Ferraris for all

In 1990 Amartya Sen, who has since won the Nobel prize in economics, wrote an article in the New York Review of Books arguing there were 100m “missing” baby girls in the third world. From an examination of statistics that many baby girls in poorer countries died as a result of poorer medical care or even deliberate infanticide. It is strange that two decades later the same story should make the cover of the Economist with both the lead editorial and a substantial feature.

It is of course right that girls should have the same access to public health resources as boys and that men and women should have equal rights. However, something odd is going on with the recent heavy emphasis by establishment figures on gender equality in poorer countries.

As I argued in my recent spiked review defending abundance something odd seems to be going on. The aspiration to achieve material equality between the rich countries and the poor has become subdued. Instead there is a widespread discussion of gender inequality - and this in turn is often understood in terms of the authorities intervening in family life to stop men abusing women.

As a result tackling inequality is redefined as a problem of male abuse rather than one of a lack of economic development. From this perspective the relatively recent mainstream preoccupation with gender inequality is more problematic than it first appears.

Labels: development, inequality, review, spiked, women

Frank Furedi’s latest review on spiked criticises David Willetts, one of Britain’s few intellectual members of parliament, for the neo-Malthusian views expressed in his new book. According to the review The Pinch: “is based on a depletionist theory of economic history. In line with the Malthusian model, The Pinch presents resources as being entirely fixed and all variables as more or less constant, except, of course, population growth. From this perspective, one generation utilises resources at the expense of the next generation.”

Labels: book, Malthus, review, spiked

Spiked has run a review by me of two books arguing that governments should be guided by research on happiness and well-being. My take on it is apparent from the headline: "It’s better to be a dissatisfied human than a satisfied pig".

Labels: book, happiness, review, spiked

An extract from my recent spiked review on growth scepticism was published today in the Washington Times.

Labels: media appearances, review, spiked

My recent spiked review on growth scepticism is featured on Arts & Letters Daily today.

Labels: media appearances, review, spiked

Spiked has published a review by me looking at three American growth sceptic books. It is essentially an introduction to some of the key themes of my new book.

Labels: book, growth, media appearances, review, spiked

Josie Appleton has written a review for the spiked review of books which examines the creation of an artificial “carbon market”. She argues it involves the redistribution of resources to more stagnant economies and the creation of a vast green bureaucracy. The article focuses on the latest book by Nicholas Stern while also discussing work by Anthony Giddens and Mike Hulme.

Labels: book, climate, environment, review, spiked

My spiked review of Neal Lawson’s All Consuming is the featured book review on Arts & Letters Daily today.

Labels: book, media appearances, review, spiked

Spiked has published my review of All Consuming by Neal Lawson.

Labels: book, consumption, ethics, review, spiked

The following review by me appeared in the latest Fund Strategy (20 July).

Apart from its branding, Neal Lawson’s All Consuming is virtually indistinguishable from the plethora of books attacking consumerism. It also embodies a similar elitist disdain for the masses.

Anyone wanting to buy a book attacking consumerism is faced with an embarrassing range of choices. There are so many different tracts, using so many different terms, saying more or less the same thing. The differences between competing brands of soap powder are more significant.

Terms used by anti-consumerists to attack consumerism include consumer addiction, compulsive acquisition disorder, enoughism, luxury fever, oniomania, shopaholism and stiffitis. Neal Lawson, the author of All Consuming and chair of a “democratic left” pressure group, prefers turbo-consumerism.

Lawson’s arguments are as well worn as a stone-washed pair of Levi’s jeans. He goes into excruciating detail about how the plethora of consumer goods is ruining our lives. In Lawson’s view, Britain has long passed the era of scarcity.

He says we live in an era of superabundance in which greater choice only makes us miserable. We are more concerned with symbols and brands as a mark of our status than meeting our basic needs.

Similar arguments have been made, with considerably more finesse, by earlier authors. The notion of conspicuous consumption can be dated back to Thorstein Veblen’s The Theory of the Leisure Class, first published in 1899. Over half a century ago John Kenneth Galbraith wrote The Affluent Society, in which he argued America was suffering from the problems of post-scarcity. No Logo, a radical critique of brands by Naomi Klein, was published in 2000.

To the extent there is any originality in Lawson’s work it is to blame the rise of turbo-consumerism on what he calls “free market fundamentalism”. From this perspective a group of rabid free marketeers, led by Ludwig von Mises and Friedrich Hayek, led an intellectual revolution which ultimately led to an obsession with consumption. In Britain it was Margaret Thatcher, the Conservative prime minister from 1979 to 1990, who put the ideas into practice.

But free market fundamentalism is a zombie category. It exists in the minds of its users rather than in reality.


Lawson may not have noticed – he does not mention it in his book – but a New Labour government came into office in Britain in 1997. It is something he should be aware of; particularly as he was once an adviser to Gordon Brown and is still a member of the Labour Party. No doubt, despite any reservations he has, he will still campaign for Labour at the next election.

It is also hard to square the idea of free market fundamentalism with the massive role of the state in the British economy. The most striking indicator of this is that state spending in Britain is equivalent to about 45% of gross domestic product. This is a huge distance away from the minimal role of the state favoured by the likes of von Mises and Hayek.

The solutions Lawson proposes for the supposed problem of consumerism push him back into well-worn territory. They include restrictions on advertising, taxing luxury goods, rationing, promoting ethical consumption and making happiness a government priority. Like many environmentalists, Lawson looks back to the last world war for inspiration:

“During the second world war we gave up some freedoms, in particular the freedom to consume, to enjoy others deemed more important. We accepted rationing, blackouts and the evacuation of children because of a greater threat.”

As with the rest of the book, his memory of the war is highly one-sided. He could have added carpet bombing of civilian areas, extermination camps, the dropping of atomic bombs and tens of millions killed.

No doubt Lawson would recoil if confronted with information about the mass carnage of the second world war. But the physical brutality was closely related to the rationing and forced restrictions in consumption he advocates.

One word Lawson shies away from using is "austerity". In this he differs from David Cameron and Nick Clegg who openly argue that Britain needs a new age of austerity. In contrast, Lawson, like his former boss Gordon Brown, avoids using the A-word. Instead he prefers to indulge in platitudes such as “less is more”.

Ultimately, All Consuming is an elitist tract. The scorn with which it regards those who market different brands of trainers or televisions can easily be applied to the ­consumers themselves. They are presented as gullible individuals who are easily manipulated by powerful corporations. That is why restrictions on advertising are seen as necessary: to ­protect victim consumers from abusive companies.

Ironically, even the most fashion-conscious teen­ager is less obsessed with ­con­sumption than the anti­consumerists. The learned professors, journalists and political lobbyists who study in detail the choices available to the public are a sorry sight.

Of course such self-appointed experts are not opposed to all forms of consumption. Although they despise the purchase of luxury items by the masses they are happy to indulge what they see as their own refined tastes. Indeed, the notion of ethical consumption is essentially a way of ­validating the shopping of the elite while deriding the masses at the same time.

From the elite’s perspective, consumption becomes what James Heartfield, a social commentator, calls status affirmation. The purchase of what are deemed to be ethically acceptable products is seen as marking individuals out from the rabble. So anyone who likes, say, ordinary chocolate ­biscuits is sneered at as a gullible consumer while those who eat overpriced organic Duchy Originals are viewed as cultured individuals.

Under the ethical tag lurks a new form of snobbery. Only the attack on consumerism is supposedly for the benefit of society as a whole.

All Consuming is a junk book in what is a largely trashy anti-consumerist genre. It is virtually devoid of serious ­intellectual content. If it was a food it would be nowhere near good enough to be served in the likes of McDonald’s or Burger King

Labels: book, consumption, ethics, Fund Strategy, review

A couple of interesting articles on the American inequality debate.

Brink Lindsey, vice president of research at the Cato Institute, has written a critique of what he calls “nostalgianomics”. This is the tendency to romanticise the “golden age” of relatively low income inequality from the 1930s to the 1970s. Paul Krugman, Nobel laureate and New York Times columnist, is the arch-exponent of this view.

Krugman favours the system under the “Treaty of Detroit” (1950) in which the United Auto Workers (UAW) agreed not to strike in return for such gains as health, unemployment and pensions benefit. More generally it refers to a more conciliatory approach to relations between capital and labour.

Yet according to Lindsey the treaty was deeply flawed:

“The Treaty of Detroit was built on extensive cartelization of markets, limiting competition to favor producers over consumers. The restrictions on competition were buttressed by racial prejudice, sexual discrimination, and postwar conformism, which combined to limit the choices available to workers and potential workers alike. Those illiberal social norms were finally swept aside in the cultural tumults of the 1960s and ’70s. And then, in the 1970s and ’80s, restraints on competition were substantially reduced as well, to the applause of economists across the ideological spectrum. At least until now.”

Lindsey goes on to conclude:

“Paul Krugman may long for the return of selfdenying corporate workers who declined to seek better opportunities out of organizational loyalty, and thus kept wages artificially suppressed, but these are creatures of a bygone ethos—an ethos that also included uncritical acceptance of racist and sexist traditions and often brutish intolerance of deviations from mainstream lifestyles and sensibilities.”

Meanwhile, Benjamin Page and Lawrence Jacobs have written what sounds like an insightful book on American inequality judging by a review on Miller-McCune. Class War: What Americans Really Think About Income Inequality evidently argues that: “Americans are both philosophically conservative and operationally liberal”. It calls this belief system “conservative egalitarianism”. According to the review this outlook “admires individual self-reliance but accepts public intervention as necessary to help citizens strive for the American Dream on an ostensibly level playing field”.

Labels: America, book, consumption, inequality, review, work

An excellent recent essay by Neil Davenport in mute magazine helps to draw out the intellectual backdrop to the rise of growth scepticism. Davenport’s piece is a review of two classics of the “Marxist” Frankfurt school - Dialectic of Enlightenment and One-Dimensional Man - plus a trilogy on the Third Reich by Richard Evans.

Davenport shows how the Frankfurt school turned what was perceived as left wing thinking on its head:

* It argued the second world war, including the Holocaust, was a culmination of Enlightenment thinking rather than a violation of it. In so doing it ignored the character of Nazism as a reaction against modernity while itself rejecting the ideas of reason and progress.

* It argued the mass of the population, the working class, largely backed Nazism. In this respect it was historically inaccurate too: it ignored the rise of Nazism as a middle class phenomenon which later became popular among the elite.

Frankfurt school ideas helped pave the way for contemporary social pessimism. It embodied a rejection of reason and a disdain for the masses. It converted what were previously seen as conservative ideas into a radical sounding form. Herbert Marcuse’s One-Dimensional Man helped popularise such ideas among the 1960s counter-culture and the themes were then taken up by the rising environmental movement.

As Davenport argues: “The contemporary political juncture can perhaps be defined as a general disdain for universalism, liberty, modernity and social progress. Far from a widespread celebration of the marvels of medicine, increased food production and increased living standards, modernity is seen to lead to environmental catastrophe, urban ugliness, stress and mental health problems and even the destruction of childhood innocence. For many radicals today, the preferred option is to seek ways in which to retreat from the ‘alienation’ of modern day life via rural retreats or organising life around ethical consumption habits. Above all else, a desire to put some distance against the imaginary masses and their cultural tastes pretty much constitutes and defines ‘radicalism’ today.”

Labels: environment, ethics, modernity, progress, review

Laura Piccinini of Repubblica, a leading Italian newspaper, has written an article on John Naish’s idea that humans have Stone Age brains including a reference to my critique of his work. A summary and partial translation of the article by Maria Grasso can be found below. A link to my article on “Enoughism” is in the reviews section on the left hand column of my homepage.

The article starts by talking about Naish and his anti-consumerism (we need to cutback, the crisis won't be enough, we need to take action to cut back even more); he cites approvingly Rutgers Trivers' evolutionary biology idea that the reason we're so greedy and consume so much is that we've been pre-planned through survival strategies/instinct to accumulate in order to deal with future scarcity. As such, we haven't evolved since then and keep behaving irrationally towards planet/ourselves/future generations because we're biologically pre-planned in the same way that the first homo sapiens was - we're stuck there mentally, seems to be his argument. As evidence, he cites a study from the Southern California University that we release opioids when we consume. He fears that "over-information" and in particular commercials will suppress our development as a species to do something more than consume. To set the example, he doesn't own a mobile or have a Facebook account - he says he lives in Brighton so he can network face-to-face.

[Then the article continues, translated word for word]:

"You're either with him or against him. As is the critic from the magazine spiked, an anti-conservative and counter-current newspaper which has already attacked the well-known environmentalist George Monbiot. The subject of the disagreement was precisely the thesis that our brains are stuck in the Pleistocene period. This thesis was undermined by scientific expert Kenan Malik, who instead argues that human nature is flexible and adapts and interacts with its environment. When we point this out Naish disagrees, "I am talking about a pre-rational state in which these decisions occur - and in any case, you should check out the website of the journalist who criticised me." We did: his name is Daniel Ben-Ami and his website is called, Ferraris for all - resources for the defence of economic progress against the growth sceptics. When we asked for his opinion, Daniel did not budge. "I am against Naish and all the pro-austerity folk such as Monbiot". You're either with Naish or with Mr Ben-Ami - make your choice. Perhaps after you've read the chapter "No more choices!" The one on (Young Experimenting Perfection Seekers) Yeppies (a syndrome diagnosed by Kate Fox from the Social Issues Research Centre), people who had the opportunity to leave when they didn't like something, who run the risk of finding themselves at home at 40: the life-time procrastinators. Or the one about ex-workaholics, sent home during the crisis. Naish continues: "I invite people to read the chapter "No more work!" and to find the hidden Keynes. What's wealth for? is also on Keynes' . Naish argues that people are reviving the wrong Keynes - the one of over-consumer spending. Naish is against Obama's faith in spending - even if he says he likes the Barack the man. "Why spend $900 billion when 1/10th of that would have been enough if he'd spoken to the alternative economists?" Would that be the ones that don't want growth like you don't want it Mr Naish? Obama's change is there, but only within a capitalist system where the market reigns king. It's not enough he thinks. The hidden Keynes that inspired him to a psychedelic Keynesianism is the one which authored Economic Possibilities for Our Grandchildren - the bisexual pre-hippy Bloomsbury man. Naish argues that: "Keynes predicted that in a few generations we would reach economic and technical abundance which would pave the way for worrying about greater issues. Not spending and creating money - to think instead about cultural evolution and the higher morals of our species. "That moment has come apparently. "Maybe this recession will finally convince us”. Since WWII we've finally arrived at maximum development he thinks. Then the crisis. After reading "Stop with stuff" "Stop with happiness" "Never enough!" one will certainly find a syndrome one is affected by. The chapter on "Stop with syndromes" isn't there, but it's there if you read between the lines. And before this one, Naish had published "Pocket handbook for hypochondriacs". Maybe he's trying to take advantage of our feeble Darwinian instinct which wants to have and know everything, including all possible diagnoses? In the last page he says sorry and invites us to say stop to this kind of book. Presumably only after we've read his though.

Labels: consumption, ethics, media appearances, review, science

The notion of corruption is one of the most widely used to call into question the drive for growth in developing countries. It is often argued that measures to promote growth are undesirable, because they could encourage corruption, or unrealistic. Corruption is also used to explain the lack of development of the poorest countries.

A review by Tim Harford, a Financial Times columnist and the author of The Undercover Economist, in the May issue of Reason shows the limitations of the notion of corruption. He discusses a chapter in Raymond Fisman and Edward Miguel’s Economic Gangsters (Princeton University Press) which examines two alternative theories of corruption. Many economists argue that corruption is a response to perverse incentives, the result of poor quality institutions in developing countries, while others see it as culturally inbred. Harford relates Fisman and Miguel’s study of parking tickets among United Nations to examine which of these theories is correct.

To me both hypotheses are limited. For a start the notion of corruption is not a precise one. A practice that might not be considered corrupt in one country – say an ally of the West or a western country itself – might be designated as corrupt in another.

It also seems to me that critics of corruption have the causation the wrong way wrong. What is often labelled corruption is frequently a symptom of underdevelopment rather than its cause. For example, in a poor country it might be easier for someone to make a living by circumventing the rules. In contrast in a rich country it is often easier to earn money by legitimate means.

Labels: book, corruption, development, economics, review

Interesting to read Göran Therborn, a sociologist with a radical reputation, trying, like me in my recent spiked review, to grapple with the contemporary meaning of inequality. Only Therborn’s concern in his article in Open Democracy is defining and measuring different dimensions of inequality. There is no conception of the need to realise the human potential. Instead he proposes measures related to social inclusion and redistribution. He concludes (at least implicitly), as many such discussions do, that the Nordic welfare states are probably the best that can be achieved.

Labels: inequality, review, spiked

Spiked has published my review of Spirit Level by Richard Wilkinson and Kate Pickett. The article looks at how the idea of equality has been redefined from political to therapeutic terms.

Labels: book, health, inequality, review, spiked

Sean Collins, writing in the latest spiked review of books, makes an important point on the conservative backlash against the 1960s counterculture in America. Many working class Americans supported the backlash in response to liberal condescension, including on the question of mass affluence. Collins quotes Rick Perlstein as arguing in Nixonland that:

“The liberal capitalism that had created this mass middle class created, in its wake, a mass culture of consumption. And the liberals whose New Deal created this mass middle class were more and more turning their attention to critiquing the degraded mass culture of cheap sensation and plastic gadgets and politicians who seemed to cater to this lowest common denominator.”

Labels: America, book, consumption, ethics, inequality, review, spiked

Steven Hayward, a fellow of the Claremont Institute in California, has written a scathing review essay on American environmentalism drawing out its pessimism, misanthrope and authoritarian character. Admittedly his aim is to identify a progressive trend in contemporary American environmentalism – likely to be a forlorn task – but that does not detract from the usefulness of his piece.

Among his astute points:

•“A trip down the environment and earth sciences aisle of any larger bookstore is usually a tour of titles that cover the narrow range from dismay to despair.”

•“unlike the eschatology of all major religions, the eco-apocalypse is utterly without hope of redemption for man or nature.”

•“The greens turn purple at the suggestion that most environmental conditions in rich nations are actually improving, and they bemoan the lack of "progress" toward the transformation of the human soul that is thought necessary for the planet's salvation.”

•”One of the most popular books of 2007 among environmentalists was The World Without Us by Alan Weisman, which projects a "thought experiment" about what would occur if human beings were suddenly removed entirely from the planet. Answer: nature would reassert herself, and ultimately remove nearly all traces of human civilization within several millennia—a mere blink of an eye in the planetary timescale. Environmentalists cheered Weisman's vivid depiction of the resilience of nature, but what thrilled them was the scenario of a humanless earth. Weisman made sure to stroke his audience's self-loathing with plenty of boilerplate about resource exhaustion and overpopulation. The book rocketed up the best-seller list, the latest in a familiar genre stretching back at least to Fairfield Osborn's Our Plundered Planet in 1948, arguably the first neo-Malthusian doomsday tract of modern environmentalism. Time magazine named The World Without Us the number one non-fiction book of 2007.”

•“McKibben and many other environmental writers affect an indifference toward, or transcendence of, politics in the ordinary sense, but ultimately cannot conceal their rejection of the liberal tradition. Here we observe the irony of modern environmentalism: the concern for the preservation of unchanged nature has grown in tandem with the steady erosion in our belief in unchanging human nature; the concern for the "rights of nature" has come to embrace a rejection of natural rights for humans. McKibben is one of many current voices (Gore is another) who like to express their environmentalism by decrying "individualism" (McKibben calls it "hyperindividualism").”

•“Al Gore employed the same "communitarian" trope in his first and most famous environmental book, Earth in the Balance (1992), where, in the course of arguing that the environment should be the "central organizing principle" of civilization, he suggested that the problem with individual liberty is that we have too much of it. This preference for soft despotism has become more concrete with the increasing panic over global warming in the past few years. Several environmental authors now argue openly that democracy itself is the obstacle and needs to be abandoned.”

Those who Hayward sees as representing a positive backlash against mainstream environmentalism include Ted Nordhaus and Michael Shellenberger, the authors of Break Through: From the Death of Environmentalism to the Politics of Possibility (Houghton Mifflin 2007).

Labels: America, book, climate, consumption, environment, ethics, review

After several recent posts about the trend towards austerity perhaps something for comic relief. Peter Wilby, a columnist for the New Statesman, writes in a review for the magazine published on 19 February:

“Children … have become the motors of economic growth, responsible (through what they spend and what their parents spend on them) for a market worth nearly £100bn annually, up 33 per cent in five years. Moreover, they influence an unquantifiable proportion of adult spending on, for example, cars and holidays. If parents show children insist they spur themselves to renewed effort. Companies once sold to children by marketing to parents. Now it's the other way round, with children sometimes pointing their parents to advertisements for loans or new credit cards.”

This takes to an absurd conclusion the already odd notion that consumption drives the economy. It is not clear where such commentators think consumer goods come from. Perhaps they are somehow consumed without being produced first? It also makes the common mistake of overestimating the importance of personal consumption in the economy.

Labels: book, consumption, economics, ethics, growth, review

The following review by me appeared in the latest Fund Strategy (9 February).

Energise! A Future for Energy Innovation by James Woudhuysen and Joe Kaplinsky is published by Beautiful Books, 2009.

Energise! starts from a fundamentally different premise from virtually every other book on energy or climate change. For James Woudhuysen, a professor of innovation and frequent speaker at Fund Strategy conferences, and Joe Kaplinsky, a science writer, any discussion of energy should be based on human needs:

“Our starting point … is the uniqueness of human beings. To us, humans will always want to do more than simply survive. They will always want more home comforts, better-lit streets and greater mobility. But to get all this – now and in the future – they will need more cheap energy. In energy matters, therefore, a far bigger and more urgent challenge than global warming lies in thoughtfully supplying the world’s population and organisations.”

This simple premise leads to radically different conclusions from the conventional writings on the subject. In contrast, the mainstream approach tends to start with a discussion of the threshold above which greenhouse gas emissions become difficult to handle.

For Energise! the priority is to work out how to generate vastly greater amounts of cheap energy so the world economy can develop as fast as possible. In general terms the authors favour a mixture of energy sources including biofuels, fossil fuels, nuclear energy and renewables. But in each case their emphasis is on generating as much energy as possible with the best technology available.

For example, the authors acknowledge that first generation biofuels, such as the ethanol produced from American maize, have limitations. But they argue that, with the required investment in technology, second and third generation biofuels could become an important energy source.

Perhaps the most surprising element of the book is its attitude to renewables or what the authors prefer to call “astronomicals”. For Woudhuysen and Kaplinsky the key to using such energy sources as geothermal, hydroelectric, solar and wind is to do so on a vast scale. Since such energy tends to be diffuse, it is best collected and harnessed in massive engineering projects.

This is in contrast to greens who tend to prefer energy projects that are small scale and limited. Perhaps the most striking example is hydroelectric power – where greens often favour small-scale dams but condemn large-scale ones. For Energise! : “Environmentalists don’t really see wind, solar, water and geothermal as massive sources of energy. Their ‘renewables’ rather, are meant to renew the world morally – by leading it away from industrialism and modernity” (p360).

The emphasis on the need for a huge increase in energy supply also rules out approaches based on conservation or energy efficiency. Conservation is rejected simply because the world needs more energy rather than less. Energy efficiency is fine in principle but there are physical limits to achieving it and in any case using energy more efficiently generally means using more rather than less.

Those who ­promote energy efficiency often seem unaware that substantial improvements since the 1970s have coincided with greater energy use overall.

In relation to climate change the authors reject the sceptic view by recognising it is happening and that human activity is an important cause. But they also repudiate the mainstream response of curbing emissions and promoting energy conservation with a fundamentally different approach. In broad terms this means heavy investment in developing new and improved sources of energy supply rather than curbing demand.

On runaway climate change – change that is irreversible and dangerous – the authors argue that it cannot be ruled out theoretically but it is highly unlikely. Energise! says that climate alarmists exaggerate the magnitude and significance of the uncertainty around climate sensitivity.

Woudhuysen and Kaplinsky point out that mainstream scientific opinion does not see the build-up of a given level of greenhouse gases as likely to have anywhere near as dramatic effect as many environmentalists suggest. In effect alarmists present an extreme worst-case scenario as if it is the mainstream view.

Rather than panic about climate change the authors suggest a programme of transformation to deal with the problem. In essence this means investing heavily in what they call “a gale of new-generation technologies” (p466). Measures would include new-generation nuclear energy including fusion, a new carbon infrastructure, astronomical use of clean energy, radically improved building infrastructure and increased mechanisation of agriculture.

The main barrier to achieving the goal of massive increases in energy supply is not technical – although there are technological challenges to be overcome – but social. There is a pervasive culture of caution which militates against bold, imaginative solutions to insufficient energy supply.

In addition, a widespread antipathy to consumption means that the idea of producing more energy is often a source of anxiety if not outright hostility. Indeed, Energise! regards this topic as so important that chapter two is devoted to examining the views of commentators who are hostile to, or at least haughty towards, consumption. These range from thinkers such as Thorstein Veblen, who coined the term “conspicuous consumption”, to John Maynard Keynes and John Kenneth Galbraith.

The only weaknesses of the book are minor and technical. It has no index or bibliography – although there are extensive references.

Overall, Energise! is a huge achievement. From its simple starting point of the need for a massive increase in cheap energy it builds a strong case with authority and flair. It should be read by anyone who wants to understand one of the key debates of our age.

Labels: book, consumption, energy, Fund Strategy, review

Spiked has published an extended version of my review of Paul Krugman’s book on “depression economics”. An earlier version appeared in Fund Strategy.

Sean Collins has a review in the same issue of the spiked review of books which examines how the current financial crisis can be linked to the real economy.

Labels: Austerity Watch, book, economics, finance, Fund Strategy, review, spiked

The following book review by me appeared in the latest Fund Strategy (12 January).

Paul Krugman is probably the most influential economist in the world today. Not only did he win the 2008 Nobel prize for economics but he also has a column in the New York Times. He used the latter as a platform to attack what he saw as the crude free market economics of the Bush administration.

The Return of Depression Economics is likely to enhance his reputation further. It is an updated version of a book first published in 1999 which seemed to anticipate many of the main trends that surfaced in the economic crisis of 2008. Indeed Krugman argues that many of the themes of "depression economics" were already clear in financial crises in Latin America in the mid-1990s, in Japan in the 1990s and in the Asian financial crisis of 1997-8:

"The world economy is not in depression, despite the magnitude of the current crisis … But while depression itself has not returned, depression economics, the kinds of problems that characterized much of the world economy but have not been seen since - has staged a stunning comeback" (p181).

For Krugman the fundamental problem is what he calls a "liquidity trap" or what others have referred to as underconsumption. For him the bursting of the financial bubble has left individuals in a state of anxiety about consuming. They would rather hold on to their money than engage in what they see as excessive spending. As a result, Krugman argues, the world is suffering from a lack of demand: "for the first time in two generations, failures on the demand side of the economy - insufficient private spending to make use of the available productive capacity - have become the clear and present limitation on prosperity for a large part of the world" (p182). His solution is for Keynesian measures, such as spending on infrastructure, to bolster demand and get the economy moving again.

There are fundamental problems with Krugman's argument but to understand them it is necessary to understand how he reaches his conclusions. It is not enough to simply reject his policy suggestions. Before that his underlying assumptions must be interrogated.

Krugman uses a simple model to explain his argument. He points to the example of a Washington babysitting co-op to explain what he means by a liquidity trap. The co-op issued its members with coupons, which each represented an hour of babysitting time. The idea was that over time every member of the co-op would do an equal amount of babysitting as they cashed in their coupons.

Unfortunately the coupon system did not work as planned. Some couples who were worried about not having enough coupons were anxious about going out and keen to babysit. As a result they started hoarding their coupons. Such hoarding made couples even more nervous about going out. Eventually there were not enough coupons in circulation for the co-op to operate. In effect the co-op was in recession. For Krugman this provides a simplified version of the economic crisis.

It is important to recognise that there is not a problem with such model-building in principle. Economists do it all the time for good reason. It means isolating the most important factors in the operation of an economy rather than focusing on relatively peripheral questions. For example, an initial model of an economy might assume that it is closed - that is, it is not involved in international trade and investment - so that the main domestic trends can be identified. Later on more complex factors can be added to the model to account for more subtle variations of the argument.

The problem with Krugman's approach is not model building itself but the ahistorical character of his assumptions. It does not grapple with the specific features of the contemporary economy that mark it out from previous times. Indeed it can be argued that there is a circularity to Krugman's argument. His conclusion - that a Keynesian fiscal boost is the solution - is built into his underconsumptionist model of the economic crisis.

In contrast a working model of the economy would need to be based on a critical examination of its defining characteristics. In Cowardly Capitalism (Wiley 2001) I argued that there were two key features underlying the workings of the contemporary economy.

First, the productive economy of the West has become atrophied. The dynamic to growth of the productive side of the economy has become weak. This weakness was partially hidden by the artificial boost to consumption from the extension of credit in recent years. The relative dynamism of Asia, which subsidised consumption in the West with many billions of dollars of capital flows, also disguised the extent of Western stagnation. Indeed the financial bubble can itself be understood as the result of an attempt to offset the tendencies to atrophy in the Western economies. Such measures worked for a while but their limits were reached back in 2008.

Second, the pervasive culture of risk aversion in contemporary society gives shape to the financial markets. Financial markets have become more about transferring risks than channelling capital. Instruments such as mortgage backed securities and credit derivatives are primarily mechanisms to allow those involved to transfer risk. Yet, paradoxically, they have provided the mechanism for "contagion" from one financial party in a transaction to another.

More recently an additional factor has become paramount: the "greening" of capitalism. In the name of such vacuous concepts as "sustainability" the expansion of production is being constrained. There is a strong cultural aversion to genuine innovation and dynamic growth. This pervasive mood in society has intensified the problem of economic atrophy still further.

Any solution to the economic crisis must take into account these characteristics of the contemporary economy. Crude models of the downturn inevitably lead to flawed solutions. Krugman's proposals to bolster the sagging economy may be at the height of fashion but they look destined to fail to counteract the descent into depression economics.

Labels: book, economics, Fund Strategy, review

This week my recent Fund Strategy news analysis on the market meltdown (see 6 October post) was reproduced on Real Clear Markets while spiked ran an updated version of my review of Robert Reich’s Supercapitalism. I was also invited to appear on the Al Jazeera English TV station and Sky News but could not do either as I was in Dubai. It seems that I am at my most popular during a global financial crisis!

Labels: book, economics, finance, Fund Strategy, media appearances, review, spiked, television

Spiked has published an extended version of my review of Robert Reich’s Supercapitalism. The original was published in Fund Strategy (see 4 August 2008 post).

Labels: book, economics, review, spiked

Miller-McCune magazine, a publication from the Miller-McCune Center for Research, Media and Public Policy in California, has a useful review essay by David Villano on the “more-is-less” thesis. In other words it examines (sympathetically) the argument that it is possible to be more prosperous while consuming less.

Many of the points it makes are familiar – Americans consume far more per head than most of the rest of the world, the threat of climate change is imminent, the need to change lifestyles etc – but it includes many useful references. Among them are Confronting Consumption, (MIT Press) a 2002 book on America’s consumer society co-edited by Michael Maniates. Others include the California-based Global Footprint Network, the Voluntary Simplicity Movement, Redefining Progress and Mean Genes, a book on how our desire to consume is embedded in our DNA.

Labels: affluenza, America, book, climate, consumption, environment, footprint, inequality, progress, review, sustainability

Today’s Guardian has an unashamedly one-sided review essay by Tim Flannery (Australian academic, climate change activist and author of The Weather Makers), of books on climate change. Among those authors recommended in the piece are works by Al Gore (Earth in the Balance), Mark Lynas (Six Degrees), George Marshall (Carbon Detox) and Oliver Tickell (Kyoto2). The review concentrates on British writers but American authors mentioned include Keith Bradsher (High and Mighty - an interesting sounding book on SUVs), Ross Gelbspan (Boiling Point), William McDonough (Cradle to Cradle), Bill McKibben and Gus Speth. Bjorn Lomborg, a leading sceptic on climate change, is mentioned in a few sentences but disparagingly dismissed.

One telling sentence in the article: “Few books about climate change have been written by the meteorologists and atmospheric physicists that dominate the field”. So even in relation to the science of climate change – as opposed to the politics or economics – there are few popular books written by experts. Pro-environmentalist non-specialists seem to dominate the popular debate.

In relation to the economics of climate change the Stern Review and William Nordhaus (A Question of Balance) are mentioned.

Labels: book, climate, consumption, economics, environment, review, science

The following review by me appeared in this week’s Fund Strategy.

Robert Reich blames big business and technological progress for the erosion of democracy. But his flawed thesis is self-serving and - worryingly - he calls for a lowering of living standards.

Supercapitalism is about a fundamental schism in contemporary society. Robert Reich, a professor at Berkeley and labor secretary under President Bill Clinton, argues that big business is increasingly undermining democracy. Although people have benefited enormously as consumers and investors from this trend they are losing out in their capacity as citizens. His understated conclusion is that people should be pushed into accepting falls in living standards in return for greater democracy.

Reich's critique of contemporary capitalism is more sophisticated than many. He eschews explanations that simply attack human greed or slate conservative politicians. Reich also acknowledges that the recent era of big business has brought some substantial benefits.

But Reich's confusion of basic categories leads him to serious errors and damaging political conclusions. The key development to understand is the demise of the role of humans as producers rather than the rise of consumption. To the extent that consumption has become more important it is largely through default. The striking trend of the past 30 years is in the reduction in importance attached to humanity's productive role.

This productive side of humanity should not be understood simply in terms of making widgets. It needs to be put more broadly in the context of what might be called "the human subject": the capacity of people to make and remake the world around them. The diminished sense of human subjectivity, rather than the rise in importance of consumption, is the key to understanding the trends identified by Reich.

Reich's notion of supercapitalism has to be set against the "not quite golden age" of 1945-75. That period embodied many of the values that he holds dear: it was an era of relative equality, job security and trust. There was also a compact between labour unions and big business. Yet Reich is balanced enough to acknowledge it was far from perfect. For example, women and minorities suffered severe discrimination.

For Reich this set-up began to break down in the second half of the 1970s. New technology increased competition between corporations. This in turn led to a new era of globalisation, new production techniques and deregulation.

He acknowledges that the new era has brought enormous benefits. Thanks largely to innovations in medical science the average American lives almost 15 years longer than in 1950. Americans are also rich and have a far wider range of consumer choices than in the 1970s. Other countries too have benefited from similar developments.

However, many of the positive features of the not quite golden age have gone too. Societies have become more unequal, job security has diminished and trust in politicians has disappeared. Corporations through their incessant lobbying have, in Reich's view, undermined the democratic process.

Against those who argue that conservative politicians, such as Ronald Reagan in America or Margaret Thatcher in Britain, are to blame for this shift Reich points out (correctly) that the shift predates their time in office. Reagan was president from 1981-89 while Thatcher was prime minister from 1979-1990 yet the shift started in the 1970s. Both leaders simply intensified an attack on the post-War consensus, particularly in relation to unions, that had started before their time in office.

However, in relation to this point Reich seems to be suffering from a temporary memory lapse. The attack on the consensus in America started in earnest under the presidency of Jimmy Carter (1977-81). It was under Carter's presidency that Reich himself was a political appointee at the Federal Trade Commission. Reich does not deny his position but is shy of drawing any conclusions about the role of the Democrats in breaking the consensus. In Britain the Labour government of 1974-9 played a similar role in launching an assault on unions and destroying post-War institutions.

More broadly the way to understand this shift is as a response to the end of the post-War boom. After the second world war the world economy, particularly the developed countries, grew at record rates. But by the early 1970s signs of economic crisis were clear. This lead governments on both sides of the Atlantic to launch an assault on the unions and give much freer rein to business.

This trend in turn meant that ordinary people had much less of a say in their lives. Politics was no longer about competing camps or competing visions of how to organise society. Instead the era of "Tina" - as Thatcher put it "There Is No Alternative" came to the fore. The focus of politics switched to regulating individual behaviour - including such areas as drinking, smoking and even eating - rather than battling over how to organise society.

This is a much more convincing explanation for the shifts that Reich identifies than his focus on technology. Although Reich denies being a technological determinist his explanation exaggerates the role of technology and understates the role of political defeat in creating the current climate.

Reich's outlook also leads to some deeply conservative conclusions despite his reluctance to spell them out in detail. He is in favour of "new rules of the game" (read regulation) particularly in relation to corporate lobbying. Reich seems to lack confidence in the capacity of others to counter the arguments of corporations.

More worryingly, he twice advocates "sacrifice" by ordinary people by which he seems to mean an acceptance of lower living standards. He appears to take the peculiar view that reducing living standards will somehow bolster democracy.

In reality democracy can only be achieved by a revival of politics in the proper sense of the term. This means relaunching a battle of ideas over competing visions of how to organise society. It involves a struggle that is entirely consistent with raising rather than lowering the living standards of the bulk of the population. It is Reich's demand for sacrifice that is the antithesis of democracy.

Labels: book, economics, Fund Strategy, globalisation, review, technology

Burn-up, BBC 2’s big budget eco-thriller on the oil companies and runaway climate change, was awful in every way: as a drama, politically and in relation to the science. Rob Johnston on spiked has written an incisive review but it is worth outlining the key misconceptions embodied in the drama as they are common in the green mindset:

* It is assumed that there is no question that runaway warming (not just climate change) is happening. Catastrophe is imminent. A worst case scenario is presented as indisputable fact.

* Corporations are driven by greed in their ruthless pursuit of oil. In this sense attacks on capitalism are moral (it is driven by bad people) rather than linked to the pursuit of profit in itself. Companies and the economy are “addicted” to oil. (Insurance companies are a partial exception as they are suffering big losses as a result of climate change).

* The role of corporate lobbyists is to shed doubt on “the science”. They play the pernicious role of generating uncertainty and may engage in “greenwash” to improve their clients’ images.

* Deep down America knows that climate change is bad but it should help further its drive for global domination.

* Britain is on the right side but ineffectual.

* China is duplicitous – playing America against Europe to further its own interests,

* The only way to deal with climate change is to cut emissions. Adaptation is hardly discussed at all let along geo-engineering.

Sadly such mistaken views are widely held in the climate change debate.

Labels: climate, environment, review, science, spiked, television

Evidently Fareed Zakaria, one of America’s most influential commentators on international relations, expresses concern about the impact of China’s economic growth on the global environment in his new book. Although he welcomes poverty reduction in China he is concerned that rapid growth will lead to such problems as climate change and water shortages. According to Sean Collins writing in the latest spiked review of books:

“In viewing growth as problematic and potentially destructive, Zakaria raises a common theme of our time. Rather than celebrate the benefits of growth, such as a reduction in poverty, Zakaria and others emphasise the downsides that accompany development. This gloomy outlook reveals more about the commentator than the reality on the ground. Zakaria refers to the predicted increase in the number of cars in China from 26million to 120million in 2020 as an environmental problem rather than a cause of celebration, as the Chinese people gain greater freedom of movement. In doing so, Zakaria joins in with today’s growing China-bashing chorus.”

Labels: America, climate, environment, review, spiked

Josie Appleton has a perceptive review of Benjamin Barber’s Consumed in the latest (April) spiked review of books. Rather than focus too closely on the book itself she looks at the changing ethic of capitalism. In broad terms her breakdown is the following:

* “The capitalist bookkeeper”. The model was Benjamin Franklin (18th century). Its chief theoritician was Max Weber in his Protestant Ethic (1910).

* “The counter-cultural ethic” of the 1920s and later the 1960s. Analysed by Daniel Bell in his Cultural Contradictions of Capitalism (1976).

* “Infantalisation”. Posited as the ethic for 21st century capitalism by Barber. However, Appleton argues it is misleading to talk of an ethic of consumption and that Barber’s is a weaker book than Bell’s. Rather it has taken on a greater importance in society by default. She cites George Simmel in his Philosophy of Money as a useful theorist of consumption.

It is a useful complement to Dolan Cummings’ recent essay on contemporary anti-capitalism (see 9 March 2008 post) which also refers to Barber’s book.

Labels: book, consumption, economics, review, spiked

Ceri Dingle of Worldwrite has previewed a BBC documentary series on six fashion designers who visit India to work for firms producing clothes for the British high street. Evidently the young British brats cannot even sew straight and are contemptuous of Indians. The views of the Indian clothing workers are not even represented on screen. Blood, Sweat and T-Shirts starts at 9pm on Tuesday 22 April on BBC Three.

Labels: india, review, television, Worldwrite

Fund Strategy has run my review of James Heartfield’s Green Capitalism in today’s issue.

Terms such as "ethical", "responsible" and "environmentally friendly" are used so often nowadays in the investment world that it almost seems churlish to question them. Who would want to present themselves as unethical, irresponsible or hostile to the environment?

Yet James Heartfield, a writer and lecturer based in London, puts a strong case for such terms to be interrogated. In "Green Capitalism" he argues that the rise of environmentalism and green consumerism are entirely negative trends. His logic is compelling even though it runs directly counter to the spirit of the times.

Heartfield's starting point is that the global elite is facing its worst nightmare: cornucopia. Until recently the history of humanity was one of living in conditions of scarcity. But the virtual abolition of scarcity, at least in the developed West, has radically changed perceptions. The elite feels a desperate need to recreate scarcity artificially just as developed economies have overcome its constraints.

The origins of contemporary environmentalism go back to the economic crisis of the mid-1970s. At that time the Club of Rome, an organisation of top industrialists, sponsored a high-profile report on "The Limits to Growth". It argued that the world economy was increasingly coming up against natural limits - although its predictions have proved ridiculously pessimistic over time. The backdrop to the report was the combination of economic crisis and industrial militancy of the time. Under such circumstances this early form of environmentalism helped make cuts in wages and a reduction in popular living standards more acceptable.

More recently, two developments have helped popularise green thinking. The first is what Heartfield calls "the retreat from production". With the abolition of scarcity it became easier to prioritise other forms of economic activity besides industry. Financial markets took on an enormous importance; most strikingly in Britain.

Notions such as brands and the New Economy were elevated to the status of key concepts. Industry, in contrast, was increasingly viewed with disdain. It was often more associated with emerging economies, notably China and India, than the developed West.

The second development was the end of the Cold War and the demise of the Soviet Union in the late 1980s. This deprived the ruling elite of a focus as anti-communism had long played an important unifying role for the Western powers. It also led many disorientated radicals to support environmentalism.

This combination of factors has had perverse results. In particular it has meant that a misplaced belief in natural limits has come to the fore. For Heartfield there is no real shortage of natural resources in the world. Instead there is an ever increasing manufacturing of scarcity by the ruling elite.

An excellent contemporary example of this trend is the retirement of land from production. "Green Capitalism" points out that almost 19m square kilometres of land, more than the combined area of China and South-East Asia, are classified as protected. This amount has grown more than sevenfold since 1962.

Heartfield argues that this is the main cause of rising food prices. It is a problem of an artificial constraint on supply rather than growing consumer demand. The increasing area of land devoted to growing crops for biofuel is tiny in relative terms. If even a small proportion of "protected" land were harnessed for agricultural production, it is likely food prices would fall dramatically.

The trend towards organic food also helps to exacerbate rising prices. Since yields from organic farming are low - by definition it shuns modern farming methods - land cannot be used efficiently. Although the total consumption of organic food is relatively small, its popularity illustrates the disdain of the green elite for economic efficiency.

A particular irony is that the richest people in the world, in other words those who consume the most resources, tend to be the greenest. In Britain this includes the likes of Zac Goldsmith of the Ecologist magazine (an Old Etonian and an heir to the Goldsmith family fortune) and Lord Peter Melchett (another Etonian, and director of the Soil Association). In America the mould is set by Al Gore (the son of a senator and the owner of three homes, including a 20-room mansion).

It is tempting but misleading to accuse such people of hypocrisy. It would be closer to the mark to describe them as elitists. Their objection is not to consumption itself but to mass consumption. They see no problem with their own considerable appetite for resources but they believe that popular consumption is constrained by natural limits.

Indeed, this elitist view of consumption, Heartfield argues, is embodied more generally in green consumerism. The main role of green products - whether organic tomatoes or GM-free soya - is what he calls "status affirmation". It is to mark the green consumer out from the bulk of society. In that way the green consumer can happily use resources while distancing himself from the consumption of the mainstream. Such expressions of ethics are in reality declarations of moral superiority. Their importance is symbolic rather than practical.

Another common expression of disdain for ordinary people, in Heartfield's view, is the attitude greens typically take to the most valuable resource of all: human time. Their admonitions to recycle, not use standby buttons and save energy are free of any concerns for the time such actions take for the average household. Ordinary people are expected to expend enormous amounts of their energy on useless gestures.

It is a shame that "Green Capitalism" is not more widely available. Although its arguments are often counter-intuitive they represent a powerful critique of the pervasive outlook of environmentalism. An unexpected bonus is that it also provides insights into practical issues such as the surge in food prices.

Fortunately, through the power of the internet, it should be possible for those readers who are interested to get hold of a copy.

Labels: book, consumption, economics, environment, review

Dolan Cummings of the Institute of Ideas has an astute review essay on the Culture Wars website on contemporary capitalism and anti-capitalism. He argues that:

“That the defence of capitalism takes the form of an apology is nothing new, but the critique made today is very different from that of traditional anti-capitalism. While in the last century the pragmatic case for capitalism was made in opposition to calls for social change, in this case it is the opposite: it is capitalism that threatens to transform society and critics who seek to conserve the status quo, talking in terms of resisting change rather than taking control of it. Rather than debating which changes are or are not desirable, from more convenient shop opening hours to GM food, we are presented with a binary opposition: for or against this single relentless force, variously described as ‘neoliberalism’, ‘globalisation’ or simply ‘capitalism’? Worse, critics rarely expect to prevail anyway: ‘anti-capitalism’ has become a moralistic posture rather than a political challenge. Significantly, this almost-emotional critique has become mainstream only with the passing of the political alternative that once had capitalism on the defensive.”

Cummings touches on similar themes to me in my critique of growth scepticism. Among the authors he cites are Benjamin Barber, Daniel Bell, Frank Furedi, Clive Hamilton, Eva Illouz, Oliver James and Brink Lindsey.

Labels: book, economics, review

Frank Furedi has written a generally positive but critical review of James Heartfield’s Green Capitalism for the February spiked review of books. On the positive side he praises Heartfield’s critique of green consumerism. Furedi endorses the view that the critics of consumerism are as obsessed with consumption as the most ardent brand junkies:

“Ironically, green protest against consumerism doesn’t represent the rejection of consumption, but rather its moralisation. From a sociological perspective, green consumption can be seen as a new form of conspicuous consumption. This is consumption for effect. Consumption apparently must no longer be an impulsive act of buying – rather it has become a massively over-examined experience, and both a moral statement and an affirmation of status and identity. In the nineteenth century, theories of commodity fetishism noted the growing tendency for people to live through things – commodities appeared to acquire a life of their own through the working of the market. In the world of green consumerism, the fetish of commodities acquires an unprecedented significance. Things are assigned human and ethical significance. Thus we have the stigmatisation of certain foods as ‘evil’ and the rendering of other products as ‘ethical’.”

However, in his criticism of the book, Furedi argues that Heartfield is guilty of reading history backwards. Furedi says that it is wrong to portray the capitalist elite as deliberately setting out to engineer scarcity:

“What Green Capitalism characterises as the ‘engineering of scarcity’ could be more usefully described as the creation of new demands. Indeed, what is most striking today is not simply the rise of the celebration of scarcity, but the growing tendency to marketise every aspect of life. Under the banner of green capitalism, more and more features of economic life are being reorganised and restructured. Everything from the emission of carbon to the air we breathe to the water we drink has been transformed into a commodity. Arguments for protecting nature are really a demand for the gradual securitisation of the environment. Powerful forces insist on transforming every object of possible use into a value, in an attempt to subject them all to the influence of market transactions.”

When I get a chance I will read Green Capitalism and make my own mind up.

Labels: book, consumption, economics, environment, review, spiked

Spiked has published a review essay by me on books which see affluence and consumerism as leading to mental illness.

Labels: affluenza, book, happiness, review, spiked

The Arts & Letters Daily website has published a link to my spiked review on John Kenneth Galbraith as the “midwife of miserabilism”.

Labels: media appearances, review, spiked

spiked has published a review by me of John Kenneth Galbraith’s Affluent Society. I argue that the book, which was first published 50 years ago, anticpates many of the key themes of contemporary growth scepticism.

Labels: book, consumption, economics, growth, review, spiked

Today’s Fund Strategy includes a review by me of a book on India and China.

The rise of China and India has, apart from anything else, produced a booming economy of books designed to introduce the countries to western readers. Robyn Meredith's The Elephant and the Dragon is one of the best of the genre.

Meredith's perspective is that of an American journalist who has covered recent developments in India and China at first hand. From her base in Hong Kong, where she is a correspondent for Forbes magazine, she has written widely on both countries. Her mission in the book is to help her predominantly American readership better understand the two emerging Asian powers.

Her approach is in contrast to that of David Smith, the economics editor of the Sunday Times, who recently wrote a book on the same subject called The Dragon and the Elephant (see 9 July post). His work, while worth reading, is more historical and based largely on secondary sources. But Meredith has spent much time watching Chinese workers produce goods for western markets, navigating India's awful roads and talking to people in the region. Both books are well written, but Meredith's is more vivid.

She, like Smith, tends to alternate chapters on the two countries. So after a general introduction on "tectonic economics" she has a chapter on China's rise since the 1970s, followed by one on India's ascent. She then moves on to China's manufacturing and India's surge in IT services.

Perhaps most interesting is her chapter on what she calls "the disassembly line". This describes how the world economy has moved from one where production is focused on assembly lines to one where supply chains are key. Under the old system, of which Ford was the emblematic example, each company was responsible for a series of processes that ended up with a final product.

Under the new system, different parts of a product can be made by an enormous array of producers all over the world. Chinese firms play a key role in such supply chains as important links in this new set of processes. Often the final goods end up in the West, under western brand names, even though a good part of their value is created in China.

Although Meredith is generally sympathetic to the rise of India and China, she does discuss problems associated with their emergence as economic powers. First, she says that the rise of the two nations puts strains on the availability of natural resources. Second, she warns that the modernisation of their military forces could create tensions with America. Finally, she discusses the environmental problems posed by the rise of the two Asian giants.

In her conclusion, Meredith looks at what the rise of China and India means for America. She argues that the solution to the challenge they pose is neither an unadulterated free market nor protectionism. Instead, America needs to create more jobs and educate its population better.

Unfortunately, The Elephant and the Dragon takes the mainstream view of the two countries too much at face value. Perhaps this is inevitable in what is essentially a primer. But, like Smith, she accepts what I call the "revelation theory" of economic development.

This essentially argues that China and India lived in the intellectual dark ages until their leaders realised that capitalism was best. If only they had latched on to this perspective sooner they could, so the argument goes, have enjoyed spectacular growth rates much earlier.

What this argument misses is that there was little incentive for third-world countries to open their economies in the decades following the second world war. During the post-war boom the West was generally uninterested in investing in or trading with the developing world. Therefore there was not much incentive for third-world leaders to encourage western investment or trade. This was particularly true of demographic giants such as China and India as their strategy of relying on their large domestic markets seemed reasonable at the time.

This is not to be in favour of autarky in principle. On the contrary, it has many disadvantages. But even if China and India had opened themselves up earlier, it is doubtful whether the West would have been particularly interested in doing business with them. It was only with the end of the post-war boom in the West that an externally orientated development strategy became feasible.

The Elephant and the Dragon is also too much influenced by western, and particularly American, preconceptions. Rather than ask what the rise of China and India means for the world, the "all of us" in the subtitle seems to refer only to Americans. Meredith's primary concern is how American policy-makers should react, rather than what is best for humanity.

Such one-sidedness is particularly apparent in her discussion of the environment. She describes, correctly, how China and India are heavily polluted. But she fails to recognise that focusing on economic development, rather than the environment, can be the correct approach for developing countries. Since human welfare is closely linked to poverty, a focus on development can benefit a country's citizens even if it increases pollution.

Meredith also fails to draw out the fact that economic development provides the resources to tackle pollution. American cities are cleaner than those of Asia precisely because America is so rich. It has the economic resources and technology to clean up its environment. As time goes on it is likely that India and China will make a clean environment a greater priority.

Despite these weaknesses, The Elephant and the Dragon is well worth reading for anyone who wants to get a quick overview of the Asian giants. Given their importance to the world economy, they are countries of which people can no longer afford to be ignorant. The rise of India and China is one of the key trends in the contemporary world.

Labels: book, china, Fund Strategy, india, review

Spiked has run my review of Gregory Clark’s A Farewell to Alms in its monthly review of books.

Labels: Africa, book, Malthus, progress, review, spiked

There follows my review of Fantasy Island by Larry Elliott and Dan Atkinson (Constable & Robinson 2007) in the 10 September issue of Fund Strategy.

Larry Elliott and Dan Atkinson see Tony Blair as having turned Britain into a "fantasy island" during his decade in office. The two economics editors, Elliott at the Guardian and Atkinson at the Mail on Sunday, argue that Britain's apparent economic and social health is largely illusory. New Labour has, in their view, simply disguised problems and stored them up for the future.

Fantasy Island sees New Labour as responsible for five minor fantasies and two master fantasies. The minor fantasies relate to inflation, the knowledge economy, the public sector, work and defence. The master fantasies relate to debt and the environment. Behind all these fantasies is a common theme of excess. As Elliott and Atkinson argue: "There is a surfeit of consumption, a surfeit of speculation and a surfeit of deceit".

Before examining these fantasies in more detail it is important to note that this is a broadly sympathetic critique of New Labour. The two authors, who are not members of any political party, praise the organisation for its record on civil partnerships and the minimum wage. They also endorse its overseas record in relation to the Good Friday agreement, Kosovo, Sierra Leone and African development.

What they object to is Labour's habit of pretending two opposites are not opposite. For example, on the one hand New Labour preaches the virtue of people living within their means. On the other hand, it has presided over a huge build-up of household debt. Yet New Labour denies there is any contradiction between the two.

It is certainly possible to sympathise with Elliott and Atkinson's charge of self-delusion against New Labour. Its pronouncements are riddled with inconsistencies. Fantasy Island's strength is that it outlines many of these contradictions well. For instance, New Labour says it is against privatisation but, in its own covert way, has played a big role in privatising welfare services. The Private Finance Initiative has involved private companies in welfare provision at the cost of saddling the public sector with a heavy debt burden.

But the characterisation of New Labour's outlook as "fantasy island" in a way misses the point. If anything defines the party it is a lack of a broader vision of how to run society. It is the Ideas Lite party. To the extent it believes in anything it is regulating individual behaviour and imposing restraint on society. Labour has given up on taking control of the "commanding heights" of the economy and instead wants to tell people how to recycle their rubbish or what food to eat.

It is New Labour's lack of any principles that helps explain why it can take up apparently contradictory positions with such ease. Beyond its avid belief in social regulation it is highly pragmatic. All its leaders care about are the perpetuation of their own cliques and the survival of the party's electoral machine.

What Elliott and Atkinson are really saying is that Labour should be more consistent in its campaign against excess. Their starting point is the old environmentalist canard of limited resources: "living within our means has to start with acknowledging what the planet can and cannot bear." From this premise they go on to argue that it is necessary to start planning for a more frugal future.

Yet this underlying assumption is false. There is no finite amount of resources on the planet or limit to the extent to which humanity can exploit the Earth. The richer and more advanced we are the better able we are to utilise the planet to our advantage.

The pattern is clear in relation to energy but it could equally apply to other natural resources. Pundits have for decades predicted the exhaustion of oil supplies yet new sources of crude keep on being discovered. New fields are found, extraction technology improves and new sources, such as tar sands, are utilised. When oil does eventually run out there is no reason why it cannot be replaced with other sources of energy such as nuclear power or hydroelectric power. There is no fixed amount of energy in the world.

The same approach can be applied to climate change. For Elliott and Atkinson, as with so many others, this is seen as the ultimate factor limiting consumption. But much of the technology needed to tackle the problem already exists. There are already many sources of energy that do not emit greenhouse gases. There are also other technologies, such as modern flood defences, that can protect humanity against the impact of rising sea levels. What is missing is the resources for this technology to become widely used. More economic growth and prosperity should provide us with such resources.

No doubt technology will improve further still as long as science and experimentation are encouraged. One way to see the history of humanity is of ingenuity enabling it to overcome what were previously seen as insurmountable problems. In the longer term it may even be possible to use advanced technologies to control the climate.

Yet Elliott and Atkinson's starting point is the mistaken idea of natural limits rather than having a positive vision of creating a better society. Although they are reluctant to spell out the consequences of this world view it presumably means more austerity and restraint. It means curbing the growth in living standards and perhaps even cutting them in absolute terms.

From this perspective it is possible to see the true content of the authors' critique of New Labour. For them its problem is that it is not New Labour enough. It should not just preach austerity but follow it through in practice. Gordon Brown, until recently known at the "Iron Chancellor", does not have enough mettle.

What Elliott and Atkinson propose in place of Fantasy Island could be called Nightmare on Fleet Street. Their vision is even more bleak and limited than that of New Labour. In that sense Fantasy Island is a remarkable achievement.

Labels: Austerity Watch, book, debt, economics, Fund Strategy, review

My review essay on “Towards an age of abundance” has made it onto the Arts & Letters Daily website.

Labels: book, media appearances, review, spiked

My review essay on “towards an age of abundance” is the lead article in this month’s spiked review of books. It discusses four recent American books on the theme of growth scepticism.

Labels: book, review, spiked

Spiked has published my review of The Bottom Billion by Paul Collier. For earlier discussions of this book see posts of 14 May, 6 June and 1 July.

Labels: Africa, aid, book, development, review, spiked

This week’s Fund Strategy included a review by me of David Smith’s new book on China and India.

A few years ago David Smith, the economics editor of the Sunday Times, was giving a talk on the world economy to a group of businessmen in London. After someone asked a question about China and India it emerged that the audience had a downbeat attitude towards the rise of the Asian giants. It was in response to this pessimism among business types, in the West overall rather than just Britain, that Smith wrote The Dragon and the Elephant.

Smith succeeds admirably in his aim of providing an overall assessment of the rise of China and India. He concedes at the start that he cannot match the local knowledge of those who have spent many years specialising in the two countries. Instead he brings to bear the relatively detached perspective of a seasoned Western journalist with a strong overall grasp of the world economy.

Smith's approach is essentially chronological. After a brief introduction he starts by examining how China and India fell from their historical position of being leading economic and technological powers. From 1820 to 1914 the European powers were dominant in the world while the rest of the twentieth century belonged to America. In the subsequent chapters he examines how China and India finally set themselves on the path to development. He ends with a chapter comparing China with India and a conclusion on 10 ways the rise of the two countries will change the world.

The Dragon and the Elephant avoids many of the common pitfalls in writing on China or India. For example, he shows both the growing importance of the Chinese economy in absolute terms and its relative poverty. Although China is one of the world's largest economies it is only 107th in the world in terms of income per head. The explanation is that China's GDP has to be divided between 1.3 billion people. But many commentators find it hard to reconcile the two facts,

Where there is a well-publicised debate relating to a country's development the book tends to give both sides of the argument. In relation to India, for instance, many commentators argue that the economic reforms of 1991 were a watershed in the country's development. But other influential voices point out that India's growth rate first accelerated in the 1980s rather than the 1990s.

Smith is also good at bringing out the contrasts between the two countries. China's growth record is much more impressive than India's. China's development is primarily industrial while India depends heavily on services. India's population is, on average, substantially younger than China's. Nevertheless the two countries are still both, at least in population terms, largely rural.

If there is a problem with Smith's book it is a corollary of his project of summarising the received wisdom on the two countries. It is usually the case that the mainstream ideas on any subject are flawed. That is true of perceptions of China and India.

An important example is the exaggerated importance attached to demographics. Many commentators claim that, over the long term, India has an advantage over China because of its younger population. But a key lesson of economic development should be that the more productive an economy becomes the less demographics matter.

Comparisons between those of normal working age and those outside working age reveal little about the character of an economy. As an economy becomes more advanced it becomes possible for fewer people to support a larger number at a higher standard of living than previously. Dependents could be people outside the working age or alternatively they could be individuals who are unemployed or in education. As technology becomes more advanced and health improves it also becomes easier for the elderly to work too.

The problem India has with a huge pool of unskilled, agricultural workers is economic rather than demographic. It needs to promote a form of development that can bring these workers into the industrial and service sectors. The challenge is one of underdevelopment rather than of too many people.

Smith also wrongly takes it as given that economic development necessarily brings environmental problems. He says: "The nightmare, for the global environment and demand on the world's energy resources, would be a rise in Chinese car ownership towards American levels". That would certainly amount to several hundred million more cars on the road but it is not clear that it should necessarily be a problem. A lesson of economic history should be that economic development allows humanity to harness resources more efficiently. A richer society should have the necessary means to build a transport infrastructure able to handle so many cars. Technological development should also mean they are cleaner and more efficient than the present generation of vehicles.

The Dragon and the Elephant can also be faulted for its adherence to what could be called the "revelation" theory of economic development. Smith implicitly accepts the view that rapid development came to China and India because their leaders finally accepted free market principles. Until then, so the argument goes, they were enmeshed in socialism in China or Fabian dogma in India.

But the development process in the two countries was never as simple as that. In the decades following the second world war there was relatively little foreign investment or trade available for developing countries so correspondingly little incentive to liberalise. In any case the state still plays an enormous role in China's economy today and an important one in India.

Nevertheless, as an introduction to the rising economies of China and India The Dragon and the Elephant works well. It should provide a good starting point to anyone who wants a lucid primer on the subject. However, working out the real significance of developments in China and India is beyond the scope of the text.

Labels: Asia, book, china, Fund Strategy, india, review

Niall Ferguson, a professor of history at Harvard, had a review of Paul Collier’s The Bottom Billion in today’s New York Times (also see posts of 14 May and 6 June). Ferguson argues that the most high profile recent debate on Africa has been between Jeffrey Sachs of Columbia University and William Easterly of New York University – both white men based in New York. Sachs argues for government intervention to help solve the problem whereas Easterly is sceptical about the benefits of aid.

Ferguson goes on: “Now comes another white man, ready to shoulder the burden of saving Africa: Paul Collier, the director of the Centre for the Study of African Economies at Oxford University. A former World Bank economist like Easterly, Collier shares his onetime colleague’s aversion to what he calls the “headless heart” syndrome — meaning the tendency of people in rich countries to approach Africa’s problems with more emotion than empirical evidence. It was Collier who pointed out that nearly two-fifths of Africa’s private wealth is held abroad, much of it in Swiss bank accounts. It was he who exposed the British charity Christian Aid for commissioning dubious Marxist research on free trade. And it was he who pioneered a new and unsentimental approach to the study of civil wars, demonstrating that most rebels in sub-Saharan Africa are not heroic freedom fighters but self-interested brigands.”

Collier argues there are four traps into which the poorest countries tend to fall:

* Civil war.
* The resource curse.
* Being landlocked.
* Bad governance.

His preferred solution, which Ferguson supports, is more Western intervention. This can take the form of the growth of international law and military intervention where necessary.

David Chandler, professor of international relations at the University of Westminster, also refers to Paul Collier, although in passing, in a review article on liberal interventionism in spiked this week. Chandler points out that Collier was the head of a World Bank team on conflict studies which influenced, among others, Paddy Ashdown. Chandler also cites a 2000 book by Collier and a World Bank paper (PDF) he co-authored in 2001.

Meanwhile, William Easterly has an article in the latest issue of Foreign Policy (July / August) attacking “the ideology of development”. His argument is straightforward: “like Communism, Fascism, and the others before it, Developmentalism is a dangerous and deadly failure.” His target is not increasing prosperity as such but the idea it can be promoted by the authorities from above. He names Jeffrey Sachs and Thomas Friedman of the New York Times as key proponents of the developmentalist approach.

Labels: Africa, book, development, review, spiked

James Heartfield has written a characteristically astute review article on technophilia and technophobia for the latest spiked review of books. Rather than attempt to summarise the whole thing I will point to a few snippets:

* “Post-Fordist Britain makes more cars than ever before, and the weight of car production remains firmly in the developed world.” I have long suspected this was the case but had not tracked down the reference to prove it. Heartfield cites The Shock of the Old by David Edgerton.

* American Cold War intellectuals played a key role in developing technophile. For example, Walt Rostow, the author of The Stages of Economic Growth, reworked Marxist theory to make industry the blind agent of history. This is discussed further in Imaginary Futures by Richard Barbrook.

* The New Left led the attack against the technocratic society. Arguably they were the forerunners of today’s environmentalists and therapy addicts. Key thinkers in this tradition included John Kenneth Galbraith, Herbert Marcuse and Reinhold Niebuhr. Theodor Adorno’s Dialectic of Enlightenment was a widely taught anti-technology manifesto of the time. All this is evidently examined by Barbrook.

* Heartfield also gives examples of how the victory of technophobia is damaging industrial growth right now.

Labels: book, review, technology

James Surowiecki, a staff writer on the New Yorker, has written an unfairly critical review of Indur Goklany’s The Improving State of the World for Foreign Affairs. Surowiecki concedes that “Goklany's rebuttal to the environmental doomsayers is both welcome and convincing”. But he then goes on to argue that: “Goklany's account leaves out too much that matters and pretends that incredibly complex phenomena can be explained away with a few catch phrases.” Surowiecki then goes on to argue that political struggle and the state have played a greater role in human progress than Goklany suggests. Surowiecki then suggests that economic development is a complex business and future advance is not inevitable.

To me this is a classic case of arguing that an author should have written a different book rather than reviewing the one that he did write. It is true that Goklany can occasionally be cavalier in attributing growth and technological development. But his main point is surely right: there is a strong correlation between an increasingly prosperous economy and improvements in human well-being. Explaining economic development in different countries is an immensely complex task. But that is not what Goklany is trying to do.

Labels: book, development, environment, review

Spiked has published a review by me of a book on Africa in its new monthly review of books. I argue that Giles Bolton’s Poor Story embodies what has become a typical combination of grandiose pronouncements and low horizons

Labels: Africa, book, review, spiked

There follows my latest book review for Fund Strategy. It is on Diane Coyle’s The Soulful Science.

Diane Coyle is annoyed. She argues with considerable justification that economics, the subject in which she has immersed herself for her entire adult life, is caricatured by critics. Those who attack the discipline often do so from a position of ignorance. They are unaware of the huge advances economics has made in the past 20 years.

The Soulful Science is Coyle's attempt to set the record straight. It is essentially an overview of the key developments in economic thought over the past two decades. With a PhD in economics from Harvard she has the theoretical background to understand often arcane debates. And as a former economics journalist she has the ability to translate them into lucid language.

Summarising, what is itself, a summary of a huge range of ideas is a difficult task. But much of the book focuses on the core idea of "rational economic man". Neo-classical economy theory was based on the idea that humans were utility maximising, unremittingly rational and had access to perfect information. In other words, humans were assumed to be Vulcan - or at least half-Vulcan - like Star Trek's logical Mr Spock. Coyle explains how each of these core assumptions has come under attack in the new economics.

The idea of utility maximisation is an old one. It assumes that humans are motivated by a desire to maximise their wealth. As a result of this drive, it is argued, society benefits.

Coyle shows how this core assumption has come under attack in recent years. Environmentalists argue that measures such as GDP do not take into account environmental damage to the economy. Some economists, such as America's Robert Frank and Richard Layard in Britain, argue that rich countries should pursue happiness rather than further affluence. Others, such as Barry Schwartz, have argued that individuals suffer as a result of the vast amount of consumer choice available.

The idea of human rationality has also been called into question. Economists have increasingly drawn on insights from psychology which show that humans often do not behave rationally. This insight has opened up behavioural economics as an important new field of study with behavioural finance as a key sub-branch. In 2002, Daniel Kahneman and Vernon Smith were awarded the Nobel price for research in this area.

Research into the economics of information has also yielded Nobel prizes. In different ways Joseph Stiglitz, George Akerlof and Michael Spence examined the implications of some people having access to better information than others. Their insights have helped governments to create new markets, such as those involved in trading carbon.

While Coyle is right to argue that critics need to be aware of these developments, it does not follow that the discipline is beyond reproach. On the contrary, both the new-style economists and the old-style neo-classical economists share many key assumptions, despite their differences.

The idea of "economic man" illustrates this point. Both accept as a starting point the idea that the economy, and society more generally, is essentially an aggregate of individuals. Different generations of economists differ over the exact character of the individuals involved but all sides tend to be imbued with this individualistic starting point.

In contrast, classical political economy - including the likes of Adam Smith, Karl Marx and David Ricardo - had a much greater sense of the social. It viewed society as more than a collection of individuals - the human world had to be understood in terms of the web of social relations around which life is organised. For example, organising society around the principle of profitability had direct consequences for the operation of laws that govern social interaction.

The current generation of economists use the word "social" a lot, but the sense in which they use it is limited. In contemporary parlance the term "social" refers to interpersonal relations. For example, "social networks" means the personal relationships between individuals. In contrast, "social" in the older sense of the term referred to the set of relations around which production and consumption were organised.

This diminished sense of the social helps to explain why contemporary economics tends to be so ahistorical. Economists can happily make generalisations about the operation of institutions 10 years ago, 1,000 years ago - even 10,000 years ago. They fail to see what is specific to market relations and underestimate the importance of changes over time.

Coyle's discussion of utility is a perfect example of this lack of sensitivity to historical shifts. The shift away from emphasising utility to one focusing on happiness is not primarily the result of theoretical development by economists. The economists' discussion reflects a broader disaffection with economic growth and prosperity in society at large. Since the 1970s it has become increasingly common for the benefits of mass affluence to be called into question. This anxiety about popular prosperity then, itself, has to be explained in terms of broader social changes.

From this wider perspective it is clear that Coyle is wrong to portray the emphasis on happiness as more human than the focus on economic growth. On the contrary, the immense benefits of a society based on affluence have made it easier for humans to realise their potential. In contrast, the happiness agenda reduces humans to the level of cows chewing grass in a field. The advocates of happiness would have us pursue individual contentment in the narrowest sense of the term rather than more demanding objectives.

The Soulful Science should be read by anyone who wants a lucid and authoritative introduction to contemporary economic thought. But the limitations of the new economics have themselves to be fully investigated.

Labels: book, economics, review

Spiked has published my review of Affluenza by Oliver James. It argues that it is more likely that Oliver James is mentally disturbed rather than, as he implies, the rest of us.

Labels: affluenza, book, happiness, inequality, review, spiked