Author Archives: Diane Coyle

Decarbonising travel – room for optimism?

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Our new Perspectives title, Good To Go: Decarbonising Travel After the Pandemic by David Metz is out. It looks at how the pandemic has affected pre-existing trends in travel – not as much as optimists might have hoped, is his conclusion, although recognising that it is probably too early to know whether commuting patterns will change permanently. Nevertheless, improved neighbourhood planning and flexible working could capture some of the benefits of the pandemic years even if there is a significant reversion to the old normal.

However, One of David’s points is that people relish mobility, with faster travel always having translated into travel further. That means that tackling the contribution of transport to solving the climate challenge will need technological contributions. The book holds out some hope for electric vehicles and digital tools contributing to decarbonising transport. But as David points out, the system is complex, involving economics, demography, technology, policy and human behaviour. There is a lot of wishful thinking about how easy it will be to change. Complexity means (as so often in policy) there is no easy solution. The book outlines a range of investments and policy interventions that will be needed to decarbonise travel.

Good to Go? is a terrific addition to our Perspectives roster on transport: David’s previous book, Travel Fast or Smart?; Transport for Humans: Are we nearly there yet? by Pete Dyson and Rory Sutherland; and Are Trams Socialist? Why Britain Has No Transport Policy and  Driverless Cars: On a Road to Nowhere  by Christian Wolmar. They complement each other wonderfully  – a great collection for transport nerds! As a special offer for readers of this blog, all five (£71 if bought individually) are available for £45 plus postage if you email sam@londonpublishingpartnership.co.uk.

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Economics – people or facts?

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In preparing for a small workshop I’ve co-organised* in Oxford tomorrow, on “Rebooting Welfare Economics”, I’ve been browsing my bookshelves. Two titles jumped out: Ariel Rubinstein’s wonderful Economic Fables (winner of the first ever Enlightened Economist annual prize in 2012 – I’ve only just realised this blog is 10 years old) and John Hicks’s The Social Framework. Hicks states (p3 of my 1947 edition): “Economics studies facts and seeks to arrange the facts in such ways as make it possible to draw conclusions from them.” The positivist claim to separate ‘facts’ and positive knowledge from the normative shines out (see Chapter 3 of my Cogs and Monsters). Rubinstein says (p15): “Economic theory is concerned precisely with the abstract concepts related to the interaction between people.”

People or facts? I’m in the people camp.

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*With Eric Beinhocker, Tim Besley, Mark Fabian and Margaret Stevens.

Co-operation vs sovereignty in an unequal world order

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Global governance is understandably something of a preoccupation as economic globalisation seems to be in retreat at the same time that the scale and intensity of global challenges – climate change, the AI race, actual or simmering conflict, organised crime – is increasing. The Bretton Woods institutions – IMF and World Bank – established in the wake of World War Two remain important and powerful, and will have a lot on their plates in the next year or two, including the possibility of a new debt crisis alongside a surge in poverty and hunger. This context raises two questions. One is what is their guiding philosophy in terms of economic analysis and policy recommendations going to be now the old Washington Consensus version of conditionality has been more or less ditched? The other is whether they can help address the new kinds of challenges, or whether instead new institutions are needed?

They were forged out of a crisis of course, but in The Meddlers: Sovereignty, Empire and the Birth of Global Economic Governance Jamie Martin traces their forbears in the international economic institutions established near the beginning of the 20th century. The key issue he highlights is on the one hand the delicate balance between mutually beneficial co-ordination and voluntary loss of sovereignty among peer countries, and on the other the exercise of power by some countries over others (Imperial powers over colonies or later the US over its debtors) at the expense of the latters’ sovereignty. Co-ordination and co-operation require ceding some decision-making ground but when there is a parity of power this expands the opportunities or benefits each party experiences. However, the international institutions also embed inequalities of power – symbolised by the Asian crisis image of an IMF bureaucrat (Michel Camdessus) leaning over a local politician (Indonesia’s President Suharto) signing up to loan conditions.

Some technocratic institutions governing for example international post or shipping have lasted throughought the century plus, while the BIS (established in 1929/30) is an interesting example of an organisation with a broader mandate yet lasting throughout the 20th century and beyond, despite its missteps during the 1939-45 conflict. Other pre-WW2 international bodies such as the Economic and Financial Section of the League of Nations fell with the implosion of the international order at the outbreak of war. The book argues that the context of post WW1 reparations, the tensions in the European empires, the growth of US economic power and the pressures of the gold standard and the tariff wars of the 1930s all contributed to their downfall. International co-ordination was both essential and impossible.

The lesson for the 21st century, it concludes, is that today’s context of shifting economic power and economic crisis pose similar challenges for the Bretton Woods institutions. The history of earlier institutions suggests that it is fundamentally hard to resolve the core dilemma of a need for co-operation with the desire for sovereignty in a world of unequal power: “Tweaks to existing international institutions, like the IMF and World Bank, may be insufficient to produce a more stable reconciliation of global governance and democratic politics.” But what form should new institutions take? This very interesting book leaves the question hanging.

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Predecessors and outsiders

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I’m a sucker for books about innovation, and enjoyed reading Gavin Weightman’s Eureka: How Invention Happens. It’s a jolly account of five 20th century inventions: flight, TV, bar codes, personal computers and mobile phones.

Despite the title, the main argument is that there is no single Eureka moment. While we often credit some well-known individuals (such as the Wright brothers or John Logie Baird) with an invention, all inventions rely on bringing together a prior series of other inventions. For example, Babbage never could build his mechanical computers; computing had to wait for electronic valves, transistors and then chips, as well as the insights of Turing and Von Neumann. Predecessor inventions are essential. Yet at the same time, it is often an outsider – such as the Wrights or Baird – who question received wisdom and join the dots to bring the new thing into being. It takes an outsider to not know that something isn’t possible…

The most interesting chapter in a funny way was the one on barcodes (which also feature in Tim Harford’s Fifty Things…). Apart from the fact that they’re less obvious as ‘an invention’, the corporate aspect to this was very interesting. Tech companies were pitching a product to supermarkets that would cost a good deal in upfront investment and needed co-ordination across competing chains to set technical standards. Retail has undergone some huge, productivity-enhancing technical changes over time. It has gone from entirely labour-intensive (shelf stacking, checking out, packing) to using increasing amounts of capital (conveyor belts, scanners) and free labour (customers doing the packing), then still more hard and soft capital (automated checkouts with scanners and sophisticated software) and free labour (we do our own scanning now too) to eventually Amazon-style stores where the paid human labour has gone and the free human labour reduced, but the software greatly augmented. All of this requires barcodes.

It was interesting to learn about some of the prior contributions to the iconic innovations, and the book is an easy read thanks to a lot of biographical background on the various people, often eccentric. The computer and mobile phone histories are ones I’ve read a lot about before.  I think Francis Spufford’s Backroom Boys (albeit only UK focused) is a far better read, if you’re only going to read one general interest book about a range of inventions. But Eureka is very enjoyable, and looks at different technologies from a US perspective, & I’d recommend it.

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Domestic solutions to global problems

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Trade Wars are Class Wars by Matthew Klein and Michael Pettis is an excellent account of the global imbalances that have emerged in the 21st century, contributing to the GFC among other consequences. “A core argument of this book is that the distribution of purchasing power within a society affects its economic relations with the rest of the world,” they write. They trace the imbalances problem to the inequailities of income and wealth within China and Germany that mean domestic demand in each case is inadequate to absord domestic production, so the two run large current account surpluses with the rest of the world. “People who cannot buy what they produce must rely on foreign demand for their output.” Hence the ‘class wars’ of the title.

While the US should have been in the same position, given how unequal it is, foreign demand for US assets means it has run a consistent deficit instead: “For more than six decades the United States has satiated savers in the rest of the world at the expense of its own workers” – the dollar being an “exorbitant burden” in this perspective. (Another great virtue of the book is spelling out the fact that balances balance and so the capital account will be in deficit if the current account is in surplus; and if some people are saving – eg the rich in surplus countries – others will have to be borrowing – Greece, or ordinary Americans before the GFC.)

A lot of the commentary has focused on the bilateral US-China trade deficit and the “China shock” due to offshoring, but Klein and Pettis argue that the link is less direct than Chinese vs American factories, and must include an account of capital flows. It portrays inequality within China and Germany, rather than China’s low-wage manufacturing capabilities, as the root cause. The book is just as critical of German as of Chinese domestic policies: “Germany’s ideological and constitutional commitment to fiscal rectitude caused lasting harm to ordinary Germans.” The harm has taken the form of welfare cuts, eroded protection in the labour market, massive under-investment in infrastructure. One doesn’t think of Germany as particularly unequal. Yet although the average German is twice as rich as the average Spaniard, the median German is much poorer – about as wealthy as the median Polish person.

The book refers back to the writings of John Hobson in the early 20th century, when the US was the surplus economy in its gilded age, and Britain the bearer of the reserve currency burden. In Imperialism: A Study (1902) Hobson wrote: “When the distribution of income is suchas to enable all classes of the nation to convert their felt wants into an effectiove demand for commodities, there can be no over-production, no under-employment of capital and labour, and no necessity to fight for foreign markets.” Inequality and the competition for overseas markets led to what what he described as “the greed of empire.” It didn’t end well a century ago, and it isn’t going so well now.

Trade Wars are Class Wars is a tale of three economies, China, Germany and the US. I’m not sure where others fit in – including the UK, also highly unequal but with a (Brexit-augmented) current account deficit. (Greece gets a walk-on role.) Still, I found the argument persuasive and in any case reducing within-country inequality from today’s socially-destructive levels can only be a good thing. It’s a terrific book.

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