Tag Archives: history

European elegy

Posted on by

My non-econ reading lately has been Timothy Garton Ash’s Homelands: A Personal History of Europe. I describe it as an elegy because of its melancholy narrative trajectory: from the 2nd world war and ‘never again’, through the ups and downs of the EU project, to today’s brutal invasion of Ukraine, “illiberal democracies” tearing up the hard-won freedoms, and the pressures of mass immigration – which will only get more intense as climate change leads to conflict and destruction.

Like the author, I mourn the way our European citizenship has been stripped from those of us in the UK, by a slender margin, by voters who were lied to by mendacious and greedy politicians and businessmen. And at the same time recognise the challenges the EU itself needs to address. No wonder the book ends by quoting Gramsci on pessimisim/optimism. But also Vaclav Havel: “Hope is not prognostication. It is an orientation of the spirit, an orientation of the heart. …. It is not the conviction that something will turn out well, but the certainty that something makes sense, regardless of how it turns out.”

So, not a cheering read, at least for those likely to pick up a book about Europe. But a compelling read, by someone who had a ringside seat at many of the key meetings and ‘where were you when…’ events (above all the fall of the Berlin Wall) of the past 40 years.

81Xwh-ZbrxL._AC_UY436_QL65_

PS For those who haven’t read it, Garton Ash’s The File: A Personal History is a must- read.

DIY history for autocrats

Posted on by

Wishing a Happy New Year to all readers of this blog – thank you for reading.

It has been a depressing 2022 and the omens for 2023 don’t look great. I’m not completely convinced about the polycrisis notion, but for somebody in the UK the impact of events (the war), the cyclical downturn and the structural weaknesses of our economy and society (where to start?) make for a bleak start to the year.

So how better to begin my reading, amid the relaxing mayhem and death of detective fiction (and a quick re-read of The Wealth of Nations to decide whether I have anything to say in an upcoming Adam Smith workshop), than Katie Stallard’s Dancing on Bones? A journalist, the author has reported for years from Russia, China and North Korea. The book was published just as Russia invaded Ukraine, so doesn’t reflect the most recent events, but it starts in Ukraine in 2014, with the initial invasion of Crimea. The book is a reflection on how these autocrats – Xi , Putin and the Kims – use history (I should write ‘history’) to cement their hold on power. In particular, it describes how in each case history has been rewritten into myth, with a specific conflict turned into a regime founding story. I hadn’t known that the USSR used not to make such a big deal of World War 2, that China’s memorial days were even more recently introduced, or indeed that the successive Kims simply invented the account of the Korean war that is taught to all North Korean subjects from kindergarten on.

It is a bit disconcerting to read of the events of 1989 told as distant history – I’m old enough to have super-clear memories of watching the TV reports from East Germany, from Prague, from Romania in late 1989, and in one of my jobs immersed myself in the detail of perestroika to interpret the USSR economy.

The most engaging parts of the book are those told from direct experience, the reportage, not surprisingly. Even so, I learned things I hadn’t known – especially about N Korea – and it’s very well written. It’s a good complement to the excellent Strongmen by Ruth Ben-Ghiat (I haven’t read Gideon Rachman’s The Age of the Strongman). Let’s hope 2023 turns into a bad year for autocrats.

61EiEjRDIqL._AC_UY436_QL65_

 

The slouch of history

Posted on by

Like many people, I’ve been eagerly anticipating Brad Delong’s Slouching Towards Utopia: An Economic History of the 20th Century, and it doesn’t disappoint. Brad was a couple of years behind me in the Harvard graduate economics programme, was an early adopter of blogging, and has been a prominent online presence ever since. So his argument in one sense is no surprise, but it comes together as an unmissable book, even for a devoted reader of his tweets.

The book starts by framing the central point: the economy, and people’s lives, have been utterly transformed by the long 20th century of 1870ish to around 2010 in a continuous tide of change both ‘marvelous and terrible’. During that long 140 year century, the average economic growth rate (we are US/west focused here) was just over 2% a year, before and since, below 0.5% a year. Income levels doubled every 33 years during that period: “A revolutionized economy every generation cannot but revolutionize society and politics, and a government trying to cope with such repeated revolutions cannot but be stressed in its attempts to manage and provide for its people in the storms.” We’re now back down to doubling about every 150 years, which actually seems just as stressful for governments given the expectations of the previous four or five generations.

The structure of the book is then (unsurprisingly) chronological. It begins with the first era of globalization, between 1870 and 1914, when the key global flow was people: a hundred million people migrated across national borders. Governments embraced openness of all kinds, though, and there were revolutionary declines in transport costs. The 1870 launch of RMS Oceanic, an iron-hulled steam-powered passenger ship, cut travel time across the atlantic from a month to nine days and 3rd class fares opened the journey to all but the very poorest Europeans. The vast waves of migration helped make the US the dominant economic power of the 20th century.

The book moves on to the economy of empires in the first part of the 20th century. The mechanization of industry in the imperial North turned the colonized South into an economic periphery, exporting raw commodities and importing manufactures. These were, “Unable to build communities of engineering practice that might provide a path to greater, industrial, riches.” Their labour force was not literate in sufficient numbers, there wasn’t enough financial capital to invest in factories.

World War I and the Depression follow, and the narrative traces two currents of thought shaping post-1918 outcomes. During this period there was no hegemon – only the US could have been, given the weakness of post-war Britain, and it rejected that role as provider of global public goods such as financial stability for all. So the ideas of a return to an 1870-1914 liberal market order competed with ideas focused on social rights and relationships. Economists broadly fell into camps – this was the era of the socialist calculation debate – but policy elites in the West doubled down on austerity.

On we go to Russia and socialism in practice, and the brutality of Leninist and Stalinist economics: “Of the 1800 delegates to the 17th Congress in 1934, fewer than one in 10 went on to be delegates to the 18th Congress in 1939.” The rest were dead or in Siberia, while forced collectivization spread famine and death. Fascism and Nazism deformed much of the rest of Europe in the 1930s, and then came the catclysm of the second world war and Holocaust. As the chapter points out, not everyone shed their opposition to the bundle of policies that could be characterized as fascist. Some Hayekians in the 1980s, such as supporters of Pinochet, found their contrast with socialism appealing. (Mrs Thatcher gets a favourable passing mention as a firm opponent of the methods, even as she approved of the libertarian economics.)

World War II gives way to the Cold War in this sobering march of 20th century history, while the spillovers from Cold War led to many false developmental starts in the Global South – alongside the amazing successes of development in some East Asian countries. The book sees the contrast as one between the aim of self-sufficiency in Latin America and countries in the Soviet orbit versus the assumption of the need to survive in export markets in East Asia – the latter had no great powers pouring in resources, or interfering and advising.

The only bright spot in this long century appears to be les trentes glorieuses, the three post-war decades of social democracy. What was their magic? A high rate of investment. Full employment but no upward wage pressure as there remained (in most of Europe) and under-employed agricultural labour force to pull in. Steady growth in industries that reached their technological maturity in that era, enabling the location of industrial production to spread to more places.

But it didn’t last. The redistribution of social democracies came into increasing tension with the conditions for innovation and growth. The logic of how governments operate differs from the logic of efficient production, so nationalized industries became wasteful and ineffective. Sometimes only moderate efficiency is fine, or indeed welcome, but there are limits. In 1979 we saw the neoliberal turn. Why so? “In my view the greatest cause was the extraordinary pace of rising prosperity during the Thiry Glorious Years, which raised the bar that a political-economic order had to surpass in order to generate broad acceptance.” people had come to expect rapidly rising incomes and broad equality of outcome, and high employment and low inflation. If this stability stumbled, the order had to change.

So the book ends with the political success of the neoliberal order – winning the Cold War – and its economic failure. And here we are. We haven’t reached utopia but living standards are massively higher than in 1870. It hasn’t been a smooth course – far from it – a slouch rather than a march. But people are so much better off than the mass of humanity before the long 20th century.

The strength of the book – as well as its immense scope and depth (more than 500 pages) is that it’s a work of political economy, braiding the different strands of ideas, Hayek, Polanyi and Keynes. Although what it ignores (and fair enough) is the series of technologica revolutions. In addition, there are plenty of pleasing asides and details. Humans love narratives, so, “The secret weapon of the economist is the ability to count.” Or, “Contests and gift exchanges have more psychological resonance. It is more satisfying to receive (or give) a present or to win a prize than to buy the exact same thing…. By ignoring and trying to suppress these dimensions – to require that everything pass through a cash nexus – the market society dehumanizes much of life.” I like that it doesn’t claim there are easy lessons from the history, but insists that there are indeed subtler lessons. Definitely one to read – or pre-order: out on 15 September.

51k+Qr6GTyL._SX498_BO1,204,203,200_

What is the free market?

Posted on by

There are a couple of important books out in September that I’ve had to restrain myself from writing about too far ahead of publication. Brad Delong’s Slouching Towards Utopia: An Economic History of the 20th Century will be published mid-month. A week or so later – and it can also be pre-ordered now – is Jacob Soll’s Free Market: The History of an Idea. So I’ll write about the latter first.

The premise of the book is that, “We are in an essentially abusive relationship with free market thought,” which has had adverse consequences that finance and big business have stacked the economic system in their favour while the little people take on high debt burdens and pay taxes, in the pretence that ‘the market’ must prevail. To recover from this dysfunctional relationship requires a task of intellectual history. What is this ‘free market’ idea and how has it come to veil a state and regulatory structure favouring the rich over the rest?

The book takes this task seriously: “To understand the origins of free market thought, it is first necessary to understand Cicero’s philosophy.” So, not Adam Smith then. Successive chapters go on to the conceptualisation of markets and what we would now call ‘the economy’ in the late Roman period, the Middle Ages, Renaissance Italy, early modern Britain, Colbertist France, the Dutch Republic, and on through the Enlightenment, French Revolution, Adam Smith, Industrial Revolution and age of Empire.

The book identifies a sort of historical pendulum: “When there is political stability and a developed economic system, it can seem as if markets just emerge on their own and sustain themselves. The fall of Rome, however, showed that when society collapses, strong and sustained state intervention may be necessary to build back the market.” The Mediaeval period was one of these. Another was the Netherlands after the Dutch War of Independence: “Windmills were the product of Dutch traditions of communcal investment dating from privately-funded medieval public works…. Citizen investors worked together to create public infrastructure. This long tradition of private-public partnership laid many of the commercial foundations of the Republic.”

The post-Adam Smith version of free market thinking is traced here to paradoxical roots in Colbert, usually thought of as the architecht of mercantilist state management. The seeming endless violence and suffering experienced by the mass of 17th century French people led Colbert’s sucessors – children and nephews – to turn back to Cicero’s vision of voluntaty exchange among Rome’s aristocracy. Add in Christian ethics and here are the foundations of rational self-interest and ordered exchange. As is now better appreciated, Adam Smith’s free market vision was founded on the ethical system he had written about in his Moral Sentiments before The Wealth of Nations. The free market was built not on greed but on social responsibility.

The book then canters toward the post-1980 bowdlerisation of this free market ideal, via ever faster swings of the pendulum for and against state activity. Soll concludes that much free market thinking is simply utopian, markets as magic. “This model, however, no longer seems realistic or relevant. After decades of deregulation and expanding free trade, the world has experienced regular cycles of economic crashes and government bailouts, along with burgeoning wealth inequality, wars, and climate and health disasters. Equilibrium eludes us.” And indeed the state remains a major economic actor, in the US as well as China, albeit in different guises.

So the dilemma remains: the ‘free market’ is a fiction and we get closest to it in historical periods of stability. But governments can be at best inefficient and at worst corrupt and authoritarian. “But the historical record shows that, as economies grow in complexity, so governments grow in response, for better or worse.” The free market? It would be a good idea. But more important than how the economy is organised is the social and moral context in which we carry out our investments and exchanges. The final word: “Faith in the market alone will not save us but hewing to those old virtues might.”

So, a very interesting read – I really learned a lot from the long historical perspective on the origins of what became the modern version of free market thought. Some of it was a bit surprising & perhaps historians of thought will contest it. I’d have liked more on the post-world war two aspects but that’s probably a different book (and indeed Delong covers that period).  I fundamentally agree with the conclusion, though: economies exist in and as part of societies, so the social and moral relations are fundamental. And – for economists – ideas about the right way to behave really matter, not just as innovation or endogenous growth, but (as Deirdre McCloskey has pointed out in her major trilogy) as the enabling or limiting environment for both markets and state to function.

51RCTcRkDyL._AC_UY436_QL65_

Post-neoliberalism?

Posted on by

The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era by my Cambridge colleague Gary Gerstle has quite rightly been highly praised. It covers a whole century, starting with the New Deal and post-world war 2 era to preface the bulk of the book, its characterisation of the neoliberal turn from the start of the 1980s. It ends with Trump and the turn away – so Gary argues – from neoliberalism to something as yet undefined. Neoliberalism is described as a commitment to free trade and financial flows, to free movement of people and openness to others, and to deregulation and the expanded scope of markets. Interestingly, he frames the point about the expansion of the market domain in terms of characterising people as consumers, instead of workers, and argues that Ralph Nader played a key role in this regard through his influence on Jimmy Carter, as the old order started to give way to the new.

The book gives a twin-tracked account of what drives these transitions from one era to another. One set of drivers consists of events – economic crisis in particular, so the 1970s commodity shocks at the start and the GFC at the end. More surprising is the role attributed to the Soviet Union: the 1917 Revolution as a stimulus for New Deal politics; Cold War contestation paving the way for business and financial interests to reach a modus vivendi with organised labour through the 1960s in order to avert any threat of domestic socialism; and consequently the collapse of the Soviet Union in 1989 as a destabilising force because it took the brakes off corporate and financial self-restraint.

Another interesting aspect of the argument is the linking of administrations generally seen as being opposed to each others’ policies – the difference between Republican and Democrat being less decisive than that between Eisenhower and Reagan or Kennedy and Clinton. As Gary puts it, the feature of a ‘political order’ is that the opponents of the government also buy into it; it becomes the water in which almost everyone swims.

The FT review described the book as an instant classic. There are lots of talks and pods online for anybody who wants a taster. As the subtitle says, it’s US-focused; an analysis of how the neoliberal order got exported would be interesting. I highly recommend it – I read it in just a couple of days of travel. And it set me thinking about what the next political order might turn out to be…..

519IOD0MJQL._AC_UY436_QL65_