"Events can move from impossible to inevitable, without ever passing through improbable." This is about capitalism, yes, and it is about the so-called financial crisis of a few years ago; in fact it was written kind of during it. I have long admired Kaletsky's writing in The Times. On the free market, he points out that the freest-market economies in the world are failed states and gangster societies such as Somalia, Congo, and Afghanistan. He gives historical gems, such as the fact that income tax was declared unconstitutional in the US in 1885. He quotes J.K. Galbraith, writing in 1977, "We all agree that pessimism is a mark of superior intellect". This book however is supremely optimistic, and as such a cheering read. He writes interestingly of the "demystification of money" which had already happened by 1990. Once Nixon had removed the US from the gold standard in 1971, every form of money in the world, including the communist world, became "an abstract symbol of confidence in the government that ordered its issue." I had never thought of it like tht before, but it's true. Keynes, he notes, had called dependence on gold "a barbarous relic".
With the (near) end of communism as a system of government, three million people have entered capitalist economies since the late 1980s. That is still playing out. Polonius, remember him from Hamlet "Neither a borrower nor a lender be", blah blah, is described by Kaletsky as "possibly the most misguided character in Shakespeare", which seems about right. But, "not only had the rigorously free-market model of capitalism introduced in the 1980s by Margaret Thatcher and Ronald Reagan proved unmanageable and unstable, it also had failed to produce the great leap forward in living standards and productivity claimed by the proponents of deregulation and minimal government." That fundamentalist market system crashed in 2007-09 and is not to be repaired. He also makes the point that essential human needs, such as food, clothing and housing, are left almost entirely to the private sector in just about all societies. (Although not health, but that is another book).
On what actually happened to the banks: liquidity rules were abandoned, especially in the US and Britain. After the crash UK liquidity became similar to that of the eurozone. Governments should regulate for it to stay that way, which would make future crashes a lot less likely. "The risk management of banks is too important to be outsourced to private credit rating agencies". The taxpayer, according to Kaletsky, is the silent partner in banking. The 1980s and 90s saw the victory of capital over labour just about everywhere - except in banking, where the workers looted the capital at the expense of the shareholders (in bonuses and huge salaries). This does not happen in high-end industry such as Microsoft. Wall Street and the City of London are the last bastions of Marxist workers' control.
On the future for China, Kaletsky cites Will Hutton on the need for it to develop the "soft infrastructure of capitalism", by which he means secure propeprty rights, representative government, an independent judiciary, and a business culture that is not solely driven by the desire for instant personal enrichment. He notes that China is commissioning as many coal-fired power stations every two years as Britain has built in its entire history. Economics is more akin to history or psychology than to physics or biology, he says. Yes, I say, also because ordinary people have opinions, that they often think are authoritative, about history and psychology, but rarely about physics and biology.
This is a chronicle of recent developments in capitalism, and is a good read. It is hugely optimistic, and in reasoned fashion. Everyone who is in politics should read it. Economists already have. Highly recommended. I am not an economist, and so I had to make a lot of notes, but the fact that I wanted to, rather than falling asleep over the book, says much for it. Keep at it Anatole. Get the book here, readers.
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