Tag Archives: history

Pursuits, grand and lesser

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Sylvia Nasar’s [amazon_link id=”1841154563″ target=”_blank” ]Grand Pursuit: The Story of the People who Made Modern Economics[/amazon_link] was published in 2011, but I only picked up the paperback in the holidays and have just finished. It’s a rattling good read, as you would expect from the author of [amazon_link id=”0571212921″ target=”_blank” ]A Beautiful Mind[/amazon_link], and also very thoroughly researched. But I was disappointed, perhaps due to overly-high expectations. Some of the chapters are simply excellent, but the book doesn’t add up quite to the sum of its parts.

[amazon_image id=”1841154563″ link=”true” target=”_blank” size=”medium” ]Grand Pursuit: The Story of the People Who Made Modern Economics: A Story of Economic Genius[/amazon_image]

I did pick up lots of delightful new facts, always a pleasure to my magpie mind:

– Alfred Marshall was a feminist, to the extent that he financed an essay competition for female students and contributed a significant sum of £60 to the construction of Newnham, one of the first women’s colleges in Cambridge;

– Beatrice Webb influenced Winston Churchill to say at one stage (1906): “I should like to see the State embark on various novel and adventuresome experiments,” and went on to advocate nationalisation of the railways, a job guarantee and a minimum standard of living;

– a visit to a Carnegie Steel plant persuaded Beatrice Webb that technology would replace human labour;

– Keynes did not like the Webbs, especially in their pro-Soviet phase. On being asked to contribute an essay celebrating Beatrice’s 80th birthday, he said: “The only sentence that came to my mind spontaneously was that, ‘Mrs Webb, not being a Soviet politician, has managed to survive to the age of 80.'”

– Joan Robinson does not emerge as a likeable character either, but this comment of hers is amusing: “We cannot be recommended to overthrow anything merely because economists have talked nonsense about it.”

– the number of economists working in Washington rose from 100 in 1930 to 5,000 in 1938;

– Isaiah Berlin was in the British Embassy in Washington during World War 2, writing dispatches on the various activities of Keynes, on the one hand, and Milton Friedman, on the other. One of Friedman’s policy innovations was introducing the withholding of income tax at source by employers. It was, wrote home Berlin, “A tax bill of unprecedented dimensions.”

There is a lot of interesting material here. I think the problem for me is that it doesn’t hang together to tell the story of modern economics as promised. This is partly due to the selection of characters: was it really for reasons of gender balance that Beatrice Webb and Joan Robinson feature so prominently? But the others are obvious – Marx, Marshall, Hayek and Schumpeter, Keynes and Samuelson. I think Mill and other Victorians are a big omission – the book leaps straight to Marshall.

There is also so much good storytelling about the individuals that the big picture on the ideas front is lost in detail. It never quite emerges as either a linear history of thought or a clash of ideas (which [amazon_link id=”0393343634″ target=”_blank” ]Keynes-Hayek: The Clash That Defined Modern Economics [/amazon_link]did very effectively). Nor do you get the sense of a whole intellectual milieu, as in the brilliant [amazon_link id=”0571216102″ target=”_blank” ]The Lunar Men[/amazon_link] by Jenny Uglow (one of my all-time favourite books); the individuals are too prominent. Nasar has much more on the historical context of the ideas than does Heilbroner’s [amazon_link id=”0140290060″ target=”_blank” ]Worldly Philosophers[/amazon_link] but the links between the personal experiences of her subjects and their work don’t quite come off.

This is picky because it’s a good read and would be informative for students or newcomers to the history of economics. Looking back at a few reviews, it was obviously very well received when first published. I was just hoping for something better than [amazon_link id=”068486214X” target=”_blank” ]The Worldly Philosophers[/amazon_link], and it doesn’t live up to my hopes. [amazon_link id=”0691148422″ target=”_blank” ]Economics Evolving[/amazon_link] by Agnar Sandmo is the best recent book I’ve read on the history of economics, a really excellent account but perhaps too hard for newbies. Put it down to Seasonal Affective Disorder.

 

The hollow economy

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Looking for the next small (pre-party) book, I picked up G.D.H. Cole’s little 1938 Pelican [amazon_link id=”B000SHWV16″ target=”_blank” ]Persons and Periods[/amazon_link] (I have a 1945 edition). It’s a collection of essays by the economist and leading Fabian intellectual on Daniel Defoe (somebody who would now be considered a leading economic journalist, a Martin Wolf of his day, as well as a famous novelist) and his times.

[amazon_image id=”B000SHWV16″ link=”true” target=”_blank” size=”medium” ]Persons & Periods[/amazon_image]

There are some amusing parallels with modern debates about the state of the nation. In Defoe’s writings, and evidently in 1938 too, people bemoaned the dominance of London. “In 18th century England all roads, by land or by water, seemed to lead to London. …. London was, in Defoe’s day, the only town in England that could be reckoned large. … No wonder London seemed to Defoe and his contemporaries a prodigious place. overshadowing the whole country with the multitude and wealth of its consuming public.”

The following chapter is about ‘Roads, rivers and canals.’ In the 18th century, as now, travellers constantly complained about the state of the transport network, although the roads were being improved. “The trouble was not that the roads were getting worse but that they were being called upon to carry a quite unprecedentedly heavy volume of traffic.” Cole argues that the 19th century development of the canals, launched by the Duke of Bridgewater, and then railways, changed the location of people and activity: “In effect, with the advent of the canals, England ceased to be hollow.” The era of the great manufacturing cities of the north and Midlands followed.

Lessons here for our current ‘hollow’ economy? For a rebalanced economy, where the new infrastructure goes will be important.

The (uncomfortable) lessons of history

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I’m not going to add to the ink/electrons expended on the UK economic policy proposals emerging from the party conferences so far. Reading about them so far – and with more to come next week no doubt – sent me back to a couple of fascinating books I have on my shelves. One, published in 1958, is [amazon_link id=”B0000CK05Q” target=”_blank” ]British Economic Policy Since the War [/amazon_link]by Andrew Shonfield. The other is a 1984 book with the superb title [amazon_link id=”0140225021″ target=”_blank” ]The British Economic Crisis: Its Past and Future [/amazon_link]by Keith Smith (as if the country had transitioned from having an economy to having a permanent economic crisis – well, it can feel like that).

One of the dispiriting things is how much of the diagnosis seems relevant in successive generations.

Shonfield writes in his concluding chapter:

“The central failure of postwar Britain is inadequate investment. So many of our difficulties flow from this. Because our wealth grows more slowly than the wealth of other countries, our prices rise faster… the balance of payments is like a raw and exposed nerve… It is bad for the spirit of any country to live with so little room for manoeuvre. There is a noticeable meanness of attitude in the British approach to the arts, to public buildings, to almost any kind of cultural activity. … It is a great depressive to live in a constant atmosphere of ‘make do’, to exist in a place where almost any effort to do anything or go anywhere leads you pretty soon into a bottleneck of some kind.”

Obviously very much of its time, but many British readers now would feel a ping of recognition.

[amazon_image id=”B0000CK05Q” link=”true” target=”_blank” size=”medium” ]British economic policy since the war (Penguin specials)[/amazon_image]

Smith, nearly 30 years later, wrote:

“If output, employment and incomes are to grow in Britain, then the problems of low and poorly directed R&D activity and low industrial investment, which are at the core of Britain’s economic decline, must be overcome. … Britain’s manufacturing performance is so poor that consumption increases have not fed through into increased demand for British products, and hence to investment in British industry. Consumption increases have been spent quite disproportionately on imports.”

Which crisis would that be?

As others have pointed out – for example, Stumbling and Mumbling – UK business investment is weak, weak, weak. The balance of payments deficit was equivalent to 3.8% of GDP last year, the biggest gap since 1989.

I’d like to see the policy debate acknowledge the long-term context.

Neglected mental furniture

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There’s an interesting article in the new edition of The American Conservative about A.J.P. Taylor. (This journal isn’t one of my regular reads – the wonderful Arts & Letters Daily brought it to me.) The title is ‘A.J.P.Taylor is History’, the double entendre being that he shaped how we conceive of modern history, but is now forgotten. Surely not? I asked Twitter. It emerged that unless you’re of a certain age (i.e. middle aged), the answer is yes, Taylor is a neglected figure.

This is a shame. His scholarly work was important. [amazon_link id=”014013672X” target=”_blank” ]The Origins of the Second World War[/amazon_link] was of course controversial but it did put the spotlight on the fact that conditions in Europe were conducive to conflict, including the economic situation (as Keynes had forewarned in [amazon_link id=”1602390851″ target=”_blank” ]The Economic Consequences of the Peace[/amazon_link]). He was also one of the first media dons, a terrific broadcaster and populariser. These people are rarely popular among their colleagues but serve an important purpose, and act as one of the (too) few conduits between academic research and the taxpayers who fund it. Here he is on the BBC talking about Europe in 1939 and here in the BBC Archive talking about Winston Churchill.

[amazon_image id=”014013672X” link=”true” target=”_blank” size=”medium” ]The Origins of the Second World War[/amazon_image]

The discussion this morning about Taylor set me to thinking about the writers who formed my mental furniture in the late 1970s, in the sixth form and heading off to university. It was a kind of accident that turned me into an economist, history having been my main interest at school. I just pulled off my shelves as well Lytton Strachey’s [amazon_link id=”019955501X” target=”_blank” ]Eminent Victorians[/amazon_link], Christopher Hill’s [amazon_link id=”0140135359″ target=”_blank” ]Lenin and the Russian Revolution[/amazon_link], Herbert Butterfield’s [amazon_link id=”0393003183″ target=”_blank” ]The Whig Interpretation of History [/amazon_link]and Eric Hobsbawm’s [amazon_link id=”0140257888″ target=”_blank” ]Industry and Empire[/amazon_link], in beaten up old Penguin editions.

I don’t know what students read now, what shapes their mental landscape. Or for that matter what middle-aged folk in other disciplines or from outside the UK read in their formative years?

 

Lessons from the past

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My Tube reading lately has been chapters from an excellent new book edited by Nick Crafts and Peter Fearon, [amazon_link id=”0199663181″ target=”_blank” ]The Great Depression of the 1930s: Lessons for Today[/amazon_link]. The comparison between the present day and the 30s has made frequent appearances in post-crisis commentary, so work by economic historians investigating the similarities and differences in forensic empirical detail is most welcome. The cast list of contributors for this book is impressive too, including Charles Calomiris, Timothy Hatton, Barry Eichengreen and other econ history stars.

[amazon_image id=”0199663181″ link=”true” target=”_blank” size=”medium” ]The Great Depression of the 1930s: Lessons for Today[/amazon_image]

In the first two chapters, the editors first give an overview of international experience in the 1930s, and then what lessons that might hold for the present day. They would serve as a stand-alone overview of the issues. The big headline is that among all the causes of the Depression in the 30s, the constraint imposed by the gold standard combined with US and French accumulation of gold stands out for its causal role. The collapse in trade is presented here as a consequence, albeit one that quickly fed into the vicious downward spiral.

For today, that means the monetary response emerges the most important policy difference, a lesson truly learned and applied by the likes of Ben Bernanke and other central bankers. And for all that some groups in some countries are currently experiencing dreadful rates of unemployment, the cost in loss of jobs and human misery has been nothing like as great now as it was then. It is really encouraging to read that policymakers have not in fact been condemned to repeat the same mistakes as their forbears.

This raises the question about the Eurozone, however, the subject of the book’s final chapter by Barry Eichengreen and Peter Temin. Its conclusions are far more depressing. The authors see little room for optimism about any possible route out of the crisis – leaving the Euro is difficult and will cause turmoil, staying in is difficult and will cause political and economic instability. The only possible hope is for European governments to deliver on policies that might stimulate growth. The preceding chapter by Kris James Mitchener and Joseph Mason is somewhat sobering too, as it asks, having avoided earlier policy mistakes, how do countries now exit from their expansionary policies without disrupting the economy too much? They suggest that exit from the policies responding to the Great Depression did not occur until the 1950s; the implication is that we should be thinking on a similar timescale now.

There is much fascinating material in between these early and late chapters – this is a super collection.

I’d like to have read more about France in the 30s, as I hadn’t before realised that its gold hoarding had been larger in scale than America’s – most accounts focus on US policy. The section on the Nazis’ economic appeal is rather sobering, emphasising their ability to prioritise reducing unemployment, introduce large-scale public works, and at the same time keep wage pressure down by abolishing unions and collective bargaining.

The other country that brought unemployment down relatively quickly and realtively far in the 1930s was Britain, via a housebuilding programme – housebuilders then were able to respond quickly to low interest rates, unhampered by mad planning laws, in contrast to today. Another key difference between countries lay in the banking system, with the UK’s then in a much healthier state than the US’s. That balance has reversed now, and it is Britain’s banks that are failing to lend for new investment.

All in all, and continuing one of the themes of yesterday’s post on global governance, this book is an excellent advertisement for the relevance of economic history.