Hillbilly Elegy, by J D Vance (2016)
The search for insight into the rise of Donald Trump has propelled this elegantly written account of a Yale law school graduate’s Appalachian upbringing into the US best seller list. Vance describes a background characterised less by poverty and deprivation, though there is some, than by what psychologists call ‘learned helplessness’. This dysfunctionality breaks out first into anger with each other and then into anger with an external world with which they no longer identify. Read it alongside Thomas Frank’s 2004 What’s the Matter with Kansas? to begin to understand why US political alignments have moved so far from a traditional left/right axis – and to see why Europe is moving in a similar direction.
Sixty million Frenchmen can’t be wrong by J-B Nadeau and Julie Barlow (2003)
This book was published some time ago, but I read it for the first time in France this summer.
Economists write of ‘the index number problem’ – the difficulty of making comparisons of the cost or value between different bundles of goods which are bought by different people at different prices and different times; and this difficulty arises even if (improbably) they began with the same underlying preferences. The French economy, and French society, culture and politics have co-evolved differently from the North American economy and its culture, society and politics. The inability of North Americans to understand how the French economy could continue to work, and the inability of French people to understand why anyone would want the lifestyle on offer in the United States, is a reflection of the index number problem.
Each bundle looks unattractive viewed from the base position of the other. I recall explaining to an American friend that French households had small refrigerators, by American standards, not because their houses were smaller (although they were) and certainly not because they were deprived of consumer durables, but because a French housewife might shop for fresh food every day rather than make a once weekly trip to Wal-Mart.
Nadeau and Barlow (Francophone and Anglophone Canadians respectively) describe these tensions sensitively. Read it with Adam Gopnik’s Paris to the Moon (2000), a brilliantly written commentary on France from the American perspective of five years as the New Yorker’s man in Paris.
The Curse of Cash, by Kenneth Rogoff (2016)
This provocative book is by the former chief economist of the IMF (and co-author with Carmen Reinhart of this Time it’s Different (2010) – a definitive history of financial crises). The volume divides clearly into two essentially disjointed parts. The second, and to my mind much less interesting, part discusses the problem of the ‘zero lower bond’ to interest rates. Rogoff argues that this problem could be reduced or eliminated if all transactions were electronic and paper money no longer in issue. (See my FT article for a sceptical discussion of the ‘zero lower bond’ problem).
But the first part of the book is the most extensive analysis so far of the role of cash in twenty-first century economies. You may – and certainly should – be puzzled both that the amount of cash in circulation is so large (over $4000 per man, woman and child in the United States) and that this amount has continued to grow rapidly even as the use you and I make of cash in everyday transactions has declined. Rogoff marshals evidence discussed here is that cash is now – at best – the medium through which we hoard and make off the books payments to the plumber and – to a much greater degree – the currency of drug dealers, money launderers, and corrupt dictators. Restricting and abolishing paper currency would be a dramatic step towards reducing opportunities for crime, corruption and terrorism.
Rogoff’s proposal has been greeted with derision and horror by some libertarians, for whom the prospect of an electronic record of all transactions is a totalitarian attack on personal liberty. There is a debate to be had here. But if – as I believe – rent-seeking and corruption are among the major obstacles to growth and inequality reduction across the world economy today, strengthening the hand of tax authorities may be a small price to pay for an attack on these obstacles – if, indeed, it is a price at all.