Daniel Drezner of Tufts University has a post on the best books on international relations published this year.
Recently, I have read ‘Your Money and Your brain’ by Jason Zweig (good one on how our brain works and why it is ill-equipped to deal with matters like investing – but a bit too long and repetitive in some places), ‘Lords of Finance’ by Liaquat Ahamed (highly recommended – it is an economic history of the 1920s and 1930s seen through the actions of central bankers of the US, UK, Germany and France), ‘China shakes the world’ by James Kynge (very strongly recommend reading to understand this rising nation with all its insecurities, fears, anger and foibles that is going to guide its behaviour towards other nations) and now ‘Panic’ (anthology of articles put together by Michael Lewis on various panics – 1987, 1999-2002 and 2006-2008. Very fascinating collection. Michael Lewis’ own pieces in this collection are the best, by a long distance. His disssection of the technology boom and bust and scapegoating is a MUST READ for its intellectual originality. Not completed yet.
In the pipeline are ‘Predictably Irrational’ by Dan Ariely, ‘Animal Spirits’ by Akerlof and Shiller, ‘Capitalism with Chinese characteristics’ by Yasheng Huang and ‘Complications’ by Dr. Atul Gawande.
Back to Daniel Drezner. Out of the five, he mentions, I have read only one and that is ‘Saving capitalism from capitalists’ by Raghuram Rajan and Luigi Zingales.
It is a very good book. The books is brilliant in its analysis. I do remember thinking, however, that there are no easy answers to the situations they describe. The only answer is a government that is not hostage to special interests – one that creates enough checks and balances and is transparent enough to prevent special interests from taking over. One of the ways for that to happen is for good men and women to enter politics and stay good! That is important.
But, we know that is easier said than done. If anything, evidence since this book was published is that the hold of special and narrow interests has strengthened. Seems like a global trend. Niranjan Rajadhyaksha of MINT thinks aloud if India is already a oligarchic capitalism. Of course, it is a question with an embedded answer.
Fareed Zakaria wrote a long piece in ‘Newsweek’ recently titled, ‘The Capitalist Manifesto: greed is good’. Whoever gave the title to that piece was not thinking hard enough and were also not doing justice to the piece.
It makes all the good points. The main criticism of the piece is that the tone is too sanguine considering the gravity of the crisis and its ongoing nature. Perhaps, all columnists – including myself – decide that they should do a balancing act vs. what they see as the widespread consensus. So, it is not fair to judge their piece as incomplete or one-sided because the piece is an implicit rejoinder to the view that is out there. [Update: See here for a similar sanguine piece on the same topic by Jerry Rao in 'Indian Express' on July 12th, 2009]
That said, just advising every one to follow their moral compass is not a wrong thing to do. Ultimately and very ultimately, that is the best thing. The late M. G. Ramachandran sang that unless the thief decided not to steal or burgle, theft/robbery would not be eliminated. But, there is something about incentives or disincentives. Lure of reward must go hand in hand with fear of punishment and other consequences. Ideology played its part too. Self-regulation was expected to work all the time in all situations. Rather naive but too convenient too. It provided intellectual cover to shenanigans.
How to bell the cat? No easy answers. Tempting to fall back on moral compasses and fear of god. But, pressure must be kept up until some balance between incentives and punishments and fairer apportionment of costs and benefits of risk-taking are put in place. They are not happening. In fact, fierce war is being waged against it and the ‘other side’ is winning.
In that sense, capitalism is not being saved from capitalists and that is where Fareed Zakaria’s piece does a particular disservice. What could Mr. Zakaria have written? One answer is this piece by Luigi Zingales in September 2008.
Matt Taibbi has a strong response to Zakaria’s piece.
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