Storm, The (27 page)

In
Chapter 1
I take a worm’s-eye view of the crisis, seeing its emergence in Britain and in particular the first tangible sign of major
trouble in the banking sector: the run on Northern Rock. This chapter depends more than most on contemporary report-age. But
there is an exceptionally clear and balanced account in Alex Brummer’s
The Crunch: The Scandal of Northern Rock and the Escalating Credit Crisis
(Random House Business Books, 2008). Alex Brummer is the
Daily Mail
’s City editor and he derives extra authority from his having warned about Northern Rock’s business model as long ago as 2002.
The House of Commons’ Treasury Select Committee provided a very good and detailed account of Northern Rock,
The Run on the Rock
, Vol. 1 (Stationery Office, 2008). Another, more wide-ranging account is provided in Dan Atkinson and Larry Elliott’s
Fantasy Island
(Constable, 2007), which deals with the dangerous overdependence of the
UK on the pretensions and ‘short-termism’ of the City. An earlier, pre-crisis account in a similar vein is Will Hutton’s
The State We’re In
(Vintage, 1996). The role of the City in influencing economic policy under New Labour is discussed very well in Robert Peston’s
Brown’s Britain
(Short Books, 2008).

Chapter 2
draws upon contemporary press comment, but I made use of the historical material described above from Minsky, Kindleberger
and Galbraith, as well as a World Bank study of more recent financial disasters: Gerard Caprio,
Episodes of Systemic and Borderline Financial Crisis
(World Bank, 2003). Perhaps the most perceptive and accurate analysis of the build-up to the current crisis is by Nouriel
Roubini, of the New York Stern School of Business, who described the ‘Twelve Steps to Disaster’ on his blog <
www.regemonitor.com
>.

A key theme is the conduct of US monetary policy – and wider economic policy – in the years when Alan Greenspan was Chairman
of the Federal Reserve. His own approach is set out in
The Age of Turbulence: Adventures in a New World
(Allen Lane, 2007). He is sympathetically reviewed in Bob Woodward,
Maestro: Greenspan’s Fed and the American Boom
(Simon and Schuster, 2000), and with some hostility in Ravendra Batra,
Greenspan’s Fraud: How Two Decades of Policies Have Undermined the Global Economy
(Palgrave Macmillan, 2005). Much of the statistical material is captured in the IMF’s
Global Financial Stability Report: Containing Systemic Risks and Restoring Financial Soundness
(IMF, 2008).

For
Chapter 3
, the rich and varied history of the oil industry is captured best in Dan Yergin’s book,
The Prize
(Simon and Schuster, 1991).

‘Peak oil’ theory is described in David Strachan,
The Last Oil Shock
(John Murray, 2007), Kenneth Deffeyes,
Hubbert’s Peak
(Princeton University Press, 2001), Jeremy Leggett,
Half Gone:
Oil, Gas, Hot Air and the Global Energy Crisis
(Portobello, 2006), Matthew Simmonds,
Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy
(John Wiley, 2005), Colin Campbell and Jean Lahererre, ‘The End of Cheap Oil’,
Scientific American
, March 1998. The counter-arguments are developed by Peter Odell,
Why Carbon Fuels Will Dominate the 21st Century’s Global Energy Economy
(Multi-Science Publishing, 2004), Morris Adelman, quoted in ‘A Survey of Oil’,
The Economist
, 30 April 2005, and Richard Pike,
Petroleum Review
, June 2006.

The issues raised in
Chapter 4
go back to the controversies first raised by Thomas Malthus in
An Essay on the Principle of Population
(first edition, 1798), and later in Thomas Malthus,
Principles of Political Economy
(first edition, 1820). The circumstances surrounding the 2008 food price shock are described in the International Monetary
Fund’s
World Economic Outlook 2008
. There is a big literature on the distorted trade in foodstuffs, summarized in Kym Anderson and Will Martin, Introduction
and Summary to
Agricultural Trade Reform and the Doha Development Agenda
(World Bank, 2005).

In
Chapter 5
the historical context relies heavily on Angus Maddison’s
Monitoring the World Economy 1820–1992
(OECD Development Centre, 1995). Maddison also explains the necessity and methodology for using purchasing power parity-based
measurements of GDP when comparing countries at different levels of development over long periods of time. Other major pieces
of historical scholarship are Dwight Perkins,
Agricultural Development in China, 1368–1968
(Aldine, 1969), and D. Kumar and M. Desai,
Cambridge Economic History of India
(Cambridge University Press, 1983).

The significance of the economic rise of China is now described in countless publications. One of the earliest was Nicholas
Lardy,
China and the World Economy
(Institute for International Economics, 1994). More recent are Will Hutton,
The Writing on the Wall: China and the West in the 21st Century
(Little Brown, 2007), James Kynge,
China Shakes the World: The Rise of a Hungry Nation
(Orion, 2006), and Martin Jacques,
When China Rules the World
(Allen Lane, 2009). The monetary linkages that connect China to the asset bubbles in Western economies are best described
in Graham Turner,
The Credit Crunch
(Pluto Press, 2008). The first comprehensive account of how Chinese growth might help to create a world with low or no inflation
is in Roger Bootle,
The Death of Inflation
(Nicholas Brearley, 1996). My own paper,
China and India: The New Giants
(Royal Institute of International Affairs, 1996), describes the relative performance and potential of the two emerging economies.

The impact of Chinese manufacturing on wage levels and income distribution in Western countries is discussed in Raphael Kaplinsky’s
Globalization, Poverty and Inequality
(Polity Press, 2005), Adrian Wood’s
North–South Trade: Employment and Inequality
(Oxford University Press, 1994), and Ravendra Batra’s
The Myth of Free Trade: The Pooring of America
(Scribner’s, 1993). A counter-view is in M. Slaughter and P. Swagel,
The Effect of Globalization on Wages in Advanced Economies
, IMF Working Papers (IMF, 1997), and P. Krugman and R. Lawrence,
Trade, Jobs and Wages
, NBER Working Paper 34478 (National Bureau of Economic Research, 1993). The history of the protectionist responses to low
wage competition is described in a book I wrote a quarter of a century ago: V. Cable,
Protectionism and Industrial Decline
(Hodder and Stoughton, 1983), and drew specifically on Ephraim Lipson,
The Economic History of England
, Vol 2:
The Age of Mercantilism
, 6th ed. (A&C Black, 1956). The general arguments are discussed very effectively in Deepak Lal,
The Resurrection of the Pauper Labour Argument
, Thames Essay No. 28 (Trade Policy Research Centre, 1981).

Chapter 6
deals more widely with the political reactions to globalization and alternative models. There is a good statement of the
‘green’ rejection of ‘free trade’ and economic interpretation in Tim Lang and Colin Hiness’ book
The New Protectionism
(Earthscan Publications, 1993), and, later, in George Monbiot’s publications, including ‘Protectionism makes you rich’,
Guardian
, 9 September 2008. Coming from a different, socially conservative direction, but reaching similar conclusions, is John Gray,
Beyond the New Right
(Routledge, 1993), and B. Jones’s ‘Globalization versus Community’,
New Political Economy
, Vol. 2, No. 1 (1997). Hostility to globalization from a more traditional ‘leftist’ standpoint comes,
inter alia
, from Noam Chomsky, who, like Lenin, sees the process as an expression of imperialism, as in
9-11
(Seven Stories Press, 2001), or in Harry Shutt,
The Trouble with Capitalism: An Enquiry into the Causes of Global Economic Failure
(Zed Books, 1998). Bob Rowthorn questioned the merits of liberal immigration from the standpoint of the working class in
developed countries in
Prospect
magazine in August 2006. A distinctive analysis is contained in David Singh Grewal,
Network Power: The Social Dynamics of Globalization
(Yale University Press, 2008). The distributional aspects of an open, liberal system are discussed in a helpful way in William
Bernstein,
Splendid Exchange: How Trade Shaped the World
(Atlantic Books, 2008).

There is a discussion of the ‘politics of identity’ and how it might re-emerge in the wake of the Cold War in my two Demos
pamphlets:
The World’s New Fissures: Identities in Crisis
(1994), and
Multiple Identity: Living with the New Politics of Identity
(2005). The attempts of the political right to develop what I call ‘modernized xenophobia’ are best captured in Giulio Tremonti’s
The Fear and the Hope
(2008) (I have relied on English commentaries on a book published in Italian), and James Goldsmith’s
Le Piège
(
The Trap
) (Macmillan, 1996). The nearest the USA has come to producing a figure on the right articulating a similar economic message
is Pat Buchanan,
Where the Right Went Wrong
(Thomas Dunne Books, 2004).