Monthly Archives: August 2015

A tale of modern Russia – and London

Posted on by

The latest instalment in my holiday reading has been Peter Pomerantsev’s [amazon_link id=”0571308015″ target=”_blank” ]Nothing is True and Everything is Possible: Adventures in Modern Russia[/amazon_link]. I’d started it on the train home from the bookstore where I bought it a few weeks ago and only saved the bulk for the holiday with the utmost exercise of willpower. It’s a brilliant book. Pomerantsev, a TV producer and writer brought up in the UK and living in London again now, spent some years working for a Moscow TV station. His account of the people he met through his documentary making and in everyday Moscow life is utterly illuminating about the state of Russia.

[amazon_image id=”0571308015″ link=”true” target=”_blank” size=”medium” ]Nothing is True and Everything is Possible: Adventures in Modern Russia[/amazon_image]

It would be impossible to do justice to the book by summarising it. Just read it. Mainly of course the book is about Russia. But it is also terrifying about the scope in the modern world for manipulating belief through the media, the combination of techniques from Goebbels and post-modern spin doctoring.

Above all, though, the final part of the book made it clear that today’s Russia is only possible because of today’s global financial system and especially today’s London, with the bankers, accountants and lawyers who are totally complicit in the handling of corrupt Russian money – not to mention all the armies of service businesses happy to feed on it.

When David Cameron recently made his speech saying London was no place for dirty money I was surprised nobody called him out on the hypocrisy of the sentiment, because London is of course the world capital of dirty money, among other things destroying the functioning of our capital’s housing market. Perhaps if the UK government turns out to be serious about eliminating the flow of illegal and corrupt funds, it will only be the case that some other offshore financial centre is willing to pick up the role. So be it. I’ll be surprised if it turns out Mr Cameron really meant it, however, given the extent to which the City depends on that flow of money. But he ought to – we should not allow gangster states the credibility of being able to use our capital city to cleanse their money.

Now onto another novel – Kamel Daoud’s [amazon_link id=”1780748396″ target=”_blank” ]The Meursault Investigation[/amazon_link].

[amazon_image id=”B00XUM79EK” link=”true” target=”_blank” size=”medium” ]The Meursault Investigation[/amazon_image]

Whose island?

Posted on by

A hint of broadband here …. Next in the holiday line-up was James Meek’s thought-provoking [amazon_link id=”1784782068″ target=”_blank” ]Private  Island: Why Britain Now Belongs to Someone Else.[/amazon_link] I was doubly interested to read this because the boundary between the state and the market, and the space for other non-state, non-market collective institutions is one of the themes running through the course I teach on public policy economics.

[amazon_image id=”1784782068″ link=”true” target=”_blank” size=”medium” ]Private Island: Why Britain Now Belongs to Someone Else[/amazon_image]

The book covers several of the UK’s privatised industries – electricity, rail, water, and post, as well as the housing crisis, the NHS and its marketisation, and a final chapter on immigration and the rise of UKIP. The chapters are largely self-contained, and indeed some started as extended essays in the London Review of Books. Each raises valid questions about the specific failures of privatisation – in particular, the failure of the privatisers to consider that markets need far more than private ownership of assets to operate efficiently and in the interests of consumers. Competition and regulation are required, in the right mix, regulations that do not turn out to inhibit competition, but rather limit monopoly rents and enable new entry.

In the end, though, the book is more a lament about financialisation and short-termism than about private sector operation of these sectors in itself. It is hard to tell whether Meek objects to private ownership at all, but he certainly objects to the ownership of large amounts of the country’s infrastructure by foreign owners and/or through debt-financed instruments. The grounds for this objection shift between chapters. In the case of water, it is that overseas bondholders require high financial returns and so necessary investment has not occurred. In the case of electricity, it is that EDF, a state-controlled French company, has bought the UK’s nuclear fleet and plans to invest in new nuclear plants – even though the essay accepts that low-carbon baseload generation is needed, and even though no UK companies were prepared to make the investment. (I sit on an advisory panel for EDF Energy.)

Should we be concerned about the high proportion of UK infrastructure owned by foreigners? I don’t know. Will Hutton recently used the purchase of the FT by Japan’s Nikkei to make this argument. But I’ve not seen a full analysis of what extent of foreign ownership is ok, in which sectors, and why nationality matters, although of course there are obvious arguments in some cases eg the threat of offshoring R&D in pharma made by big multinationals which had to be bought off with a big tax break (the ‘patent box’). It seems to me an academic questin, however, until and unless British investors are prepared to stump up the funds for long-term projects and long-lived asset holding.

Meek doesn’t address this question, though some chapters do have clear and sound policy conclusions. Build more council housing is one – yes! Scrap the dreadful ‘Help to Buy’ scheme – yes!

Still, overall the essays, with their sympathetic reportage of the conditions of casualised mail workers, about-to-be-homeless disabled people, flooded householders, add up to a powerful critique of the absence of strategic thinking in the British state. “No one has answered the question,” he writes, “of how governments with five year terms can be held to account for their stewardship of projects whose lifespan is measured in generations.” Only the Treasury, with its equally short-termist, penny-wise pound-foolish principles endures. I don’t think the question is mainly specific accountability, though; it is the absence of any institutions or public consensus about the need to take a long term perspective and embody responsibility to the future.

The Price of Everything, including women

Posted on by

Although a holiday is obviously a reason to read books that aren’t about economics, I’m also fitting in one or two more work-related ones. (Although, luckily, my connectivity in rural France is poor, so subsequent posts might need to queue until back somewhere near reliable broadband.)

On the fiction front, two terrific books – [amazon_link id=”1846687535″ target=”_blank” ]Black Water Rising[/amazon_link] by Attica Locke, and the third of Elena Ferrante’s Neapolitan [amazon_link id=”160945233X” target=”_blank” ]novels, Those Who Leave and Those Who Stay[/amazon_link]. These novels by Ferrante rank among the greats, just wonderful, on the experience of being working class, female, human.

Back to the daily grind. I read [amazon_link id=”0099537354″ target=”_blank” ]The Price of Everything: The True Cost of Living [/amazon_link]by Eduardo Porter. This has been out for a couple of years so I don’t know why I hadn’t spotted it before. It’s in the vein of Tim Harford’s [amazon_link id=”0349119856″ target=”_blank” ]Undercover Economist,[/amazon_link] using real world examples to explain applied microeconomics. The Price of Everything is a lively read with lots of good examples of how markets work, or don’t work. These included a few I’ve not come across before, like the outrage over Coca Cola’s experiment in Brazil with “dynamic pricing” in its vending machines – charging more for a cold drink when the weather gets hotter. It covers a wide range of topics, illustrating basic concepts like opportunity costs, the unintended consequences of regulation, and also cost benefit analysis, the behavioural economics ‘biases’ and the debate about income and happiness.

[amazon_image id=”0099537354″ link=”true” target=”_blank” size=”medium” ]The Price of Everything: The True Cost of Living[/amazon_image]

The chapter I liked best was the one about women, all too rarely covered by popular books about economics. It has a marvellous quote from my hero David Hume: “This sovereignty of the male is a real usurpation, and destroys that nearness of rank, not to say equality, which nature has established between the sexes.” Also Arthur Lewis, Nobel prize winning development economist at my department in Manchester, and the first black professor in a British university (not that there are all that many even now), writing in 1955: “It is open to men to debate whether economic progress is good for men or not, but for women to debate the desirability of economic growth is to debate whether women should have a chance to cease to be beasts of burden and join the human race.” The chapter also cites Claudia Goldin’s work on u-shaped female labour supply as countries develop, the social dynamics of women entering the workforce after the 1950s, Becker’s economic analysis of the family, work on assortative mating, demographic trends, dowries, the missing girls of Asia and more.

If I had to recommend just one book to a student thinking about or starting on economics I’d probably stick with the [amazon_link id=”1405503572″ target=”_blank” ]The Undercover Economist[/amazon_link], but [amazon_link id=”B00XIV0YCM” target=”_blank” ]The Price of Everything[/amazon_link] is a serious contender for that chapter alone. So kudos to Eduardo Porter, and for an all-round enjoyable book for non-economists.