Book Reviews

30 dezembro, 2008

209) Livro sobre a Rodada Doha e a reforma agricola

Delivering on Doha: Farm Trade and the Poor
Kimberly Ann Elliott
Washington, DC: Peterson Institute, 2006, 148 p.
ISBN 0881323926, 9780881323924

It is frequently asserted that agricultural liberalization by the United States, European Union, and other rich countries is the key to making the global trade negotiations launched in Doha, Qatar, in 2001 a "development round." Agricultural market liberalization is essential in achieving a successful Doha Round agreement because these are the most protected markets remaining in most rich countries. But the implications for developing countries, especially the poorest, are more complex than the current debate suggests. This volume examines the structure of agricultural support in rich countries and explores the challenges as well as opportunities that developing countries might face if the Doha Round succeeds in reforming OECD agriculture policies.

Read more at this link.

Contents:

Introduction, 1
Doha Round, Cairns Group, developing countries Rich Countries Supporting Rich Farmers, 13
OECD, European Union, TRQs Lessons from US and European, 35
OECD, blue box, countercyclical Opportunities and Challenges for Developing Countries. 63
World Bank, Bangladesh, cocoa The Devil in the Doha Details, 91
countercyclical, blue box, food aid
Delivering on Dohas Promise, 115

Glossary, 133

208) Um livro sobre a socializacao dos diplomatas

Mana
Print ISSN 0104-9313
Mana vol.14 no.2 Rio de Janeiro Oct. 2008
doi: 10.1590/S0104-93132008000200017

RESENHAS
Tatiana Oliveira Siciliano
Doutoranda PPGAS/MN/UFRJ

MOURA, Cristina Patriota de
O Instituto Rio Branco e a diplomacia brasileira. Um estudo de carreira e socialização
Rio de Janeiro: Editora FGV, 2007, 136pp.

Como o próprio título sugere, O Instituto Rio Branco e a diplomacia brasileira. Um estudo de carreira e socialização trata, principalmente, do processo de interação social e aprendizado na carreira de diplomata. Os indivíduos não se tornam diplomatas quando aprovados no concorrido Concurso de Admissão do Instituto Rio Branco, mas aprendem a sê-lo através de um longo processo de socialização, transformação subjetiva e formação profissional, no qual a vivência com professores e colegas nos primeiros anos de Instituto Rio Branco – no Programa de Formação e Aperfeiçoamento, Primeira Fase – é capital.

Este livro é o resultado, quase na íntegra, da dissertação de mestrado, então intitulada Jovens colegas: um estudo de carreira e socialização no Instituto Rio Branco, defendida em 1999, no Programa de Pós-Graduação em Antropologia Social do Museu Nacional da UFRJ, por Cristina Patriota de Moura, hoje professora do Departamento de Antropologia da Universidade de Brasília (UnB). O "mundo da diplomacia" entrelaça-se à trajetória da autora, ela própria neta, filha e sobrinha de diplomatas, e o seu interesse em "observar o familiar" com um olhar antropológico acompanha-a desde sua monografia de graduação em antropologia na UnB, cujo foco eram as identidades dos filhos de diplomatas.

Quando da defesa de Cristina de Moura, a carreira diplomática quase não era investigada academicamente. Há dez anos, época em que realizou seu trabalho de campo, o único estudo disponível, com o qual inclusive a autora dialogou bastante, era a dissertação de mestrado de Zairo Borges Cheibub, Diplomacia, diplomatas e política externa: aspectos do processo de institucionalização no Itamaraty, defendida em 1984, no IUPERJ. Atualmente, como a própria autora assinala na "Apresentação" do livro, o quadro vem mudando: cresceu tanto o interesse pela diplomacia como profissão como o número de pesquisas acadêmicas sobre o tema.

Outra contribuição do trabalho de Cristina Moura é o modo como ela se beneficia da leitura dos "estudos sobre carreira" de autores ligados à Escola de Chicago – como Everett Hughes, Erving Goffman e Howard Becker, as principais referências teóricas sobre o assunto – em sua abordagem sobre a construção da carreira dos jovens diplomatas pesquisados. A carreira é aqui entendida como um ciclo, um fluxo, um processo, no qual ator, instituição e acontecimentos encontram-se inevitavelmente imbricados. Assim, tornar-se um diplomata não é uma "conformação" aos preceitos do Instituto Rio Branco (IRBr), mas uma permanente "negociação da realidade", nos termos de Schutz. Naturalmente, a diplomacia apresenta peculiaridades, é um "campo" formal e hierárquico com fortes características institucionalizantes, cujo acesso à profissão e o seu controle se dão, via burocracia do Estado nacional, através do Ministério das Relações Exteriores.

Para exercer a profissão é preciso, primeiro, ser aprovado no concurso do IRBr; a partir de então, o "neófito" passará a constar do quadro funcional do Ministério das Relações Exteriores como terceiro secretário, o primeiro estágio das seis fases que estruturam a carreira diplomática. Como observa a autora, tal situação deve ser percebida não como um sistema predeterminado, mas como, na acepção de Gilberto Velho, um "campo de possibilidades" no qual os atores constantemente (re)elaboram seus "projetos" a partir de suas experiências e da interação com seus "pares" e "superiores".

A pesquisa de campo, ampla e minuciosa, merece destaque especialmente por se tratar de uma dissertação de mestrado, cujo tempo para a sua consecução é exíguo. A fim de entender e descrever não só o processo de incorporação do ethos profissional, mas também a "visão de mundo" compartilhada pelos jovens diplomatas, a autora recorreu a diversas fontes de informação, tanto primárias quanto secundárias. Fez um ano de observação participante dentro do Instituto Rio Branco, em Brasília, assistindo a várias aulas no PROFA-I junto com os diplomatas recém-aprovados na casa, conversou informalmente nos corredores com alunos e professores, além de assistir a cerimônias oficiais e formais como a do "Dia do Diplomata".

A sua observação não se restringiu, todavia, ao Itamaraty, pois freqüentou também um curso, no Rio de Janeiro, que preparava candidatos para o concurso, visando investigar este "momento traumático" de que tanto os diplomatas falavam. Além de conversas informais, usou entrevistas estruturadas e aplicou 39 questionários junto aos alunos do IRBr com o intuito de levantar as principais tendências e os perfis das turmas. Os arquivos e os currículos formais do IRBr, assim como os trabalhos acadêmicos disponíveis, constituíram as demais fontes de informações consultadas.

Por perceber a carreira do diplomata como uma trajetória, a autora mostra que ela se inicia antes da admissão do candidato ao IRBr. O "projeto" de tornar-se diplomata começa a se configurar, para alguns, ainda no Ensino Fundamental ou Médio; para outros, um pouco mais tarde, ou após o exercício de outra profissão. Em todos os casos, contudo, é um processo longo, no qual são investidos tempo, esforços físicos e mentais e recursos financeiros. Assim, existem algumas etapas bem delimitadas no aprendizado da carreira diplomática. A primeira é contar com uma boa formação prévia, ou direcionar seus esforços nesse sentido, visto que, para ingressar nos quadros do Ministério das Relações Exteriores, é preciso ter diploma de nível superior reconhecido pelo MEC, ser bem informado, ter bom domínio do inglês e português "impecável". A segunda é preparar-se para as provas do concurso, o que requer um estudo intenso e, por vezes, a freqüência a cursos preparatórios ou a aulas particulares.

Depois de "enfrentar" e vencer a tensão das cinco fases do concurso, o "calouro" inicia o Programa de Formação e Aperfeiçoamento, Primeira Fase (PROFA-I) com duração de dois anos. O primeiro ano está voltado para o desenvolvimento teórico e o segundo, mais centrado nas atividades profissionais, é o período de estágios na Secretaria das Relações Exteriores ou em postos fora do país. Percorrido todo esse caminho e aprovado no PROFA-I, vem a consagração na formatura, ocorrida no "Dia do Diplomata", após a qual o ex-aluno muda de status, transformando-se em "jovem colega" aos olhos de seus superiores.

O "Dia do Diplomata" consiste em um dos rituais mais representativos para a compreensão da "cosmologia" e do "sistema classificatório" do mundo diplomático, por ser composto de várias ações coletivas que visam institucionalizar a diplomacia brasileira e definir o seu papel junto à nação. Cristina Moura argumenta, apoiando-se nos conceitos de Tambiah, que as práticas rituais do "Dia do Diplomata", bem como a crença na sua eficácia, são fundamentais na incorporação do ethos e no compartilhamento da "visão de mundo" dos diplomatas.

Trata-se de uma cerimônia oficial e anual, cujo ritual é marcado pelos seguintes momentos: chegada do Presidente da República, execução do Hino Nacional, entrega de medalhas e insígnias pelo Presidente, cerimônia de formatura e encerramento com um almoço com o Presidente, no qual estão presentes os formandos. É uma "tradição inventada", nos termos de Hobsbawn, em 1970, ano da inauguração do Palácio do Itamaraty na capital federal e transferência da sede do Ministério das Relações Exteriores do Rio de Janeiro para Brasília. A escolha do dia 20 de abril é uma homenagem ao nascimento do Barão do Rio Branco, "patrono da diplomacia".

Para os principiantes, o "Dia do Diplomata" é um marco. É quando institucionalmente são considerados diplomatas, não mais alunos do Instituto Rio Branco. Assinala o fim do treinamento e a entrada no dia-a-dia da profissão. Além de ser um momento especial, de distinção, ele oferece a oportunidade de, ao final das comemorações, os jovens diplomatas compartilharem um almoço com o chefe da nação e conversarem informalmente com os "chefes da casa".

A fase do treinamento, experimentada no PROFA-I, é fundamental na "metamorfose" de neófito à diplomata de carreira. É nesse período que o ethos diplomático é incorporado, uma vez que no seu decorrer o aluno "deixa de ser quem era" e passa a fazer parte da instituição. E, para isso, é preciso aprender os códigos que não são ensinados nos livros, como o conhecimento das regras de etiqueta e dos protocolos, o uso formal da linguagem, o domínio da hexis corporal e a adequação do vestuário. Ao interagirem com os colegas de turma, professores e diplomatas hierarquicamente superiores, os alunos absorvem muito mais do que conceitos teóricos, construindo um sentimento de pertencimento institucional, uma adesão ao status diplomático que lhes permite ver como "naturais" os processos formais da "casa".

Cristina Moura mostra que optar pela carreira diplomática transcende à escolha de uma profissão, representando uma aderência a um estilo de vida, ao "espírito" de uma corporação, o que inclui novas responsabilidades, privilégios e deveres extensivos à família nuclear, existente ou a ser formada. Daí a importância do fato, para ser bem-sucedido, de que se escolha um cônjuge à altura dos requisitos profissionais: sociável, sofisticado e com boa escolaridade, além de flexível, uma vez que deverá aceitar seguir o(a) companheiro(a) nas constantes transferências de posto inerentes ao ofício, exigências estas que, por vezes, propiciam o casamento "endogâmico" entre diplomatas ou entre diplomata homem e filha de diplomatas. Afinal, nas palavras da autora, "a instituição engloba a família nuclear, definindo seus membros em um sistema classificatório tríplice: diplomata, filho de diplomata e cônjuge de diplomata" (:102).

A leitura do trabalho de Cristina Moura, agora publicado e acessível a um público maior, interessa não somente aos que estudam setores da burocracia do Estado brasileiro, mas a todos que desejam compreender a complexidade de certas dimensões culturais do país nas quais concepções formais e comportamentos "aristocráticos" convivem, lado a lado, com o "moderno" conceito de "meritocracia". Ademais, o livro certamente agradará a quem se sente atraído por "estudos sobre carreira". Trata-se de uma etnografia bem escrita, que sublinha a heterogeneidade das experiências no processo de construção de uma carreira. Um livro que faz lembrar, por sua vivacidade, o processo de "socialização" dos estudantes de medicina descritos por Howard Becker em Boys in white. Student culture in medical school.

© 2008 Mana

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29 dezembro, 2008

207) Niall Ferguson, The Ascent of Money, duas resenhas

Duas resenhas do mesmo livro:


Can You Spare a Dime?
By Robert Skidelsky
The New York Review of Books, Volume 56, Number 1 · January 15, 2009

Niall Ferguson:
The Ascent of Money: A Financial History of the World
Penguin, 442 pp., $29.95

1.
The historian Alan Taylor used to say, mischievously, that the only point of history is history. The idea that one could use it to predict the future, still more to avoid past mistakes, was pure illusion. Niall Ferguson's The Ascent of Money, a history of financial innovation written as a television documentary[1] as well as a book, offers a neat test of Taylor's theory. Ferguson can claim some powers of anticipation. History convinced him in 2006 that the good times could not last "indefinitely." This was an insight to which the Nobel Prize–winning mathematical economists who devised the Black-Scholes formula—the complicated model for pricing share options used by the highly leveraged firm Long-Term Capital Management, which famously crashed in 1998—were oblivious. Their formula persuaded them that a massive sell-off could occur only once in four million years.
History has alerted Ferguson to the perils of the state relying on the bond market for its financing. On Lou Dobbs Tonight on November 13, 2008, he said:
How much can the international bond market absorb of new ten-year treasuries?... And if yields go up, the cost of government borrowing goes up, and the thing begins to spiral out of control....That's why you need the historical perspective....
Between the two opposed views that history can teach us nothing and that the future is simply a reflection of the past lies the sensible middle position that history, like any other way of experiencing the past, can give us "vague" knowledge of what may lie in store for humanity. Only history-free economists could have bought the "efficient market hypothesis," which claims that the market will price shares correctly, with deviations from accurate prediction occurring only at random. But knowledge of history would not have enabled anyone to predict the timing and extent of the present meltdown. Above all, history cannot settle the question of what our attitude should be toward money, which is at root a moral question.
The Ascent of Money is a superb book, which illustrates both the strengths and the weaknesses of history for understanding what is happening now. It is written with the narrative flair, eye for detail, range of reference, and playfulness of language that we have come to expect from this exceptionally versatile historian. Ferguson is clearly fascinated by the subject of finance, knows a huge amount about it, and communicates his enthusiasm to the reader. Many parts of the story will be familiar enough to specialists, but Ferguson has a special ability to color even the familiar with strange and unusual examples, and he weaves together the separate strands of the financial tapestry with great skill. Some of the financial material is quite technical, but there is no attempt to "dumb down." The book is an all too rare example of good, even dense, scholarship finding a way to engage the larger public.
Ferguson's strategically themed structure starts with the origins of money, and shows, in successive chapters, how money found a way of multiplying itself through the development of banking, bond, equity, and insurance markets, and derivative instruments of all kinds until the world economy came to resemble what Charles Morris has called an inverted pyramid of debt resting on an increasingly narrow base of real assets.[2] The large claim Ferguson makes is that we owe our prosperity more to finance than to technology. Throughout history men have been more ingenious at finding ways to make money than to make things. As Gibbon shrewdly noted, without the "incitement" given by money to the "powers and passions of human nature," societies could scarcely have emerged "from the grossest barbarism."[3]
Money, according to Ferguson, is not a thing but a relationship—above all, a relationship between creditor and debtor. As soon as time and distance start to elapse between exchanges of things of value—which happened at the start of civilization—people needed something more than barter. Farmers needed to borrow while they waited for the harvest to ripen; merchants needed to borrow while they waited for shipments to arrive; above all governments needed to borrow to finance their wars. The three functions of money—as a means of exchange, a unit of accounting, and a store of value—developed to bridge the interval between purchase and payment. Bills of exchange or "promises to pay" seem to have been used for the settlement of debts from the earliest times to overcome the inconvenience of shipping the precious metals.
Primitive banks, or safe depositories, must also have existed from the earliest times. The actual word "bank" originated from the Italian banca, or bench, at which the medieval moneychangers sat to do their business. Bankers soon learned how to augment their profits by lending out their deposits at interest. The Medici of fifteenth-century Florence were the first famous banking family. They made their fortune by buying and selling "bonds," the debts issued by cash-strapped monarchs. These bits of paper bound the borrower to repay within a specified period of time. The bond market started when these bonds became tradable. The bond market, the first truly modern financial market, was perfected in eighteenth-century England; great merchant bank underwriters of loans like the Rothschilds dominated the public finance of nineteenth-century Europe. Fractional reserve banking, an early innovation, starting with Sweden's Riksbank in 1656, enabled banks to make loans in excess of the money deposited with them—on the assumption that "depositors were highly unlikely to ask en masse for their money."
Ferguson rightly points out that the early growth of European finance was driven more by the needs of the state than by those of commerce. His thesis, familiar from his two volumes on the Rothschilds,[4] is that state policy determines the development of finance, not vice versa. This reverses the usual Marxist argument that finance controls governments. The Rothschilds started as court bankers. The Bank of England was created in 1694, mainly to help the government with war finance, by converting a portion of the government's debt into shares, in return for which the bank was given special privileges, such as a partial monopoly on issuing banknotes.
England's rise to world power in the eighteenth century was based on the ability of the British government to borrow larger sums at cheaper rates than any of its rivals; hence the importance for the nineteenth-century public mind of maintaining the state's creditworthiness by balancing the government budget. In the twentieth century it was the eagerness of democratic governments to extend home ownership—as an antidote to revolution—that later led to the practice by which home mortgages are converted into securities and sold around the world.
Long-term investment needed a different financing structure, and this was found in the development of the joint-stock, limited-liability company and the emergence of stock markets. By enabling many individuals to pool their resources by buying shares of a particular enterprise, while protecting them from losing everything if the project failed, the limited-liability company was one of the greatest innovations in financial history. The Dutch East India Company, formally chartered in 1602, was the first company to issue its own stock and bonds through the Amsterdam Stock Exchange. Over its two-hundred-year history the average dividend it paid out to its 358 shareholders was 18 percent a year. It helped that it was a chartered monopoly, with the power of the government behind it.
Ferguson notes that the history of stock markets has been punctuated by spectacular bubbles and crashes. Some of these have been caused by fraudulent company promoters: Kenneth Lay of Enron had a worthy predecessor in John Law, whose Mississippi Company went spectacularly bust in 1720. Many fraudsters, like Ivar Kreuger, the "Swedish match king" who committed suicide in 1932, were men of vision who turned to crime only to rescue great projects that had gone wrong. But the fraudsters could get away with it—for a time—because of what Alan Greenspan called the "irrational exuberance" of investors. Why are stock markets so volatile? Ferguson believes it is because they are mirrors of the human psyche. Like homo sapiens, they can become depressed. They can even suffer complete breakdowns. Yet hope—or is it amnesia?—always seems able to triumph over such bad experiences.
This is a good analogy, but, as I shall argue, it is not an explanation.
As Ferguson tells it, volatility is inherent in financial markets, but bad monetary policy can make it worse. Central banks were created, in part, to stop the "over-issue" of notes by private banks, and to act as "lender of the last resort." Following Milton Friedman, Ferguson believes that the Great Depression of 1929–1933 was caused by bad monetary policy—money was kept so cheap that a huge stock market bubble formed, and, when it burst, the Federal Reserve Board failed to provide the banking system with sufficient liquidity. This view that monetary policy alone is sufficient to keep economies relatively stable is unlikely to survive its harsh confrontation with present reality.
The next step in money's ascent is the development of insurance markets to guard against risk. Ferguson tells the story through three central episodes. The start of insurance depended on the work of the mathematicians at Port-Royal in eighteenth-century France, who laid the basis for the modern theory of probability. Provided that the relative frequency of an occurrence was known from past information, it would be possible to insure people against the risk of it happening to them. This insight was applied by the two clergymen founders of the Scottish Ministers' Widows' Fund in Glasgow (Ferguson's hometown) in 1743. They worked out the premiums required to create a fund that, when invested, would cover payments to beneficiaries on the deaths of their husbands. As conditions of life eased, and people demanded greater protection against its hazards, insurance and pension funds "would rise to become some of the biggest investors in the world—the so-called institutional investors who today dominate global financial markets."
From the late nineteenth century onward, the state increasingly took on the "insurance" function, providing social security and health benefits to the whole population through the tax system. This was because private insurance companies left a sizable fraction of the population uninsured and uninsurable. Ferguson unusually, but effectively, uses Japan rather than Germany or Britain as his main example of the way the state nationalized risk—mainly, one suspects, because it bests illustrates his favorite thesis that financial systems grew up to serve the military needs of the state. Social security, in this view, was the reward for military sacrifice. This was particularly so in Japan.
Ferguson's third example comes from Chile, which he uses to illustrate the return from government social insurance to private—albeit compulsory—insurance. The tax-financed welfare state had never been fully accepted by conservatives, who believed it rotted the character by removing the incentive to save and by separating benefit from individual contribution. Influenced by Milton Friedman and the "Chicago boys," José Piñera, General Augusto Pinochet's minister of labor from 1979 to 1981, privatized Chile's cumbersome state pension scheme. According to Piñera, "What had begun as a system of large-scale insurance had simply become a system of taxation, with today's contributions being used to pay today's benefits, rather than to accumulate a fund for future use."

The Chilean reform encouraged workers to opt out of tax-financed state pensions into personal retirement accounts, managed by licensed but competing pension funds, and financed by compulsory deductions from wages. Although most Western countries remained wedded to their traditional single-payer welfare states, set up during and after World War II, the Chilean model was imitated across Latin America and emerging market economies. Despite what he calls its "shadow side"—it "leaves a substantial proportion of the population with no pension coverage at all"—Ferguson clearly approves of the Chilean reform, traveling to Santiago to see firsthand what he considers its beneficent results. It will be interesting to see whether the provision for universal health care promised by the Obama administration follows the European model—by extending tax-financed Medicare for everyone along the lines proposed by Paul Krugman[5]—or the Chilean/Singapore model in which compulsory insurance premiums, paid out of wages, provide the contributors with individual entitlements.
Land and the buildings on it—or in modern parlance "bricks and mortar"—have played a crucial part in the development of the financial (and economic) system, because "the land can't run away," and is therefore easy to use as collateral. Mortgaging their property became the way improvident landowners maintained extravagant lifestyles and, in later, more sober times, the way house owners raised money to start businesses. The spread of home ownership in the twentieth century—largely promoted by government in an attempt to make capitalism more popular—made possible a vast expansion of collateralized debt, and was the main stimulus to the development of the conversion of debt into securities.
Ferguson points out that property "is a security only to the person who lends you money.... By contrast, the borrower's sole security against the loss of his property to such creditors is his income." This is not quite true. The lender's security also depends on the income—actual or expected—of the borrower, because, although the property cannot "run away," it may lose its value, or it may be costly, and even impossible, for the creditor to get possession of it. Ferguson might have told the story of the costly mistake made by France's Credit Lyonnais, which set up its own proprietary credit-rating agency in the late nineteenth century. Its mistake was to rate the credit-worthiness of governments not on their debt-to-income but on their debt-to-property ratios. The imperial government of Russia got top rating, because, despite its disordered finances, of all governments it owned the most property. On the basis of this rating, French investors snapped up tsarist bonds. They lost all their money, not because the property disappeared but because the government did. Credit Lyonnais failed to take into account "political risk."
The tsarist government would now be considered a subprime borrower. Yet today's vastly more sophisticated credit-rating agencies made the same mistake in giving triple-A ratings to bonds that took no account of the income of the borrowers—what the professionals called "toxic waste." Ferguson notes that a disproportionate number of sub-prime borrowers were ethnic minorities and wonders whether subprime is a new euphemism for black. Both Democratic and Republican administrations brought pressure on lenders to relax their rules in order to spread home ownership—for example, not to press borrowers for full documentation. And indeed home ownership—or bank ownership of homes—did expand greatly in the last ten years. The bubble burst in 2007 when a rise in the federal funds rate from 1 percent to 5.4 percent coincided with the expiring of the enticing "teaser" rate periods that lenders had offered subprime borrowers. Repayments were then set at much higher interest rates and many could not pay.
The sober conclusion Ferguson draws from this fascinating story of financial incontinence and skullduggery is that property ownership is not the "magic bullet" it is often claimed to be. This is the basis of his criticism of the exaggerated claim of the economist Hernando de Soto that the path to Latin American prosperity lies in secure property rights.[6] "In short, there was irrational exuberance about bricks and mortar and the capital gains they could yield."
Ferguson's last chapter, "From Empire to Chimerica," argues convincingly that it was the investment of billions of dollars of Chinese savings in US Treasury bonds that fueled the US debt binge, by enabling Greenspan to keep money so cheap for so long. In a bravura passage that rounds off his story of money's ascent, Ferguson writes:
"Chimerica"—China plus America—seemed like a marriage made in heaven. The East Chimericans did the saving. The West Chimericans did the spending. [Cheap] Chinese imports kept down US inflation. Chinese savings kept down US interest rates. Chinese labour kept down US wage costs. As a result, it was remarkably cheap to borrow money and remarkably profitable to run a corporation. Thanks to Chimerica, global real interest rates...sank by more than a third below their average over the past fifteen years. Thanks to Chimerica, US corporate profits in 2006 rose by the same proportion above their average share of GDP....
The more China was willing to lend to the United States, the more Americans were willing to borrow. Chimerica, in other words, is the underlying cause of the surge in bank lending, bond issuance and new derivative contracts that Planet Finance witnessed after 2000. It was the underlying cause of the hedge fund population explosion. [It] was the underlying reason why the US mortgage market was so awash with cash in 2006 that you could get a 100 per cent mortgage with no income, no job or assets.

2.
In the long sweep of history, the failures of money seem trivial in comparison with its triumphs, mere incidents on the road of financial innovation that leads to universal prosperity. Yet the failures have been extremely damaging to the generations that experienced them. The famous criticism made by John Maynard Keynes about the economics of his day can be applied to Ferguson's history:
In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.[7]
Ferguson, of course, is aware of the storms—in fact he writes brilliantly about them—but he never doubts that the journey has been worth it. The "ascent" of which he writes owes more to Reagan-Thatcher triumphalism than to the more sober assessments of the performance of markets currently in vogue. It also leaves out an important part of the drama of finance—the constant struggle between financial innovation and government attempts to protect populations from financial rapacity.
It is not till he comes to his "Afterword," interestingly, if ambiguously, entitled "The Descent of Money," that Ferguson seriously considers the question of why the "ascent" of money he celebrates is linked to extreme financial instability. Here he pays brief homage to the distinction made by the economist Frank Knight (and also Keynes) between "risk" and "uncertainty"—with risk referring to a situation in which the probabilities of different random outcomes can be determined, as in roulette, whereas uncertainty pertains when no such probabilities are possible, such as the prospect of a future war. And he concedes that Keynes may have been "thinking along the right lines" when he talked of investors falling back on "conventions" to disguise from themselves the fact that they do not know what the future will bring—the main convention being to behave like everyone else is behaving.
But he fails to follow up these crucial insights. The distinction between "uncertainty" and "risk" is essential, in my view, to a proper understanding not only of the present crisis but of the whole "roller-coaster ride of ups and downs, bubbles and busts, manias and panics, shocks and crashes" that have punctuated economic history. The point is that the future cannot be decomposed into measurable risk, however much risk is spread across intermediary instruments. The illusion that it can be blinds investors to the ever-present possibility that the world may change in ways which set all their calculations at nought. The credit mountain was built on the belief that house prices would always go up; when they started to fall the balloon was pricked.
Ferguson realizes that mainstream economics is flawed, but then veers away to what I think is the dead end of "behavioral economics" and false analogies between financial evolution and Darwinian natural selection. Behavioral economics claims that we are "wired" to behave "irrationally"; theories purporting to derive from Darwinism claim that finance follows the law of the "survival of the fittest," whereby firms fitted to their environment flourish and weaker ones go to the wall—a process that inevitably involves "creative destruction." These attempts to explain the rise of money in terms of natural processes strike me as being both morally and philosophically naive.
Ferguson's mistake, I suggest, comes from an incomplete appreciation of the role of money. Evidently money is more than just a facilitator of trades. It is a way of coping with changing views about an uncertain future. Why, Keynes asked, should any rational person wish to "hold money" rather than spend it? Precisely because it is a way of postponing spending when confidence is low and the "conventions" promising a secure future have broken down. Keynes writes:
The desire to hold money as a store of wealth is a barometer of the degree of our distrust of our own calculations and conventions concerning the future.... It operates, so to speak, at a deeper level of our motivation. It takes charge at the moments when the higher, more precarious conventions have weakened. The possession of actual money lulls our disquietude; and the premium which we require to make us part with money is the measure of the degree of our disquietude.[8]
Even a (modestly) depreciating currency may at moments of high uncertainty seem more "secure" (carry a higher premium) than any other asset. We are seeing the truth of this today. The failure to take account of this aspect of money is the missing dimension from an otherwise splendid book.
A final reflection on Ferguson as a historian. He is overimpressed by economics. Many historians feel that history is in some way inferior to the more exact sciences; the thought that he can "do" economics gives the historian an expanding sense of mastery. I know the feeling, because I've lived through it myself. Economics, especially in its mathematicized form, purveys a peculiar vision of society. Society to the mathematicians is a market imperfection. Among other imperfections, the idea is that allocation of resources is not as efficient and information for making choices is not as complete as they should be.
This delusive, but powerful, idea suggests that behind the imperfection lies perfection, a world in which the future will be perfectly known and therefore hold no surprises. Mathematics is the inheritor of the platonic ideal; and mathematically driven financial innovation is its handmaiden. At one time philosophers projected their utopias, and the early economists followed suit. Keynes was perhaps the last one who indulged in utopia building. In his essay "Economic Possibilities for Our Grandchildren" (1930), he looked forward to a time when the economic problem was solved and an age of abundance and leisure had arrived in which people would cultivate the arts of life.[9]
Instead, Keynes's grandchildren face a rerun of the Great Depression, and President-elect Obama promises a new New Deal. On December 6, he pledged to create an estimated 2.5 million jobs in the first two years of his administration by large-scale investments in infrastructure projects, including bridges, mass transit, and electrical grids. Estimates of the costs by members of Congress range from $400 to $700 billion.
Having taken on $7.8 trillion in financial obligations over the last year—roughly half the size of the entire American economy—the US government is now represented in some form on the boards of most major American companies. Obama has promised to help those facing foreclosure on their mortgages and those hit by the relocation of jobs overseas. He has vowed to curb the excesses enjoyed by those at the pinnacle of deregulated credit. While not addressing the fundamental direction of economic theory, ad hoc policies such as these may help to ensure that the ascent of money does not lead to the descent of man.

—December 17, 2008
Notes
[1]The two-hour documentary The Ascent of Money airs on PBS on January 13, 2009.
[2]Charles R. Morris, The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash (PublicAffairs, 2008), p. xii.
[3]Quoted in The Oxford Book of Money, edited by Kevin Jackson (Oxford University Press, 1995), p. 18; from Edward Gibbon, The Decline and Fall of the Roman Empire, Book I (1776).
[4]The House of Rothschild: Money's Prophets, 1798–1848 (Viking, 1998) and The House of Rothschild: The World's Banker, 1849–1999 (Viking, 1999); reviewed in these pages by Robert Skidelsky, December 16, 1999.
[5]See Paul Krugman, The Conscience of a Liberal (Norton, 2007), pp. 236–237; reviewed in these pages by Michael Tomasky, November 22, 2007.
[6]In Hernando de Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (Basic Books, 2000).
[7]John Maynard Keynes, "A Tract on Monetary Reform" (1923), in Collected Writings (Macmillan/St. Martin's/Royal Economic Society, 1971), Vol. 4, p. 65.
[8]Keynes, "General Theory of Unemployment" (February 1937), in Collected Writings, Vol. 14, p. 116.
[9]Keynes, Collected Writings, Vol. 9, p. 321.

==========

Follow the Money
By MICHAEL HIRSH
The New York Times Sunday Book Review, December 28, 2008

THE ASCENT OF MONEY
A Financial History of the World
By Niall Ferguson
Illustrated. 442 pp. The Penguin Press. $29.95

Niall Ferguson, it is fair to say, is a one-man book factory. In fact, if the American economy cranked out goods as prolifically as Ferguson does histories, we might not be in half the fix we are in right now. But then Ferguson wouldn’t have nearly as much to write about. The onetime enfant terrible of the Oxbridge historical establishment, Ferguson specializes in finding fault with great powers, especially the way they mismanage their empires. Ferguson first came to notice a decade ago with “The Pity of War,” a revisionist tour de force arguing that Britain made a world-historical error by entering World War I (and thereby destroying its empire) when it should have simply waited out the swift German conquest of Europe and remained a superpower, with Europe the better for it. More recently the Scottish-born Ferguson, who now spends half the year teaching at Harvard and the other half at Oxford, has turned his attention to the prodigal young heir to the British imperial crown, the United States. In “The Cash Nexus” (2001) and “Colossus” (2004), he urged Americans to emerge from their self-denial and fulfill their obvious destiny as the next “liberal” empire spreading the light of democracy and Anglo-­Saxon legalism across the globe. “The greatest disappointment facing the world in the 21st century,” Ferguson concluded in “The Cash Nexus” (published in the opening months of the Bush presidency), is that “the leaders of the one state with the economic resources to make the world a better place lack the guts to do it.” Ferguson later supported the Iraq war as evidence that Washington had finally gotten up its courage, imperially speaking.
Whatever one thinks of his arguments, it’s impossible to ignore Niall Ferguson. He’s like the brightest kid in the debating club, the one who pulls all-nighters in the library and ferrets out facts no one thought to uncover. And in his latest book, “The Ascent of Money” — humbly subtitled “A Financial History of the World” — Ferguson takes us on an often enlightening and enjoyable spelunking tour through the underside of great events, a lesson in how the most successful great powers have always been underpinned by smart money. “The ascent of money has been essential to the ascent of man,” he writes, making a conscious reference to the BBC production he loved as a boy, Jacob Bronowski’s “Ascent of Man.” (In fact, like Ferguson’s three previous books, “Colossus,” “Empire” and “The War of the World,” “The Ascent of Money” was written as a companion to a TV documentary series.)
“Behind each great historical phenomenon there lies a financial secret,” Ferguson says. He goes into fascinating detail about how “it was Nathan Roth­schild as much as the Duke of Wellington who defeated Napoleon at Waterloo” by selling bonds and stockpiling gold for the British Army. The richest bankers on the Continent in the 19th century, the Rothschilds became known as die Finanzbonaparten (the Bonapartes of finance). And, as Ferguson argues, they also played a crucial part in the South’s defeat in the Civil War by declining to invest in Confederate cotton-­collateralized bonds. Imperial Spain amassed vast amounts of bullion from the New World, but it faded as a power while the British and Dutch empires prospered because they had sophisticated banking systems and Spain did not. Similarly, the French Revolution was made all but inevitable by the machinations of an unscrupulous Scotsman named John Law, whom the deeply indebted French monarchy recklessly placed in charge of public finance. “It was as if one man was simultaneously running all 500 of the top U.S. corporations, the U.S. Treasury and the Federal Reserve System,” Ferguson writes. Law proceeded to single-handedly create the subprime mortgage bubble of his day. When it collapsed, the fallout “fatally set back France’s financial development, putting Frenchmen off paper money and stock markets for generations.” Wilhelmine Germany, meanwhile, came up short in World War I because it “did not have access to the international bond market,” Ferguson writes. Every one of these episodes sounds like a warning shot: Will America be the next great power to fall because of unsound finance?
The question is particularly pressing in the midst of what is widely seen as the worst financial crisis since the Great Depression. And Ferguson’s conclusions are troubling. Only a few years after accusing Washington of “imperial understretch” for failing to flex its muscles — and without any hint of irony — Ferguson now argues that the United States may be succumbing to financial overstretch. Deeply in debt to the rest of the world, it has become part of a “dual country” that he calls “Chimerica.” “In effect, the People’s Republic of China has become banker to the United States of America,” he writes. Until the current global financial crisis, this seemed to be a fairly reliable relationship. American consumers over-bought goods and over-borrowed from China, and the Chinese in turn accumulated huge dollar surpluses that they plowed back into Wall Street investments, thereby supplying profligate Americans with the financing we needed to consume and sustain ourselves as the lone superpower. “For a time it seemed like a marriage made in heaven,” Ferguson writes. “The East Chimericans did the saving. The West Chimericans did the spending.”
Suddenly, however, it’s looking more like a marriage made in hell. According to Ferguson, much of the current crisis stems from this increasingly uneasy symbiosis. It turns out “there was a catch. The more China was willing to lend to the United States, the more Americans were willing to borrow.” This cascade of easy money, he argues, “was the underlying cause of the surge in bank lending, bond issuance and new derivative contracts that Planet Finance witnessed after 2000. . . . And Chimerica — or the Asian ‘savings glut,’ as Ben Bernanke called it — was the underlying reason why the U.S. mortgage market was so awash with cash in 2006 that you could get a 100 percent mortgage with no income, no job or assets.” Going forward, the system seems likely to be increasingly unstable, as Treasury Secretary Henry Paulson suggested recently when he warned that unless fundamental changes are made, “the pressure from global imbalances will simply build up again until it finds another outlet.”
Previous periods of global stability and peace had relied on judicious mechanisms like the Congress of Vienna or the Bretton Woods agreements. Now the international system — and America’s position within it — has come to depend on what looks more like a global Rube Goldberg machine running on hot money. And though Ferguson doesn’t come out and say it, the Chinese may now have the upper hand in this chimerical Chimerica. While so far it’s worked in Beijing’s interest to under­write America’s rampant consumerism — because we buy so many of their goods — the Chinese also have the option of recycling some of their surplus billions into their own huge population. We, on the other hand, don’t have the option not to borrow from them. Indeed, it’s no secret on Wall Street and in Washington that the real targets of President Bush’s $700 billion bailout plan were the foreign funds, including “sovereign wealth funds,” that keep America’s financial system afloat. Unless these foreign financiers — principally China and Japan — get reassurance that the global financial system can function properly again, Ameri­ca’s long period of growth and power may be coming to a close.
Perhaps, then, the conclusion should be that Americans need to flex our muscles less as an empire and fight a little harder for fiscal sobriety and balance in our foreign policy. To be fair, Ferguson was early in seeing that America’s fiscal problems were serious. In “Colossus,” he warned presciently of America’s increasing reliance on Chinese capital, although he argued then that we should be mainly worried about domestic entitlements like Medicare and Social Security — indicating that he, like the Bush administration, seriously underestimated the ultimate cost of the Iraq war.
As with Ferguson’s three previous documentary efforts, “The Ascent of Money” sometimes feels as if it were laid out like a shooting script. Ferguson will depart from an exegesis on the 17th century or the Great Depression to pop up in post-Katrina New Orleans or Memphis (for a report on bankruptcies), and we surmise it’s to record another on-scener for PBS. The book, whose main text comprises a scant 360 pages (a light effort for Ferguson, especially considering the ambitious subtitle), is also reductionist at times. Is it really fair to say Chimerica is mainly at the root of our current problems? (A lack of oversight and regulation of the subprime mortgage market here at home had a lot to do with it as well.) China’s backwardness between the 1700s and 1970s was largely due to its dearth of financial innovation, he suggests, but other historians have pointed equally to the absence of technological innovation of the kind that arose in Europe’s close-quartered patchwork of states because of repeated wars.
And in the end, as Ferguson himself seems to acknowledge, the scope of the financial crisis that is plaguing the world today calls into question the book’s premise — that the “trajectory” of finance through history, while “jagged and irregular,” is “unquestionably upwards.” Our increasingly sophisticated finance clearly contains self-destructive tendencies, and its very complexity may have become our undoing. Ferguson wonders whether the cruel realities of biological evolution are the model for what is happening now. Contemplating the financial Armageddon that has devastated Wall Street and set back globalization, he asks: “Are we on the brink of a ‘great dying’ in the financial world — one of those mass extinctions of species that have occurred periodically, like the end-Cambrian extinction that killed off 90 percent of Earth’s species, or the Cretaceous-Tertiary catastrophe that wiped out the dinosaurs?” Here we thought we were making all this progress as a species, and suddenly we find our supposed innovations lumped with Tyrannosaurus rex. Doesn’t sound like much of an ascent to me.

Michael Hirsh is Newsweek’s national economics correspondent and the author of “At War With Ourselves: Why America Is Squandering Its Chance to Build a Better World.”

04 dezembro, 2008

206) Os melhores livros de 2008, segundo The Economist

Books of the year
Pick of the pile

The Economist, December 4th 2008

The best books of 2008 covered the Iraq war, Chinese capitalism, Mississippi blues, fishing in Sweden, ayatollahs, human waste and the secret life of words
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Politics and current affairs
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The Fall and Rise of the Islamic State
By Noah Feldman
Princeton University Press; 200 pages; $22.95 and £13.50
A short, incisive and elegant book by a Harvard specialist in Islamic political thought, which analyses the dilemma posed by the huge popular support, among many Muslims, for explicitly Islamic forms of government.

A Choice of Enemies: America Confronts the Middle East
By Lawrence Freedman.
PublicAffairs; 624 pages; $29.95. Weidenfeld & Nicolson; £20
The region's key events provide ample material for this subtle re-examination: the fall of the shah, the three wars in the Persian Gulf, jihad in Afghanistan, Jimmy Carter's half-success at peacemaking at Camp David in 1978 and Bill Clinton's failure there two decades later.

Britain Since 1918: The Strange Career of British Democracy
By David Marquand.
Weienfeld & Nicolson; 496 pages; £25
A rich, compelling and convincing account of recent British political history by a man who has experienced it as a member of parliament, a journalist and a distinguished academic historian.

The Three Trillion Dollar War: The True Cost of the Iraq Conflict
By Joseph E. Stiglitz and Linda J. Bilmes
Norton; 311 pages; $22.95. Allen Lane; £20
With the patience of auditors and the passion of polemicists, two academics, one a Nobel prize-winning economist and the other a public-finance expert at Harvard's Kennedy School of Government, take an unflinching look at the hidden cost of invading Iraq.

The Dark Side: The Inside Story of How the War on Terror Turned into a War on American Ideals
By Jane Mayer
Doubleday; 400 pages; $27.50 and £22.85
A comprehensive and compelling examination of how a handful of officials, working in extreme secrecy, even from their colleagues, prosecuted the war on terror, undermining America's civil liberties.

Law and the Long War: The Future of Justice in the Age of Terror
By Benjamin Wittes
Penguin Press; 305 pages; $25.95
How the Bush administration came to adopt the tactics that became the hallmark of its struggle against al-Qaeda and its ilk.

India: The Emerging Giant
By Arvind Panagariya
Oxford University Press; 544 pages; $39.95 and £19.99
An analysis of how Manmohan Singh, first as finance minister and now as prime minister, sought to fight India's poverty with sweeping reforms aimed at promoting rapid economic growth.

Dinner with Mugabe: The Untold Story of a Freedom Fighter Who Became a Tyrant
By Heidi Holland
Penguin; 280 pages; $30 and £17.99
The most intimate account yet published of Robert Mugabe's transformation from liberation hero to reviled despot.

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Economics and business
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The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash
By Charles R. Morris
PublicAffairs; 224 pages; $22.95 and £13.99
The first big book on the credit crunch saw the crisis coming three years ago. Freak-out-onomics for I-told-you-sos.

Capitalism with Chinese Characteristics: Entrepreneurship and the State
By Yasheng Huang
Cambridge University Press; 366 pages; $30 and £15.99
Convincingly overturns the usual analyses of the nature of China's economy, and brilliantly predicts, a year ahead of other commentators, its steep decline.

When Markets Collide: Investment Strategies for the Age of Global Economic Change
By Mohamed El-Erian
McGraw Hill; 304 pages; $27.95 and £15.99
Ignore the in-your-face cover. This is a fluent and intelligent account of the credit crisis: why it happened and how to survive it. Winner of the 2008 Financial Times and Goldman Sachs business book of the year award.

The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World
By Amar Bhidé
Princeton University Press; 520 pages; $35 and £19.95
A counterintuitive view of technology and globalisation that will delight those who believe that American innovation is insulated from economic ups and downs.

The Logic of Life: The Rational Economics of an Irrational World
By Tim Harford
Random House; 272 pages; $25. Little, Brown; £18.95
Neither too lofty nor dumbed down, this is a fascinating study of how society is shaped by hidden pay-offs and punishments.

Grown Up Digital: How the Net Generation is Changing Your World
By Don Tapscott
McGraw-Hill; 384 pages; $27.95 and £15.99
A management guru explains why the net generation, who grew up playing video games and spending time on the internet, are not all messed up, as many people suspect, but have actually been improved by the experience.

Globality: Competing with Everyone from Everywhere for Everything
By Hal Sirkin, Jim Hemerling and Arindam Bhattacharya
Business Plus; 304 pages; $26.99 and £18.99
Hal Sirkin and two colleagues explore how rich-country multinationals face increasingly effective competition from new emerging-market corporate champions, which compete not just on lower costs but also on greater ingenuity and efficiency.

The Partnership: The Making of Goldman Sachs
By Charles D. Ellis
Penguin Press; 752 pages; $37.95. Allen Lane; £25
Goldman Sachs has long set the gold standard in finance, even though the current crisis nearly brought it down. With unprecedented access to insiders, Charles Ellis provides the best account yet of the rise of this investment bank and what makes it tick.

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History
________

The Return of History and the End of Dreams
By Robert Kagan
Knopf; 128 pages; $19.95. Atlantic Books; £12.99
A short, simple book arguing that we are now back in a world of clashing national ambitions and interests; not so different from the 19th century.

A Splendid Exchange: How Trade Shaped the World
By William J. Bernstein
Atlantic Monthly Press; 467 pages; $30. Atlantic Books; £22
Globalisation often gets a bad press, so it is interesting to read this hymn to commercial exchange that shows how, largely for better, sometimes for worse, our world has been defined by trade.

Freedom for the Thought that We Hate: A Biography of the First Amendment
By Anthony Lewis
Basic Books; 240 pages; $25 and £14.99
A concise and wise presentation of the history and scope of freedom of thought in the United States, with conclusions that are well worth pondering.

The Age of Wonder: How the Romantic Generation Discovered the Beauty and Terror of Science
By Richard Holmes
Harper Press; 380 pages; £20. To be published in America by Pantheon Books in July
A dazzling cornucopia exploring the impact of discovery upon such great Romantic writers as Mary Shelley, Samuel Taylor Coleridge, Lord Byron and John Keats.

Masters and Commanders: How Roosevelt, Churchill, Marshall and Alanbrooke Won the War in the West
By Andrew Roberts
Allen Lane; 720 pages; £25. To be published in America by Harper in May
Andrew Roberts lays claim to the title of Britain's finest contemporary military historian with this important analysis of grand strategy during the second world war, which, among other delights, vindicates that much maligned British way of doing things: the committee.

Out of Mao's Shadow: The Struggle for the Soul of a New China
By Philip P. Pan
Simon & Schuster; 368 pages; $28. Picador; £14.99
Detailed profiles of 11 Chinese, mostly present day, which together provide a not very pretty snapshot of China's political development. One of the best descriptions of what life has been like for many Chinese citizens during the past 15 years.

Modern China: The Fall and Rise of a Great Power, 1850 to the Present
By Jonathan Fenby
Ecco Books; 816 pages; $34.95. Published in Britain as "The Penguin History of Modern China"; Allen Lane; £30
The extraordinary growth in China's population, economic productivity and military grasp has not been matched, to anything like the same extent, by developments in the way the country is governed. Jonathan Fenby has written a much-needed new history that points to a coming crisis.

The White War: Life and Death on the Italian Front 1915-1919
By Mark Thompson
Faber & Faber; 464 pages; £25. To be published in America by Basic Books in March
A startling indictment of the Italian state's conduct during the first world war, which shows how Italy's nationalist dream of expansion would turn into the Fascist nightmare.

The Blackest Streets: The Life and Death of a Victorian Slum

By Sarah Wise
The Bodley Head; 240 pages; £20
An affecting history of life in the crowded slums of 19th-century London which traces, with great restraint, the links between poor housing, poverty and criminality.

Empires of the Sea: The Siege of Malta, the Battle of Lepanto, and the Contest for the Centre of the World
By Roger Crowley
Random House; 368 pages; $30. Faber and Faber; £20
How the clash of civilisations between Christianity and Islam came to be fought out during the Ottoman sieges of Rhodes and Malta and the battle of Lepanto, with some fairly familiar faults on both sides already becoming visible more than 500 years ago.

American Rifle: A Biography
By Alexander Rose
Delacorte Press; 512 pages; $30
How and why American soldiers have learnt to shoot straight.

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Biography
__________

Nixonland: The Rise of a President and the Fracturing of America
By Rick Perlstein
Scribner; 896 pages; $37.50 and £25
Americans supported Richard Nixon because of his anger and resentment, not despite it. Rick Perlstein offers compelling evidence for a simple but convincing thesis about Nixon's appeal.

The World Is What It Is: The Authorised Biography of V.S. Naipaul
By Patrick French
Knopf; 576 pages; $30. Picador; £20
An elegant and insightful study of the Trinidad-born Nobel laureate who made his name as a novelist and chronicler of India and the Islamic world. A singular example of how good authorised biographies can, and should, be.

Soul of the Age: A Biography of the Mind of William Shakespeare
By Jonathan Bate
Random House; 496 pages; $35. Viking; £25
It is almost impossible to write something fresh about William Shakespeare. Yet Jonathan Bate has succeeded, with a sparkling and arresting portrait of the Bard and his world as discovered in his writings.

White Heat: The Friendship of Emily Dickinson & Thomas Wentworth Higginson
By Brenda Wineapple
Knopf; 432 pages; $27.95 and £27.95
A portrait of a friendship that is also a sweeping cultural and political history of the lead-in to the American civil war and its aftermath.

Chagall: A Biography
By Jackie Wullschlager
Knopf; 608 pages; $40. Allen Lane; £30
Manages to be both magical and utterly credible in describing an artist who put fiddlers on the roof and made lovers fly through the air.

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Science and technology
______________________

The Big Necessity: The Unmentionable World of Human Waste and Why It Matters
By Rose George
Metropolitan Books; 304 pages; $26. Portobello Books; £12.99
A frank and illuminating look at a generally neglected, but very important, aspect of human life.

The Princeton Companion to Mathematics
Edited by Timothy Gowers, June Barrow-Green and Imre Leader
Princeton University Press; 1,008 pages; $99 and £60
This is a panoramic view of modern mathematics. It is tough going in some places, but much of it is surprisingly accessible. A must for budding number-crunchers.

Bad Science
By Ben Goldacre
Fourth Estate; 352 pages; £12
A fine lesson in how to skewer the enemies of reason and the peddlers of cant and half-truths.

The Sun and the Moon: The Remarkable True Account of Hoaxers, Showmen, Duelling Journalists, and Lunar Man-Bats in Nineteenth-Century New York
By Matthew Goodman
Basic Books; 384 pages; $26 and £15.99
In retelling the story of how, in the 1830s, the New York Sun tried to persuade its readers there was life on the moon, Matthew Goodman vividly brings to life a town on the brink of becoming a world-class city.

Nudge: Improving Decisions About Health, Wealth, and Happiness
By Richard H. Thaler and Cass R. Sunstein
Yale University Press; 304 pages; $26 and £18
How behavioural economics affects everything—from what we eat in restaurants to our investments and pension choices.

Fatal Misconception: The Struggle to Control World Population
By Matthew Connelly
Harvard University Press/Belknap; 544 pages; $35 and £22.95
A vivid account of how the road to controlling population growth in the 20th century was paved with good intentions and unpleasant policies that did not work.

Gang Leader for a Day: A Rogue Sociologist Takes to the Streets
By Sudhir Venkatesh
Penguin Press; 320 pages; $25.95. Allen Lane; £18.99
A rich portrait of the urban poor, drawn not from statistics but from vivid tales of some of the 30,000 residents of Robert Taylor Homes, America's biggest public housing scheme, on Chicago's South Side.

_______________________
Culture and digressions
_______________________

Artists in Exile: How Refugees from Twentieth-Century War and Revolution Transformed the American Performing Arts
By Joseph Horowitz
HarperCollins; 480 pages; $27.50 and £27.50
A many-layered account, focusing on the interwar years, of the European immigrants, particularly those from Germany and Russia, who helped create American culture.

Salon to Biennial: Exhibitions that Made Art History: Volume I, 1863-1959
Edited by Bruce Altshuler
Phaidon; 410 pages; $90 and £45
The story of the medium through which most art lovers have experienced modern art: the big group show. A must for anyone interested in art, politics and taste in the 20th century.

The Secret Life of Words: How English Became English
By Henry Hitchings
Farrar, Straus and Giroux; 440 pages; $27. John Murray; £16.99
A globe-trotting survey of the world's lingua franca, which includes such nuggets as the word "chagrin", derived from the Turkish for roughened leather, or scaly sharkskin, and "lens", which comes from the Latin for "lentil", or "window" meaning "eye of wind" in old Norse.

How Fiction Works
By James Wood
Farrar, Straus and Giroux; 288 pages; $24. Jonathan Cape; £16.99
Displaying a playful exuberance wonderfully at odds with the dry, jargon-strewn tradition of academic criticism, this deft, slender volume analyses how novelists pull rabbits out of hats.

Delta Blues: The Life and Times of the Mississippi Masters Who Revolutionised American Music
By Ted Gioia
Norton; 448 pages; $27.95 and £16.99
A way of life as much as music, the passionate blues singing of Mississippi's steamy cotton fields ultimately gave rise to rock 'n' roll. Ted Gioia expertly traces its colourful history and heroes.

Cold Cream: My Early Life and Other Mistakes
By Ferdinand Mount
Bloomsbury; 384 pages; £15
A beautifully written, poignant and, at times, very funny memoir by a man who describes himself at different points in his life as idle, supercilious, incompetent and emotionally retarded.

____________________

Fiction and memoirs
___________________

Sea of Poppies: A Novel
By Amitav Ghosh
Farrar, Straus and Giroux; 528 pages; $26. John Murray; £18.99
Set in India in 1838, this rich and panoramic adventure tells the intricate stories of a cast of hundreds in lustrous and mesmerising prose. The first of a promised trilogy from a master of fiction.

Breath: A Novel
By Tim Winton
Farrar, Straus and Giroux; 224 pages; $23. Picador; £14.99
Two teenagers get caught up with a dangerous surfer, his wife and the waves in this Australian coming-of-age novel that perfectly balances youthful romanticism and disillusion.

Lush Life
By Richard Price
Farrar, Straus and Giroux; 464 pages; $26. Bloomsbury; £12.99
The wry bartenders, brusque cops and gritty rhythmic dialogue of Manhattan's Lower East Side turn this fast-paced murder-mystery into a whodunnit with literary heft.

The Secret Scripture
By Sebastian Barry
Viking; 304 pages; $24.95. Faber and Faber; £16.99
An elderly female inhabitant of a mental hospital and her psychiatrist tell their stories through their journals. A moving and memorable novel about conflicting versions of Ireland's past.

Fishing in Utopia: Sweden and the Future That Disappeared
By Andrew Brown
Granta Books; 352 pages; £16.99
Fishing, journalism and the death throes of the Swedish social system are the unpromising ingredients of this thought-provoking and evocative autobiographical memoir.

The Ayatollah Begs to Differ: The Paradox of Modern Iran
By Hooman Majd
Doubleday; 288 pages; $24.95
A Western-educated son of an ayatollah portrays the intricacies of Iranian society in this illuminating, critical and affectionate memoir of his homeland.

Palestinian Walks: Forays into a Vanishing Landscape
By Raja Shehadeh
Scribner; 200 pages; $15. Profile Books; £7.99
This superbly written and sad memoir tells the story of a lawyer's fight against Israel's seizure of Palestinian land and how he seeks solace by walking in the wild countryside of the West Bank.

The Three of Us: A Family Story
By Julia Blackburn
Pantheon; 313 pages; $26. Jonathan Cape; £16.99
A raw and moving story about a chaotic family and a lost childhood. Beautifully crafted and brave, this book is surprisingly full of forgiveness and humour.

03 dezembro, 2008

205) The Monetary Policy of the Federal Reserve: A History

From: Book Reviews in Economic and Business History
Date: 3 de dezembro de 2008 11h28min58s GMT-02:00
To: eh.net-review@eh.net
Subject: Richardson on Hetzel, _The Monetary Policy of the Federal Reserve: A History_
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Published by EH.NET (December 2008)

Robert L. Hetzel, _The Monetary Policy of the Federal Reserve: A History_. Cambridge: Cambridge University Press, 2008. xvi + 390 pp. $50 (cloth), ISBN: 978-0-521-88132-6.

Reviewed for EH.NET by Gary Richardson, Department of Economics, University of California -- Irvine.

_The Monetary Policy of the Federal Reserve: A History_ by Robert Hetzel studies the evolution of monetary policy from the beginning of the Federal Reserve until the end of the Greenspan Era. The title claims the book is a history, and it is that, but it is much more. As a history, Hetzel’s book details the conduct of monetary policy over nearly ninety years, and sets that conduct in the context of the intellectual and
political environment of the time. As an economic synthesis, Hetzel’s book views the evolution of monetary policies as a series of experiments useful for understanding fundamental issues concerning money, prices, and macroeconomic policy. The past serves as a laboratory for understanding the present. The emergence of modern monetary policy and prospects for our nation’s financial future are understood by studying
the learning-curve of the leaders of the Federal Reserve, the painful process of replacing the gold standard with a fiat money standard, and the recurrent monetary instability during the decades following the Second World War.

Enough for the sales pitch. Let me get to the details.
The book contains 26 chapters and an appendix listing the data that the FOMC saw during the “stop-go” period from 1963 to 1982. Chapter 3, “From Gold to Fiat Money,” examines policy from the founding of the Federal Reserve System in 1913 through the end of the Great Depression. Chapters 4 and 9 examine the creation of the postwar monetary system (note that one of my few suggestions to the author would have been to place most of the material in Chapter 9 in the fourth chapter). Chapters 10 through 14
discuss the Great Inflation of the 1970s, Volcker’s disinflation at the tail end of the 1970s and beginning of the next decade, and monetary policies during the early 1980s. Chapters 15 through 25 focus on monetary policies during the Greenspan Era. The distribution of time across chapters reveals the focus of the book, which is largely on postwar monetary policy and particularly on recent decades. As a student
of the Great Depression, I desired more analysis of earlier decades, but I realize that the author’s research and experience make his insights on the later decades more valuable, and believe that his decisions about emphasis and pacing reflect carefully considered judgments about his marginal product. In other words, he made sensible choices about where he should devote his time and attention.

A strength of the book is its integrative chapters, including Chapters 1, 2, 23, and 26. These shed light on broad policy issues that cut across time and elaborate on his insight that monetary policy during the twentieth century consisted of a series of policy experiments whose outcomes we are just beginning to understand.

Chapter 1 examines the evolution of the monetary standard. It points out the importance of this issue. Monetary instability coincided with social upheaval and political disorder throughout the twentieth century. An example is the rise of Nazism in Germany after the hyperinflation of the 1920s and during the depression of the 1930s. The success of society in the twenty-first century may depend on whether societies learn the lessons from the twentieth century. “One of the ‘grand’ monetary
experiments of the last century was the replacement of the gold standard with a fiat money standard.”
Initially, central banks did not understand their new powers and responsibilities, and failed to provide a nominal anchor for prices. Keynesian economists tried to exploit expectations of price stability and fine tune the economy. Their stop-go aggregate demand management led to gradually increasing inflation during the 1950s and 1960s and the spectacular monetary failures of the 1970s. Eventually, central banks realized the importance of nominal anchoring, and adopted policies that promoted price stability. This period coincided with Paul Volcker and Alan Greenspan’s reigns over the Federal Reserve. From this experience, the author concludes that “The central bank cannot predictably manipulate real variables -- real money or unemployment. It can control
trend inflation, but it must do so through consistent (rule-like) behavior that creates the expectation of unchanging trend inflation.”

Chapter 2 continues the overview of the monetary experiments of the twentieth century and the author’s conclusions. The chapter discusses disagreements over the nature of monetary policy and the political advantages of policy ambiguity relative to the confusion that ambiguity causes about the appropriate role for monetary policy.
Chapter 26 summarizes “a century of monetary experiments.” The chapter emphasizes three key lessons. (1) Inflation and deflation are monetary phenomenon. In a world with fiat money, the behavior of the central bank determines the level and rate of change of prices. (2) To stabilize inflation, central banks must maintain a consistent and credible policy designed to fight inflation. (3) The government must allow the price system to operate and relative prices to allocate resources among competing opportunities.

Overall, I find Hetzel’s book cogent and comprehensive. Hetzel participated in many of the monetary experiments that he describes. His seminal innovation is the Treasury Inflation Protected Securities (TIPS) program. Returns on half of these securities are fixed in nominal terms. Returns on the other half are indexed to the price level. The difference in the prices of these securities provides a market measure of expected
inflation, providing the Federal Reserve with the information it needs to establish a nominal anchor for the price level. The importance of this innovation and the quality of Hetzel’s book insure that it will be widely read for many years to come.

Gary Richardson is an Associate Professor of Economics at the University of California in Irvine who studies the causes and consequences of the banking panics of the Great Depression.

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