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H-NET BOOK REVIEW 
Published by H-PCAACA (August, 1998) 
 
Daniel Yergin and Joseph Stanislaw. The Commanding Heights: The Battle 
Between Government and the Marketplaces That Is Remaking the Modern World. 
New York: Simon & Schuster, 1998. 457 pp. Illustrations, bibliographical 
references, index. $26.00 (cloth), ISBN 0-684-82975-4. 
 
Reviewed by Ulf Zimmermann, Kennesaw State University. 
 
Lenin made his antepenultimate public appearance to defend his desperate 
readmission of private trade and agriculture in 1922, declaring that the 
state would, after all, retain control of what he christened the 
"commanding 
heights." Yergin and Stanislaw are concerned to explain why the control of 
these heights has increasingly shifted from the state to the market in 
recent years. They do this by giving not just a global gazetteer of 
twentieth-century politics and economics but also an equally insightful 
guide to the ideas and individuals behind this shift. 
 
With the failures of capitalism in the 1920s and 1930s, and the initial 
successes of governments east and west, both in the New Deal and in Soviet 
central planning, and in the war, government seemed, after that war, the 
unequivocal solution to problems such as the unemployment the market had 
earlier permitted. Countries around the globe adopted a variety of 
government-managed approaches to running their economies, from the Soviet 
extreme and its many imitations to strategic nationalization as in Britain 
and government-business-labor corporatism in Germany down to government 
regulation in the United States. 
 
India's independence from British rule as of 1947 marked the beginning of 
the end of colonialism, and all the newly emerging countries, like India, 
saw state control as the only alternative. (It had, after all, worked in 
industrial latecomers like France and Germany, but, mutatis mutandis, many 
of these new nations did not let go of their industries when they could go 
it on their own--and ultimately strangled them.) Indian policymakers, for 
example, eventually recognized the great entrepreneurial successes Indians 
were achieving, as in the U.S., were possible only once they were out of 
India and its overregulated economy. 
 
Where most of these purely state-centered efforts failed, many of Asia's 
countries succeeded through a mix of government intervention and market 
forces. Where India was the model for the "Third World," Japan and its 
Ministry of Trade and Industry demonstrated that there could indeed be such 
a mix as Confucian Capitalism-- Max Weber's claim to the contrary 
notwithstanding. As we know from the current headlines, though, this 
approach seems to have succumbed to the debilitating excesses of 
inbreeding. 
 
In the U.S., government regulation had become necessary, first to control 
the railroads in the late 19th century, and then in banking and other 
financial industries. But by the end of the 1960s, after innumerable new 
regulatory agencies had been created--several, ironically, by the Nixon 
administration--many perceived free enterprise to be straitjacketed by 
regulation, and it was, just as ironically, Ted Kennedy who started the 
deregulatory trend in Congress with the airline industry. 
 
Direct state control seemed to have shackled industry altogether in 
Britain, 
and in getting the government out of business it thus became the model for 
the market reform that has been sweeping the world in the nearly two 
decades 
since. Here as elsehwere Yergin and Stanislaw nicely bring in those 
theories 
and personalities which compelled action. To give but one pivotal example, 
Keith Joseph, a member of parliament, had turned into the "mad monk" who 
preached relentlessly about entrepreneurship and initiative and the wealth 
these created for everyone in the nation. He found intellectual support in 
the economic theories of Friedrich von Hayek and Milton Friedman, which are 
at the center of this shift to markets, and created a think tank to develop 
and broadcast their ideas the length and breadth of what was left of the 
British empire. Most important, Joseph persuaded parliamentary colleague 
Margaret Thatcher to reread Hayek--and soon enough she would be leading the 
party with this ideology, and shortly thereafter the whole country. 
 
Initially, of course, all her reforms, chiefly privatization, were 
unpopular 
in the extreme. But her Falklands victory seemed to vindicate her and 
enabled her to press on with them. (Argentina's defeat, meanwhile, likewise 
prompted its leadership to redirect its economic policies in the same 
way--with great success.) While Thatcher's radical belt-tightening created 
much unemployment at the time, today Britain is far behind the continent in 
its unemployment rate. 
 
Just how badly excessive state control stifles initiative and innovation 
and 
hence prevents real economic growth was best revealed by the fall of the 
Berlin Wall which allowed more than the occasional peeks the rest of the 
world had had behind the Iron Curtain. The exposure of the East German 
economy--that much-touted exemplar of communist economic progress--showed 
palpably just how poorly the politics and economics of central planning had 
worked and showed the truth of what the workers said of their workers' 
states: "They pretend to pay us, we pretend to work." 
 
The implosion of the Soviet system thus discredited all kinds of statism, 
and that sped up trends towards markets already underway. With 
denationalization in Britain and deregulation in the U.S., their economies 
are booming, and countries everywhere are increasingly following suit, from 
continent to continent, as Yergin and Stanislaw richly depict. Yet they 
rightly wonder whether markets will really deliver the goods in terms of 
economic growth, employment, and higher standards of living for all. 
 
While they are partial to the market case, they do not neglect the signal 
cautionary tales of regulatory laxity that can be spun from, say, the 
sorrily underpublicized savings and loan debacle. While there may have only 
been some of us who understood and weren't happy with how that was handled, 
there'll be many more of us who'll understand and won't be happy with what 
we're getting in health care. As these cases demonstrate, markets don't 
always exercise the self-restraint we might like them to, and Yergin and 
Stanislaw therefore see government stepping in more as a referee than a 
major player itself. So now the question is, What are the rules of the game 
it must enforce? The way health care is going, it seems clear that the 
public will ultimately demand more regulation (as it may perhaps in the 
financial markets that are increasingly dictating not just our economic 
well-being). 
 
Having interviewed practically the whole pantheon of intellectual and 
political leaders involved in these developments around the world, Yergin 
and Stanislaw are able to dramatize political history and even the dismal 
science: character, atmosphere, and the telling anecdote make their volume, 
compendious as it is, into a compelling read for students and lay readers. 
Even academics will find much here, though they may wish for a bit more 
critical analysis of a politics that leaves government as mere referee 
between those who control the markets and those who have no choice but to 
shop in them. 
 
Library of Congress call number: HD87.Y47 1998 
Subjects: 
Economic policy 
Markets 
Privatization 
Deregulation 
Economic history -- 1945- 
Competition, International 
 
Citation: Ulf Zimmermann. "Review of Daniel Yergin and Joseph Stanislaw, The 
Commanding Heights: The Battle Between Government and the Marketplaces That 
Is Remaking the Modern World," H-PCAACA, H-Net Reviews, August, 1998. URL: 
http://www.h-net.msu.edu/reviews/showrev.cgi?path=8156903556446. 
 
Copyright c 1998 by H-Net and the Popular Culture and the American Culture 
Associations. It may be reproduced electronically for educational or 
scholarly use. The Associations reserve print rights and permissions. 
(Contact: P.C.Rollins at the following electronic address: 
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