Deficit Disorder: The Keynes Solution

The new chancellor will find himself in the worst starting position of anyone new in that job since the Second World War. According to the Treasury, we are just starting to limp out of the “most severe and synchronised downturn since the Great Depression in the 1930s”. Recovery is not secure. With the Greek crisis as the trigger, the world monetary system is starting to disintegrate. The historically minded will recall that the international financial crisis of 1931, two years after the start of the Depression, aborted an incipient recovery and forced Britain off the gold standard. A double-dip recession is a distinct possibility today.

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The Big Squeeze

The Trouble With Markets: Saving Capitalism From Itself
by Roger Bootle
Nicholas Brealey Publishing, 282pp, £18

The Trouble With Markets, by the economist and financial analyst Roger Bootle, is the latest in a spate of books unleashed by the Great Contraction of 2007-2009. It offers a short, reliable analysis of the crisis in language that the intelligent general reader can understand. Bootle has skilfully assembled all the elements of the crisis: its causes in financial deregulation and global imbalances, the pros and cons of a monetary versus fiscal stimulus, and how to design a system that can avoid repeating such disasters.

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A Thinker for our Times

John Maynard Keynes has been restored to life. Rusty Keynesian tools – larger budget deficits, tax cuts, accelerated spending programmes and other “economic stimuli” – have been brought back into use the world over to cut off the slide into depression. And they will do the job, if not next year, the year after. But the first Keynesian revolution was not about a rescue operation. Its purpose was to explain how shipwreck might occur; in short, to provide a theoretical basis for better navigation and for steering in seas that were bound to be choppy. Yet, even while the rescue operation is going on, we need to look critically at the economic theory that takes his name.

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Truck and Barter

Surviving Capitalism: how we learned to live with the market and remained almost human
by Erik Ringmar
Anthem Press, 210pp, £16.99

Erik Ringmar has written a fascinating short book about the different forms of historical resistance to capitalism. Since its earliest appearance, capitalism has called forth social arrangements designed to maintain our humanity in the face of its inhumanity. Its ideal of specialisation alienates people from society and each other. Through the market, more of our lives are “commodified”, crowding out non-economic values and understandings. But human beings are social animals, with a strong need for identity, companionship and a sense of worth, so they devise strategies for protecting their human substance against the encroachment of the market. These strategies are based on non-market institutions – the family, friendly associations, the state – which develop functions to cope with newly threatening environments. These strategies will vary according to the “social grammar” of the society in question.

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Arrested Development

The End of Poverty: economic possibilities for our time
by Jeffrey Sachs; with a foreword by Bono
Allen Lane, the Penguin Press, 397pp, £20

Jeffrey Sachs has the mind of an economist but the temperament of a missionary. His thought and striving are in the service of his passion to make humans materially better off. Like most economists, he is an unconscious Marxist. He believes in the materialist interpretation of history, with institutions and culture as products of material conditions. Thus he writes: “Africa’s government is poor because Africa is poor.”

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Engine of Growth

In Defence of Globalisation
Jagdish Bhagwati Oxford University Press, 324pp, £17.99
ISBN 0195170253

Why Globalisation Works
Martin Wolf Yale University Press, 398pp, £19.99

These two books offer a defence of globalisation against its critics. Both cover much the same ground, though with differing emphases. Martin Wolf, a noted economics columnist at the Financial Times, has written the more comprehensive, better organised and (despite its greater length) more concise book. It is a necessary and compelling read for all who want to understand the logic of unfolding events. Jagdish Bhagwati is one of the world’s leading trade theorists. His book has its moments, but he is not at his best. It is intellectually self-indulgent, and his style – with its mixed metaphors (“white elephants making gargantuan losses”), ponderous jokes, linguistic tics and exclamation marks – often seems like a parody of good writing. For this kind of book it is surely better to keep one’s language as unadorned as possible.

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The Global Guru

The Bubble of American Supremacy
by George Soros
Weidenfeld & Nicolson, 224pp, £12.99

Having made a fortune as a financier and then given much of it away in philanthropy, George Soros has embarked on a new career as a guru. He urgently wants to put his mouth where his money is. He looks at our arrangements for managing the planet and finds them sadly wanting. “The combination of financial markets and national politics,” he writes, “has created a lopsided system designed primarily for the production and exchange of private goods. Collective needs and social justice receive short shrift because the development of international institutions . . . has not kept pace with the development of markets.”

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The Killing Fields

Changes in the character of war partially account for the mass murders of the past century. But the rise of democracy also plays a role.

Why did the 20th century produce so much mass killing of civilians – a phenomenon so terrible and unexpected that it caused a new word, “genocide”, to be coined to describe it? Mass slaughter is nothing new. What was new was its return to the centres of civilisation after two centuries of progress. From Europe, it spread to Asia and Africa. In Rwanda on 7 April 1994, the Hutus started killing the Tutsis, or “cockroaches” as they were called. They shot and hacked a million to death in three months. The killings were as coldly deliberate as those organised by Hitler, Stalin and Pol Pot. The great powers supplied the weapons that allowed the genocide to happen and withdrew the small force of UN peacekeepers who might have stopped it.

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A Janus-faced World

The Breaking of Nations: order and chaos in the 21st century
by Robert Cooper
Atlantic Books, 180pp, £14.99

International relations may or may not be in a mess; the theory of international relations certainly is. The old theory was that the world consists of “states” which exist in an “international anarchy”. It was an “anarchy” because there was no world government. But there was, nevertheless, a principle of order, or rather two: empire and the balance of power. These coexisted in uneasy juxtaposition. By the end of the 19th century, the balance of power in Europe had become a world balance as the United States and Japan took their place as “great powers” alongside the empires of the main European states. After 1945, there was a bipolar “balance” between two “imperial systems” headed by the US and the Soviet Union. At any rate, this was the theory, though the facts never quite fitted it. Then the Soviet pole collapsed, and conceptual confusion reigned.

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Inside the Bubble

The Roaring Nineties: seeds of destruction
Joseph Stiglitz, Allen Lane, 389pp, £18.99

This book is the story of the forces that drove the American economy to frenzy in the 1990s and collapse in 2000. It is much better than Professor Stiglitz’s last offering, Globalization and Its Discontents (2002), which was largely a rant against the IMF and the World Bank. Diatribe is not absent from this book. But it is much more solidly rooted in his own path-breaking work on the economics of risk and information, for which he won a Nobel prize in 2001. Stiglitz is not an elegant, nor even a punchy writer. But when he relates the politics of the 1990s to the economics he knows well, the discussion becomes exciting.

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