Visions of the future are always forged within a present. The Great Depression led sober economists to wonder whether capitalism and economic growth had come to an end. Golden Era economists of the 1950s and 1960s, confident they knew better, promised that the formula for permanent growth had been discovered. In the 1970s a combination of high inflation and unemployment – known as 'stagflation' – brought a painful end to such hopes, and the pessimists once again argued that this was the new normal. Instead came the giddy exuberance of the 1980s and 1990s. This spawned books like Francis Fukuyama's The End of History and the Last Man (1992), which declared that Western democratic capitalism had won and would be the 'final form of human government'.
Today, gloom is back in fashion. Fukuyama's hopes for democracy have been toppled by the meteoric rise of China and the return of an authoritarian Russia, and for capitalism by the largest crisis since the Great Depression. These times call for a different kind of book – one like Satyajit Das's A Banquet of Consequences. Will pessimism prove prescient this time around?
Compared to the epic narratives of America and Europe, our story can seem rather unglamorous. Australia's 'tyranny of distance' from the seismic events of world history induces a vague sense that Australians labour under a certain tyranny of irrelevance. Perhaps we don't look hard enough to appreciate what is unique about our past. Or is is that our innate sense of inferiority tripwires us to sell our legacy short?
Australia's Second Chance: What our history tells us about our future, by George Megalogenis, is a bold and innovative rewriting of our nation's history. It reminds us that our history is noteworthy and of global significance. But it also serves as a cogent warning about the consequences of Australia's current political malaise and policy inaction. In essence, Megalogenis – former political and economic commentator with The Australian – reprocesses the nation's conventional narratives to amplify poorly understood facts and trends. He also downplays the long-term import of what are conventionally regarded as pivotal moments or themes.
John Maynard Keynes has not lacked for biographers – about a dozen at last count. His first, his student Roy Harrod, established the framework of the public life, though providing only a sanitised version of the private Keynes. Donald Moggridge wrote the definitive account of the economic man, while Robert Skidelsky, with his three-volume work, John Maynard Keynes, published over a period of twenty years, has produced one of the great biographies of our time. In Universal Man, Richard Davenport-Hines is well aware of the challenge. Noting that Moggridge and Skidelsky between them have published 2748 pages of Keynesian biography with economics 'paramount', he argues that this approach while 'estimable ... is not right for every reader'. Even Skidelsky, in his recent single-volume biography, concedes that for some readers 'three volumes on Keynes is simply too much'. Universal Man is short, and concentrates on Keynes's life rather than Keynes the economic theorist.
The structure of the book derives from a characterisation of Keynes by Leonard Woolf as 'a don, a civil servant, a speculator, a businessman, a journalist, a writer, a farmer, a picture dealer, a statesman, a theatrical manager, a book collector, and half a dozen other things'. Davenport-Hines, more economical, depicts seven facets of Keynes: an exemplary figure, a youthful prodigy, a persuasive governmental official, an influential public man, a private sensualist, a connoisseur of the arts, an international statesman. The category 'economist' is avoided, thus enabling Davenport-Hines to rescue Keynes the individual from economics or more precisely from economic theory and economic jargon.
With economic theory at a discount and unconstrained by a strict chronology, the book has an enviable verve, vivacity, and wit. Davenport-Hines has a novelist's sense of character and writes memorable pen portraits. Keynes's fellow Cambridge Apostle, sexual partner, and rival in love, Lytton Strachey, 'demanded sincerity in others, [but] had a forte for self-deception'; Professor McTaggart was 'agoraphobic, and scuttled along streets with his backside to the wall like a crab scrabbling against the side of a bucket'; Leonard Woolf had 'the face of an anxious, ill-used basset-hound'. Thorough research has produced an illuminating collection of apposite quotes, much gossip, and a fund of anecdotes. The author also has a sharp eye for the ironies of history. We learn that the Archduke Franz Ferdinand was peppered with shot by a careless French aristocrat at a hunt in Nottinghamshire eight months before he was assassinated at Sarajevo. And Keynes, interviewing a fellowship candidate in 1935, finds him 'excellent', with 'good fingernails' (Keynes was given to appraising manicures) and 'very nice'. Davenport-Hines informs us that the candidate's name was Turing.
'Money is like poetry because both involve learning to communicate in a compressed language that packs a lot of meaning and consequence into the minimum semantic space.' This comparison, coming from one of today's most strident critics of the capitalist system, British novelist John Lanchester, is just one of the many delights and surprises John Plender provides in this fascinating and widely researched book, which he describes as 'a probe around the grumbling bowels of the capitalist system'. Elsewhere we learn that Marx was a 'day-trader', financed largely by factory-owner and fox hunter Engels, and enjoy a potted biography of the charmingly named rogue English MP Nicholas If-Jesus-Had-Not-Died-For-Thee-Thou-Hadst-Been-Damned Barbon.
Plender has given us a thematic primer in economic thought, combined with a rich compendium of what famous people have said about economics, business, and various manifestations of the profit motive. Criticisms of the pursuit of financial gain date back to Plato and the Old Testament, and caricatures of business people to Aristo-phanes and Petronius. Many leading figures in the Western canon have joined in, but despite the well-known tendency of artists to place themselves above the grubby marketplace, a large number of the giants of our culture were also involved in business – or at least gainfully employed – including Chaucer, Cervantes, Trollope, Rimbaud, T.S. Eliot, Gauguin, and Kafka. Many turned their art itself into a successful business, notably Shakespeare, Pope, Rubens, Sir Joshua Reynolds, and, of course, Picasso.
If free markets promote themselves as the most effective and efficient way of creating and sharing prosperity, then growing inequality has emerged as one of their deepest failings in the early part of this century. After all, how ‘effective’ is having ninety-nine per cent of the world’s wealth go to less than one per cent of its population? Is it ‘efficient’to allow the gap between the rich and poor in leading Western countries to return to levels not seen since the nineteenth century? The widening gap between haves and have-nots has become the focus of much public, political, and policy angst in recent times. The resulting debate is often big on ideological point-scoring on one side, or arcane debates about definition and measurement of inequality on the other. The result is a shortfall in the clear-sighted argument and analysis of practical solutions needed to tackle the problem.
Inequality: What Can Be Done?, written by British economist Anthony B. Atkinson, is a refreshing departure from these dynamics. Atkinson has been at the centre of research into inequality for more than four decades. As inequality scholarship’s ‘grand old man’, he has developed extensive inequality databases, pioneered new forms of analyses, and coined key terms that have provided the foundations of the current debate. (Atkinson has also been an intellectual mentor to Thomas Piketty, his younger French counterpart, who set the global debate on inequality alight last year with his Capital in the Twenty-First Century, which I reviewed for ABR in August 2014.)
Consider the following statements: unregulated markets achieve the best outcomes for society; ‘A rising tide lifts all boats’; government intervention, regulation, and redistribution damage economic growth; tax cuts for the rich are a reliable way to foster growth; financial market innovations create growth and benefit society. Anyone who still believes these statements hasn’t been paying attention for the last seven years. Anyone who believed them before the GFC hadn’t been reading Joseph E. Stiglitz.
Stiglitz’s focus on inequality was inspired by having been present, as a twenty-year-old student, at Martin Luther King Jr’s ‘I Have a Dream’ speech, and he wears his politics on his sleeve. But this self-edited collection of the Nobel Laureate’s writings for several US journals over the last few years offers more than political opinion pieces. When he describes the above statements as ‘self-serving, ignorant falsehoods’, his arguments are well-supported by evidence, as well as having a satisfying punchiness of their own. His alternative formulation would include: inequality reduces growth and endangers social cohesion; unregulated markets seldom serve the interests of society at large; you can’t grow an economy by taking money away from the poor, who spend everything they can, and by giving more to the rich, who don’t; failing to provide the best possible education to everyone reduces an economy’s long-term potential; financial markets are rent-seeking, create no value for the economy at large, and actively damage it by increasing risk and diverting talent.
The collection is informed by a heartfelt lament for the loss of the American dream. Contrary to the nation’s self-image and aspiration, accident of birth is a more powerful determinant of outcomes in today’s America than in any other developed economy, and it is harder for a child born to poor parents to get ahead in the United States than virtually anywhere else. Opportunity in America is now inherited. Stiglitz hates this.
Writing an effective book on climate change is a challenge as diabolicalas it is important. The complexity of the science, economics, and politics is daunting. How to extract the diamonds lurking in the rough of the International Panel on Climate Change reports? How to balance the good cop, dishing out hope, with the bad, lashing the reader with honest accounts of potential catastrophe? If the book should be a hit, how to fend off those hordes of vested interests determined to muddy even the clearest of waters?
Climate Shock’s strategy is not obvious on first picking up the book. Published by Princeton University Press, and authored in part by the highly respected Harvard economist Martin L. Weitzman, one might expect the rattling of a bone-dry academic paper. The subtitle, ‘The Economic Consequences of a Hotter Planet’, suggests loftier ambitions: it references the great economist John Maynard Keynes’s book The Economic Consequences of the Peace (1919), which married scholarly insight with sparkling prose. On the other hand, the ferocious red of the cover, with jagged lines carving out the promise to ‘shock’, screams sensationalism. It is more in line with the style of the book’s co-author, Gernot Wagner, who has penned accessible books on climate change like But Will the Planet Notice? (2012). By the end of the preface, it is clear that Wagner’s jocularity has prevailed. It is his road we travel, through the landscape of Weitzman’s research.
It is now more than six years since the Global Financial Crisis threatened to topple the banking systems of the Western world. Although a complete breakdown in the financial system was ultimately avoided, one consequence of the events of 2008 has been the biggest slump in economic activity since the Great Depression. Australia was, in the main, spared the economic damage that ravaged large parts of Europe, and there has been little discussion in these parts of the causes and social effects of what the authors refer to as the ‘Great Recession’. Somewhat surprisingly, on the evidence presented in this book (and despite both the United States and the United Kingdom being severely affected) it would seem that the Anglosphere at large is guilty of what the authors call the ‘veil of complacency’. The book asserts that in those countries there is little concern for either the financial consequences or the victims of the crisis. Why should this be the case? Perhaps the Great Recession was not as bad as the headlines have suggested.
This clear and cogent book is an important wake-up call. It should not need saying that it is impossible for human populations and economies to grow without limit on a finite planet, but that delusion is widespread. This book is a reminder of the inconvenient truth that should be informing our leaders, as well as an excellent analysis of the way public understanding of our global predicament has been systematically subverted for decades by powerful vested interests.
More than forty years ago, the Club of Rome published its first report, The Limits to Growth (1972). Subtitled ‘a report for the Club of Rome’s project on the predicament of mankind’, it caused a storm by using computer models to show that there were limits to the growth of population, resource use, agricultural production, manufacturing, and pollution. The cover of my battered paperback edition says that ‘even under the most optimistic assumptions about advances in technology, the world cannot support present rates of economic and population growth for more than a few decades’. The report went on to argue that the existing trends were not inevitable: ‘It is possible to alter these growth trends and to establish a condition of ecological and economic stability that is sustainable far into the future’ with the possibility that this redesigned future could meet every person’s basic needs and give every person the opportunity to realise their potential.
In an ideal world, leaders might have been expected to embrace the report with enthusiasm and gratitude, delighted to be shown a way to avoid serious problems and smooth the path to a sustainable future. Instead, the report was vigorously attacked by economists and politicians, many of them clearly offended by the very idea of limits. The attacks usually took the form of portraying the report in dishonestly simplified terms, claiming that it said we would run out of resources by 1990 or be choked by pollution, then appealing to our faith in human ingenuity or market forces to avoid this particular problem. It was an approach described by Alan Coddington as ‘cheer-mongering’: portray the problem in simplified terms, make the obvious observation that the real world is more complicated, then express a cheerful optimism that the more complex situation will always yield to the combination of market forces and human ingenuity. It works, Coddington argued, because it tells people what they want to hear: don’t listen to the alarmists; human ingenuity and the market have made us more comfortable, so you can rest assured they will continue to work their magic.
‘It should not need saying that it is impossible for human populations and economies to grow without limit on a finite planet, but that delusion is widespread.’
More generally, as this book reminds us, economists argued that economic growth had been the key to improving material living standards, so the only hope of lifting the world’s poor out of their desperate living conditions was further growth. The implication was that continuing growth would eventually allow the poorest peasants in the world to live a life of middle-class comfort. Those making that claim ignored the scale of resource use (and consequent waste production) necessary for that future utopian world. Any critics who questioned the claim were portrayed as heartless people, content to allow widespread poverty to continue.
Higgs shows the two fundamental problems with that argument. The neo-liberal economic agenda, adopted enthusiastically by governments in English-speaking countries, has not benefited the poor but has dramatically widened inequality, within and between nations. Secondly, the limits shown forty years ago are now becoming apparent. The book draws on recent studies by CSIRO scientist Graham Turner, as well as systems ecologists Charles Hall and John Day. Their work shows that the pattern of human development since 1970 has been following the ‘standard run’ in The Limits to Growth, the path which leads to what that report called ‘a rather sudden and uncontrollable decline in both population and industrial capacity’.
As Higgs notes, the pie has grown, but its growth has ‘utterly failed to yield sufficiently large slices to afford everyone even modest security’. Prosperity is ‘concentrated among a privileged minority’, while more than half of the world’s people remain desperately insecure. At the same time, it has become increasingly clear that total human consumption is straining the capacity of natural systems.
Climate change is an obvious symptom of the problem, with the science showing that future generations will pay a very heavy price for our profligate use of fossil fuels. But it is not the only problem, and arguably not even the most serious problem. In principle, the damage we are doing to the climate system could be repaired within a few hundred years. If we were to move decisively to reduce our energy use and obtain our supply from the renewable sources like wind and solar, we could stabilise the climate this century and then set about restoring it to something like the average over the last 10,000 years. That is physically possible, if politically challenging.
‘Future generations will pay a very heavy price for our profligate use of fossil fuels’
On the other hand, the loss of the Earth’s biological diversity is permanent; extinct species do not return. As I was preparing this review, the WWF (in partnership with the Zoological Society of London, Global Footprint Network and Water Footprint Network) released the Living Planet Report 2014. It reviewed the populations of some 10,000 vertebrate species: mammals, reptiles, fish, birds, and amphibians. On average, those populations have declined by more than fifty per cent since 1970. That current rate of species loss is comparable with those during the five previous great extinction episodes of the planet’s history. The Millennium Assessment projected that we could lose up to a third of all mammal, bird, and amphibian species this century, if present trends continue. We know what is causing the decline of populations and the loss of species: habitat destruction, introduced species, chemical pollution, and climate change. All of those forces are driven by increasing human population numbers and increasing consumption. The Living Planet Report estimated that we are now using 150 per cent of the sustainable productivity of natural systems. While there might be an economic case for deficit budgets in the short term, especially if the borrowing is used to invest in ways that allow future prosperity, there is absolutely no ecological case for the current approach of running down our natural capital.
Higgs argues convincingly that the pursuit of economic growth is now a serious threat to our future. Unfortunately, the ideology of many leaders makes them incapable even of recognising the problem. The thought process of these people seems to be that they deeply believe governments should not impede private corporations from profitable activities, so if the science says that governments should intervene to slow climate change or protect threatened species or just keep the planet habitable, the science must be wrong and the scientists must be engaged in some sort of giant left-wing conspiracy to undermine civilisation. While the people of Australia are putting solar panels on their houses, cycling or using public transport, and organising community gardens, our national government has said the G20 meeting in Brisbane has to focus on economic growth. It would be easy to get depressed.
This clear and cogent book is an important wake-up call. It should not need saying that it is impossible for human populations and economies to grow without limit on a finite planet, but that delusion is widespread. This book is a reminder of the inconvenient truth that should be informing our leaders ...