David Kynaston’s Till Time’s Last Sand reveals how the Bank’s relationship with government—from the gold standard to the Crash—have shaped the nation’s economy since 1694

David Kynaston is a wonderful social historian, with three massive volumes on post-war Britain and many others to his name. He has been a leading practitioner of “history from below,” reflecting the experiences of ordinary people. He has now turned to telling the story of one of Britain’s most powerful and mysterious institutions—the Bank of England, from its founding in 1694 up to 2013.

Continue reading ““Never explain, never apologise”: a review of David Kynaston’s history of the Bank of England” →

John Maynard Keynes would have been conflicted by the referendum. Culture pulled him towards Europe; politics and especially the continent’s current austerity economics would have pushed him increasingly away.

Continue reading “What would Keynes think of Brexit?” →

The early 19th-century founders of the classical school of economics reasoned that the distribution of a society’s income depended crucially on who owned its productive resources. David Ricardo identified three classes of producer, landlords, capitalists and workers. Each of these classes owned a factor of production—land, capital and labour. With land and capital scarce relative to labour, landlords and capitalists could claim a disproportionate share of the produce that they and the workers jointly produced. Workers’ pay would be forced to subsistence. Classical socialism, as Karl Marx conceived it, was a branch of this tree. Abolish private ownership of land and capital (and the power which this gave) and one would abolish the “rents” to their owners, enabling workers to receive their proper share of production.

Continue reading “Book review: Capital in the 21st Century by Thomas Piketty” →

Any great failure should force us to rethink. The present economic crisis is a great failure of the market system. As George Soros has rightly pointed out, “the salient feature of the current financial crisis is that it was not caused by some external shock like Opec… the crisis was generated by the system itself.” It originated in the US, the heart of the world’s financial system and the source of much of its financial innovation. That is why the crisis is global, and is indeed a crisis of globalisation.

Continue reading “Where do we go from here?” →

I have always said that Keynes would live as long as the world needed him. What the world decided, 30 years ago, was that it no longer needed him. The Keynesian revolution had been reduced to a mechanical system for stabilising economies by means of budget surpluses and deficits—more deficits than surpluses, as it turned out, leading to the “stagflationary” crises of the 1970s. Keynes, the theoreticians said, was redundant, having failed to prove that the world needed “Keynesian” policies. The market system was automatically self-correcting; Keynesianism led only to inflation.

Continue reading “Essay: Keynes is Back” →

Joseph Alois Schumpeter (1883-1950) was one of the greatest economists of the 20th century—commonly bracketed with such giants as Keynes, Hayek and Friedman. He is best known for his theory of “creative destruction”—the view that the capitalist system progresses by constantly revolutionising its economic structure. New firms, new products, new technologies continually replace old ones. Since innovation comes in fits and starts, the capitalist economy is naturally, and healthily, subject to cycles of boom and bust. The agent of this revolutionary process is the heroic entrepreneur: the individual owner in the 19th century, big business in the 20th. Innovation needs its reward, hence a dynamic economy is one which allows the innovator huge profits. Temporary monopoly is nature’s way of allowing innovators to gain from their inventions. Short-run inequity is the price of long-run progress.

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When asked about the effects of the French revolution, Zhou Enlai is famously supposed to have said: “It is too early to tell.” After only 15 years, post-communist Russia is still near the start of a film which clearly has a long time to run. Official and editorial commentary from the west takes the form of criticism and exhortation—the attitude of an improving, sometimes despairing, schoolmaster. Recently Russia has had an exceptionally bad press. The expulsion of “illegal” Georgian and other trans-Caucasian, central Asian and Chinese immigrants, the unexplained murders of Anna Politkovskaya and Alexander Litvinenko, the interruption of oil supplies to Belarus, the forced sale to Gazprom of a controlling stake in Royal Dutch Shell’s Sakhalin-II project have all been pilloried. These incidents follow a long period of attrition of fledgling democratic institutions and civil society, and the brutal war in Chechnya. Like naughty schoolboys, Russians react to western sermons with a defensive truculence (“double standards”) or by changing the subject. Rather than continue this sterile tit for tat, it is more useful to try to understand the structural features of the Russian system that stop Russia doing what the west wants it to do. Two of these stand out: first, the domination of its economy by a monopolised energy sector; second, the fusion of power and property. These two features together have created Putin’s system. They are a product both of Russia’s history and geography and the way the transition to post-communism was handled in the 1990s. They shed light on the three questions of most interest about Russia today. How solid is its economy? How solid is its political system? And is it a “reliable partner”?

Continue reading “Essay: Putin’s Patrimony” →

Review of Absent Minds by Stefan Collini
Oxford University Press, £25

This ambitious work is about British attitudes to intellectuals. Specifically, it is about why the British have been so reluctant to admit that they have intellectuals. Collini calls it the “denial” or “absence” or “exceptionalist” thesis. The claim to immunity from intellectual influences is part of Britain’s definition of itself. Today hardly anyone bothers to deny that we have intellectuals, because the species is almost extinct. Perhaps a trace of the denial survives in the anti-Europeanism of many commentators.

Continue reading “Book Review: John Bull’s Small Ideas” →

I had been plotting my return to China for about a year, and now an invitation from Lanxin Xiang, author of a book on the Boxer rebellion, to lecture in Shanghai in September 2005 made it possible. I say “return,” because the last time I had been on the mainland was in 1948, when I was nine years old. I was born in Harbin in Manchuria in 1939, came to England when I was three, and then went back to China with my parents in 1947, living for a little over a year in Tientsin (now Tianjin). We escaped to Hong Kong just before the communists took the city.

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In recent years there has been a revival of war as a policy of choice. Since the collapse of communism, the US and its allies have attacked Iraq (twice), Yugoslavia and Afghanistan. With “hot war” released from its cold war constraints, it is important to consider the conditions under which resort to war is justifiable, and what methods of fighting wars are right. This is the domain of “just war” theory.

Continue reading “The Just War Tradition” →