Martin Wolf on his best economics books of the year

Plunder: Private Equity’s Plan to Pillage America by Brendan Ballou (PublicAffairs)

There have always been two ways to make money: value creation and plunder. A good society is one in which the first outweighs the latter. In this powerfully argued book, Ballou, currently at the antitrust division of the US Department of Justice, insists that private equity’s returns derive in substantial part from plunder. That is particularly likely where those profits are made at the expense of the powerless — prisoners, patients or the elderly. Given the incentives, the outcomes he describes seem inevitable.

Digital Empires: The Global Battle to Regulate Technology by Anu Bradford (Oxford University Press)

The arrival of the digital economy, now accelerated by the emergence of artificial intelligence, has inevitably — and properly — created a political and regulatory response. In this comprehensive and important tome, Bradford of Columbia Law School elucidates the contrasting approaches of China, the US and the EU. She notes that the latter two confront China, “in the name of saving democracy from the autocracy”. But there is a battle to save democracy from the power of unbridled tech, too. This one is crucial: it is about whether tech controls democracy or democracy controls tech.

A Crash Course on Crises: Macroeconomic Concepts for Run-ups, Collapses, and Recoveries by Markus Brunnermeier and Ricardo Reis (Princeton University Press)

“Economies sometimes go through macro-financial crises.” Indeed, they do, as we have so painfully learned in recent decades. In this excellent and blessedly brief book, two distinguished scholars bring students and busy professionals up to date on the best thinking about how these crises originate and unfold and how policymakers need to respond. A valuable guide for those who need to understand what contemporary economics has to say on this vital topic.

Economics in America: An Immigrant Economist Explores the Land of Inequality by Angus Deaton (Princeton University Press)

Deaton, winner of the Nobel memorial prize, is also an immigrant to the US. In this highly enjoyable book of essays, he focuses largely on the country in which he now lives. He also condemns international aid. This is surprising and also too sweeping. Yet Deaton emerges from the book as a decent human being who wants to make the world a better place. Unfortunately, he has also come to the conclusion that economics and economists are not as good at that as he would wish.

The Chile Project: The Story of the Chicago Boys and the Downfall of Neoliberalism by Sebastián Edwards (Princeton University Press)

“The story of Chile’s free-market reforms may be summarised with two words: success and neglect.” Thus does Edwards, himself of Chilean origin, summarise the outcome of this “experiment”. These reforms originated in dictatorship, made Chile “within one generation Latin America’s brightest star”, at least economically, then, somewhat surprisingly, survived the transition to democracy and finally foundered in popular reaction against inequality and perceived injustices. Edwards tells this complex and controversial story superbly.

The Eight Per Cent Solution: A Strategy for India’s Growth by Nikhil Gupta (Bloomsbury)

This is an outstanding book. The author, chief economist at Motilal Oswal Financial Services, explains and applies the “sectoral balances” approach to the Indian economy. This analysis illuminates the weak financial position and deteriorating savings of households and, more recently, also of the unlisted corporate sector. In view of the likely weakness of household consumption, government spending and exports, there is little chance of the desired boom in investment. The balance of this decade must be, he argues, a time of healing, before growth can accelerate.

Legacy: How to Build the Sustainable Economy by Dieter Helm (Cambridge University Press)

Helm of Oxford university puts forward a passionate case for moving to a sustainable economy based on the principle that each generation bequeaths a stock of capital — physical and, far more important, natural — as good as what it inherited. To make this approach operational, we should embrace the twin ideas of “polluter pays” and the “precautionary principle”. Helm argues that implementing such ideas requires a concept of citizenship. Unfortunately, the challenges of making this idea work globally are daunting.

The Trade Weapon: How Weaponizing Trade Threatens Growth, Public Health and the Climate Transition by Ken Heydon (Polity)

Trade has become a weapon. Heydon, a former Australian trade official, argues that this approach — in the form of trade sanctions, pursuit of self-reliance in value chains, use of trade remedies in the cause of “national security”, and curtailing imports necessary for the climate transition — are “bad for the world economy, as it diminishes and distorts the benefits of international flow of goods and services.” A brave and necessary book.

Seven Crashes: The Economic Crises That Shaped Globalization by Harold James (Yale/ Princeton UK)

In this fascinating book James, a leading historian of both economies and economic policy, analyses the impact of seven economic crises on the history of globalisation: the famines of the 1840s, the financial crisis of 1873, the first world war and subsequent hyperinflations of 1914-23, the Great Depression of the 1930s, the inflation of the 1970s, the Great Recession of 2008, and the lockdowns of 2020-22. His surprising conclusion is that supply shocks promote globalisation, while demand shocks inhibit it.

Freedom from Fear: An Incomplete History of Liberalism by Alan Kahan (Princeton University Press)

The roots of both the market economy and the democratic state lie in liberalism. In this remarkable book, Kahan recounts in persuasive detail the history of this transformative set of ideas. Today, as often before, liberalism confronts enemies, essentially because “The liberal project of creating a society where none need be afraid frightens those who think that some people and/or some groups ought to be afraid.” Liberals cannot concede on this. But they must, he suggests, add a moral/religious pillar to their more traditional political and economic ones.

Ours Was the Shining Future: The Story of the American Dream by David Leonhardt (Random House)

Leonhardt demonstrates the failure of American capitalism to generate widely shared prosperity since 1980, labelling this the “Great American Stagnation”. The story is not narrowly economic. Life expectancy has, for example, fallen well behind levels in other high-income countries, while the life expectancy of those who did not go to college has actually fallen. Leonhardt, a senior writer for The New York Times, brings these realities to life. Partly as a result of the trends he describes, American democracy is at risk. This is an important book.

Visions of Inequality: From the French Revolution to the End of the Cold War by Branko Milanovic (Belknap Press)

Inequality is back, as a political topic and as a focus of study. In this fascinating book, Milanovic, one of the world’s most influential scholars of inequality, examines what leading economists of the past have had to say on this issue. He moves from Quesnay to Kuznets, via Smith, Ricardo, Marx and Pareto. At the end, he looks at the work of Thomas Piketty. Today, he argues, we have more theories, more data and a wider focus on both national and global inequality. We also have more concern. The field is duly booming.

The Capitalist Manifesto: Why the Global Free Market Will Save the World by Johan Norberg (Atlantic)

Norberg is perhaps the world’s most effective defender of free-market capitalism. In this book he returns to the theme that “freedom of choice and competition” are the engines of economic progress. He is, of course, correct. Moreover, the evidence is also that more prosperous societies are in general happier ones. Yet what he says is far from entirely true. Not only are the social and political underpinnings of free markets hard to build, but their social and political consequences can be damaging: capitalism is good; unbridled capitalism is not.

My Journeys in Economic Theory by Edmund Phelps (Columbia University Press)

In this lovely little book, Phelps, a winner of the Nobel memorial prize in economics, describes his journey of intellectual creativity. He is famous for his contribution, with Milton Friedman, to the idea of the “natural rate” of unemployment. Subsequently, he became engaged in ideas of economic justice pioneered by the philosopher John Rawls, and so recommended wage subsidies. Most recently, he has focused on the idea that economic progress is the fruit of dispersed creativity. Societies that encourage this achieve “mass flourishing”; but those that do not do not.

Making Sense of China’s Economy by Tao Wang (Routledge)

This is an indispensable book for those trying to understand the Chinese economy. The author grew up in mainland China and is currently chief China economist at UBS investment bank in Hong Kong. Her analysis is well-informed and penetrating. She concludes that China’s annual rate of growth is likely to average 4-4.5 per cent between 2021 and 2030, a marked drop from the 8 per cent achieved from 2010 to 2019. But it could even be as low as 3 per cent, as domestic and external constraints interact. It is very unlikely to exceed 5 per cent.

Revitalizing the World Trading System by Alan Wolff (Cambridge University Press)

Wolff, former deputy director-general of the World Trade Organization, has written the definitive guide to the past, present and possible future of the multilateral trading system. Somewhat surprisingly, given rising hostility to the WTO and trade itself in the US, his own country, and the lack of enthusiastic support elsewhere, notably including China and the EU, he is optimistic: “Autarky cannot be achieved . . . There can be no decoupling of major economies except at unacceptably high cost.” The WTO is the only place where the needed international co-operation can be sustained because it, like trade itself, is global.

Age of the City: Why Our Future Will Be Won or Lost Together by Ian Goldin and Tom Lee-Devlin (Bloomsbury Continuum)

“In 1800,” note Oxford’s Goldin and The Economist’s Lee-Devlin, “there were 1bn humans sharing our planet, roughly 70m of whom inhabited cities. Today, global population is 8bn, with over 4.5bn people living in cities.” This then is a 6,300 per cent increase in the globe’s urban population. By the end of this century, the urban population may have doubled again. Cities are arguably our most extraordinary creation. They are sources of dazzling creativity. They are also places of vast inequality. This fascinating book explains the challenges they pose and what needs to be done to make them work better for all their inhabitants.

Techno-Feudalism: What Killed Capitalism by Yanis Varoufakis (Vintage)

Varoufakis is a remarkable combination of analyst and dreamer. In this book, the former Greek finance minister asserts that something new, which he calls “techno-feudalism”, has replaced the traditional capitalist economy. In this new economy, the great tech monopolies, ubiquitous owners of “the cloud”, are seen as feudal lords, charging the rest of us “cloud rents” for the right to access what they own. Surely, this is not altogether wrong. Whether his proposals for transforming this new system into a modern utopia make sense is another matter. But, as always, Varoufakis makes his readers think. That is an important achievement.

For further recommendations, see Summer Books 2023

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