Tag Archives: review

Webs of money

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A 2016 book that was an eye-opener for me was Brooke Harrington’s Capital Without Borders: Wealth Managers and the One Percent. A sociologist, she had trained as a private client wealth manager and worked among/for the global elite – the Ultra High Net Worth Individuals (UHNWIs).  The rich really are different…. and among her striking findings was their deep-seated belief they have that the money is theirs, or their family’s, and governments truly have no legitimate right to take any of it away from them in taxes.

Spiderweb Capitalism: How Global Elites Exploit Frontier Markets by Kimberly Kay Hoang is a sort of companion or follow-up volume. She is also a sociologist, but in this case conducted academic research as a clear outsider. Her focus is also different: her interest is in the ploys the UHNWIs and their delegated High Net Worth Individuals (professional lawyers and PRs etc who act for them, making pretty vast amounts of money themselves but bearing some legal risk) devise to distance themselves from “playing in the gray” – that is on the borders of legality or beyond – in emerging markets Vietnam and Myanmar. These ploys generally involve complex structures with holding companies in the Caymans, Samoa, British Virgin Islands etc, multiple Special Purpose Vehicles to make investments, professional advisers in Hong Kong or Singapore, and local fixers.

More academic (ie. slightly clunky) in style than the earlier Harrington book, it is nevertheless a fascinating read, reflecting five years of interviewing the different categories of people involved in these global money flows, and following some around on their extensive travels. Again, avoiding – or evading – tax is a regular theme. The book documents the various mechanisms involved, from the on-the-ground bribery (including attempts at mutually assured destruction deterrence such as sharing compromising social events with bribed officials) to the setting up of bank accounts and pitching investments to UHNWIs in the US. The scope of the fieldwork involved is impressive.

What to do about the spider’s web of global money flows? That’s less clear. Each individual (whether dominant or subordinate spider) is one element in a system that ultimately traps all. Although an optimistic note I took from the book is that US legislation does seem to be inhibiting some of the practices documented. In any case, it’s super-valuable to have htis kind of rigorous evidence about how the web operates, and how its inhabitants are motivated and incentivised. This is a very impressive book.

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Facts about facts

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There’s something wonderful about a book titled All The Facts. Ambitious or what? The subtitle narrows it down, a bit, to “A History of Information in the United States since 1870.” One country, one and a half centuries. Needless to say, it’s still ambitious in its scope, embracing not just the technologies of information management – from account books and filing cabinets to punch cards and the Internet – but also how information has been created and used across all aspects of life: housework, healthcare, factory work, national security, you name it. Boxes have headings such as “The car salesman as a knowledge worker in the 1980s” and “Growth in Medical Information in America: evolution in a doctor’s training 1870-1940”.

It’s a hefty tome, whose basic point is the central role information plays in modern society. I’m with the programme; for example, agreeing with such statements: “A company’s success, is based on its experiences, what knowledge or information it and its employees posess … what a company knows is the source of all potential, and indeed actual, increases in productivity.” (p94) Information ecosystems structure markets and the economy as a whole (p282).

Although I did read it through, it might be more appealing to some readers as a book to dip in to, or to refer to for some specific issues (such as information in medicine or in houeshold management). I found it to be – yes – stuffed with facts, and a mixture of enjoyable and excessive detail, depending on how interested I was in the specific examples. It brought to mind the scale and ambition of Vaclav Smil’s books on energy & other matters, which are similarly both engrossing and challenging reads.

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Keeping models in their place

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The increasing use of algorithmic decision making raises some challenging questions, from bias due to societal biases being baked in to training data, to the loss of the space for compromise (due to the need to codify a loss or reward function in a machine learning system) that is so important in addressing conflicting aims and values in democratic societies. The broader role of models as a means of both understanding and shaping societys is one of the themes of my most recent book, Cogs and Monsters, in the domain of economics. In particular, I wanted to expose in economic modelling the reflexivity involved in being a member of a society analysing the society in order to try to change the society – when its other members may well alter (in often-unanticipated ways) the behaviour that was analysed – because they are subjects, not objects.

Well, all of this is the subject of Erica Thompson’s excellent book Escape from Model Land: how matehmatical models lead us astray and what we can do about it. It focuses on the use of algorithmic models, and has a wide range of examples, from health and epidemiological modelling to climate projections to financial markets. It covers as well as the reflexivity some familiar challenges such as performativity, non-linear dynamics, complex systems, structural breaks and risk vs ‘radical’ uncertainty. The ultimate conclusion is the need to be duly humble about what models can achieve. Alas, people – ‘experts’ – seem to all too often get caught up in the excitement about technical possibilities without the thoughtfulness needed to make decisions that will affect people’s lives in important ways.

So this is a much-needed and welcome book, and I’m looking forward to taking part in an event with the author at the LSE in January.

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Money stuff

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Modern money is intangible, electrons whizzing around – unlike older forms of money, whether paper and coin, or wartime cigarettes, or huge stone wheels. Paid: Tales of Dongles, Checks and Other Money Stuff, edited by Bill Maurer and Lana Swartz, is a reminder that even the 1s and 0s have a material basis – such as credit card machines, dongles, mobile phones, and indeed the whole physical infrastructure of the wired and wireless networks and the electricity network. What’s more, the less tangible the tokens of exchange, the more important the accounting system recording transactions. This explains the emphasis crypto folks put on the blockchain, but as one of the essays in the book points out, this has its drawback as nothing is reversible, not even transactions that ought to be reversed. There is no substitute for trust in a co-ordinating institution that keeps record.

The book is a nicely illustrated collection of essays by money afficionados from different disciplines, and spanning the Inca civilisation to Dogecoin. As a collection, there’s no central argument – except that we would do well to remember the physical and social embededness of money. There are lots of, “Well, who knew?” moments, which makes it an enjoyable read – at least if you have a fact-magpie mind like mine. I particular enjoyed Keith Hart’s reminiscence of becoming a fence and money lender during his PhD fieldwork in Ghana – which gave rise to the notion of the informal economy; I’ve met Keith (a fellow Mancunian) and love his book The Memory Bank.

Also Swartz’s essay about cash, and the notion that technological innovation in money – the Diners Club card and later credit cards – was forced by the postwar economic boom and associated travel. It reminded me of my first job at the Treasury in the 1980s, trying to find a monetary aggregate that wouldn’t grow too damn quickly for a monetarist government, at a time when rapidly increasing use of ATMs and credit cards was affecting the velocity of money and making monetary aggregate control a hopeless task.

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Capitalism, property and production

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Capitalism: The Story Behind The Word by Michael Sonenscher is an enjoyable short read (with a great cover) that does what the subtitle says. It compares the history of ‘capitalism’ with the history of the idea of ‘commercial society’ and the division of labour, making the case that the two referred to different economic arenas. Capitalism concerned capitalists: people who lent money to governments to fund war and other expenditure. It was thus a concept relating to public finance and taxation, and concerned with private property. Commercial society and the division of labour were concepts used in broader societal debates about the organisation of production, markets and prices – issues that predate the general use of the word ‘capitalism’. The essay argues that the distinction is worth keeping, although this may be a losing battle as ‘capitalism’ has swallowed the wider issues – and much of the wider contemporary literature on these latter has been largely forgotten.

Among other things, a quotation from Hegel struck me: “Money is not in fact one particular resource among others; on the contrary it is the universal aspect of all of them, in so far as they express themselves as an external existence in which they can be apprehended as things. Only at this extreme point of externality is it possible to determine services quantitatively and so in a just and equitable manner.” (This is obviously not the modern usage of the term ‘externality’.) I was surprised to see a rationale for using the measuring rod of money as a common standard from this author.

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