Losing Control: Why the West's Economic Prosperity Can No Longer be Taken for Granted [Hardcover]

I am still reading this book and greatly enjoying it. King is pleasingly erudite and his evident fondness for classical economics and "political economy" over the increasingly dismal science of the postwar era will engage anyone who enjoyed eg Paul Ormerod's "The Death of Economics."

Of course, I don't agree with everything he says: I dare say I try to be more of a "rational optimist" (to borrow from the title of Matt Ridley's new book) than King does and I think the chances are reasonably good that technology does more to offset increasing competition for scarce resources (engendered by emerging market growth) than he allows for.

But it's always refreshing and helpful to listen to people whose views are not in line with your own, and Losing Control is thus far doing an excellent job. The rather mean-spirited (might that be catty?) review in The Economist to my mind missed the point. Yes King is better at highlighting problems than proposing solutions. But isn't that what economists ought to be paid for? To misquote Rowan Williams, "economics is the question to all our answers, not the answer to all our questions." In a world that prizes second-rate answers above first-rate questions, I would rather have half a dozen of the latter than almost any quantity of the former. Well done Mr King.

Dreadful cover artwork mind; tell your publishers.

The global economist Stephen King has produced an analysis of "the emerging threats to western prosperity" that is clear, readable yet ultimately more chilling than a thriller from his namesake.

King may be doing no more than bring together the information which can be deduced from regular reading of daily broadsheets, but it is thought-provoking to have the evidence for our inevitable terminal decline set out in one place. Writing from the viewpoint of a "westerner", we are in a Catch-22 position: we need the rising economies of the east, most recently China and India, as areas for new productive investment, sources of capital for us to borrow in turn, sources of labour as our own working populations decline. Yet, at the same time, the swamping effect of the Chinese surpluses invested in US bond markets destabilises our financial system. Increasing earnings and rising expectations create intense competition for scarce resources of energy etc. In the bargaining process, what is to prevent, say Russia, from making gas deals with the east rather than the west? Just as old eastern empires declined and the west "succeeded" because it was flexible and entrepreneurial, the tables may now be turned back again. Retreat into a protectionist bunker, such as the formation of "The Independent EU", is a sterile solution, as we should know from the US attempts at protectionism which exacerbated the World Depression of the 1920s-30s. Our complacent assumption of being in a permanently superior position cannot last.

There is already evidence of the truth of King's predictions of increasing internal unrest, as say, "the Tea Party" in the US provides an example of economic nationalism in what is likely to be a futile effort to stem the changing balance of world power.

In reading this book , one is frustrated again by the short-termist attitude of our political leaders, who persist in the fallacy that continual growth is possible and "fiddle while Rome burns" by encouraging us to focus on immediate relatively minor issues and "scandals" rather than face up to the "bigger picture" long-term.

Although King is good at painting this picture, and certainly covers a wide range of interconnected political and social aspects as well as the economic, there is the odd occasion when he forgets to explain the basics for a lay reader (e.g. the operation of the US bond market - very important since developing countries invest so much of their surplus wealth in currently "safe" US bonds). The small number of diagrams included do not shed much light (e.g. p. 69 of hardback) and the book becomes rather repetitive, even rambling, after a while, as though a very busy man has thrown it together in a hurry.

His solutions also appear a little thin. Suggestions for e.g. a small number of major financial power blocs rather than reliance on the US dollar is interesting, but the suggested common currency for China and Japan sounds a bit Utopian! He fudges the issue of increased migration into areas like Britain to offset the "demographic deficit", saying that "it is not time to close borders", without addressing the counterarguments adequately. I was left with the depressed conclusion that King has no real answer for "coping with the West's diminished status" apart from accepting it with an air of defeatism. It may be indefensible for the West to have obtained its unfair advantage in the first place but, having identified the problem of our inevitable decline, one could wish that "experts" could come up with better strategies for how the decline might be managed.

At least this book enables us to understand more coherently what is in store for us in terms of a permanently reduced standard of living, with increased inequality within countries, not least for the growing numbers of pensioners reliant on declining savings.....

I was disappointed by this volume. It strings together many different - and often seemingly unconnected points - ranging from the decline of sixteenth century Spain to demographic trends across the 21st century world, without assembling more than a handful of statistics for any of them, or examining these issues in any depth. Many topics have been covered better and in greater depth in occasional articles in the Financial Times.

Complex social and historical processes such as the integration of the world economy under the European empires of the 19th and 20th centruries are reduced to crude and simplistic narratives about "rigging markets" and "plundering virgin territories", which do little to illuminate these issues for the reader or shed light on today's world.

The analysis is rather unbalanced - there is little discussion of the potential strengths enjoyed by the developed world, or the (huge) problems likely to be faced by the emerging powers as they trash their environments and fail to evolve stable political and social structures.

The author talks about the insufficiency of pure quantitative economics and advocates a return to 'political economy', but there is little effort to actually achieve this in this volume, there is no substantial social, political or historical context offered for the economic developments Mr King describes.

Worst of all, the reader can't help but detect a smug and complacent ambivalence, or even a favouritism - perhaps shared by HSBC, his employer - towards the development model pioneered by the P.R. China ("the envy of the world" in the words of Michael Geoghegan, HSBC CEO) and subsequently refined by their friends in North Korea, Myanmar, Iran and Uzbekistan.

The scientific, social, economic and intellectual achievements of Japan and the West are dismissed as merely the ill-gotten spoil of 'rent-seeking workers in the developed world', yet without copying and often stealing the intellectual property of our societies, and without the investment foreign corporations have provided, China would still be the famine-stricken basket case it was 50 years ago.

The book ends with a slight discussion, lasting for no more than a handful of brief pages, of the possible choices open to the developed world. Like many academic or professional economists, safe and sound in tenured university posts or lucrative positions in the major banks, the author expresses the pious hope that western governments will not seek to protect ordinary citizens, and maintain their faith in the tenets of the free trade gospel.

The author deplores the possibility that the US and the EU could - as Japan has done in recent years, not without some success - turn inwards, embrace a slower rate of growth, and focus on developing their own peoples and societies. There is a vague comment about the populist Smoot-Hawley Trade Tariff being enacted against the views of economists in the 1930s, with the inference that the academic views of those in Finance should trump all else. So thats that argument settled then. After all, we are only their constituents - why listen to us? Clearly, the overriding priority for the EU, the US and Japan should be to maintain employment and social stability in China.

You get the feeling the author thinks that the security of east Asia, and the Straits of Hormuz and Malacca, are safer in the hands of Pyongyang and Beijing than they are in the hands of Washington. Is this not a little naive?

How can the West accept a diminshed role in world affairs - as the author recommends - when its competitors are generally criminal and corrupt dictatorships that see nothing amiss in a regime starving its own people on a massive scale (North Korea), let alone acknowledge their wider international responsibilities to promote good governance and cooperation across the world.

I'm not an economist or a historian but I thought this book was pretty poor.