Western decline is a bit of a theme in publishing at present. There's Ian Morris's terrific Why the West Rules For Now. Dambisa Moyo wrote How the West Was Lost, which I haven't read (& hasn't been well reviewed). And there are plenty of titles which make it implicit by their focus on the rise of China.

David Marquand's The End of the West has a particular angle revealed by the subtitle: The Once and Future Europe. The European Union and its workings have a special ability to seem unbelievably dull, rather like trade negotiations, even if you think the subject is profoundly important. (The one time I ever laughed at a book about the EU was the Very Short Introduction to it, which revealed the existence of a sub-committee called the 'horizontal working party on drugs'.) So it is a measure of success that David Marquand's book is interesting and highly readable.

That's because it's about the politics, not the institutional mechanics, of the EU. It starts with the post-war political context, and it is always good to be reminded that the directives of today have their origin in the determination of some visionary politicians to ensure there never could be another murderous civil war between Europeans – and the threat to this vision of knitting peace into the fabric of the continent was why the Bosnian war was such a test of EU politicians in the 1990s. Marquand points out that the EU's founders were not visionary dreamers but practical men. But he adds:

“They had an exceptional capacity to see beyond their noses: to imagine a different future and a path toward it.” (p25)

(Readers of my book will know that achieving a long term focus in practical decisions is a current obsession of mine.) Their tactic was to achieve the vision precisely through knitting, stitch by stitch, a practical, sturdy, institutional structure. But Marquand's argument is that this tactic has reached its limit. The EU has become submerged in technocratic practicalities and now the high politics needs to come to the fore. He spends some time describing the disconnect between the elite project of the EU and the imperatives of popular democracy. This disconnect is most apparent in the European Parliament (of which he was once a member), which claims popular legitimacy because there are elections, but in reality turnout is low, popular indifference high, and MEPs are sitting in the First Class carriages of the gravy train.

I don't agree with some of Marquand's specific points but do agree that the questions he raises must be addressed if the massive success of the EU is to be sustained. These include – all too obviously – the mismatch between a single monetary policy, separate fiscal policies and an ill-regulated banking system; the role of religion in the European ideal; the boundaries of Europe, especially in the present 'Arab spring'. Not small questions, then. This book is a good place to start thinking about them without getting bogged down in the acronyms and dull detail of so much that is written about the most important political structure shaping the lives of 300m Europeans.

The Master Switch by Tim Wu

Guest Review by Rory Cellan-Jones (@ruskin147)

I have a confession to make: I wasn't really
looking forward to reading The Master Switch. From what I'd heard about this
important book, I had imagined a worthy but dull treatise
on net neutrality, an issue which has excited fierce passions in the US, but
has, until recently at least, left the UK cold. But I was completely wrong.
Until the very end, The Master Switch is not really about the principles
governing the internet –  rather, it's a rip-roaring saga about the
communications and media industries, peppered with extraordinary incidents and
with a cast of larger than life characters.

So we have Alexander Graham Bell and his battle
with telegraph monopolist Western Union over the telephone – “a match to
the death”, as Timothy Wu puts it. We see the Jewish immigrants Adolph Zukor and Carl
Laemmle taking on the New York-based Edison Trust which held absolute sway over
the infant movie industry – then, with other independents, moving to Los
Angeles and creating the Hollywood studio system, with an even more ferocious
grip on moviemaking and distribution. 

We track the rise of radio and television, each
beginning with idealistic independent-minded pioneers, and quickly captured by
what Wu calls information empires – RCA in radio, NBC and CBS in television.

We see smart inventors broken by the power of these
empires. In 1934 Edwin Armstrong comes up with something he calls
“frequency modulation” radio, or FM.  But RCA, fearing the
innovation would mean more radio stations and so dilute its monopoly power, responds
first by belittling Armstrong's invention, then effectively stealing it and
waiting for him to sue. Eventually, twenty years after inventing FM, he throws
himself out of his New York apartment.

We meet Henry Tuttle and Leo Beranek, who invent a
bizarre device called the Hush-a-Phone to allow confidential telephone calls, and
find themselves in an endless legal battle with the telephone monopoly
AT&T, which prohibits “foreign attachments”. Eventually AT&T
is defeated, too late for Tuttle to market his product, but the ruling
foreshadows the eventual break-up of the monopoly.

Wu's thesis, inspired by Joseph Schumpeter's
theories on creative destruction, is that each information industry goes through
a cycle of life and death, with the new destroying the old, as the telephone
killed the telegraph. But he sees each new industry becoming dominated by
powerful corporations, allied with the law and government, seeking to slow the
pace of innovation in order to maximise their profits and put off their own
destruction.

Until, that is the arrival of the internet. In this
case, he's more optimistic about the technology's innate ability to route
around monopoly power, detailing with glee the story of how the AOL Time Warner
merger unravelled. The internet, he says, “defies every expectation one
has developed from experience of other media industries, which are predicated
on control of the customer…. the internet abdicates control to the
individual; that is its special allure, its power to be endlessly surprising,
as well as its founding principle.”

But the author does fear a new battle for the soul
of the internet between open and closed systems, represented by Google in the
open corner and Apple, maker of beautiful but locked-down devices.  He
ends with a battle-cry for what he describes as a “separations
principle”, calling on regulators to keep content creators, network
operators and device makers apart. The aim is to ensure that the vertically
integrated monopolies that ran the telephone, broadcasting and movie industries
in the 20th century are not replicated on the internet in the 21st.

So there is an ample supply of economics in The
Master Switch to satisfy anyone with an interest in how innovation ebbs and
flows through the information industries. But luckily for those of us whose
heads begin to hurt after too much theory, there's enough plot and vivid characters
to make a gripping Hollywood blockbuster.

The holidays must be approaching – at least, I'm getting that irresistible urge to sit in the garden and read books rather than sitting at my desk writing articles. I polished off Tim Harford's terrific new book Adapt, but am not allowed to review it until near its publication date. I'm midway through David Marquand's Death of the West, which is very thought-provoking especially after David Runciman's lecture on 'the democratic trap' during the week.

In the absence of a review, however, it seems well worth pointing readers of this blog to Jeff Madrick's excellent feature in the current New York Review of Books covering books about the financial crisis. One of the titles he covers, the report of the Financial Crisis Inquiry Commission, has been reviewed on this blog by Phil Thornton. Madrick calls it: “[T]he most comprehensive indictment of the American financial failure that
has yet been made” This in a field which includes indictments such as Matt Taibbi's utterly brilliant Griftopia.

The article also covers the Charles Ferguson documentary Inside Job (the movie website – slow to load), well worth viewing, and two other titles for which I'm currently seeking reviewers for The Business Economist. Volunteers welcome! They are

Regulating Wall Street: The Dodd-Frank Act and the New
Architecture of Global Finance

edited by Viral V. Acharya, Thomas F. Cooley, Matthew
P. Richardson, and Ingo Walter

                              

Reforming US Financial
Markets: Reflections Before and Beyond Dodd-Frank

by Randall S. Kroszner and Robert J. Shiller, edited
and with an introduction by Benjamin M. Friedman

    

This week has of course brought publication of the UK's own polite inquiry into the crisis, the Interim Report of the Vickers Commission. The analysis in the document is compelling, but the proposals feeble, the outcome of intense lobbying by the banks. I wrote about its inadequacies in the FT (registration/£), along with Professor Jonathan Haskel, earlier in the week. Will Hutton has a strongly critical column about it in today's Observer.

In his article, Madrick notes that the US at least has the Dodd-Frank Act and that didn't go far enough:

“The Dodd-Frank Act could have been much more effective. It could, from
the outset, have set high capital requirements—the amount of money that
banks and other financial institutions have to put aside for possible
losses. It could have broken up today’s enormous banks, which have grown
rapidly in size since the crisis. Measured by their profits, the six
largest financial institutions in the US now
account for 55 percent of all banking assets. It could have divided the
banks by function in order to reduce the overlapping of investment
activities, which increases the chances of damage to the entire
financial system. For example, those banks that accept federally insured
deposits from savers could have been restricted to making loans to
consumers and businesses.”

We in the UK haven't got anywhere yet in terms of banking reform, and it looks like whatever emerges from the Vickers Commission will be even less effective.

Time to put away your Kindles and iPads for reading? I'm excited by the news of an innovative new format for books. It has paper pages between somewhat more substantial covers, and you can easily pop it into a pocket or handbag for convenience, or hold it in one hand while reading. Even better, there's no recharging required, once you buy it you own it, and you can give it away or resell it.

This innovation – an ultra-small paperback on thin paper and set in a new font for clarity – will be called the Flipbook in English and will be launched by Hodder in June. They arrived first in the Netherlands in 2009, and are called dwarsliggers in Dutch. I love small books – perfect for commuting and delightful as artefacts in their own right. Now all I want is print-on-demand meets dwarsligger so I can get the latest economics books in that format.

Yesterday evening I heard David Runciman give the Princeton Annual Lecture about his forthcoming (2012) book The Confidence Trap. The title of the lecture was 'Can Democracy Cope?' – there's a rather fuzzy snapshot below of Her Majesty looking on as he spoke. It was certainly enough to make me eager to read the book when it's out.

The question David posed was whether the long run (over decades) success of democracies is coming to an end given the setbacks the leading democracies have faced in the past 10 years – unsuccessful wars in Afghanistan and Iraq, the intractable public finance problems, possible environmental catastrophe and the plausibility of autocractic Chinese capitalism as a rival model. He noted it was hard to be sure there is a crisis of democracy, given that people think there's one a decade but in fact there have only been 2 or 3 – the 1890s, 1930s and possibly 1970s.

He then outlined three traditions of thought about the nature of democracy.

One, dating back to Plato and including Burke and Nietszche, is that democracy is a sham – the elites tell the people what they want to hear and the people elect those who say the pleasing things, and real power is exercised back stage. (The 'confidence trick')

A second, dating from Paine and Condorcet at the end of the 18th century, is that democracy needs to pass a critical threshold to survive but once past that it can defeat its enemies and becomes self-sustainingly robust. (The confidence threshold)

The third – and this is his preferred model, which he attributes to Volume 2 of Tocqueville's Democracy in America – is that democracies, once successful, become complacent. They succeed so well that people don't have enough to worry about and behave in ways that undermine success. This is the confidence trap.

This reminded me of the famous El Farol oscillating equilibrium in economics, and seems highly plausible. I think I'd add a time trend on to the cycles David identifies, that of the increasing complexity of modern democracies and economies, and the consequent tension between technocracy and populism. (This was noted by Daniel Bell in The Coming of Post-Industrial Society.)

It was highly stimulating. For a flavour of it, David was on Start the Week. If you missed both, you'll have to wait for the book next year.