History is all about wars and kings and destruction. Economics is always about inflation and growth. How does one then narrate economic history? The subject can be a drag and it is difficult to maintain interest as we are dealing with centuries of events and developments. This is where Philip Coggan achieves the impossible by weaving a superb story of the 10,000-year rise of the world economy in around 380 pages. Being a journalist with Financial Times and The Economist gives him a head start. When you get to know that he had authored the columns Bartleby and Buttonwood, which cover niche subjects, it seems natural that the end product is brilliant.
This story has been told in various chapters, starting from the basics of how economics developed in primitive times, beginning with trade which needed a government to maintain law, to the evolution of finance to facilitate transactions. From these basics he traces the evolution process covering various phases in short chapters. There are 18 chapters that span the entire time period from the ancient economy right to the present times. The need for agriculture and the quest for energy have been the building blocks of this economic journey, with manufacturing taking the cake in terms of innovation.
Globalisation, which is spoken of a lot these days, is not really new, and existed in various forms as early as 1820, right up to the World War. The charm of this book is that one can start anywhere, and the reviewer actually started from the back. The Lehman crisis has been described succinctly in a couple of pages where one learns about how it started and how policy makers reacted. In a few paragraphs the author takes us through the contagion in Europe, with the property crisis in Ireland providing the start, which then went across to the PIGS Group. Interestingly, while we normally associate MBS (mortgage backed securities) as the starting point of the financial crisis, the first transaction was undertaken as far back as in 1970 by Ginnie Mae.
This way Coggan manages to be to the point when explaining or describing events and uses the advantage of being a journalist to not meander off course. Just like how columns in newspapers and magazines have to be within a world count of 800 or 1,000, the chapters stick to this norm and ensure that one never loses track of the subject.
He has special focus on the 1979-2007 period, which is when the world saw the biggest changes. China was led by Deng Xiaoping which overturned the model of Mao to what it is today with the blended economy approach. The Iran crisis brought about a leadership change in USA that was a turning point as Ronald Regan brought in the ‘less government’ doctrine that was pursued in England and later spread to the other nations. The bringing down of the Berlin Wall and the disintegration of the USSR were turning points as communism disappeared, or almost did, and markets opened up. India, too, came into the frame with liberalisation, as also the concept of the Asian tigers as rapid growth took place across the world—the great moderation as it was called.
He also traces the history of central banks that not just talks of the institutions but also the evolution of money, from the barter system to metals to currency and finally digital money. This is an interesting chapter for sure. Another one talks of the importance of a government and the common refrain is that it is an impediment once it crosses the domain of preservation of law and order. But he points out that it is indispensable, especially since everything that happens in the private economy is dependent on the state—it provides education, health, welfare, infrastructure to all, without which enterprise cannot move. Without being judgmental on what the role of the state should be, he provides a refreshing perspective.
An issue he puts on the table that will make us think is technology. We have had two rounds of technology revolution. The first was in terms of physical products— steam engine, power, aircrafts, ships, machines and so on. The second one today is IT-based. Without really getting into a debate, he makes some comparison on which has been more effective. We may pitch for the second, but his point is that productivity levels are lower today than they were during the first round of the technology revolution. While we have more information, better communication, newer forms of entertainment today, we may not be more productive. This makes sense when we think deeply as he gives an example of a current office environment where we may be surfing lots of stuff and spending time on things which are not part of our job!
More is a must read for anyone interested in the evolution of economies. It is easy to read and grasp and it is amazing how centuries of stories have been covered in one very readable and engaging volume.
Madan Sabnavis is chief economist, CARE Ratings
Pp 466, Rs 799