Review of Mindless: Why Smarter Machines Are Making Dumber Humans by Simon Head
Basic Books, $26.99

1.

The entire thesis of Simon Head’s arresting new book is contained in the subtitle. It goes all the way back to Adam Smith’s telling observation that the division of labor in a pin factory, while doing wonders for productivity (output per worker), would make workers as “stupid and ignorant as it is possible for a human creature to be.” This was because no worker needed to know how to make a pin, only how to do his part in the process of making a pin. Artisan production was on the point of becoming industrial production; industrial production would destroy work skills.

Continue reading “The Programmed Prospect Before Us” →

The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order
by Benn Steil
Council on Foreign Relations/Princeton University Press, 449 p., $29.95

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Do we need another book on Bretton Woods, the conference in 1944 in New Hampshire that established a new monetary system following World War II? The answer is yes. The two excellent existing histories of Bretton Woods, by Richard Gardner (1956) and Armand van Dormael (1978), are now dated. New historical materials have become available. Since the crash of 2008 the arcane subject of the world’s money has become urgently relevant. So a fresh look at the famous conference is warranted.

Continue reading “Inventing the World’s Money” →

By Robert Skidelsky and Felix Martin

President Obama is in a bind. He knows that the economic recovery is fragile and dependent on continued fiscal stimulus—hence the bipartisan deal on further tax breaks he brokered in December. But he also knows that the tolerance in Washington for deficits of close to 10 percent of Gross Domestic Product is running out. In the short term, the politics of the new Congress will not allow them; and in the long term, the President’s own National Commission on Fiscal Responsibility and Reform has warned against them.

Continue reading “For a National Investment Bank” →

Fixing Global Finance
by Martin Wolf
Johns Hopkins University Press, 230 pp., $24.95

1.

By common consent, we have been living through the greatest economic downturn since World War II. It originated, as we all know, in a collapse of the banking system, and the first attempts to understand the resulting economic crisis focused on the reasons for bank failures. The banks, it was said, had failed to “manage” the new “risks” posed by financial innovation. Alan Greenspan’s statement that the cause of the crisis was the “underpricing of risk worldwide” was the most succinct expression of this view.[1] Particular attention was paid to the role of the American subprime mortgage market as the source of the so-called “toxic” assets that had come to dominate bank balance sheets. Early remedies for the crisis concentrated on bailing out or refinancing the banks, so that they could start lending again. These were followed by “stimulus packages,” both monetary and fiscal, to revive the real economy.

Continue reading “The World Finance Crisis and the American Mission” →

The Ascent of Money: A Financial History of the World
by Niall Ferguson
Penguin, 442 pp., $29.95

The historian Alan Taylor used to say, mischievously, that the only point of history is history. The idea that one could use it to predict the future, still more to avoid past mistakes, was pure illusion. Niall Ferguson’s The Ascent of Money, a history of financial innovation written as a television documentary[1] as well as a book, offers a neat test of Taylor’s theory. Ferguson can claim some powers of anticipation. History convinced him in 2006 that the good times could not last “indefinitely.” This was an insight to which the Nobel Prize–winning mathematical economists who devised the Black-Scholes formula—the complicated model for pricing share options used by the highly leveraged firm Long-Term Capital Management, which famously crashed in 1998—were oblivious. Their formula persuaded them that a massive sell-off could occur only once in four million years.

Continue reading “Book Review: Can You Spare a Dime?” →

Making Globalization Work
by Joseph E. Stiglitz
Norton, 358 pp., $26.95; $15.95 (paper)

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Making Globalization Work is the third of Joseph Stiglitz’s popular, and populist, books.[1] Like Jeffrey Sachs, Stiglitz is an economist turned preacher, one of a new breed of secular evangelists produced by the fall of communism. Stiglitz wants to stop rich countries from exploiting poor countries without damaging the springs of wealth-creation. In that sense he is a classic social democrat. His missionary fervor, though, is very American. “Saving the Planet,” one of this new book’s chapter headings, could have been its title.

Continue reading “Gloomy About Globalization” →

By Force of Thought: Irregular Memoirs of an Intellectual Journey
by János Kornai
MIT Press, 461 pp., $40.00

The Hungarian János Kornai is the most famous, and certainly the most influential, economist to have emerged from postwar Communist Europe.[1] His reputation is based on three books, Overcentralization, Economics of Shortage, and The Socialist System, which knocked away the intellectual foundations of the publicly owned, bureaucratically planned economy. In one sense, he was in the line of critics of central planning such as Ludwig von Mises and Friedrich von Hayek, who had argued in the 1930s that it could not be efficient. But Kornai was the first of these critics who wrote from the concrete experience of a centrally planned economy. His books were a stylized rendering of an actually existing socialist economy, not an imagined one, written by someone who—while cultivating extensive contacts with Western scholars and holding, from the mid-1980s, a dual appointment at Harvard University—elected to stay and work in Hungary right through the postwar years.

Continue reading “Winning a Gamble with Communism” →

The Prince of the Marshes and Other Occupational Hazards of a Year in Iraq
by Rory Stewart
Harcourt, 396 pp., $25.00

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The British governed Iraq under a League of Nations mandate, and with some success, between 1920 and 1932. They returned to southern Iraq in 2003 as a junior member of the US-led coalition which invaded and conquered the country. With the second British coming arrived Rory Stewart, a young soldier and diplomat. The book under review is his story of the part he played in governing, successively, two southern provinces in Iraq, Maysan and Dhi Qar, between September 2003 and June 2004. He tells how the attempt to bring democracy and freedom to Iraq led to the frustration of the conquerors, the dissolution of the state, and the country’s collapse into insurgency and sectarian violence. Implicitly his book is a devastating indictment of a total failure to align rhetoric with reality. It raises profound questions about the purposes and limits of military intervention in the internal affairs of a country in today’s world. The reader cannot put the book down without wondering: What on earth did they think they were doing?

Continue reading “Drawing a Dog in Iraq” →

1945: The War That Never Ended
by Gregor Dallas
Yale University Press, 739 pp., $40.00

Among Empires: American Ascendancy and Its Predecessors
by Charles S. Maier
Harvard University Press, 373 pp., $27.95

The question of how the world should be run, and America’s part in its running, is the subject of much academic and political discussion in Washington these days. The factual questions are: Is the United States on the road to becoming an empire like the Roman and British Empires before it? What are the prospects for such an enterprise in today’s world? More speculatively, does globalization require an imperial underpinning? There are also questions of value: Is imperialism a good or bad thing? Should the United States sacrifice its republican institutions in order to fulfil an imperial vocation?[1] Gregor Dallas’s 1945: The War That Never Ended can be read as setting the scene for this discussion. The Second World War cleared away the European empires, actual and aspiring, leaving the United States and the Soviet Union as the two contending superpowers. The collapse of the Soviet Union concluded the “unfinished business” of the war, by leaving the United States the sole superpower and simultaneously creating a single world economy. The dynamics of postwar US supremacy and the question of whether they are pushing the United States toward formal empire are the subject matter of Charles Maier’s Among Empires: American Ascendancy and Its Predecessors.

Continue reading “Hot, Cold and Imperial” →

Three Billion New Capitalists: The Great Shift of Wealth and Power to the East
by Clyde Prestowitz
Basic Books, 321 pp., $26.95

China, Inc.: How the Rise of the Next Superpower Challenges America and the World
by Ted C. Fishman
Scribner, 342 pp., $26.00

China’s Urban Transition
by John Friedmann
University of Minnesota Press, 168 pp., $56.95; $18.95 (paper)

Made in China: Women Factory Workers in a Global Workplace
by Pun Ngai
Duke University Press/Hong Kong University Press,227 pp., $79.95; $22.95 (paper)

The River Runs Black: The Environmental Challenge to China’s Future
by Elizabeth C. Economy
Council on Foreign Relations/Cornell University Press,337 pp., $17.95 (paper)

1.

Three superb recent books by John Friedmann, Pun Ngai, and Elizabeth C. Economy explore the effect of China’s economic “rise,” not on the United States but on China.[1] John Friedmann’s China’s Urban Transition looks at it through the lens of urbanization. Mao Zedong was anti-city, partly for military reasons: industries were to be dispersed into western mountains and caves, provinces were to be self-sufficient. The population was divided into a privileged urban minority (17 percent) and an exploited rural majority (83 percent). The Maoist city was seen as a production, not a consumption, unit, with workers coralled into factory barracks. The flow of rural labor to cities was tightly controlled; indeed in the decade of the Cultural Revolution millions of “decadent” urbanites were forcibly sent to the countryside. The one-child-per-family policy, originally introduced in cities, held in check the urban population.

Continue reading “The Chinese Shadow II” →