Joris Luyendijk is speaking at the Festival of Economics in Bristol in November so naturally I had to read his book Swimming with Sharks: my journey into the world of the bankers and have torn through it. It’s a fantastic book, and is up there with Whoops! by John Lanchester as a guide to the financial crisis. There is lots of close observation, not unsympathetic. For example, spotting that it’s the Continental European bankers who wear blue suits and brown shoes – so true. What’s that about? His many interviews also provide revealing vignettes, like the group of middle-ranking bankers singing ‘Another One Bites the Dust’ in authumn 2008 when news of another bank failure broke.
It’s also a terrifying book. In the opening pages Luyendijk reminds us how close the economy and consequently society came to collapse in October 2008. In the UK we were a few hours away from cash machines, supermarket and petrol station tills not working, logistic chains breaking down. The Bank of England Court minutes recently published confirmed demand for cash had shot up and new banknotes had to be printed. I certainly got out a lot of cash. By the end of Sharks, you realise that the whole thing can happen again, and probably will. Nothing has changed.
This is not because bankers are immoral and greedy, although many, he says, are amoral. It is a whole system problem: the gripping image is a plane, on which we’re all sitting having a meal and a drink, slowly realising that the cockpit is empty. Interestingly, he pinpoints a specific London problem of people staying with high-paying City jobs because they have a huge mortgage and high school fees.
Like Luyendijk, I’ve often wondered why there has been so little political imperative to change the system – it is a matter of politics. And some of the key measures are not at all difficult to get your head round: smaller banks, and much, much more equity capital and less leverage. Simples. It’s a good time for new books about finance, with John Kay’s Other People’s Money and Adair Turner’s Between Debt and the Devil. Let’s hope that a new crop of books making exactly the same recommendations will help change the political climate. That means lots of people need to read them – and of course come the the Festival of Economics.
I’ve enjoyed reading Bernard Carlson’s Tesla: Inventor of the Electrical Age (although, as I confessed, skipping over the physics). How exhilarating to read about the exceitement as thousands of people crammed into lecture halls to hear Tesla speak about his discoveries. “The demand for seats was so great that tickets were being scalped outside the hall for three to five dollars,” Carlson writes of an 1893 lecture in St Louis (that’s $80-130 in today’s dollars).
The book is particularly interesting on the lack of form and direction in the early stages of commercial development of a new technology. Standards had not been agreed. Different technical approaches seemed equally viable. Companies were forming – and going into receivership – and the investment risk was substantial. Rich investors (hello J.P.Morgan) were trying to corner new markets. Patent litigation was common.Tough choices had to be made between promoting ideas and licensing the patents versus holding patents and going into manufacturing.
In this confusion, sober analysis was insufficient to make technical and financial choices. What Carlson calls ‘illusion’, the building of sufficient belief in a single path to the future, was critical: “We need to understand and appreciate how inventors and entrepreneurs forge relationships that foster a balance between imagination and analysis.” The inventor has to inspire his (or her) backer, the businessman has to keep the creative genius grounded (no pun intended). One could see it as creating the focal point in a game with many possible outcomes, and hence sometimes the phenomenon of lock-in to what might be not the best technical outcome.
So, a fascinating read on the early development of an important new technology, as well as an extraordinary character. As the book observes, there was always a kind of minority interest in Tesla, a real maverick; but he deserves this fine biography.
I’m writing about GDP in particular and economic statistics in general again – can’t keep off the subject (& by the way, GDP is out now in paperback!) Today I picked up Adam Tooze’s marvellous 2001 book Statistics and the German State 1900-1945: “This book … has sought to portray the construction of a modern system of economic statistics as a complex and contested process of social engineering … A functioning statistical system … implied a particular model of political order and in particular a vision of the relationship between state and civil society.”
The national accounts framework in place today is a modernist project. Like so many of these, it is being unravelled in unpredictable ways by technology, globalisation, and the changing character of the state. My writing task today is responding to the call for evidence on the current Review of Economic Statistics. It’s a tall order to say something succinct about getting from the categorisation of the world coded into current statistics to something closer to (disordered) realities, especially when there is an important element of performativity in statistical categories.
Courtesy of the terrific weekly newsletter from Benedict Evans, this link to a terrific article about Krushchev’s 1959 visit to IBM in what later became Silicon Valley. This is a good excuse to plug again one of my favourite books, Red Plenty by Francis Spufford. The book also has a supplementary website with some fascinating short essays by the author – like this one on ‘plenty’ or (lack of) enoughness.
Among the many reasons I love Red Plenty is that it must be the first time a literary author has been able to describe the formal equivalence between a competitive general equilibrium and a centrally planned economy, as set out in the socialist calculation debate of the 1930s. Anyway, the book starts with Krushchev’s 1959 US visit, although not his admiration of the cornucopia of food and democratic access in the IBM cafeteria in San Jose. It is a gripping read, a true story told with the verve of a novel.
This morning I picked up Tony Judt’s brilliant 2005 book Postwar, a history of Europe since 1945. He wrote in the Introduction:
“An era was over and a new Europe was being born. … What had once seemed permanent and somehow inevitable would take on a more transient air. … Europe’s future would look very different – and so too would its past.”
Until re-reading this passage, I had forgotten that Austria did not join the EU until 1995, and that in 1999 Jorg Haider and his “Freedom Party” won 27 per cent of the vote.
Judt continues, explaining the roots of the 2nd World War in the 1st, “The little countries that emerged from the collapse of the old land empires in 1918 were poor, unstable, insecure – and resentful of their neighbours.” It is only 20 years since the last, dreadful & bitter, Balkans conflict.
I do hope that somewhere in Europe there are political leaders reflecting on this past rather than obsessing about what the latest opinion polling tells them about popular attitudes to migrants. Century-old resentments and suspicions are not far below the surface; keeping them in their place is an unfinished, probably permanent, task.