Commanding Heights: The Battle for the world Economy is a three-episode documentary from PBS alleging to inform viewers on the world economic history of the 20th century. The first episode illustrates how the world transformed, forth and back, from market economies to planned economies.
The second episode illustrates the impact, some of which are painful, of this transformation. The third episode concentrates on both current and future problems of globalization. The movie is a six hour documentary introducing important ideas and events associated with the political economy thus igniting critical thinking concerning economic issues. This essay is, therefore, a critical summary of the movie.
Episode One: The Battle of Ideas
In the wake of the First World War, the economic turmoil experienced by the global economic super powers led to new perceptions of the world economy in both public and private sectors (Mayer, 1987). This has since ignited a debate on the virtues of a global free market as opposed to planned economies managed by governmental controls.
In this episode various ideas associated with economic planning emerge leading to a battle of ideas as stated in the title. The episode presents a battle between two competing economic ideologies: free market supported by Hayek, economic theorist, and planned economy supported by Keynes. These conflicting ideas lead to this important question: who should be in charge of “the Commanding Heights” of the economy?
In every democratic society, there are two schools of thoughts (Baumol, and Blinder, 2009). On one side is Keynesian economics developed by John Maynard Keynes, a British economist, and on the other side is Austrian school of thought developed by Friedrich Hayek, an Austrian. Keynes advocates for government intervention in managing inflation and economic stabilization as well as cushioning economic busts and booms (Public Broadcasting Service).
Hayek on the other hand advocates for a free market with minimal government intervention if any. He believes in a free balancing of market forces and use of market price as a signal to communicate businesses for decision making purposes (Public Broadcasting Service). Interventions like price control will thus interfere with the signal and lead to market inefficiency.
The viewer is presented with two options on economic planning. The first option favors government control and the second option favors free market. The first option carries the notion that the commanding heights of the economy should be controlled by the government. People have equal rights and should be treated with respect, “each according to his/her needs (Baumol, and Blinder, 2009).
Keynesian ideology can be summarized as: Economic planning with some government intervention is essential in preserving full employment and a mixed economy whereby government own essential industries (Baumol, and Blinder, 2009). Full blown socialism as presented by Vladimir Lenin and Josef Stalin can be summarized as: Complete government control of the economy in which the government takes charge of planning and owns all industries (Baumol, and Blinder, 2009).
The episode presents a case whereby there is a conflict on whether to adopt the socialism option or the Keynesian option (Public Broadcasting Service). The episode addresses various questions that arise as the viewer digests these conflicting ideas on how market control should be undertaken.
The second option on the other hand, carries the notion that markets should be free from government control and government should only intervene to curb fraud and maintain market integrity (Public Broadcasting Service). This option as presented by Hayek and Friedman discourages state ownership of industries, i.e. all industries should be privately owned (Baumol, and Blinder, 2009). This option advocates for absolute liberty rights.
These views run throughout the first half of this episode with Keynesianism carrying the flag of the day for economic planning. The second part of the episode presents the viewer with events to help think about the economy as a whole.
The economic stagflation experienced in the U.S. in the 1970s and workers strike in Britain made planners go back to the drawing board as it became clear that Keynesianism was no longer registering any results (Mayer, 1987). The last part of this episode presents the emergence of economic reforms which are illustrated in details in the second episode.
Episode Two: The Agony of reforms
In the 20th century, majority of countries in the world embraced centralized planning as a means to economic prosperity: from the communist world totalitarian central planning, to the nationalization of industries in the more democratic countries (Mayer, 1987). However, those policies started failing dramatically in the 1980s and the Berlin wall fall lead to an era of global turbulent and dramatic economic reforms (Baumol, and Blinder, 2009).
In this episode, Commanding Heights take a wider look at countries worldwide as they swing from government planned economies to free market economies. Unlike episode one, this episode takes viewers away from the United states and Britain to Bolivia, Chile, India, Poland, the former Soviet Union, and China, highlighting each case’s economic problems an attempted solutions (Public Broadcasting Service).
This episode describes how economic planning transformed from central planning back to free market economy in many states around the world and emphasizes on the role played by Thatcher and Reagan as pioneers this transformation.
Events that led to the end of naive Keynesianism are well illustrated. In this part of the episode, the viewer is presented with various reforms that took place following the economic stagflation that led to the end of Keynesianism in the United States. The rise of Reagan and Thatcher led to various reforms including Reaganomics, the war on inflation, and Thatcher’s final battle with coal miners leading to massive privatization of state owned industries in Britain (Mayer, 1987).
In a nutshell economic planning in the U.S. and Britain transformed from centralized planned economies to free market economies. This episode also tries to address the impact of privatization on labor. While those supporting government control argues that labor is in the public interest and thus businesses should be publicly owned free market supporters argue that markets are in the public interest and privatization is the way to advance public good (Mayer, 1987).
The role played by government that came to be referred to as “The curse of Bigness,” was to create regulations under the new deal of Keynesianism (Mayer, 1987). In the United States, Keynesianism led to massive employment creation as was intended in the deal, but this only lasted for about 30 years after which economic stagflation hit the country in 1970s.
This culminated into the adoption of Reaganomics following the election of Reagan in 1980. Reaganomics advocated for deregulation, sound monetary policy, modest tax rates, and limited government spending thus a return to free market (Public Broadcasting Service).
In the United Kingdom, the adoption of Keynesianism led to the nationalization of major industries and heavy regulation of all unionized occupation. These reforms were, however, not welcomed by many in a country that became the “First Era of Globalization” in the pre-World War I period (Mayer, 1987).
Britain finally reverted to free market economy under privatization move by Thatcher in the 1980s. For some strange reasons the author, avoids to talk about the negative impact of privatization and free market economy thus leaving it for the viewer to dig deep into the topic.
This is the story told by all the countries presented in this episode: a move from Keynesianism back to free markets as the reforms under Keynesianism were more dangerous than was thought. Free markets thus led to the emergence of a global economy in the 1980s. The final episode of this documentary tackles the important topic of globalization.
Episode Three: The New Rules of the Game
By early, 1990s, most countries had become free market economies thus globalization became obvious. This was driven by a combination of factors including removal of trade barriers, free flow of capital, and a new global workforce (Baumol, and Blinder, 2009). Episode III of this documentary looks at both the benefits and risks of globalization in the 1990s.
The episode presents the viewer with a story on how the former U.S. President Bill Clinton embraced free trade policies, the challenges faced by world leaders in taming the powerful infection of financial collapse in the developing countries, and the cruel globalization debate that emerged in the Seattle protests (Public Broadcasting Service).
The new Rules of the Game tackle a series of issues including: free trade impacts on American workers and on the developing countries, the risks of financial contagion when investors pull out their capital in all developing countries following problems in one developing country, and the challenge of including the third world countries in the era of global growth (Public Broadcasting Service).
Everywhere in the world, socialists are now embracing capitalism, companies are being privatized and countries are working modalities to lure back multinationals they expelled in the recent past. State control and Marxism are being abandoned in favor of entrepreneurship; and stock market is expanding (Baumol, and Blinder, 2009).
Planners are being forced to reassess their assumptions as it is becoming obvious that governments cannot provide solutions to all problems. As a result, new opportunities and prospects are being opened up globally. This shift is, however, imperiled and antagonists are now more concerned with the insecurities and anxieties that surrounds such a transformation.
Through globalization, a greatest expansion of trade in the global economic history has been ushered in. This extraordinary level of trade provides opportunities for wealth creation, but also produces crises which had not been experienced earlier (Baumol, and Blinder, 2009). This episode thus tries to address the questions surrounding globalization by examining the new rules of the game.
The first test of globalization occurred with the implementation of North America Free Trade Agreement (NAFTA) in 1993. NAFTA covered the North American countries of the United States, Canada and Mexico. While NAFTA was well-received by Wall Street and business leaders, it was heavily criticized by labor leaders in the U.S. especially the AFL-CIO (Baumol, and Blinder, 2009).
They argued that NAFTA gave too much power to the multinationals at the expense of individual worker. In addition, they feared NAFTA would make many U.S. based workers loose their jobs to Mexico.
Despite the fact that NAFTA led to an increase in investments, growth in total trade in the region, more jobs for Mexicans and increase in their standards of living, it also adversely affected the labor market in the U.S. with approximately 400,000 workers adversely affected and increased the costs of labor in the region (Baumol, and Blinder, 2009).
The viewer is puzzled with the question on whether such agreements that join the emerging markets with global economies are morally justified. The results realized in Mexico justify such agreements, but we cannot overrule the fact that such agreements are likely to lead to exploitation of emerging economies.
Conclusion
This documentary is a very good piece in understanding the history of world economy. Very important issues like centralized planning, free market, privatization and globalization are well addressed in the documentary. I strongly recommend this documentary for every student interested in understanding the world economy.
References
Baumol, W., Blinder A. (2009). Economics: Principles and Policy. 11th Edition. United States: Southwestern Cengage Publishers.
Mayer, C. S. (1987). “In Search of Stability: Explorations in Historical Political Economy”, Cambridge: Cambridge University Press, pp.3–6.
Public Broadcasting Service (PBS). Commanding Heights. Storyline. Web.