In "The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers," published in 1960, author Robert L. Heilbroner asked the question: “How well do Americans fare under their present economic system?” For three-quarters of Americans, living standards had never been higher. But the other quarter—especially minorities and people in rural areas—remained mired in poverty. “It means,” wrote Heilbroner, “that for the lowest quarter of the nation, capitalism as a system of high living standards, personal dignity, or individual ‘affluence’ is little more than a myth, or, worse, a bitter mockery.”

More than 50 years on, Heilbroner’s guide through two centuries of economic thought bears revisiting for the eerie relevance it holds today. After steering us along comfortably from Adam Smith through Malthus and Ricardo, early Socialist utopians and Victorian prudes, from Marx through Veblen to John Maynard Keynes, Heilbroner takes the measure of each of these giants and is left confronting the future. By 1960, 130 corporations accounted for half the U.S. economy while state, local and federal government expenditure comprised one-fourth of the Gross National Product. America was far outperforming the developing world, way ahead of communist regimes and even the social democracies of Western Europe; in comparison to the rest of the planet, the U.S. model was a resounding success. Yet, numerous economists and other thinkers had already offered foreboding predictions for American capitalism and Heilbroner found the theories of three of them—or rather four, since two posited the same theory—persuasive.

The first was a book of mind-numbing statistics, "The Modern Corporation and Private Property," written in the bleak year of 1932 by Adolph Berle and Gardiner Means. Berle and Means laid out their theory in the bluntest of terms: “If the dominant trend of American business continued for another fifty years, the traditional fabric of capitalism would be destroyed.”

They found that in 1932, one half of all corporate enterprise was in the hands of 200 companies. Most appalling, the 200 companies were growing at a rate that dwarfed the growth of the other 3 million enterprises in the country. According to their research, the top 200 were on track to control three-fourths of the nation’s wealth by 1950, and by 1975 they would virtually rule the economy. In 1932, the largest of those companies, had it been a state, would have ranked 22nd in wealth.

Where Berle and Means warned of the threat of corporate expansion, arch-conservative Friedrich Hayek saw a different threat: huge, ever-expanding government. Born in Vienna at the turn of the 20th century, Hayek had watched the people of his native central Europe enslaved by the rise of fascism, and had grown alarmed by the explosive growth of government in Britain and the United States during and after the war. While many, if not most, believed the state’s heavy involvement to be a temporary necessity, Hayek saw it differently. He posited the theory that “once a government had interfered enough with the market mechanism it had no alternative but to embrace the economy in a top to bottom rigid grip.”

In his early influential writings Hayek could not have foreseen the Cold War, the ultimate example of the Orwellian slogan “War is Peace.” But this state of permanent mobilization for war, requiring multi-billion dollar budgets and government involvement at every level as part of an exponentially-expanding federal bureaucracy—not to mention social safety-net programs, entitlement programs, pension systems, tax breaks galore for industry, regulatory agency on top of agency—only added credence to his theory. Direct control over economic activity, Hayek believed, was by an inner necessity forced to expand. At a certain point, government involvement in the economy would become unstoppable. To Hayek this process meant not only the end of capitalism but of personal liberty as well.

In 1960, the same year Eisenhower warned of the growing influence of the military-industrial complex, Heilbroner found Hayek’s theory alive and well. Berle and Means with their theory of ever-expanding corporate power had been onto something, in Heilbroner’s estimation, and so had Hayek in his theory of ever-expanding governmental power.

But Harvard’s Alvin Hansen offered a third, more complicated prognosis. Looking at the state of capitalism in America in the 1930s, Hansen did not foresee a rosy future. First there was the problem of a declining population. For the American economy to prosper it needed a steady rate of population growth—new consumers, in short. The depression years saw a significant decline in population growth: only 8 million new customers instead of the usual 16 million per decade. New consumers meant new homes, new cars, and larger quantities of goods of every kind. But even if the population continued to grow, there was the Malthusian proposition that the earth and its resources are in fact finite, and that a population can’t grow forever. (The U.N.’s latest projections foresee a global population of 11 billion by 2050, simply beyond the holding capacity of the earth and unsustainable by any economic system, capitalist or otherwise.) 

In addition, Hansen pointed out, American capitalism had relied upon cycles of technological innovation to spur growth. We had gone through the industrial era, the railroad era, the electrification era, the automobile era. Each cluster of inventions spurred economic growth. But it was impossible to maintain the pace of invention and innovation; in the interim periods the economy was subject to collapse, in the form of recession and even depression. Hansen believed that the government involvement that had been necessary during the depression would become a permanent requirement to maintain some modicum of economic stability. Government, through directed spending, would have to partner with the so-called free enterprise system to keep the economy from periodically crashing.

Heilbroner wasn’t so persuaded by Hansen’s predictions. He would have needed to wait another 50 years to watch a wild-eyed Secretary of the Treasury, Henry Paulson, formerly of Goldman Sachs, explain that “Wall Street needs an infusion of $700 billion taxpayer dollars or else the entire global economic system will collapse!” Throw in stimulus packages, Fed infusions of billions into the economy, bloated defense budgets that support, among other things, over 800 military installations in exotic locations around the world, and Hansen’s prediction of a government/private sector interdependency looks entirely convincing.

Can America’s ungainly economic system be sustained with structural unemployment a new reality; with wealth inequality---the gap between the 1% and the 99% - increasing ad infinitum; with no great technological innovations on the horizon; and with deep and ever more intractable political divisions paralyzing the government while federal and state governments drown in red ink?

In effect, now where? It would be nice if Heilbroner were around to sort it out for us. In the long run none of the prognosticators from the '30s and 40s saw a particularly sustainable future for capitalism in America. Of the growing power of corporations, Heilbroner wrote: “We seem to confront a form of economic power great with possibilities for economic good or evil.” Looking at the behavior of the titans of Wall Street during their recent looting of the treasury at the cost of fifteen million jobs and millions of homeowner evictions, it seems safe to say which of Heilbroner’s possibilities—“economic good or evil”—has come to pass.

In 1960, Heilbroner predicted that if the economic trends continued, poverty would be almost entirely eliminated by 1980. That seems like a cruel joke now. There is a special irony in one of Heilbroner’s last paragraphs: “The questions which face us in the future are not the purely economic ones of whether corporations will naturally grow larger or whether we will suffer from business cycles, but the moral ones of whether we will let corporations grow unchecked and whether we will allow business cycles to develop their full momentum unchecked. Government planning, public investment, anti-monopoly policy—these are the tools of the antieconomic, moral impulse.”

Clearly, those tools were not put to use in America’s sustained shift to an anti-government/pro-corporation model over the past three decades. And the end result represents not only a lasting downturn in America’s economic fortunes but the moral failure of the nation as well.