02/02/98 GLOBAL TODDLER

GLOBAL TODDLER

THE COMMANDING HEIGHTS
The Battle Between Government and the Marketplace That Is Remaking the Modern World
By Daniel Yergin and Joseph Stanislaw
Simon & Schuster 457pp $26

Few people would charge willingly to their deaths ''with the words 'free market' on their lips,'' write Daniel Yergin and Joseph Stanislaw. It's a good point--and a reminder that, much as the market economy seems to have triumphed around the globe, belief in its value may be 25,000 miles wide and an inch deep.
The global market economy, argue the authors in The Commanding Heights: The Battle Between Government and the Marketplace That Is Remaking the Modern World, is by historical standards still an infant. For rich countries, it's barely 20 years old, and the former communist world has experienced it for less than a decade. For this phenomenon to prove itself, they argue, it must show that society as a whole gains more from the pursuit of self-interest and moneymaking than from having government manage the economy. The authors suggest measuring this new world by the following: Does it deliver better goods, is it better for the environment, is it fairer and more protective of pensioners, and does it respect, or trample over, national cultures? Finally, would we view it as the best way to contain arbitrary decisions made by some politicians?
Americans might find these questions simplistic--perhaps even disingenuous. After all, even though rhetoric from Wall Street and Washington sometimes makes it sound as though the market writes all the rules, there's no place in the developed world where government is really shrinking. Global bond and foreign-exchange markets can act as a check on government spending--and so prevent a state from expanding. But as the authors themselves point out, government spending in rich countries now accounts for 46% of the economies, up from 28% in 1960. That hardly points to diminishing state power.
Nor is government an endangered species in emerging markets. But there, a primary problem is state corruption. The market experiment is fragile--and staggering in its volatility. Asians who have lost half their wealth in the past six months are numb. But there's no doubt many see international markets as the villain--overlooking the problems posed by their own governments.
Asia's crisis, the authors suggest, probably isn't a short-term boom-and-bust problem. The old formula of state-directed capitalism no longer works. As Asians move from being low-wage to higher-wage producers, they're finding they have to make more sophisticated products to be competitive. They may also have to establish a much larger Asian market for trade and investment.
If such analysis had been developed, Yergin and Stanislaw might have turned out a terrific book. But it is found only in the last few pages. Yergin, the Pulitzer Prize-winning author of The Prize, a classic on the world oil industry, doesn't come through this time. For the most part, The Commanding Heights is a boringly familiar, clip-job recitation of the march to globalization in the past 20 years. If you've never heard of Margaret Thatcher, Deng Xiaoping, or Mikhail Gorbachev, it might be the book for you. Otherwise, let's hope there's a better sequel ahead.
By ROBERT J. DOWLING