A customer uses an RBS cash machine in Edinburgh. Photo: Getty
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Power to the economists: new books by Ha-Joon Chang and John Lanchester

Both books are based on the premise that if the general public knew more about finance and economics things might be better.

Economics: the User’s Guide 
Ha-Joon Chang
Pelican, 528pp, £7.99

How to Speak Money 
John Lanchester
Faber & Faber, 304pp, £17.99

In 2008, while the Queen was at the LSE being schooled on the troubling situation that turned into a credit crisis, she asked the assembled professoriate: “Why did nobody notice it?” A number of reputable economists felt the need to send her a letter apologising for their lapse and stating that the reason was a “failure of collective imagination”. But although it was the first case to involve such a specific rebuke from the lady with her face on the money, it was far from the first instance of failed imagination – or collective misprognostication – involving the economics profession.

Repeated evaluations of the accuracy of economic forecasts hint at predictive powers reminiscent of the wrong day’s horoscope. And when it comes to growth strategies, any economist worth a PhD should be able to present competing theories supporting the advantages of openness or protection, the centrality of education and health, the prime role for investment in factories or infrastructure, and the overwhelming importance of civil rights or property rights. One might be left wondering: does econo­mics have any real-world utility at all?

Given this, Economics: the User’s Guide, by the Cambridge University economist Ha-Joon Chang, and How to Speak Money, by the journalist and author John Lanchester, should provide some comfort to the lowly researcher hunched over his laptop, analysing the latest data from the Office for National Statistics. For all that they poke a stick at mainstream thinking in the subject, at least the authors prove that it matters.

Both books are based on the premise that if the general public knew more about finance and economics things might be better. Chang says there is no one right answer in economics, and so “we cannot leave it to experts alone”. For Lanchester, with most of us ignorant, “the money people didn’t have to explain what they were up to” before the Great Recession. He learned “to speak money” and he wants us to learn, too.

The authors take different approaches. Much of Lanchester’s book is taken up with an entertaining (if not fully reliable) dictionary of terms. I spent a happy and thought-provoking few hours reading the entries. But I am not sure, if you took the book as your teaching aid to the 2008 financial crisis, that you would learn all you needed to know. The “hot waitress index” (the theory that you find many more attractive women working as waitresses in a recession, because the jobs they do when the economy is good, such as fashion and luxury retail, get scarce) has a longer entry than the one on derivatives and is, as Lanchester suggests, “fanciful” at best.

The 12 chapters of Ha-Joon Chang’s book cover topics ranging from income, happiness and finance to inequality and international development. He writes with enough depth to provide insights for experts and enough breadth to reach the further shores of the discipline for the interested layman. Chang convincingly demonstrates that there are no certain laws of behaviour and that individuals (let alone societies) are too complex to be explained by simple models. He highlights the example of Singapore, one of east Asia’s most miraculous success stories, which has policies that frequently place it at the top of the “economic freedom” indices compiled by right-wing think tanks. At the same time, as Chang points out, 85 per cent of housing in Singapore is supplied by the government, which also owns a swath of big businesses that account for more than a fifth of the country’s GDP. Or look at China: it is a melange of Wild West capitalism and state control beyond the fevered imagining of even the most postmodern of economic theorists.

But despite that, and though economists disagree about a lot of things, a lot of economists also do agree about some things. And this very agreement indicates that their hubris and blind spots might matter less than Lanchester and Chang seem to think. The Chicago Booth survey of US economic experts finds that more than four out of five think that increased budget spending in 2008 helped reduce unemployment over the next two years, but only 5 per cent were convinced that the costs of the US stimulus programme outweighed its benefits. Only 5 per cent think having trillion-dollar banks is definitely good for the US. Not a single economist out of those surveyed said he or she disagreed with the idea that “freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment”. Almost nine out of ten think that more skilled immigration would be good for the economy and few­er than one in ten think that more unskilled immigration would definitely be bad.

Better regulating banks that are deemed too big to fail, and going for stimulus when the economy craters (because we didn’t regulate the banks properly), are ideas that most economists actively support – but, before the 2008 financial crisis, their opinions didn’t seem to matter very much. The immensely powerful lobbying efforts of the financial services industry stymied such responses. We created corporations that can be sued by minority shareholders if they do not focus on maximising shareholder value: a case of too much regulation. When we give those corporations the right to spend on political campaigns we should not be surprised if they lobby for a singular focus on (short-term) shareholder value rather than longer-term sustainable growth.

If economists had such great power over the world, wouldn’t the World Trade Organisation be a little less moribund, and the transatlantic and trans-Pacific trade deals a little less of a land-grab by people trying to preserve their intellectual monopolies? Chang notes that “there are very few free-market economists who advocate free immigration in the way they advocate free trade”. That is all too true, yet opening the world’s borders to unencumbered movement of people could more than double global GDP, compared to a gain of a few percentage points from removing the remaining barriers to trade. However, economists know that their power to influence the debate is minimal, and so they keep quiet.

Or take the neoliberal policies of the Washington consensus, pushed by the World Bank and the International Monetary Fund. The American economist William Easterly reviewed the evidence on the impact of loans from the Washington-based institutions that were meant to help balance budgets, introduce open exchange rates and support privatisation and competition. He found that while some macroeconomic policies led to marginal improvements, overall they appeared to have had almost no impact – positive, or negative.

It may be that we want economists – with their consensus desire to spend our way out of recession, reduce monopolies, rein in the banks and open our borders not just to goods but to people – to have more influence over politics. If such books as these two spark a greater interest in economics, as they should, I hope that will be one result.

Charles Kenny is a senior fellow at the Centre for Global Development and the author of “The Upside of Down: Why the Rise of the Rest Is Great for the West” (Basic Books, £17.99)

Correction: an earlier version of this article incorrectly stated that "How to Speak Money" does not contain an entry on credit default swaps. The author apologises for the error. 

This article first appeared in the 09 December 2014 issue of the New Statesman, How Isis hijacked the revolution

Donmar Warehouse
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Limehouse raises the question of when party loyalty becomes political irresponsibility

Labour's “Gang of Four” are brought to life brilliantly at the Donmar Warehouse.

A star of the Labour Party right wing, exiled from the shadow cabinet for deviating from the dominant orthodoxy, rants about how a decent but weak Labour leader, with an election-losing anti-European, anti-nuclear manifesto, risks letting the prime minister get away with whatever she wants.

Laughter shows that the audience gets what the dramatist Steve Waters is up to. Limehouse takes place on 25 January 1981, when a gentle veteran, Michael Foot, seems to be leading Labour to such sure oblivion at the next election that Dr David Owen has summoned his fellow moderates Shirley Williams, Bill Rodgers and (just back from a stint running Europe) Roy Jenkins to Sunday lunch in his kitchen in east London. This meeting led the “Gang of Four”, as they became known, to make a statement of estrangement from Labour that heralded the creation of the Social Democratic Party.

Waters was inspired by a New Statesman interview in which Rodgers wondered if the left-right divide under Jeremy Corbyn might justify a similar evacuation of the pragmatists now. The debates that the play stages – fidelity to party and national tribes against a fear of political and historical irrelevance – feel hotly topical.

Williams, considering an offer to abandon Labour and teach at Harvard, faced then the dilemma of an Ed Balls or Tristram Hunt now. And Labour members today who fantasise about a new progressive grouping might reflect that, while the SDP briefly seemed a plausible alternative to Thatcherism (winning 7.8 million votes at the 1983 election), the middle-class revolution was squeezed externally by two-party domination and internally by disputes over leadership and direction.

But, for all the parallel relevance, the success of Limehouse ultimately depends on the convincing re-creation of an era and its people. Enjoyable period details include the luxury macaroni cheese to a recipe by Delia Smith that Debbie Owen, Delia’s literary agent, chops and fries on stage to fuel her husband’s discussions with his three wary comrades. Waters also skilfully uses the mechanics of a pre-digital world – having to go out for newspapers, going upstairs to answer a phone – to get one character out of the way to allow others to talk about them.

As a good playwright should, Waters votes for each character in turn. Owen, though teased for vanity and temper, is allowed a long speech that honours his status as one of the most memorable orators in modern British politics. Tom Goodman-Hill samples Owen’s confident baritone without going the whole Rory Bremner.

Playing Jenkins, a man celebrated for both a speech defect and rococo cadences, Roger Allam has no choice but to deliver the voice perfectly, which he does. Waters carefully gives the character an early riff about the “crepuscular greyness” of Brussels, allowing Allam to establish the w-sounds and extravagant adjectives. Actor and playwright also challenge the assumption that for Jenkins both to love fine wine and to advocate social justice was inevitably a contradiction.

Debra Gillett refreshingly avoids the scattiness that caricaturists attribute to Williams, stressing instead her large brain and deep soul, in a portrayal that increases the sense of shame that the Tories should lead Labour 2-0 in the score of female prime ministers. As Rodgers (in Beatles terms, the Ringo of the confab four), Paul Chahidi touchingly suggests a politician who knows that he will always be a bag-man but still agonises over whose luggage to carry.

Unfolding over 100 minutes, Polly Findlay’s production has a lovely rhythm, staging the delayed entrances of Jenkins and Williams for maximum impact. Biodramas about the living or recently dead can be hobbled by a need to negotiate objections of tact or fact. Politicians, however, often purchase even the rudest cartoons of themselves for the loo wall, and the real Owen, Williams and Rodgers laughed warmly during, and strongly applauded after, the first night.

At an impromptu press conference afterwards, a genial and generous Owen astutely observed that what at the time was “a very happy day in our house” has been dramatised as tragicomedy. But, regardless of whether Marx was right about history repeating itself the second time as farce, the possibility that farce is being repeated in Labour Party history has encouraged a compelling play that is sublimely enjoyable but also deeply serious – on the question of when loyalty to party can become disloyalty to political responsibility.

“Limehouse” runs until 15 April

Mark Lawson is a journalist and broadcaster, best known for presenting Front Row on Radio 4 for 16 years. He writes a weekly column in the critics section of the New Statesman.

This article first appeared in the 23 March 2017 issue of the New Statesman, Trump's permanent revolution