Time and times

I went into my office on Friday to pick up some books out of their quarantine, mainly things i need to get papers written, but I also rescued Changing Times: Economics, Policies and Resource Allocation in Britain Since 1951 by Martin Chick. I’ve torn through it, a very interesting book.

As the subtitle indicates, it’s a history of postwar economic policy in the UK, ranging over six decades and issues spanning industrial policy, macro and trade policies, environmental, labour market, health and education policies. It’s also only 400 pages, to give an indication of the quite long focal length it necessarily requires. Given this broad span, the structure of the book is provided by the theme of time. Time in two senses: how policies relate to the distribution of economic welfare between generations; and the importance of assets, stocks as well as flows, and in particular the state’s withdrawal from investment in the future over this period.

This doesn’t 100% work as a thematic structure but it is nevertheless extremely interesting to reflect on some familiar trends and episodes in postwar economic history through this lens. Chick also draws on a huge range of the economics literature in order to cover the various policy areas, and has obviously spent hours in the National Archives reading Treasury papers and other policy documents. (Indeed, by the <6 degrees of separation rule, he lodged with my in-laws while staying at Kew to do the archive work.)

My favourite chapter was the one on privatisation of state-owned industries, which politely eviscerates the rationale for the policy. As Chick writes: “What was perhaps under-appreciated at the time of privatisation was the historical novelty of trying to induce large sunk investment from utilities operating in competitive markets.” After all, profit rates in the utilities sector are never spectacular. He goes on to interpret nationalisation as being “preferred to regulation as a means of extracting for consumers the benefits of improvements in productivity.” Privatisation was introducing risk into areas “from which it had been absent for decades”, the risk of costly, lumpy investments not delivering an adequate return, and technological risk – as well as altering the distribution of returns.

However, there is loads of interest in every chapter even for someone who has read a lot of the economic and political history of this period. For instance, the London smog of 5-8th December 1952 is thought to have led to the deaths of 4000 Londoners, a staggering number. Yet it wasn’t until 7 months later that the government even appointed the Beaver Committee on Air Pollution. The same chapter on environmental policy is super-interesting on the relationship between stocks and flows of different types of natural asset – fish vs oil.

Chick concludes the book: “Considerations of time and space affect all of the major issues of concern today (housing, utility output, global warming, infrastructure, educational opportunities, access to healthcare, trade, the internet and so on).” I have quibbles about the book – for instance, it would have been nice to replace dense paragraphs describing data and trends with some charts. But in the end, what’s not to like about a book with references ranging from Derek Parfit and Frank Ramsey to articles about the Cod Wars of the 1970s or technical reports on council house sales?



Self-evident truths?

Reading Jill Lepore’s These Truths: A History of the United States has been quite a commitment – 800 pages and too big to carry around even as a paperback. It was well worth it. What a brilliant book.

Even at such a length, to cover the history of the US from Columbus to Trump requires a long focal length. The thread Lepore draws through the entire text is slavery and race, America’s original sin, and the intention of the Founding Fathers (“We hold these truths to be self-evident…”) and meaning of the American constitution. What does the founding dedication to equality mean in practice? But this is too reductive. This is a dense, rich book well worth the two weeks it has taken me to read.

Lepore is a wonderful writer, which helps. Consider the early section where she discusses the deal at the 1787 constutional convention to count a slave as three-fifths of a person for the purposes of determining states’ populations and therefore representation in Congress – a deal that gave southern states a lasting advantage in the legislature. During a break, Madison asked after the whereabouts of one of his slaves, Anthony: “Anthony had gone looking to be five-fifths of a person.” He had run away.

Or this: “Walter Lippman wore a three piece pinstripe suit the way a tiger wears his skin, but the cue to his acuity came in the raised eyebrows, as pointed as the tip of an arrow.”

The more modern sections are more familiar, but I like the way Lepore uses certain themes to ensure the book is more than one thing after another. The key ones for the 20th century are the media – the term “fake news” was in circulation in the 1930s, when Goebbels was an admirer of Edward Bernays, and both opinion polling and modern lobbying and campaigning were taking off – and computer technology. “Computers are often left out of the study of history and government, but starting at the end of the Second World War, history and government cannot be understood without them. Democracies rely on an informed electorate; .computers … would both explode and unsettle the very nature of knowledge.”

It turns out – now I look her up – Lepore has a podcast called The Last Archive, which must be worth a listen. I came across These Truths in a New York Times article about what Joe Stiglitz is reading – many other appealing reads on his list.



Globalisation past and future

Sitting in quarantine in my office is the Piketty tome, Capital and Ideology, the book that’s so ridiculously massive it arrived with its own tote bag. I’d got far enough in to it to reach the long historical section, to which my first reaction was he didn’t need to show us all his workings in such immense detail.

Another economist who has turned to history is Jeff Sachs in his latest, The Ages of Globalisation: Geography, Technology and Institutions. Sachs has long been alert to the implications of geography for economic outcomes; in this book he adds a very long historical perspective. So long that we start in paleolithic times at 10,000 BCE. The narrative is framed in terms of seven ages: paleolithic, neolithic, equestrian (domestication of horses), classical (Rome/Han China, ocean (start of European empires), industrial and digital.

There has been a trend towards these long-perspective books in recent times: Ian Morris’s Why the West Rules (For Now), Jared Diamond’s Guns, Germs and Steel and Collapse, James Scott’s Against the Grain, the dreadful Sapiens by Yuval Noah Harari. If you have read a number of these, then much of the ground covered in Sachs’s book will seem familiar; there’s only so much that is known about paleolithic times. Its great merit – especially if you haven’t read any of the others – is that it’s concise, and sends the interested reader to other sources. It doesn’t need its own tote bag, and Sachs wears his own extensive reading lightly. He’s a very clear writer, too, and the book has some lovely (colour) charts and maps.

The pitfall of taking this synoptic approach is that a lot hangs on the narrative thread and underlying argument. Sachs’s seven ages work quite well in this regard, and do include sections on China, India, and the Islamic world. The argument in this book – a bit like Martin Sandbu’s new book, The Economics of Belonging, which I am reviewing for another publication – is that we shouldn’t be turning our back on globalisation. It can be made to work better for the many, not just the few, if we take the SDGs and international organisations seriously and reform the latter.

I’m sceptical that reforming the UN will fix anything. One of the earlier threads that gets lost in the final ‘what to do’ chapter is the way technologies shape what is feasible in terms of governance as well as shaping the form of economic globalisation that occurs. Still, it’s a good thing there are still some advocates for globalism rather than nationalism, and for the global public good. It’s a pre-pandemic book but post-publication events suggest this is the time to argue for at least some parts of the international order to be strengthened.




The end of capitalism as people knew it

After a week on holiday reading detective fiction, I’ve devoured 1931: Debt, Crisis and the Rise of Hitler by Tobias Straumann. I’d never picked out 1931 as a particularly significant year, knowing nothing about the German banking crisis that year. Yet, the book argues, what hapened “is a story of almost biblical proportions, demonstrating how quickly a situation that seems manageable at first can spin out of control.” Greek tragedy was the comparison that came to my mind: every person doing exactly what they inevitably had to, ending in disaster because of the situation.

The book, which is highly readable, starts with an economist I’d never heard of, ‘The Raven of Zurich’, Felix Somary, the Cassandra who warned of disaster staring as early as January 1930. It didn’t happen for another 18 months, with the collapse of German banks after the Credit Anstalt collapse, so Somary was mocked. But had seen the inevitable consequences of the combination of the Depression, the burden of reparations on Germany, the international imbalances that resulted from the country seeking short term foreign capital, and the efects of consequent repeated rounds of austerity on German politics.

The circumstances were of course highly specific, yet throughout the book, there are alarming parallels with the post-GFC west. Take the Smoot-Hawley tariffs, signed into law by President Hoover despite the fact that over 1000 American economists warned him against doing so. In Germany itself, the parliamentary processes of the already weak Weimar republic were increasingly debased by extremists. The latter, prominently the Nazi party, welcomed the chaos.

By mid-1931, wages and pensions had been cut, unemployment was high and rising, there was no prospect of relief from the burden of reparations or indeed further short term financing to help Germany meet those payment – and then the main banks started to topple and experienced massive bank runs. “It felt like the end of capitalism as people knew it.” Arnold Toynbee wrote that “men and women all over the world were seriously contemplating and frankly discussing that the western system of society might break down and cease to work.” In important ways they were right.

It’s a relatively short book that reads like a thriller, and – as Straumann concludes – illustrates the fundamental point that “Only when domestic electorates are prepared to accept a loss of sovereignity for the benefit of cross-border co-operation can international institutions and agreements have a chance of working effectively.” When a debt crisis makes sustained growth difficult and  leads to repeated austerity measures, electorates start to wonder what the point is.




What numbers make visible & what they erase

That I read Caitlin Rosenthal’s Accounting for Slavery: Masters and Management was a bit random – we’re going away for a week and I didn’t want to start a holiday book, so pulled this bound proof the publisher had sent me off the pile. I’m glad I did. It’s a terrifically interesting book. It’s in effect a business history of slavery in the Caribbean and the American south, using the detailed management records that remain to understand how plantations were run – just as business historians would later use similar documentary evidence to trace the practices of management in industry. As she writes, “Scale required structure.” The sugar and cotton plantations were sometimes very large scale indeed. And the science of management emerged in this context before any manufactories grew to the same kind of scale.

There is a particularly illuminating section on the standardisation of record keeping: “Preprinted forms were an important and overlooked technology in organizing plantation labor.” Early records were hand written and ruled, with documents often sent to absentee owners in England – this was, Rosenthal points out, also one of the earliest instances of the separation of ownership and control, as large plantations were often run by professional managers. (The role of earnings from slavery in fuelling the growth of financial instruments and the City in England are the subject of this UCL research project, Legacies of British Slave-ownership) The availability of standard forms helped spread the ‘scientific management’ techniques – again, ahead of Taylor’s famous introduction of scientific management in industry. (This reminded me of Donald Mackenzie’s brilliant essay on how the commercial availability of options prices calculated by computers helped grow derivatives markets.)

Rosenthal also covers the role of slaves as, literally, human capital. Plantation managers kept inventory records and appied several different valuation techniques. As she observes, this was fundamentally an issue about property and therefore about power and politics, property being something defined by law. (And property in the form of people is more political than most.) By the eve of the Civil War, the total value of enslaved human capital was over $3 billion. (Before anyone takes this particularly noxious version of human capital as an opportunity to knock economics, economists were prominent in the abolition campaign, and historian Thomas Carlyle named economics the ‘dismal science’ for not respecting the property rights of slave owners.)

Rosenthal (formerly a management consultant) ends by pointing out that labor conditions for many people in the world still leave much to be desired: “Confronting plantation account books can remind us how easy it is to overlook the conditions of production from the comfort of a counting house or safety of a computer screen. Reckoning with the ways planters accounted for slavery should encourage us to rethink the kinds of data we record and how we use it. Quantitative records can help us to see farther, but only if we remember what the numbers make visible and what they erase.”