Stephen D King's Reading List

"Yes, I think that’s true, and so my first book is Power and Plenty by Findlay and O’Rourke. What’s particularly good about this is the tremendous detail on the way in which different parts of the world used to trade with each other, and how it helps us to think about a world that wasn’t purely European, or European-plus-satellites focused. The huge amount of trade that took place between the east coast of Africa, India and China hundreds of years ago got forgotten with the rise of European empires, and these kinds of trading routes are now all being re-established. It’s almost like the new, modern-day Silk Road, and the great thing about this book is that it records all the ways in which these trade linkages were created and then destroyed over the last thousand years. Part of it was very simple: politically, countries sometimes chose to withdraw. China is the classic case – it really withdrew from globalisation in the 1400s when the Ming dynasty destroyed its ocean-going fleet, then the most powerful in the world, due to the sense that its relationship with the rest of the world was a corrupting influence on traditional Chinese values. But also it was almost by accident, often associated with technologies that were extraordinarily disruptive. A classic case is the overland spice trade, which made the Middle East very rich, made Islam powerful for hundreds of years, and created amazing European cities like Venice. Then Vasco da Gama sails around the Cape of Good Hope and finds a seagoing route to all the spices, and suddenly all the middle men who’ve made a fortune out of this overland trade were just cut out of the deal and went into decline. I think there’s a lesson here for today: with all this cheap information, it’s easier for countries that had forgotten how to trade with each other to be able to trade with each other again. More or less. It goes through a number of different periods from the world economy at the turn of the first millennium all the way up to what it calls the re-globalisation at the end of the 20th century. I think the other thing you forget is that for much of the 20th century there was a collapse in globalisation, which we now take for granted as being a feature of the world economy. Trade was suppressed, often by a lack of technology, but more importantly by a series of dogmatic political views. Anyway, it’s a wonderful book, full of amazing detail, and I can’t think of a better history of the world economy of the last thousand years. I think many economists have forgotten that economics ultimately is rooted in things like politics and geography and history: if you don’t focus on those sorts of things you often lose sight of what’s really going on."

"The Wealth and Poverty of Nations. Another huge historical sweep on economic development and, perhaps controversially, this time more a view of why the West has been particularly successful and why other countries have not. I think there’s a danger that recent events may begin to question some of those assumptions, but as a tentative exploration of the issue of economic progress and culture, it’s fascinating. One of the stories here is about clocks, and how the Europeans would bring their clocks along when it came to trading with China. Europeans used clocks as a coordinating mechanism: what time you arrived for work, and what time you went home in the evening. Whereas the Chinese initially regarded clocks as being almost a decorative toy, so you’d end up with this weird situation throughout China with extremely long hours being worked in the summer and extremely short hours in the winter, which were all determined by the lack of understanding of this particular technology. I think what’s clever about the book in one sense is that it points out that it’s not just the technology that’s important but how you use it. If you invest in lots of computers, unless you can do something with them and work out how you can become more productive, the computers in themselves are utterly useless. There are lots of examples of this in the world: you have to work out how best to use a technology before investing in it. Yes, there’s a lot of Enlightenment thinking going on in this particular book. I’m not 100 per cent sure that this still stacks up, because one big challenge to the whole Enlightenment process is the rise of Asia over the last 50-60 years. It has proved to have been successful for a number of decades now, so it does raise some big questions as to whether it’s either the same model and we haven’t understood it, or a different model, in which case it’s a challenge to Western assumptions about liberal democracy, and so on. New technology can cause tremendous upsets. I think often people forget that the technologies partly explain why it is that some countries have become rich or some others have remained poor or become poor. What of course we don’t know is whether countries that are currently wealthy might subsequently become poor in the future, and I think this is a big question for the West, actually. If China and Brazil and India trade increasingly with each other, and the demographics of the world’s population continue to change in a way that makes the West increasingly unimportant, there are some big questions as to whether the West itself, having unleashed this wonderful new information technology, will go the same way as, say, Islam in the 14th and 15th centuries: of having a technology that has been so disruptive that it makes life much more difficult for the West than it assumed 20 or 30 years ago. They do. The one thing you could say is that countries which have recently lost it, like say the UK, or maybe Austria, have remained relatively wealthy. But it may be like the demise of the Roman Empire: it took hundreds of years to fall flat on its face, and maybe we’re seeing the same kind of process in the West. Landes wouldn’t support that view: he’d say there’s a particular model that’s worked well and here are the reasons why. But the lessons from history seem to be that those who think they’re going to be powerful suddenly find that their power has gone. I’m not sure I agree with all of it but it’s a fascinating book, particularly for these examples of how technologies were used in different parts of the world with completely different conclusions."

"Adam Smith, The Wealth of Nations. It was an extraordinary insight into how society works, and I stress the idea of society, rather than the economy, because his attempt was really to think about not just the famous things like division of labour, or the efficiency with which resources were allocated, but also how they were distributed: whether it was done in a moral, ethical way. And therefore he was thinking about winners and losers. Much of modern day economics, and the modern day reinterpretation of Smith, is all about the idea that you can create only winners if you allocate resources efficiently, that ultimately you are making the cake bigger and therefore, in theory, everyone can be better off. Of course those beliefs fed into the way we walked into the financial crisis, and the problem with that was that with time – which is what capital markets deal with – comes uncertainty. What is amazing about Smith is that he tried to relate economics to morals and ethics, in the sense that economics is only a small part of what society should be thinking about. I think it’s rather unfortunate: he’s been hijacked to a degree by a sort of right-wing free-market view of the world, which has done him a disservice in terms of his contribution to economic thought."

"This was first published in 1939 while the US was still grappling with the Depression, and what is brilliant about it is that it reveals that economic problems can’t just be dealt with through some wave of the free-market magic wand. It’s a very harrowing read. The sufferings that the family in this book go through you wouldn’t wish upon anybody, but their sufferings in part come about through a mixture of misfortune, misjudgment and bad luck. I think that this sense of people finding themselves hugely disadvantaged is something that has a modern-day connotation – the whole debate about immigration today is tied up with this. In both cases it’s about migrant labour. In The Grapes of Wrath it’s migrant labour from within the US, and it’s those people who are often the most vulnerable. This is the human aspect of that story, and I think that Steinbeck summarised much of what happened in the Great Depression far better than many economists did, because he really dealt with the true losses that came through for people who just happened to be down on their luck. It may still be possible to argue that free markets are the best option, but it’s important to realise that even if they’re the best option, they may not give you a perfect result. The danger people fall into is thinking it does."