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Promising much but delivering less
on 12 June 2013
Frustrated by politicians' refusal to admit that western economies may be in permanent decline, and their wrangling over austerity versus stimulus as the key to restoring growth which may be a chimera, I leapt eagerly on King's topical book.
I like King's rejection of economists' recent preoccupation with obscure models, and his concern to take historical, political and social factors into account, although I think some of his analyses would make academics in these disciplines wince.
The most original aspects seem to be his comparisons between the current situation and previous events, such as the decline after a period of promising growth of both Argentina and Japan, the bubble of "subprime" investment in the original American railroads, or the crises of the 1990s from which "Tiger economies" like South Korea or Malaysia, recovered quickly owing to their lack of a sense of entitlement, or so the author claims.
His examination of the recent financial crisis is clear, but has already been well-covered elsewhere. Yet his approach to economic terms seems inconsistent: the "loss aversion" which occurs in periods of stagnation is defined at some length, but I am not aware that he explains at any point how bond yields work, or the difference between monetary and fiscal policies, all crucial to an understanding of the economy. A glossary of economic terms would have been useful.
There is a good deal of space-taking repetition and some of his observations seem unduly subjective and perhaps a little confused, such as frequent references to the guilty role of "baby boomers" who are "having their cake and eating it". Does he expect this group to opt for early euthanasia so they can hand their ill-gotten share of resources on to the next generation?
I was disappointed by his recommended policies, which are presented in a rather rushed and woolly fashion in the final chapter. Some, too complex to explain fully here, on say, rating creditors for the quality of their decisions, or setting up "fiscal clubs" or encouraging more mobility of labour seem too theoretical, taking little account of the realities of nationalism, democracy or the implications for local services. Other policies seem based on flimsy arguments: I am unconvinced that banks have been forced to pursue risky ventures promising higher profits by the need to subsidise such "social commitments" as ATMs, or telephone and internet banking services for small savers.