The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse, by Mohamed El-Erian, Yale, RRP£18.99/ Random House, RRP$28
Central banks saved the world economy from collapse. But they cannot create enduring and stable economic growth. What is needed now, argues this distinguished and knowledgeable author, are “invigorating structural reforms, rebalancing aggregate demand, lifting crippling debt overhangs, and modernising regional and global architectures”. He is right.
Makers and Takers: The Rise of Finance and the Fall of American Business, by Rana Foroohar, Crown Business, RRP$30
Finance is a good servant but a bad master. That is the case made in this powerfully argued book. In recent decades, alas, finance has risen to dominate the US economy, not just directly, via the growth of its often unproductive activities, but indirectly, via its impact on corporate management and politicians. As Foroohar shows, the results have included soaring inequality, weakening investment and faltering innovation.
Money Changes Everything: How Finance Made Civilization Possible, by William Goetzmann, Princeton, RRP£24.95/$35
This fascinating book rehabilitates finance by examining its 5,000 years of history. It argues that finance is the handmaiden of civilisation. Among its products were the “development of writing, recording, calculation, and printing”. Why is finance such an important social innovation? The answer is that it allows us to move “economic value forward and backward through time”. That allows humans to plan their lives, both individually and collectively.
The Rise and Fall of American Growth, by Robert Gordon, Princeton, RRP£29.95/$39.95
This is an extremely important book. It shows that a wide a range of unrepeatable technological, economic and social transformations drove an exceptional rise in prosperity between 1870 and 1970. It also argues that the narrower recent developments in communications and information technologies, albeit dazzling, have not had — and will not have — a comparable effect on prosperity. Today’s techno-optimists should beware: their enthusiasm is rooted in ignorance of the relevant past.
The End of Alchemy: Money, Banking and the Future of the Global Economy, by Mervyn King, Little Brown, RRP£25/ WW Norton, RRP$28.95
Mervyn King, former governor of the Bank of England, has chosen not to write another memoir of the global financial crisis; instead, he gives us a remarkable account of the economic forces behind it. In drawing lessons, he notes that the promise made by banks to turn illiquid and risky assets into liquid and safe liabilities is, like other forms of alchemy, fraudulent. Banks have to rely on central banks as lenders of last resort. To discipline this process, Lord King suggests that the central bank should set the terms on which it would make loans in advance, acting as a “pawnbroker for all seasons”.
Bourgeois Equality: How Ideas, not Capital or Institutions, Enriched the World, by Deirdre McCloskey, University of Chicago, RRP£31.50/$45
The distinguished economic historian Deirdre McCloskey has written a sparkling book. She argues that ideas have been the drivers of the astounding and increasingly widely shared economic progress of the past two centuries. The most important idea of all, she argues, is that of “bourgeois equality”, the belief that everybody is entitled to better himself or herself. She makes a convincing case, though the contrast between ideas and institutions is exaggerated: equality before the law is, for example, an idea embedded in an institution.
Global Inequality: A New Approach for the Age of Globalization, by Branko Milanovic, Harvard, RRP£22.95/$29.95
Branko Milanovic’s outstanding book adds significantly to recent works by Thomas Piketty, Anthony Atkinson and François Bourguignon. Milanovic concludes that inequality is rising within most countries, although global inequality, albeit huge, has been falling. Unfortunately, he sees no end to the current upswing in inequality in the high-income countries. This creates disturbing political dangers.
The Money Problem: Rethinking Financial Regulation, by Morgan Ricks, University of Chicago, RRP£28.95/$38
This is yet another book that identifies the central problem of the financial system as being its vulnerability to panics. The solution, argues the author, lies in improved “monetary system design”. The essence of his intriguing plan is twofold. First, the government would guarantee all deposits, charging risk-based insurance premia. Second, only regulated banks would be allowed to offer liquid liabilities, defined as debt liabilities with maturity of less than a year. In this way, argues Ricks, government would regain control over money.
The Rise and Fall of Nations: Ten Rules of Change in the Post-Crisis World, by Ruchir Sharma, Allen Lane, RRP£25/ WW Norton, RRP$27.95
Ruchir Sharma is head of emerging markets at Morgan Stanley Investment Management. In this lively and informative book, he explains his system of 10 rules for identifying economies with good potential. Among the striking conclusions is his bearishness about China, largely because of its huge and growing indebtedness. But the world economy as a whole is now facing important economic headwinds, he argues.
Empire of Things: How We Became a World of Consumers, from the Fifteenth Century to the Twenty-first, by Frank Trentmann, Allen Lane, RRP£30/ Harper, RRP$40
Ours are consumer societies. But this is neither a recent phenomenon, nor an American invention. In this important book, Trentmann argues that our increasingly complex consumer societies have evolved over five centuries: today, he notes, a typical German owns 10,000 objects. “The empire of things,” he argues, “expanded in part because possessions became increasingly important carriers of identity, memory and emotions.”