical context of this book and this I believe is the key to its importance. The details of the arguments which I have not repeated here are presented with admirable clarity and the insight of someone with experience in government and in a major company. This is not the usual CV of an economist and the value of the book surely must result in part from the author's background.
It is truly remarkable to see the batten of Friedrich List taken up today in Britain by someone with influence. Let's hope this is a step towards countering the domination of orthodox, neo-liberal, neo-classical, Adam Smith economics.