Here’s Your New Consensus Reading List

A new consensus in economic thought is emerging around the question of how nations should take care of their economies. Here’s your reading list to get caught up!

    1. First, get yourself de-programmed with Bad Samaritans. This is the best overall globally-oriented introduction to how economic progress really happens. Even though Ha-Joon Chang has written some great new books (see below), Bad Samaritans is the best treatment of how the rich countries got rich by trying as societies, by building institutions such as national investment banks, non-profit savings bank networks, state-owned or state-backed industries, infrastructure and education designed to promote industrial development, and so on – and how all the countries today that are making economic and social progress are still using those kinds of institutions.

Bad Samaritans was an introduction to open-minded economists and political free-thinkers to Ha-Joon Chang’s theories of the dangers of free-trade. With irreverent wit, an engagingly personal style, and a keen grasp of history, Chang blasts holes in the “World Is Flat” orthodoxy of Thomas Friedman and others who argue that only unfettered capitalism and wide-open international trade can lift struggling nations out of poverty. On the contrary, Chang shows, today’s economic superpowers-from the U.S. to Britain to his native Korea-all attained prosperity by shameless protectionism and government intervention in industry, a fact conveniently forgotten now that they want to compete in foreign markets. Chang’s cage-rattling, contrarian history of global capital appeals to readers new to economic theory as well as members of the old school looking for a fresh take.

  1. Learn about the biggest, baddest entrepreneur from Mariana Mazzucato. The Entrepreneurial State documents how virtually every innovative and dynamic part of the U.S. economy has been funded essentially by public venture capital. But it’s a very strange sort of venture capital that takes no stake in exchange for its investments (why? because: private=good, public=bad!). Learn how every cool piece of technology in your smart phone was developed by some company that was venture-backed by the U.S. government decades before anyone else saw any practical application for the technology.

In this sharp and controversial exposé, Mariana Mazzucato debunks the pervasive myth that the state is a laggard, bureaucratic apparatus at odds with a dynamic private sector. She reveals in detailed case studies, including a riveting chapter on the iPhone, that the opposite is true: the state is, and has been, our boldest and most valuable innovator. Denying this history is leading us down the wrong path. A select few get credit for what is an intensely collective effort, and the US government has started disinvesting from innovation. The repercussions could stunt economic growth and increase inequality. Mazzucato teaches us how to reverse this trend before it is too late.

  1. Try on a new paradigm with Kate Raworth. Doughnut Economics doesn’t just tell you what’s wrong with the current economics paradigm, it offers a whole new one to take it’s place. It’s exploding right now. I was visiting a think tank in Berlin, and the book was out on every desk.

Economics is the mother tongue of public policy. It dominates our decision-making for the future, guides multi-billion-dollar investments, and shapes our responses to climate change, inequality, and other environmental and social challenges that define our times.

Pity then, or more like disaster, that its fundamental ideas are centuries out of date yet are still taught in college courses worldwide and still used to address critical issues in government and business alike.

That’s why it is time, says renegade economist Kate Raworth, to revise our economic thinking for the 21st century. In Doughnut Economics, she sets out seven key ways to fundamentally reframe our understanding of what economics is and does. Along the way, she points out how we can break our addiction to growth; redesign money, finance, and business to be in service to people; and create economies that are regenerative and distributive by design.

Named after the now-iconic “doughnut” image that Raworth first drew to depict a sweet spot of human prosperity (an image that appealed to the Occupy Movement, the United Nations, eco-activists, and business leaders alike), Doughnut Economics offers a radically new compass for guiding global development, government policy, and corporate strategy, and sets new standards for what economic success looks like.

Raworth handpicks the best emergent ideas—from ecological, behavioral, feminist, and institutional economics to complexity thinking and Earth-systems science—to address this question: How can we turn economies that need to grow, whether or not they make us thrive, into economies that make us thrive, whether or not they grow?

Simple, playful, and eloquent, Doughnut Economics offers game-changing analysis and inspiration for a new generation of economic thinkers.

  1. Let Rana Foroohar introduce you to the good guys and the bad guys in Makers and Takers. Foroohar turns around Mitt Romney’s famous division of America by showing us who the real makers are, and the real takers. Makers are people who add value to our economy, as workers, entrepreneurs, caregivers, artists, parents and grandparents and others. Takers those on Wall Street who use the power of de facto government-insured credit and government bailouts to suck huge amounts of wealth out of the economy.

In looking at the forces that brought our current administration to power one thing is clear: much of the population believes that our economic system is rigged to enrich the privileged elites at the expense of hard-working Americans. This is a belief held equally on both sides of political spectrum, and it seems only to be gaining momentum.

A key reason, says Financial Times columnist Rana Foroohar, is the fact that Wall Street is no longer supporting Main Street businesses that create the jobs for the middle and working class. She draws on in-depth reporting and interviews at the highest rungs of business and government to show how the “financialization of America”—the phenomenon by which finance and its way of thinking have come to dominate every corner of business—is threatening the American Dream.

Now updated with new material explaining how our corrupted financial sys­tem propelled Donald Trump to power, Makers and Takers explores the confluence of forces that has led American businesses to favor balance-sheet engineering over the actual kind, greed over growth, and short-term profits over putting people to work. From the cozy relationship between Wall Street and Washington, to a tax code designed to benefit wealthy individuals and corporations, to forty years of bad policy decisions, she shows why so many Americans have lost trust in the sys­tem, and why it matters urgently to us all.

Through colorful stories of both “Takers,” those stifling job creation while lining their own pockets, and “Makers,” businesses serving the real economy, Foroohar shows how we can reverse these trends for a better path forward.

  1. Learn how the some scrappy right wing activists and business leaders changed America’s mind about economics last century and created the consensus we’re now breaking away from. Here’s how we got into this mess!

Invisible Hands tells the story of how a small group of American businessmen succeeded in building a political movement. Long before the “culture wars” of the 1960s sparked the Republican backlash against cultural liberalism, these high-powered individuals actively resisted New Deal economics and sought to educate and organize their peers. Kim Phillips-Fein recounts the little-known efforts of men such as W. C. Mullendore, Leonard Read, and Jasper Crane, drawing on meticulous research and narrative gifts to craft a compelling history of the role of big and small business in American politics—and a blueprint for anyone who wants insight into the way that money has been used to create political change. Some images in the ebook are not displayed owing to permissions issues.

  1. Get a deeper overview of the emerging consensus from a whole range of economists – including:
  • Rethinking Capitalism: An Introduction (Michael Jacobs and Mariana Mazzucato)
  • The Failure of Austerity: Rethinking Fiscal Policy (Stephanie Kelton)
  • Understanding Money and Macroeconomic Policy (L. Randall Wray and Yeva Nersisyan)
  • The Costs of Short-termism (Andrew Haldane)
  • Innovative Enterprise and the Theory of the Firm (William Lazonick)
  • Innovation, the State and Patient Capital (Mariana Mazzucato)
  • Investment-led Growth: A Solution to the European Crisis (Stephany Griffith-Jones and Giovanni Cozzi)
  • Inequality and Economic Growth (Joseph Stiglitz)
  • The Paradoxes of Privatisation and Public Service Outsourcing (Colin Crouch)
  • Decarbonisation: Innovation and the Economics of Climate Change (Dimitri Zenghelis)
  • Capitalism, Technology and a Green Global Golden Age: The Role of History in Helping to Shape the Future (Carlota Perez)

Western capitalism is in crisis. For decades investment has been falling, living standards have stagnated or declined, and inequality has risen dramatically. Economic policy has neither reformed the financial system nor restored stable growth. Climate change meanwhile poses increasing risks to future prosperity.

In this book some of the world’s leading economists propose new ways of thinking about capitalism. In clear and compelling prose, each chapter shows how today’s deep economic problems reflect the inadequacies of orthodox economic theory and the failure of policies informed by it. The chapters examine a range of contemporary economic issues, including fiscal and monetary policy, financial markets and business behaviour, inequality and privatisation, and innovation and environmental change. The authors set out alternative economic approaches which better explain how capitalism works, why it often doesn’t, and how it can be made more innovative, inclusive and sustainable. Outlining a series of far-reaching policy reforms, Rethinking Capitalism offers a powerful challenge to mainstream economic debate, and new ideas to transform it.

  1. Go back to Ha-Joon for a deeper understanding of how economies really work.

In his bestselling 23 Things They Don’t Tell You About Capitalism, Cambridge economist Ha-Joon Chang brilliantly debunked many of the predominant myths of neoclassical economics. Now, in an entertaining and accessible primer, he explains how the global economy actually works-in real-world terms. Writing with irreverent wit, a deep knowledge of history, and a disregard for conventional economic pieties, Chang offers insights that will never be found in the textbooks.

Unlike many economists, who present only one view of their discipline, Chang introduces a wide range of economic theories, from classical to Keynesian, revealing how each has its strengths and weaknesses, and why there is no one way to explain economic behavior. Instead, by ignoring the received wisdom and exposing the myriad forces that shape our financial world, Chang gives us the tools we need to understand our increasingly global and interconnected world often driven by economics. From the future of the Euro, inequality in China, or the condition of the American manufacturing industry here in the United States-Economics: The User’s Guide is a concise and expertly crafted guide to economic fundamentals that offers a clear and accurate picture of the global economy and how and why it affects our daily lives.

  1. Let Justin Lin clue you in to what the world economy looks like from Beijing. Justin Lin is one of the figures who is bringing Beijing into it’s own as the once and future center of the world. After serving as the chief economist of the World Bank, through the worst economic crisis since the Great Depression, he gives his take on what’s really going on.

In June 2008, Justin Yifu Lin was appointed Chief Economist of the World Bank, right before the eruption of the worst global financial and economic crisis since the Great Depression. Drawing on experience from his privileged position, Lin offers unique reflections on the cause of the crisis, why it was so serious and widespread, and its likely evolution. Arguing that conventional theories provide inadequate solutions, he proposes new initiatives for achieving global stability and avoiding the recurrence of similar crises in the future. He suggests that the crisis and the global imbalances both originated with the excess liquidity created by US financial deregulation and loose monetary policy, and recommends the creation of a global Marshall Plan and a new supranational global reserve currency. This thought-provoking book will appeal to academics, graduate students, policy makers, and anyone interested in the global economy.

  1. Be shocked at how easy this could all be with The Public Banking Solution. Ellen Brown lays out the too-good-to-be-true-but-actually-true public bank solution.  Banks create money when they loan out money and borrowers write checks for far more money than what’s sitting in the vault. In most thriving industrial countries, public banks are a big part of what keep’s them thriving. Public banks fund what private banks aren’t interested in: low-profit margin infrastructure projects, small and medium sized business, large long term investments in new or upgrading industries.

WHAT WALL STREET DOESN’T WANT YOU TO KNOW. Shock waves from one Wall Street scandal after another have completely disillusioned us with our banking system; yet we cannot do without banks. Nearly all money today is simply bank credit. Economies run on it, and it is created when banks make loans. The main flaw in the current model is that private profiteers have acquired control of the credit spigots. They can cut off the flow, direct it to their cronies, and manipulate it for personal gain at the expense of the producing economy. The benefits of bank credit can be maintained while eliminating these flaws, through a system of banks operated as public utilities, serving the public interest and returning their profits to the public. This book looks at the public bank alternative, and shows with examples from around the world and through history that it works admirably well, providing the key to sustained high performance for the economy and well-being for the people.

  1. Then read Ann Pettifor’s book to prove to yourself that Ellen wasn’t making it all up.

In this accessible, brilliantly argued book, leading political economist Ann Pettifor explains in straightforward terms history’s most misunderstood invention: the money system. Pettifor argues that democracies can, and indeed must, reclaim control over money production and restrain the out-of-control finance sector so that it serves the interests of society, as well as the needs of the ecosystem.

The Production of Money examines and assesses popular alternative debates on, and innovations in, money, such as “green QE” and “helicopter money.” She sets out the possibility of linking the money in our pockets (or on our smartphones) to the improvements we want to see in the world around us.

  1. And if you’re still not convinced, then read The End of Alchemy by the former governor of the Bank of England!

      1. Have mainstream Financial Times economics guru Martin Wolf tell you how he and all his colleagues had it all wring, and that it’s time governments start mobilizing many trillions of dollars in “non-debt monetary expansion” (creating money) for “fiscal policy” (investing in industry and infrastructure) again!

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There have been many books that have sought to explain the causes and courses of the financial and economic crisis that began in 2007. The Shifts and the Shocks is not another detailed history of the crisis but is the most persuasive and complete account yet published of what the crisis should teach us about modern economies and econom­ics. Written with all the intellectual command and trenchant judgment that have made Martin Wolf one of the world’s most influential economic com­mentators, The Shifts and the Shocks matches impressive analysis with no-holds-barred criti­cism and persuasive prescription for a more stable future. It is a book no one with an interest in global affairs will want to neglect.

      1. And if one mainstream econ guy wasn’t enough, then read former PIMCO CEO Mohamed El-Erian who says it too.

Our current economic path is coming to an end. The signposts are all around us: sluggish growth, rising inequality, stubbornly high pockets of unemployment, and jittery financial markets, to name a few. Soon we will reach a fork in the road: One path leads to renewed growth, prosperity, and financial stability, the other to recession and market disorder.

In The Only Game in Town, El-Erian casts his gaze toward the future of the global economy and markets, outlining the choices we face both individually and collectively in an era of economic uncertainty and financial insecurity. Beginning with their response to the 2008 global crisis, El-Erian explains how and why our central banks became the critical policy actors—and, most important, why they cannot continue is this role alone. They saved the financial system from collapse in 2008 and a multiyear economic depression, but lack the tools to enable a return to high inclusive growth and durable financial stability. The time has come for a policy handoff, from a prolonged period of monetary policy experimentation to a strategy that better targets what ails economies and distorts the financial sector—before we stumble into another crisis.

2) And now that you know we need to launch a massive national rebuilding project in every nation, it’s time to learn about some of the ways that nations have done this in the past. Have your breath taken away by seeing what’s possible with Freedom’s Forge. This book is written by a hard right-wing historian, which makes it all the better to read. He provides a great model here for how to explain a national economic building project in terms that conservatives will like.

Remarkable as it may seem today, there once was a time when the president of the United States could pick up the phone and ask the president of General Motors to resign his position and take the reins of a great national enterprise. And the CEO would oblige, no questions asked, because it was his patriotic duty.

In Freedom’s Forge, bestselling author Arthur Herman takes us back to that time, revealing how two extraordinary American businessmen—automobile magnate William Knudsen and shipbuilder Henry J. Kaiser—helped corral, cajole, and inspire business leaders across the country to mobilize the “arsenal of democracy” that propelled the Allies to victory in World War II.

“Knudsen? I want to see you in Washington. I want you to work on some production matters.” With those words, President Franklin D. Roosevelt enlisted “Big Bill” Knudsen, a Danish immigrant who had risen through the ranks of the auto industry to become president of General Motors, to drop his plans for market domination and join the U.S. Army. Commissioned a lieutenant general, Knudsen assembled a crack team of industrial innovators, persuading them one by one to leave their lucrative private sector positions and join him in Washington, D.C. Dubbed the “dollar-a-year men,” these dedicated patriots quickly took charge of America’s moribund war production effort.

      1. Then read a much better-researched and objective account of the mobilization for World War II in Mark Wilson’s Creative Destruction.

During World War II, the United States helped vanquish the Axis powers by converting its enormous economic capacities into military might. Producing nearly two-thirds of all the munitions used by Allied forces, American industry became what President Franklin D. Roosevelt called “the arsenal of democracy.” Crucial in this effort were business leaders. Some of these captains of industry went to Washington to coordinate the mobilization, while others led their companies to churn out weapons. In this way, the private sector won the war—or so the story goes.

Based on new research in business and military archives, Destructive Creation shows that the enormous mobilization effort relied not only on the capacities of private companies but also on massive public investment and robust government regulation. This public-private partnership involved plenty of government-business cooperation, but it also generated antagonism in the American business community that had lasting repercussions for American politics. Many business leaders, still engaged in political battles against the New Deal, regarded the wartime government as an overreaching regulator and a threatening rival. In response, they mounted an aggressive campaign that touted the achievements of for-profit firms while dismissing the value of public-sector contributions. This probusiness story about mobilization was a political success, not just during the war, but afterward, as it shaped reconversion policy and the transformation of the American military-industrial complex.

Offering a groundbreaking account of the inner workings of the “arsenal of democracy,” Destructive Creation also suggests how the struggle to define its heroes and villains has continued to shape economic and political development to the present day.

      1. Next learn about how some other countries have mobilized just because they wanted to, not because they needed to go to war. Like Finland and Denmark, who used many institutions that any country could such as public venture funds.

At the close of the twentieth century, Denmark, Finland, and Ireland emerged as unlikely centers for high-tech competition. In When Small States Make Big Leaps, Darius Ornston reveals how these historically low-tech countries managed to assume leading positions in new industries such as biotechnology, software, and telecommunications equipment. In each case, countries used institutions that are commonly perceived to delay restructuring to accelerate the redistribution of resources to emerging enterprises and industries.

Ornston draws on interviews with hundreds of politicians, policymakers, and industry representatives to identify two different patterns of institutional innovation and economic restructuring. Irish policymakers worked with industry and labor representatives to contain costs and expand market competition. Denmark and Finland adopted a different strategy, converting an established tradition of private-public and industry-labor cooperation to invest in high-quality inputs such as human capital and research. Both strategies facilitated movement into new high-tech industries but with distinctive political and economic consequences. In explaining how previously slow-moving states entered dynamic new industries, Ornston identifies a broader range of strategies by which countries can respond to disruptive challenges such as economic internationalization, rapid technological innovation, and the shift to services.

      1. Learn how a fruit-importer, Samsung became a global powerhouse – and many other incredible tales from the complex and conflicted Park Chung Hee era. South Korea started with virtually no economy, a mostly illiterate population, and very few resources – and built a modern, wealthy economy almost in a single generation. Many believe that they were favored by huge investments from the United States. But the U.S. was actually very stingy with South Korea. The country used public funding, and tight coordination – even micromanagement – of firms.

In 1959 South Korea was mired in poverty. By 1979, it had a powerful industrial economy and a vibrant civil society that led to democracy eight years later. This volume examines the transformation as a study in the politics of modernization, contextualizing many historical ambiguities in South Korea’s trajectory toward sustainable economic growth.

      1. The story of the post-war Japanese model.

The focus of this book is on the Japanese economic bureaucracy, particularly on the famous Ministry of International Trade and Industry (MITI), as the leading state actor in the economy. Although MITI was not the only important agent affecting the economy, nor was the state as a whole always predominant, I do not want to be overly modest about the importance of this subject. The particular speed, form, and consequences of Japanese economic growth are not intelligible without reference to the contributions of MITI. Collaboration between the state and big business has long been acknowledged as the defining characteristic of the Japanese economic system, but for too long the state’s role in this collaboration has been either condemned as overweening or dismissed as merely supportive, without anyone’s ever analyzing the matter.

The history of MITI is central to the economic and political history of modern Japan. Equally important, however, the methods and achievements of the Japanese economic bureaucracy are central to the continuing debate between advocates of the communist-type command economies and advocates of the Western-type mixed market economies. The fully bureaucratized command economies misallocate resources and stifle initiative; in order to function at all, they must lock up their populations behind iron curtains or other more or less impermeable barriers. The mixed market economies struggle to find ways to intrude politically determined priorities into their market systems without catching a bad case of the “English disease” or being frustrated by the American-type legal sprawl. The Japanese, of course, do not have all the answers. But given the fact that virtually all solutions to any of the critical problems of the late twentieth century―energy supply, environmental protection, technological innovation, and so forth―involve an expansion of official bureaucracy, the particular Japanese priorities and procedures are instructive. At the very least they should forewarn a foreign observer that the Japanese achievements were not won without a price being paid.

  1. Get the REALLY BIG picture with Why Europe Grew Rich and Asia Did Not. The short answer: It’s because Barbarians on horses (or ships) are fully capable of taking over giant, advanced empires. It happened all the time through history… The Mongols, and then Manchus, taking over China. The Moguls taking over India. And so on. Britain taking over the India and China was just part of that same tradition. It’s a sucker punch, but it works. The internal ruling class tends not even to mind, because they’re so sick of their own rulers. That helps the invaders. The barbarians move into the palace and soon become locals. But the Industrial revolution changed the pattern and made this kind of conquest incredibly destructive for the conquered. Because of the industrial revolution and the nationalist project that had begun in Britain, the conquerors now merely wanted to extract resources to feed coal-powered factories back home that sucked more wealth back to the whole British People. And why did the Industrial Revolution get started in the first place? To compete with the overwhelming dominance of Chinese and Indian industry (much like Japan and now China leaping ahead of the US in industrial innovation). So there you have it.

  1. And why didn’t Africa or the Americas develop empires as big as Eurasia? Well, it would be nice to go with Julius Nyerere’s explanation: That Africans and Americans were just better at upholding socialism for longer! But the answer is probably less glamorous: Only Eurasia had horses!

There is definitely something confidence-eroding about Diamond’s pop-science approach to big history. But he does tell a good, detailed story.

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