Chatting to a philosopher friend yesterday about the state of the world in general and capitalism in particular, we concluded that a lot of the heavy analytical lifting on the changing structure of post-industrial economies had been done long ago by Daniel Bell and Peter Drucker. Bell’s [amazon_link id=”0465097138″ target=”_blank” ]The Coming of Post-Industrial Society[/amazon_link] was published in 1973 and [amazon_link id=”0465014992″ target=”_blank” ]The Cultural Contradictions of Capitalism[/amazon_link] in 1976, while Drucker’s key books were published even earlier – [amazon_link id=”0434903965″ target=”_blank” ]Technology, Management and Society[/amazon_link] came out in 1970, a year after [amazon_link id=”1560006188″ target=”_blank” ]The Age of Discontinuity[/amazon_link], with its coinage of the term ‘the knowledge economy’.

[amazon_image id=”0465014992″ link=”true” target=”_blank” size=”medium” ]The Cultural Contradictions of Capitalism[/amazon_image]

I have on the shelf a 1970 collection of essays edited by Bell and Irving Kristol, [amazon_link id=”0465008690″ target=”_blank” ]Capitalism Today[/amazon_link], in which Bell and Drucker again stand out for their prescience. Drucker writes about the development of mass global markets in capital and professional careers, alongside the mass market in products and services, and calls for economic theory to integrate the three in order to understand the global economy. Bell’s essay discusses the break between the dynamics of the economy and the cultural and moral foundations that had always made capitalism work until then; and the disjunction between the rational, technocratic decision-making of the economy and the “anti-cognitive and anti-intellectual currents” of modern culture.

Is it cheering or depressing that today’s deep problems are at least a generation old?  It does feel like a return to the 1970s in so many ways, from maxi dresses in fashion and a punk revival, to exchange rate crises and the back-to-the-future macro debate of Keynesians versus monetarists.

Is it 1978 again?

I’ve been mulling over the Malcolm Gladwell comment mentioned in my previous post – “Poverty is not deprivation; it is isolation.”

Much of my consultancy work during the past eight years has concerned the social and economic impact of mobile phones in low-income countries. The first report I did for Vodafone (on the impact of mobiles in Africa, in 2005, Paper 2 in this series) included a now-famous piece of econometrics by Len Waverman and co-authors estimating that an additional 10 mobile phones per 100 people (from 1995 to 2003) had raised a country’s per capita GDP growth 0.6%. Although this was large, an estimate we thought was probably biased upward a bit by simultaneity despite the team’s best efforts to take this into account, it made sense that the impact could be large when looking at earlier research on the effects of fixed line telephony in the US.

One comparison Len made always stuck in my mind: at that time mobile penetration rates in a country like Kenya were similar to fixed-line penetration rates in a country like France in the early 1970s. When I grew up in northern England in the 1960s and 70s, few of us had phones at home – we had to walk about 10 minutes to the nearest call box. My parents got a phone in the late 1970s, and shared the line with another house even then. Within the past generation, communication has changed the way all of us on Earth engage in everyday economic (and social) activities like shopping or finding work.

[amazon_image id=”B004SHO570″ link=”true” target=”_blank” size=”medium” ]Linked: The New Science Of Networks Science Of Networks[/amazon_image]

I looked back at the first book I read about networks, Albert-Lásló Barabási’s [amazon_link id=”B004SHO570″ target=”_blank” ]Linked: The New Science of Networks[/amazon_link]. He points out that the structure of the economy or its sub-components like industries or firms is a tree. Poor countries, or people are at the outmost branches, with the fewest opportunities. Unhealthy, uncompetitive industries have too few over-large trees whose shade destroys the vigorous undergrowth.

Andy Haldane at the Bank of England has spoken of the need to apply network thinking to the banking industry, and the risk of systemic failure. Mainstream economists actually need to consider much more carefully how network models might apply across the board, as a few pioneers such as [amazon_link id=”0415594243″ target=”_blank” ]Alan Kirman[/amazon_link] and [amazon_link id=”0571197264″ target=”_blank” ]Paul Ormerod[/amazon_link] have long argued.

Thinking about networks is natural in the field of telecoms, but the connection between the physical networks that fundamentally underpin the economy and the mental models we use to analyse the economy hasn’t been fully made. The economy has been rewired since around 1980 but economics hasn’t yet.

The internet tree

On the Tube in the past couple of days, I’ve spotted an intriguing mix of books being read by fellow passengers (real books, that is):

[amazon_link id=”0521007771″ target=”_blank” ]The Cambridge Companion to Merleau-Ponty[/amazon_link]

[amazon_link id=”0091867770″ target=”_blank” ]Round Ireland with a Fridge[/amazon_link] by Tony Hawks

[amazon_link id=”074758589X” target=”_blank” ]A Thousand Splendid Suns[/amazon_link] by Khaled Hosseini

[amazon_link id=”0099502232″ target=”_blank” ]The Associate[/amazon_link] by John Grisham

[amazon_link id=”B005MJFA2W” target=”_blank” ]Thinking Fast and Slow[/amazon_link] by Daniel Kahneman

I’m still reading [amazon_link id=”1594482675″ target=”_blank” ]The New Kings of Nonfiction[/amazon_link] edited by Ira Glass. There’s a classic Malcolm Gladwell essay about the six degrees of separation and Granovetter’s strength of weak links idea. It contains the line: “Poverty is not deprivation; it is isolation,” which must be true.

There were of course lots of kindle etc readers on the Tube so I couldn’t see what they were reading, but as it turns out that e-readers explain the success of the smutty ‘Fifty Shades of Grey’ series, that’s what I’m going to assume was keeping them all occupied on their commute, rather than the philosophy of Merleau-Ponty.

[amazon_image id=”0521007771″ link=”true” target=”_blank” size=”medium” ]The Cambridge Companion to Merleau-Ponty (Cambridge Companions to Philosophy)[/amazon_image]

It’s one of those weeks, wall-to-wall meetings, all on different subjects so I’m reading the papers on the train on the way there to get my head around things. So for a bit of mental relaxation I’ve been reading a wonderful book recommended to me by Tim Harford. That’s [amazon_link id=”1594482675″ target=”_blank” ]The New Kings of Nonfiction[/amazon_link], edited by Ira Glass , producer of the utterly brilliant This American Life.

As the title suggests, this is a collection of long non-fiction essays. They amount almost to a new genre, one greatly encouraged by the web for reasons I’m not sure I understand. After all, the conventional wisdom is that people only read short items online. Maybe it’s because the scope of the addressable market for this work is so much increased. Maybe it’s the arrival of iPads and other tablets, and this kind of short long-form work is perfect for commuting. The revival of long essays and short books these days is a very welcome phenomenon.

The style is distinctive too. Reportage meets the techniques of good fiction, so the stories are gripping. Anyway, highly commended. And proceeds from the book’s sales go to a Chicago literacy programme.

[amazon_image id=”1594482675″ link=”true” target=”_blank” size=”medium” ]The New Kings of Nonfiction[/amazon_image]

I took part in a very stimulating debate on BBC Radio4’s Start The Week with Michael Sandel, author of [amazon_link id=”184614471X” target=”_blank” ]What Money Can’t Buy[/amazon_link], and Grigory Yavlinsky, author of [amazon_link id=”0300159102″ target=”_blank” ]realeconomik[/amazon_link]. The podcast is available on the Start the Week website. Here are the two authors just before we went into the studio.

Michael Sandel

Grigory Yavlinsky