Fredrik Albritton Jonsson and Carl Wennerlind set out a comparison of ideas about the use of natural resources and economic organisation. They term these as ‘Cornucopian’, being the active mastery of nature by mankind, and ‘Finitarianism’, which emphasises the limitations of humanity over nature and the importance of constraint and moderation. They trace these ideas from Aristotle to Marx and Keynes. Jonsson builds here on his work on the impact of Enlightenment ideas on the Scottish Highlands from which he developed ideas about cornucopian and pessimistic outlooks. Wennerlind’s previous work has centred on David Hume, while they have previously both contributed essays to a collection on mercantilism.

Their view is that cornucopian theories are inimical to sustainable life on the planet and that constraint on economic activities is needed if climate change is not to have an irreversible adverse impact. The way that ideas about the relationship between human needs and natural resources are summarised, with the tone set by the assurance that palaeolithic foragers ‘always had more than they needed’.

While there is much here of interest, it is unfortunately undermined by a lack of rigour when dealing with less familiar material, in places by unnecessary arrogance and is arguably overly simplistic. Jonsson and Wennerlind are historians of the Enlightenment, with a focus on political economy, and they are clearly most at home when writing about these subjects. It is unsurprising that they draw most of their examples from England but might perhaps exercise a little more caution when outside their area of expertise. They refer to the Poor Laws and Sumptuary Legislation as examples of finitarianism harnessing desire for ‘moral and spiritual ends’. They describe sumptuary legislation as being introduced ‘to regulate consumer desire’ and the poor laws as providing ‘parish welfare’. While broken windows at the Carlton Club were doubtless irritating, to cite the riots in the west end of London in 1886 as an attack on industrial capitalism alongside the Russian revolution of October 1917 is surprising. They are perhaps on their weakest ground in their understanding of how land tenure changed in England and exaggerate the nature and the impact of sixteenth century enclosures. They describe land as being transformed from the ‘existential and spiritual foundation of the community’ into ‘exclusionary and alienable pieces of property’. The active land market which has been extensively explored by medieval historians, the impact of the Black Death and the complexity of changing forms of tenure are ignored to suggest a transition from virtue to vice, which is not persuasive. While one could regard the frailty of their grasp of English history, outside their area of expertise, as not being fatal to their argument, there is a sense of material being mined at a superficial level and with a limited grasp of context.

Perhaps more serious is the tone of arrogance which characterises this work. The authors claim to have undertaken ‘historical detective work’ which has uncovered ‘this hidden history of scarcity’. This is difficult to reconcile with their having written for ‘students and other young people’. Given that they have summarised the work of More, Luther, Bacon, Locke, Swift, Hume, Adam Smith, Rousseau, Mill, Burke, Ricardo, Malthus, Marx and Keynes, one is tempted to compare this to an introductory course on political economy rather than anything obviously original. It is helpful to show how ideas have developed over time, but to claim that they have uncovered hidden material does not aid their credibility. It would have been much better to have recognised that people have debated the ways in which natural resources are exploited for an extended period and to use that debate to contribute to the current challenges. The impression is created of academics responding to the pressure to publish by placing readily available material in the context of climate change, to make it topical, and being tempted to claim more for their contribution than can be justified.

However, this should not detract from the fundamental weakness of this book. The central thesis is that unconstrained human demand, facilitated by the wickedness of capitalism, has brought the planet to the verge of disaster. There is no recognition of the extraordinary improvement in living standards since the industrial revolution. Many would accept that the unconstrained use of fossil fuels has had a serious and perhaps disastrous impact on the planet, but to characterise their use as reflecting greed and wickedness, without recognising the benefits to humanity, means that this book does little to advance the debate about the trade-offs between prosperity and sustainability. To suggest that capitalism ‘has brought about rapid and massive changes that threaten to overwhelm the earth system’, rather than recognising that, independent of the economic system, fossil fuels had the capacity to increase human productivity, is to advance a political agenda with shallow support. In a world of short life expectancy and widespread poverty, it is surely unreasonable to blame mankind for having made use of the fuels available. To conflate their use with criticism of the economic system which has arguably been most commonly found on the planet is unhelpful.

Their conclusion is, perhaps unsurprisingly, that we need to give up the idea of perpetual economic growth. They see this as the exorcising of cornucopianism from culture to be replaced by a focus on repair aiming at ‘universal flourishing within planetary constraints’. To be fair to the authors, they recognise both that ‘degrowth’, presumably in the West, to balance growth elsewhere, would require ‘immense effort and creativity’. However, they fail to engage with how this might be done.

The failure to engage with the challenge of an industrialising Asia being unsurprisingly unwilling to deny themselves the benefits of fossil fuels that facilitated the economic growth of Europe and North America undermines the value of this book. Not everyone will accept the authors’ analysis, but many will be interested in how a genuinely sustainable world might be achieved. Perhaps most surprising is their failure to include the contribution of Garrett Hardin in his well known, if contested, article from 1968 ‘The Tragedy of the Commons’. The challenge of how the sustainability of the planet is to be ensured, while individual nations seek to prosper, is arguably the key challenge for the next generation. This book is a missed opportunity to advance that debate. A little less grandstanding and a little more thought would have been welcome.

‘Scarcity: A History from the Origins of Capitalism to the Climate Crisis’ by Fredrik Albritton Jonsson and Carl Wennerlind was published in 2023 by Harvard University Press (ISBN: 978-0-67-498708-1). 304pp.

Andrew spent his career with PricewaterhouseCoopers where he was a partner for more than 25 years. He led a variety of the firm’s businesses both in the UK and globally, with a focus on the pharmaceutical industry. He also led the firm’s work on explaining corporate taxation to civil society and the public. He is now studying for a masters in history which he combines with being a trustee at the London Handel Society. 

We have witnessed thirty years of neo-liberal triumphalism. Essential services have been privatised, and utilities have been sold off, while the state has seldom been so weak, and, as a result, work has become more precarious, inequality has widened to unacceptable levels, and a super-elite of mega-rich plutocrats has been allowed to grow wealthier and wealthier at everyone else’s expense. The liberal-left has so successfully established this prevailing narrative about what is wrong with modern capitalism, and how only a stronger state can fix it, that even many of its natural opponents buy into much of its analysis. Ruchir Sharma’s analysis, however, is here to make a simple point. They are completely wrong. Modern capitalism is indeed in bad shape, he argues. But not because the state is too small, but because it is too big.

What Went Wrong With Capitalism tells a powerful story about how the system of making and selling stuff has changed dramatically over the last fifty years. In Sharma’s view, the conventional wisdom is that the state grew slightly in the immediate post-war period, but its size was dramatically rolled back during the Reagan and Thatcher era, and ever since then has shrunk in size and influence. ‘Millennials, the next ruling generation, have embraced a narrative that is clear on the problems of capitalism and way too certain of the causes,’ he writes. ‘Like the media establishment, many Americans seem to assume that the story of shrinking government is true [and] if these distortions arose in a period of shrinking government, they figure, then bigger government must be the answer. But if the era of shrinking government never happened, that is exactly the wrong answer.’

Sharma brilliantly sets out the stark facts and figures on the ever expanding role of government in the modern economy. While Reagan and Thatcher were preaching the virtues of liberal, small government, low-taxes and free markets, central bankers were moving steadily in the other direction. The rot started with the former Federal Reserve chairman Alan Greenspan, ironically a devotee of the extreme liberal Ayn Rand, who started propping up the financial markets with cheaper money every time they fell a little. Ever since then, central bankers saw it as their job to tame and manage the business cycle. First interest rates were cut too close to zero, and then they started printing money on an extravagant scale, and that allowed governments to borrow to finance deficits on a scale that used to be impossible. As Sharma points out, in America potential Presidents used to pay at least lip service to balancing the books, and Bill Clinton actually managed it in one year, the last occupant of the White House to do so. Now they no longer even bother to mention it, so that by 2024, with a deficit of 6pc of GDP in a strong economy, until recently an unthinkable sum outside of wartime, the candidates compete with one another on how much more they can borrow and spend.

But it is not just debt of course. The state has been intervening more and more directly in the economy as well. In the US, Sharma points out the Code of Federal Regulations was first updated annually in the early 1960s, and has grown more than eight-fold since then, and now runs to 180,000 pages covering 240 volumes. America turned into ‘a nation of lawyers’ he argues, not because its people are naturally litigious, as is sometimes lazily assumed, but because it was the only way to cope with the often bewildering accumulation of extra rules that businesses have to follow. In Europe, it is even worse. Sharma brilliantly nails the myth of a ‘neo-liberal’ European Union, pointing out that all it has done is replace cumbersome national regulations with even more cumbersome versions designed in Brussels. ‘In part because the European Union lacks the power to tax and spend directly, its energies have been directed instead into what scholar Giandomenico Majone called “an almost pure regulatory state”, which by the late nineties was issuing regulations at an almost exponential pace.’ On both sides of the Atlantic, the story is the same, with governments attempting to micro-manage almost every aspect of commercial life. Both the Covid pandemic and now the drive to hit Net Zero targets have massively accelerated that.

The strength of the book is in its forensic use of facts to puncture left-liberal myths, and to chart the increasing role of government in our lives. For example, the number of lawyers in the US was growing by only 30,000 per decade prior to 1970, but increased to 100,000 every ten years after the tide of federal regulation grew and grew. Likewise, the number of lobbyists in Washington has overtaken the number of federal employees, with companies spending vast sums trying to manipulate the law in their favour. Almost every page contains a fresh nugget of data, each one illustrating how much more powerful the state has become. Add it all up, and Sharma paints a devastatingly accurate portrait of how massively the state has grown in size and power over the last thirty years, and more importantly, how that has slowed down the innovation and growth that were vital to a stable, free and prosperous society.

If it has a flaw, it is that the book is weaker on remedies. Sharma identifies Switzerland, Taiwan and, perhaps controversially, Vietnam as the three examples of states that have managed to get it right. They are good choices. The trouble is, voters in all the major democracies keep voting for leaders who promise to intervene more, spend more, and regulate more: Argentina is the only country in recent times to vote for less government. The hard part is to convince the voters that the state should get out of their lives, and while Sharma will convince his readers of the case, he has little to say about how to turn that into a message with mass appeal. Even so, it is an excellent book, timely and well-argued, and essential reading for anyone who wants a refreshing corrective to the prevailing wisdom.

‘What Went Wrong With Capitalism’ by Ruchir Sharma was published in 2024 by Penguin (ISBN: 978-0-24-159576-3). 384pp.

Matthew Lynn is an author, journalist and entrepreneur. He writes for The Daily Telegraph, The Spectator and Money Week, is the author of the Death Force thrillers, and is the founder of Lume Books. 

The history of the liberals, radicals, socialists, feminists, and Christians who advocated for free trade as the necessary accompaniment to anti-imperialism and peace is the subject of Marc-William Palen’s Pax Economica: Left-Wing Visions of a Free Trade World. Pax Economica was a term promoted by Jane Addams of the Women’s International League for Peace and Freedom, whose idealistic vision was of such a world after the catastrophe of the First World War (page 199).

Today, free trade is most often associated with neo-liberal economic thought but Palen demonstrates that its origins are rooted in nineteenth-century left-wing politics, with its advocates promoting a heady blend of peace, anti-imperialism, and free trade: a vision at odds with the powerful currents of nationalism, protectionism, and colonial expansion.

The book charts the continuous movements for free trade from the 1840s to the present day. Its scope is broad in time and space, with the core themes often intersecting with major events across the period. The vicissitudes of the drive for free trade as the harbinger of a peaceful world is prominent, and its mutability is closely considered and evaluated.

Palen reveals how, for some of its more left-wing adherents, free trade represented a challenge to imperialism and militarism. In its most idealistic form, it was held that free trade would create international bonds of union, dependence, and harmony which would make war obsolete. Suffice to say, that idealist vision has not materialized. 

Nonetheless, the vision of a ‘Pax Economica’ evolved to include supranational regulation, and the establishment of post-1945 liberal institutions such as the United Nations (UN), International Monetary Fund (IMF), and the General Agreement on Trade and Tariffs (GATT) which did meet, albeit insipidly and ultimately disappointingly, their support for global governance and cooperation. Yet Palen’s work is not primarily a history of international institutions but rather a detailed study of the left-wing vision of globalism. In the main, this means a roll call of movements, pressure groups, and individuals, mostly those employing an ‘outsider strategy’ as a means of changing policy. The work is ambitious, immaculately researched, and a timely publication amid the resurgence of economic nationalism and geopolitical conflict. 

The text, divided into six chapters, ranges over an extensive landscape, encompassing the anti-imperialism of free trade, Christian pacifism, socialist internationalism, feminism, and Marxism. The idealism conflating free trade, peace, and prosperity is well-delineated, and the intellectual antecedents well-identified and contextualized, with Richard Cobden, Henry George, and Norman Angell referenced throughout in multiple contexts. The geographical diaspora of free trade sentiments is a fine testimony to the vibrancy and durability of these ideas. 

The book considers these developments, broadly defined, with short-hand organizing themes such as the ‘Marx-Manchester’ and ‘Marx-List’ traditions. Continuity of struggle and complexity of the tasks are keynotes of the work, from the battle against the systemic protectionism of the 1840s to the current disputes over trade liberalization and neoliberalism.

Indeed, divisions over the legitimacy of free trade principles were explicitly made with the publication of Friedrich List’s National System of Political Economy as early as 1841 at the height of the campaign for economic liberalization in Britain. Economic nationalism, as a counterpoint to free trade, features prominently, with List’s ‘infant industry’ framework and the ‘American System’ of Alexander Hamilton appearing equally, if not more, historically important, in the commercial policy of nations. The idea of tariffs as a shield against foreign competition, and more positively, as an economic development strategy, proved highly influential in the United States, Canada, Australia, Germany, and even Britain.

Free Trade has always been presented in many different guises, and Palen effectively demonstrates that it is intersectional and situational. It could be a liberal, socialist, or anti-colonial force, for the variegated ‘productive profile’ of nations meant it possessed different connotations and meanings on a country-specific basis. While viewed as a liberating measure in Victorian Britain, the same policy preferences led to it being considered by less-developed countries, such as India, Ireland, and China, as a tool of economic imperialism, used against territories which had ‘suffered under the yoke of British free-trade imperialism’ (page 109). Conversely, protectionism, while historically often reflecting the dominance of political and business elites, was often considered, especially in recent times, integral to the economic development of emerging states, and in anti-colonial national struggles. Hence the terminology of ‘Marx-List’ and ‘Marx-Manchester’ traditions as a way of understanding political economy preferences via national subjectivities and economic complexities. Undoubtedly owing to constraints of space, the book does not go far in its forensic analysis of divergent commercial policy preferences, and a particularly notable omission is the extent to which policy preferences were influenced by the fiscal demands of increasingly democratic electorates.

Chapters on free trade feminism and Christian pacifism demonstrate the continuing influence of Cobdenite ideas into the twentieth century. The final chapter takes the story up to the present day, charting the post-war Bretton Woods system, and the triumph of the Pax Americana and neoliberalism, with the caveat that economic nationalism aligned with infant-industry strategy continues to challenge the long-standing association between equity and free trade. Argentina is usefully highlighted as a case study of a nation adopting a growth strategy informed by Listian and American System ideas as ‘economic blueprints’ for development (page 196).

In a divided and unequal world, an absolutist stance for free trade has often been construed as entrenching inequality. Interestingly, free traders often reconciled these Global South infant-industry strategies as a rational, though hopefully temporary, response to Western neo-liberalism, which preached free trade but practiced protectionism. Most notable in that respect, despite the guiding principles of Reciprocity and Non-Discrimination promoted by the World Trade Organization, is the recent surge of regional trade agreements delimiting and protecting rather than expanding market access.

In some ways, the timing of the book’s publication in 2024 was unfortunate, and the idea that the ‘neo-liberal order has been placed on notice’, appears chimerical. With rising global geopolitical tensions, and war in Ukraine and Gaza, any notion of Pax Economica appears unlikely (page 222).

Nonetheless, the analysis within the book is broad-ranging, conceptually coherent, and highly informative. A particular strength is the ability of the author to convey the changing nature of free trade movements, yet while the breadth of the study is highly impressive, it does necessitate a sacrifice of depth in places.

The book is primarily an intellectual and institutional history with a plethora of organizations, acronyms, and an eclectic array of individuals. At times, it would have been useful to know how popular many of the cited organizations were, and how long they lasted. Some readers may find the numerous terms, ideologies, adjectives, and acronyms difficult to follow. Equally, the thematic approach means there is some reiteration and repetition.

Nomenclature is a little odd at times, with John Bright described as an ‘antislavery activist’ and Cobden as an ‘opponent of slavery’ (page 155). It is not that these descriptions are inaccurate but that they convey a limited view of individuals whose backstory is much wider than suggested by the description. There are also some contentious points, such as the claim that the Manchester School ‘envisaged the gradual decline of the nation-state, and with it the elimination of national rivalries and trade barriers’ (page 97). Despite its purported universalist and utopian principles, there existed many, maybe even Cobden himself, who supported free trade at least partly because it aligned with vested class and/or national interests. Self-interest could co-exist with or even be disguised by idealism. Indeed, trade agreements today, such as the USMCA, are examples of managed and negotiated free trade, which are a far cry from the voluntarist model promoted by free trade idealists portrayed within the book.

At times the book appears a somewhat breathless account (indicated by 65 pages of notes and a 20-page index) in covering so many events, times, and places but there is much to be gained from a close and careful reading of the text.

In sum, the book will interest scholars and general readers. It follows the tradition of ‘broad sweep’ history, informed by a considerable body of research and synthesis, and as such is thought-provoking, engaging, and interesting to read.

‘Pax Economica: Left-Wing Visions of a Free Trade World’ by Marc-William Palen was published in 2024 by Princeton University Press (ISBN: 978-0-69-119932-0). 309pp

Gordon Bannerman is a professor teaching Business History at Wilfrid Laurier University and the University of Guelph-Humber, Ontario. His primary research interests focus on modern British political and economic history.

I have read many books in my life, and reviewed quite a few. I can safely say I have never hated a book more than this one. That is probably not unrelated to the fact that I doubt I have ever read a book for which I was less the target audience. And one should bear that in mind in considering what I say about it. After all, if I were a Calvinist theologian and chose to review a movie entitled ‘A pornographic proof of atheism’, would I really be entitled to declare I found its arguments weak and its conclusions shocking? As someone with a PhD in economics, head of an economics consultancy, devising policy for many governments, perhaps it should be unsurprising that I am unimpressed by a book purporting to overthrow and replace economics as we have known it?

Yet even if I tried to place myself into the mindset of a sympathetic reader I would still have to feel this book was poor. It makes assertion after assertion about economics that is simply false, and even if the initial assertion were true, what is done with that assertion would still be wrong, raising a rickety homestead of Error on a stilt-bed of Falsehood.

This is not just an occasional problem. It is relentless throughout the book. We are told that economists regard firms as atomic units and do not seek to unpack them or look inside. Coase? Marginal costs? Theory of contracts? Economics of asymmetric information? Apparently none of these things exists. We are told that in an economics textbook the only mention of ‘power’ will be in relation to energy. Monopoly power, monopsony power, bargaining power, outside options — apparently none of these things is of any interest to economists. Perhaps most bizarrely, Raworth accuses economists of assuming and implicitly teaching that ‘a woman’s place is in the home’, a claim so frankly weird that I have no idea how to argue against it.

Her main theme is that economics teaches that maximising GDP is the sole or main goal. Well, that’s just blatantly false. Insofar as orthodox economic reasoning accepted any goal, it would be maximising ‘welfare’, and the paradigm form of utility functions includes consumption and leisure. In many advanced economies, average hours worked, for those working ‘full-time’, have fallen over many decades. Have you ever heard any economist declare this a Bad Thing? Doubtless you’ve heard economists suggest it was bad if unemployment rose or labour force participation fell, but does anyone think it’s bad if full-time hours fall, even though GDP would presumably be higher if full-time hours were longer. No. Because (inter alia) leisure is of value as well as consumption.

Now it may well have been the case that, at least for several decades from the 1930s onwards, governments sought to use economic policy to maximise GDP even if economists did not consider that their main goal. And it wasn’t merely that governments sought to grow GDP rapidly. All over the world, in major countries, they sought to grow not merely as fast as they could, but often specifically faster than the economies of their political enemies. Raworth does not ask herself the obvious question about that: why? If she had done so, she might have realised that the answer was that if you let your enemies grow faster than you for any length of time, then in an era of industrial wars you would be overtaken, militarily dominated, and then your populations would be taken as slaves by authoritarian rulers or (from the other side) exposed to the decadent immorality and depraved injustices of liberal capitalism. In Europe, if economies had failed to grow fast enough, producing mass unemployment (like the 1930s) and famine (like the 1940s), there would have been fascist coups or communist revolutions. And, oddly enough, politicians consider that kind of thing a Bad Idea.

Raworth condemns economics for seeking to produce technical methods for achieving goals independently of what those goals might be. She also condemns economists for assuming economic decision-makers are selfish. Again she’s wrong about that. Modern economics is expressed in terms of value functions where people can have whatever goals they want, and there is no assumption that those goals are solely self-interested. But as with many other issues, even if she were right about economics assuming that she’d still be wrong. She wants to say we should embed within economics goals that include reducing inequality and living sustainably on our planet. I disagree with both those. I don’t care about inequality at all and I believe humanity should seek to be a multi-planetary species within a currently economically relevant timescale, and we should be prepared to devote a non-trivial portion of the Earth’s resources to achieving that. Does the fact I don’t share her goals mean I’m not permitted to do economics and have to invent a subject of my own? Economics is, perhaps, based on the idea that we don’t all necessarily want the same things. The reason for that is: we actually don’t.

Maybe we should forgive the deep naivete and extensive errors of her discussions of the Global Financial Crisis, since her mistakes, though scarlet, are shared by so many other popular analyses of those events. But it all adds to the general sense that the reasoning is shallow and the author insufficiently informed about the subject matter to be as ambitious as she is in attempting to reinvent things she doesn’t understand.

One discussion she presented that I did find of genuine interest was where she explored the perils of seeking to price everything – e.g. if we pay children to read books, could that corrupt or replace the love of reading? Or if we charge fines for collecting children late do parents more willingly arrive late, seeing the fine as an overtime charge they’re content to pay? Her discussion of how this issue applies in Development Economics settings was quite valuable. But what made her discussion there more interesting was its more orthodox use of economic reasoning (understanding goals, collaboration and habit-formation) than her weak critiques of economics elsewhere.

This was a rare respite. Even the pictures are bad. As a project, she actually has quite a nice idea. She identifies a series of classic images she says make us inclined to think about economics a certain way and to subconsciously accept, unchallenged, assumptions about matters that are actually contentious. So she wants to replace those images with new ones. So far, so good. But what she actually does is to replace a series of elegant images that abstract away vast complexity to focus, beautifully and concisely, upon the nub of important issues with, instead, fantastically busy diagrams that create the illusion of being ‘more practical’ and ‘more realistic’ by using vast numbers of words (the ‘doughnut’ itself has 50 words on it!) and complex arrows that obscure rather than illuminating.

Economics is not in crisis and doesn’t need reinventing. It is in robust good health and producing extremely useful insights that are improving lives every day. Theoretical and applied economics grow and adapt all the time, including expanding to cover new topics such as industrial symbiosis, asteroid mining, the intellectual property implications of 3D printing, the insurance of autonomous vehicles and the pricing of publicly-available training information used by AI. Economists design auctions for carbon permits, devise progressive tax regimes that seek to address inequality, and incorporate endogenous behavioural responses into epidemiological models. Economics helps you achieve your goals whatever they are, progressive or liberal, authoritarian or communitarian, Earth-preserving or Martian-terraforming-focused.

We don’t need to reinvent economics. We just need to understand it properly and apply it correctly and with imagination. Unfortunately, reading this book will not help you to achieve any of that.

‘Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist’ by Kate Raworth was published in 2018 by Penguin (ISBN: 9781847941398). 384p

Read more CEME Book Reviews 

In Capitalism and Christianity, Luigino Bruni provides a sweeping overview of various strands of Christian thinking about economic and, to some extent, social matters over the past 2,000 years and seeks to assess their impact. The book is short, comprising only 109 pages, but it covers a significant amount of ground and needs to be read slowly and reflectively. It is not for the casual reader or someone who is only interested in down-to-earth everyday economic issues but those who are interested in the history of ideas and want to think about their impact today will find much in it that is worth pondering.

Bruni accurately describes his work as an essay and some of its strengths and weaknesses reflect its nature. In particular, Bruni does not seek carefully to support all of his assertions and many of his statements are highly contentious (e.g. is it really true that ‘Christianity was not the mass culture of the Middle Ages’, [page 90] and that ‘we had to wait until the second part of the second millennium for Christianity to become, at least a little, popular culture in the countryside’ [page 97]?). He also has a tendency to make statements that sound impressive without their meaning being clear (e.g. the statement that: ‘The medieval man was in general much poorer than we are, but he lived in a richer world, denser with life’ [page 36]) and he does not define his terms closely, the most serious omission being his failure to explain precisely what he means by ‘capitalism’. However, the other side of this point is that Bruni makes suggestive links between things that might otherwise be regarded as discrete and draws attention to long-term trends that might otherwise be missed.

He briefly considers the teaching of the New Testament but focuses primarily on that of Christian thinkers down the ages, starting with an interesting contrast between the economic thinking of Augustine and that of Pelagius before taking in that of well-known figures such as Dante, Luther, Calvin, Hobbes and Smith. There is plenty to take issue with in his analysis (e.g. his suggestion that, thanks to Hobbes, ‘European society…went from the community without individuals, to the individual without community’ [page 72], surely attributes far too much influence to Hobbes). However, much of what is said is thought provoking and a lot of it relates to matters that are only rarely covered in English language publications.

His discussion of medieval monasticism is a good example of this. He rightly points out the significance of the monasteries to the medieval economy and the long-term impact of the Benedictine motto ‘Ora et Labora’ (prayer and work), particularly as taken up and applied to everyday life in Lutheran thought. As often, Bruni is guilty of some exaggeration (e.g. the statement that ‘capitalism was not only generated by monasticism, but would not have been borne without it’, [page 14]) but his contention that, at least as originally conceived, the monastic emphasis on the value of work for a free person helped generate a wider acceptance of the value of work in society as a whole is well worth considering.

Bruni’s discussion of the late medieval Monti di Pieta is also interesting. Few Anglo-Saxon readers will know much (if anything) about them but they deserve to be taken into account in any consideration of historic models of the use of credit in the alleviation of poverty. Franciscan friars provided the impetus for their creation as not-for profit organisations which, nonetheless, were not charities and which sought to make credit available to the poor whilst still charging interest and seeking sustainability in their business model. Bruni clearly sees some lessons for today in this model, although he does not give detail of precisely what these lessons might be.

It is also good to see a discussion of the now largely forgotten contribution of Jansenists to the theological and economic debate. Jansenist theology was in many ways similar to Calvinism (albeit located within Catholicism) and it is interesting that it produced some recognisably similar economic thinking. This in some ways anticipated Adam Smith and classical liberal economics. For example, Pierre Nicole, writing a hundred years before Adam Smith, noted that those who served travellers did not act from charity but nonetheless provided the assistance that travellers required, whilst Pierre Boisguilbert, writing slightly later, commented that ‘All the trade of the land, both wholesale and retail…is governed by nothing but the interests of entrepreneurs who have never thought of doing someone a favour’ (cited by Bruni on page 60).

Bruni is Professor of Economics at the Università di Roma LUMSA, which states that it was ‘formed on Catholic principles’ and, in some places, his Catholic background shines through his writing. However his views on the impact of Catholicism on economics will not make comfortable reading for many of his Catholic colleagues. Although he is critical of the impact of the Reformation, he reserves his most strident criticism for the Counter-Reformation. He attacks both its theology and practices (suggesting that it was so concerned to react against Luther that it failed to deal with the aspects of Catholicism that were the most in need of true reform [page 44]) and sees its influence on the economy in almost wholly negative terms: ‘the Counter-Reformation blocked the process which had started in the middle-ages and which resulted in civil humanism, a capitalism that was both personalist and communitarian, which was able to fuse together individual freedom and common good’ (page 87) and ‘the Counter-Reformation set the moral evaluation of economic activities back a few centuries’ (page 88). Overall, he has very little positive to say about the contribution of Christian thought to appropriate economic structures over the past few hundred years.

It is less easy to be sure of what Bruni favours. He often quotes other authors without being clear of the extent to which he agrees with them. However, he is no other-worldly theorist. For example, he refers to ‘An entirely biblical and evangelical secularity…which still leaves all those who (like me) believe that there are few things more “spiritual” than double-entry method and a construction site, breathless’ (page 24). Furthermore, his most favourable tone is reserved for what he refers to as ‘civil economy’. He quotes at length from Fénelon’s ‘Les Abeilles’ (the precursor of Mandeville’s more famous Fable of the Bees) and he contrasts what he understands Adam Smith to be saying unfavourably with a different approach in which ‘the fundamentally economic principle…is instead that of “mutual assistance”, where each individual, in addition to his own interest, intentionally wishes for the interests and well-being of the other party as well’ (page 79).

Bruni writes openly from the perspective of Catholic Southern Europe and he clearly feels personal involvement in the matters about which he is writing. Capitalism and Christianity is not a mere academic essay: Bruni cares deeply about his subject and, as the book draws towards its conclusion, he begins from time to time to write in the first person.

Sadly, he is not able to offer much hope for himself or others. Referring to the people of the South (and, one suspects, primarily, Italy), the book concludes: ‘the capitalism of the nineteenth and twentieth centuries, the capitalism based on the factory and labour, could not then be seductive enough to buy our souls. But that of the twenty first century based all on consumption and finance, seduced us to a point that we did not need to buy our souls because we gave them for free’ (sic; page 108).

This is perhaps a surprising conclusion, especially from a writer who clearly regards Augustinian theology as much too pessimistic about human nature. It may be influenced by the slightly Romantic tendency that may be detected in some of what Bruni says. However, Bruni might fairly counter by saying that his essay is not intended to offer a way forward but merely to enable people to think about how we have arrived where we are and thus be able to pose questions that will facilitate the fashioning of the future.

Much of what Bruni says is contentious and one might take strong exception to his negative assessment of particularly early Protestant thinking, Adam Smith’s views and more recent Catholic social teaching. However, the issues that he raises deserve careful reflection and Capitalism and Christianity is a serious and worthwhile contribution to a vital debate.

‘Capitalism and Christianity: Origins, Spirit and Betrayal of the Market Economy’ by Luigino Bruni was published in 2024 by Routledge (ISBN: 978-1-03-252401-6). 109pp

Richard Godden is a Lawyer and has been a Partner with Linklaters for over 25 years during which time he has advised on a wide range of transactions and issues in various parts of the world. 

Richard’s experience includes his time as Secretary at the UK Takeover Panel and a secondment to Linklaters’ Hong Kong office. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the Global Executive Committee.

Opening the newspaper or watching the news can lead one to think that the environment is doomed. A litany of isolated images (polar bears drowning or forests being cut down) are seared into many minds. People have a difficult time putting these isolated images into context and knowing whether the pervasive doomsday rhetoric is well founded. In her Not the End of the World: How to be the First Generation to Build a Sustainable Planet (2024), Hannah Ritchie deftly cuts through the informational fog surrounding much popular environmental thinking.

The overriding thesis of the book is that many misunderstand the basic pattern of environmental harms over time and that this misunderstanding leads to false trade-offs that risk both environmental and humanitarian harm. Environmental degradation is deeply troubling, but in nearly all areas the pace of harm is slowing; in some cases, things are improving dramatically.

Per capita carbon emissions have peaked (page 75); forests in Europe have rebounded since the 19^th century (page 118); the air is less polluted in the developed world and even Beijing (page 38). Technical innovations and targeted solutions (often aided by well-informed policy decisions) have proven successes that shouldn’t be ignored. The author is at pains throughout to not appear as a climate change sceptic or Panglossian and roots her claims in simple empirical claims. 

Ritchie was trained in the natural sciences and now works for Our World in Data, the indispensable Oxford organization that collects data on all sorts of things and gives users the ability to create their own custom charts. The data that she brings to bear on environmental questions will shock most readers.

The book is divided into eight chapters (and an introduction and conclusion) which range from the scene-setting chapter on sustainability to more focused chapters on biodiversity and plastics. There is a chapter on climate change, but this subject is also woven through most of the other chapters. The book is distinct from others on the topic by the clarity of its purpose and the breadth of information it brings to bear on the issues which are often discussed in alarming bits of isolated information. The breadth of information and nuanced argument on climate change both makes the book more interesting and makes the most important topic difficult to summarize in this review.

The clarity of purpose I mention is interesting because most of the broader argument of the book follows from the perhaps under-argued philosophical approach in the beginning of the book. The argument has to do with the focus of her first chapter: sustainability. On page 17, Ritchie writes:

In 1987, the UN defined sustainable development as ‘meeting the needs of the present without compromising the ability of future generations to meet their own needs’. That definition has two halves. The first is making sure that everyone in the world today – the present generations – can live a good and healthy life. The second half is about making sure that we live in a way that doesn’t degrade the environment for future generations.

She further adds that, ‘on a moral level, I cannot ignore the first half of the equation. A world full of avoidable human suffering does not meet our definition of sustainability’ (page 18).

It is also in the first chapter that Ritchie dismisses both depopulation (for obvious reasons) and degrowth as reasonable options. The argument for degrowth is first complicated by the fact that while growth increases environmental harms initially, the accompanying technological innovation and care about environmental harms increase beyond a certain point of wealth, lowering the impact per person (page 34).

Additionally– even ignoring dynamic effects– there is very clearly not enough to redistribute. With egalitarian redistribution the world economy would have to quintuple for every person on the planet to be as well off as the average Dane. For every person to reach the line of poverty in the developed world ($30 a day), the world economy would have to double (pages 34-35). 

Most of the chapters begin with a shocking misleading headline that Ritchie contextualizes. For example, she begins the chapter on ocean plastics with a quote from the Washington Post claiming that ‘By 2050, there will be more plastic than fish in the world’s oceans, study says’ (page 223). This statistic went viral in 2016 but is quickly undermined by Ritchie. The claim stems from a report from that year that took two pieces of academic research and extrapolated their findings to the year 2050. Neither researcher endorsed this reading and the researcher on the number of fish in the sea even found different results when he revisited his own study. Similar stories abound for topics like deforestation and soil degradation.

In the introduction, Ritchie argues that these kind of headlines – and especially the more apocalyptic ones about climate change – manage to both undermine the credibility of scientists with the public and paralyze (or radicalize) those most concerned about the environment.

The book is organized in a way that sets the broader issues assessed in each chapter in the author’s own experiences and past mistaken beliefs. While sometimes annoying, this humanizes the issues. It is compelling to see that a motivated environmentalist trained in the natural sciences used to not just recite but truly believe in and act according to the very notions she discredits now. It also leads readers to buy into her claims about the sorts of individual actions that can actually have a positive impact.

Seven of the eight chapters include a section detailing things to stress less about (the exception being the chapter on biodiversity that suggests that many worry too little about the topic). For instance, the chapter on plastics suggests that many worry too much about single use plastics like bags and especially plastic straws. Similarly, in the chapter on food production, she touts the benefits of plastic packaging on other serious environmental harms like the spoilage of carbon intense food. Approximately four percent of the carbon emissions of food comes from packaging (page 190). The real harm of plastics is when they enter our rivers and oceans. Of the 350 million tonnes of plastic waste generated per year, approximately one million tonnes of it enter oceans and virtually none of it is from countries like the UK (page 232). The solution to this in other countries is sealed landfills. Landfills are another thing we should worry less about. The idea that there isn’t enough space for landfills is hilarious when dealing with relevant numbers. All the plastic produced in history would fit in a landfill of normal depth covering 0.001 percent of the size of the world (page 253).

Ritchie argues that misunderstandings about environmental impacts lead people to do unintentional harm. For instance, in the chapter on food Ritchie relates the story of one her environmentalist lecturers at Edinburgh ordering lamb instead of chicken because it was raised locally (page 183). While its location means that fewer emissions were used between farm and table, the carbon impact of consuming lamb over chicken far exceeds the relatively small carbon impact of the transportation. 

I was struck by the example of palm oil. While decried for being the driver of deforestation, palm oil is much less land intensive than nearly all relevant substitutes. Even focusing on tropical forests – for the reason that the land used to grow palm oil is often more biodiverse than other types of land – the most relevant substitute is coconut oil, which uses more tropical land for the same amount of oil. Ritchie estimates that the ecologically minded Ben & Jerry’s uses five to ten times the amount of land because of the switch from palm oils to coconut and soybean oils (page 130). While palm oil is viewed by the public as the least environmentally friendly oil, the boycott of it likely leads to a worse environmental impact.

More than just being rife with interesting facts, this book is an excellent and accessible introduction to the very broad topic. The author pulls together enlightening data and clear argumentation to put humane bounds on the types of environmental actions we should consider morally desirable.  

‘Not the End of the World: How to be the First Generation to Build a Sustainable Planet’ by Hannah Ritchie was published in 2024 by Vintage (9781784745004). 352 pp.

John Kroencke is a Senior Research Fellow at the Centre for Enterprise, Markets and Ethics. For more information about John please click here.

Michael Sonenscher suggests that while capitalism is ‘hard to define’ it is ‘easy to see’ reflecting the ‘range of subjects encompassed in the word’ (page viii). In this tightly written book, he both explains the origins of the word and the historic tension between capitalism and capital. The word has its roots in the ‘capitalistes’ who had lent to finance the wars fought by the French state and so were ‘stockholders rather than capitalists’ (page xii). ‘Capitalism’ as a term grew in popularity after the 1830 revolution, and was associated with ideas of positive and negative liberty and the concern that capitalism led to a level of inequality which could only be resolved by revolution.

Sonenscher argues that the ubiquitous and often confused modern use of ‘capitalism’ has conflated the discussion of what in the eighteenth and nineteenth centuries were thought of as separate concepts. Starting with Adam Smith, Sonenscher identifies the linked concepts of the division of labour and of ‘commercial society’ as being of particular significance (pages 3-6). Once the form of society had developed so that a man’s needs were provided by exchange rather than his own labour, that exchange was dependent on the existence of markets and so ‘commercial society’ was formed. Capital was not the ‘initial or primary component’ of a commercial society – it came next (page 5). This leads him to argue that ‘capitalism’ is not a synonym for ‘commercial society’ and that there is much to be gained from considering them separately (page 7). He points out that capital can be formed in a predatory society by simply taking it; the division of labour is not needed to achieve this. On this basis, the division of labour is the ‘novelty’ which was the basis of commercial society. That required markets and prices which he describes as ‘relentless and remorseless’ which, unlike capital, ‘are not the types of things that can really be owned’ (page 11).

By contrast, ‘capitalism’ as originally understood was a theory of property and one which he suggests may be ‘more fluid than it looks’ (page 14). Property can be socialised while the challenges which flow from the division of labour are more difficult to address. While property can be owned in a variety of ways, a price has only one form. This leads to the view that ‘capitalism’ has unhelpfully come to encompass the division of labour so that while there have been many studies of political systems in capitalist societies, there has been much less thought given to politics in a commercial society (page 16).

Sonenscher divides his book in two parts: problems and solutions. The first is a discussion of how these issues were discussed in the first half of the nineteenth century, arguing that the idea of commercial society turned over time into the problem of capitalism. The second looks at how the challenges of politics in a commercial society were analysed before the idea was subsumed within ‘capitalism’. A key concern among French political economists following 1830 was whether capitalism was compatible with liberty. It was feared that unbounded capitalism would generate levels of inequality that would be inconsistent with justice. Explaining its roots in the financing of war he suggests that ‘capitalism’ acquired its meaning as those ideas moved from an international to a national setting. This built on the belief in France developed by Louis de Bonald and Charles Montesquieu that a commercial society based on consensus could not co-exist with a political society based on union. The idea of capitalism moved politically from the right to the left with the distinction made between the need for capital, and capitalism as a system, joined with a debate over the right to work. This led to Louis Blanc’s ideas about the use of public debt to finance welfare and of using publicly owned capital to defeat capitalism (pages 66-73).

In the second part of the book, Sonenscher considers how political economists from Karl Marx and Adam Smith to Georg Hegel, David Ricardo and Lorenz von Stein approached these issues. The previous discussion provides a new perspective on Marx’s thinking on the relationship between property and the division of labour (page 78). He suggests that there was no ‘Adam Smith problem’, as envisaged in Germany, as his theories of justice and expediency can be reconciled. Hegel’s focus on the role of public authority, and the associated role of public debt and the concept of civil society, built on Rousseau and Montesquieu but also on the thought of Adam Smith. Ricardo’s work on comparative advantage is suggested to be connected to the role of money and debt, while Stein’s focus was on the state’s ability to raise public debt as a means to reconcile the state and civil society (page 150, page 162-164). He concludes by explaining that while capitalism has its origins in a theory of property, the concept of a commercial society, based on the division of labour, was that of a society where individuals are ‘radically dependent on one another’ (page 169).  While capitalism was thought to have the capacity for catastrophe, there are alternatives (even if experience suggests they may be unattractive). By comparison, the division of labour is ‘worse’. Once people have become dependent on each other, alternative models are hard to imagine. In that context, the understanding that ‘capitalism’ has come to encompass the division of labour is more than semantics or arcane intellectual history.

This book not only provides a compelling introduction to the distinction between capitalism and commercial society but to a world of intellectual debate which is now little known. While Marx, Hegel, Adam Smith and Ricardo are reasonably widely understood, this book draws attention to a school of French writers such as Louis de Bonald, Louis Blanc and Frederic Bastiat who are generally less widely read, at least by an Anglophone audience. It has the great merit of clarity of argument and is an accessible introduction to a set of issues which can be complex and where there is a formidable body of literature. Excellent notes and bibliography provide a basis for further reading.

Given this book is aimed at the general reader a few more general thoughts arise. While Marx receives attention, it is perhaps briefer than might be expected which at least might deserve explanation. It might also be of interest to understand whether and if so how, the French writers of the first half of the nineteenth century responded to the growing significance of joint stock companies. Finally, a brief glossary might aid a reader new to these issues.

This is an excellent introduction to a complex area of intellectual history. Clearly written and helpfully setting out the argument at the outset, it is a model for an academic introducing challenging ideas to a wider audience. Sonenscher subtitled his work, ‘The story behind the word’ but provides an engaging introduction to a body of work which demonstrates an impressive rigour of analysis; delivering more than he promises in an age of publishing hyperbole is particularly welcome.

‘Capitalism: The Story Behind the Word’, by Michael Sonenscher, was published in 2022 by Princeton University Press (ISBN 9780691238883). 225pp.

Andrew spent his career with PricewaterhouseCoopers where he was a partner for more than 25 years. He led a variety of the firm’s businesses both in the UK and globally, with a focus on the pharmaceutical industry. He also led the firm’s work on explaining corporate taxation to civil society and the public. He is now studying for a masters in history which he combines with being a trustee at the London Handel Society. 

When we consider the evident benefits of capitalism in its capacity to generate wealth and lift people out of poverty, and contrast this with the failure of attempts to implement socialism, we might ask ourselves why Marxist thought continues to exercise such influence. This is the question with which Tibor Rutar (Assistant Professor at the University of Maribor) opens Capitalism for Realists. His answer is that the appeal of Marxism appears to lie in its theoretically grounded criticisms of capitalism – criticisms that might very well ring true for those who do not directly feel its benefits. Nevertheless, the author points out, the more poignant criticisms of capitalism are not unique to Marxism and might just as easily be reached from other theoretical positions. Accordingly, the aim of this book is not to offer an ideologically driven attack on capitalism – or necessarily to defend it – but to provide a balanced reckoning based on the available (quantitative) evidence. What follows is a fairly involved and detailed examination of the statistical information relating to the debates that surround capitalism in connection with issues such as wealth and poverty, inequality, exploitation, morality and politics.

The first chapter considers the origins of capitalism and in place of cultural explanations such as Weber’s ‘Protestant Ethic’ thesis, offers a materialist account that attributes the emergence of capitalism in England to the massive population decline caused by the Black Death, a situation that gave rise to a market for land leases and labour as land became vacant and landowners sought to retain peasants on their demesnes in order to mitigate economic losses. Thus, whatever the role of ‘ideational’ changes such as the Protestant Reformation, it was English material conditions that ‘set the scene’ for the transition to capitalism. The argument in this chapter is compelling and interesting to follow, but I was left wondering what capitalism is taken to be in the author’s view. As a very broad term, it can often encompass vastly different phenomena – a point that the author himself makes about ‘neoliberalism’ – and it would have been useful from the outset to have a definition of what the author was seeking to analyse throughout the book.

Subsequent chapters consider the criticisms commonly levelled at capitalism. In the chapter on poverty, inequality and exploitation, the author points out that capitalism has reduced extreme poverty but does not distribute the wealth that it creates equally. While the picture painted by the data is not uniform, Rutar’s analysis suggests that over longer periods of time, inequalities in wealth within countries are increasing. However, he is quick to highlight the fact that the growing wealth of the rich does not mean that the poor are getting poorer, though he does urge us to remember that rising inequalities can and do result in various societal problems which should not be ignored. While rejecting the classical Marxist position on exploitation, the author’s suggestion is that some (wage) exploitation is likely to exist in any economic system and in capitalist economies cannot be eliminated by market competition for labour alone. However, a difficulty with the treatment of this subject is that it is not quite clear what Rutar intends by ‘exploitation’: whether the mere fact of companies paying employees less than the full value of their labour when estimated as a financial contribution to the company, or the more sinister, deliberate attempt to suppress wages in order to maximise profits. The former is open to question as a definition of exploitation, since it is unclear whether the financial contribution of workers can be calculated with any accuracy; the latter more obviously runs counter to our ideas of a just wage.

The following chapter considers ‘neoliberalism’, a term that is often used pejoratively but, as the author rightly states, lacks any clear definition. In view of this, his focus is on those generally accepted features of neoliberalism that lend themselves to empirical investigation, such as support for free markets and modest welfare states. The analysis leads to the view that as the world has become more neoliberal over the last forty years, poverty has been reduced and material prosperity increased, with no apparent fall in overall government spending, no destruction of welfare provision and broad stability (or increases) in tax revenues. Moreover, capitalist societies appear to be conducive to the emergence and development of democratic orders. Thus, contrary to the charges levelled at it by its critics, neoliberalism has surely been an economic success.

I was particularly interested in the chapter on morality, which the author begins by contrasting the ‘classical’ view that commerce leads to gentler manners, greater co-operation and trust, with the anti-capitalist position that capitalism, as a system based on competition and profit, surely appeals to our most selfish tendencies, eroding trust and leading us to see others as mere means. From surveying the existing evidence, Rutar concludes that capitalist societies are certainly not inimical to the emergence of more moral conduct and in fact show greater levels of trust, whilst exposure to market competition appears to boost co-operation and fairness. At the state level, the data suggests an incompatibility between economic liberalisation and human rights abuses, and that wealthier states with complex economies characteristic of capitalism are less likely to suffer political coups.

It is clear, given his focus on measurable, quantifiable phenomena, that what the author is (understandably) concerned with in this chapter is not morality understood as personal virtue or vice, but what we might call pro-social attitudes and behaviours. Indeed, the book does not take up questions of value, except insofar as it is implied that capitalist economics can be said to embody a set of values, such as a belief in property rights and economic liberty, and a conviction that material prosperity is a ‘good thing’ for all. However, if capitalism appears consistent with – if not an actual cause of – pro-social, tolerant, moral conduct, we might wonder where this leaves its critics. Given the nature of their criticisms, it would be foolish to assume that they do not also value pro-social behaviours, co-operation, trust and prosperity. We are left to conclude, therefore, that they believe either that such things are only realised in spite of capitalist systems (contrary to the evidence presented in this book), or, since capitalism increases overall material prosperity but does not close the wealth gap, that they are not realised to the degree or in the manner desired.

The short concluding chapter discusses the environment and rejects the idea that there is something inherent in capitalism that results in environmental degradation, such that protecting the environment necessitates a shift to some form of socialism. At the same time, the data analysed does not suggest that market solutions alone will do enough to deal with the environmental problems that we face, resulting in Rutar’s recommendation that at this stage, greater regulation is required.

What ultimately emerges from Capitalism for Realists is that, when one considers the available data, capitalism’s critics are often wide of the mark. Indeed, it would appear that in some cases, capitalism is often correlated with (and is perhaps the cause of) the very opposite of the faults of which it is accused. The writing is accessible in the main, though the numerous typographical errors can be distracting and are indicative of poor copy-editing on the part of the publisher. Some of the more detailed statistical discussions can be hard to follow, but this evidence is fundamental to the book’s very project of offering a realistic rather than an ideological assessment. Overall, this is a fairly specialist work which offers a nuanced, balanced, evidence-based analysis of how the modern economy works and what its effects might be.

‘Capitalism for Realists: Virtues and Vices for the Modern Economy’ by Tibor Rutar, was published in 2022 by Routledge (ISBN: 978-1-32-30592-9). 178pp.

Neil Jordan is Senior Editor at the Centre for Enterprise, Markets and Ethics. For more information about Neil please click here.

“Capitalism Without Capital” is an ambitious attempt to go beyond the regular quasi-investment-type advice and explore some of the more profound trends that have occurred in the macro landscape of (mostly) developed western markets. The book hones in on one such major trend, that is, the gradual growth and influence of intangible assets in company valuations and their subsequent effects on equity valuations and the broader economy. The overarching thesis of the book is that “…there is something fundamentally different about intangible investment, and that understanding the move to intangible investment helps us understand some of the key issues facing us today: innovation and growth, inequality, the role of management, and financial and policy reform” (page 7). The authors argue that the two fundamental differences brought on by intangible assets are, (1) we are trying to measure capitalism without counting all the capital and (2), intangible asset rich economies behave differently from their tangible-rich counterparts (ibid).

Jonathan Haskel is Professor of Economics at Imperial College Business School, he is also an external member of the Bank of England’s Monetary Policy Committee. Stian Westlake is Executive Chair of the Economic and Social Research Council (ESRC). The book is aimed at the enquiring reader though it is perhaps more suited for an enquiring reader who also has a specific interest in the world of equity investments and financial markets. Toward this end, the book does require some basic literacy in finance and macroeconomics even though it does not make excessive use of technical jargon. However, some chapters (such as Ch. 3) will clearly be of greater benefit to those that are already familiar with equity research.

The structure of the book is divided into ten chapters. Chapters I to IV focus on the growth of intangible assets, the different methodologies for measuring them and some of the unique economic properties that intangible assets possess. Here the authors claim ‘four S’s’ which they refer back to at various points throughout the book. These stand for the fact that intangible assets are “more likely to be scalable, their costs are more likely to be sunk, and they are inclined to have spillovers and to exhibit synergies with each other” (page 58).

Two interesting observations are worth mentioning here. First, it may come as no surprise that scalability is an underlying feature of intangible assets whereby, unlike their physical counterparts, “…intangible assets, […] can usually be used over and over, in multiple places at the same time. […] [and] at relatively little cost” (page 65). This in turn, gives rise to at least three rather problematic consequences: 1. Intangible-intensive businesses tend to become quite large (the authors use Microsoft, Facebook and Google as examples – page 67). 2. They tend to dominate their respective markets and smaller players may try their luck but usually fail to survive within this oligopolistic competitive environment. 3. Competitors that do to go against highly scalable assets are often left in the difficult second position within a winner-takes-all scenario, leaving the runners-up with very little (page 68).

A second interesting observation is the issue of spillovers. Here the authors point out that high-value intangibles are likely to ‘spillover’ and be replicated or used by other businesses. For instance, it was only after the release of the first iPhone that most other smartphone manufacturers started making devices that look almost identical to the iPhone (page 72). This is problematic for a number of reasons which are enumerated within the chapter (pages 77-79) but chief among these is that spillovers can have a constraining effect on business investment – particularly in key areas such as R&D (ibid).

Chapters V through X move the discussion on to the consequences of the intangible economy. Here the authors argue that the rise of intangibles may play a role in the “…puzzling fall in investment and productivity growth seen in major economies in recent years” (page 91). One of the several arguments put fourth is that the dominance of a few major actors in the marketplace “…raises the productivity and profits gap between the leaders and the laggard firms. This could help explain how low levels of investment coexist with high rates of return…” (page 116).

The final chapters focus on some possible ways forward in terms of policy and wider market action. The author proposes a shift in “…the public policy agenda” where the focus should be on “…facilitating knowledge infrastructure – such as education, Internet and communications technology, urban planning, and public science spending…” (page 241). Good intentions but one cannot help but feel that the proposals put fourth will ultimately struggle to solve the issues raised by intangibles.

 There are also other perhaps more contentious points within the book. For instance, the discussion on intangibles and the rise of inequality in Chapter 6 will no doubt raise eyebrows amongst readers. The authors draw a string of rather naïve socioeconomic conclusions, from overestimating the attractiveness of large urban cities (if anything, the post-Covid trend has been quite the opposite), to far-flung connections in claiming that Brexit voters and Trump supporters are more likely to “…score low on tests for the psychological trait of openness to experience. Openness to experience seems to be important for the kind of symbolic-analysis jobs that proliferate as intangibles become more common” (page 143), therefore contributing to increasing inequality. In their defence however, the authors make an admission in the concluding chapter of the book that their analysis of the implications for the wider economy “…is inevitably speculative” (page 242).

In summary, despite some shortcomings there is a lot to applaud within the book. It establishes a novel case for the rise of intangible assets and why they matter and brings a compelling perspective on the implications of the intangible asset economy. Although the enquiring reader may find much use within its pages, the book is really best suited for those with a specific interest in company valuations (fundamental equity research), macro trends, and the wider world of investment and asset management.

Capitalism Without Capital: The Rise of the Intangible Economy by Jonathan Haskel & Stian Westlake was first published in 2018 by Princeton University Press (ISBN 9780691183299, 0691183295), 296pp.

Andrei E. Rogobete is Associate Director at the Centre for Enterprise, Markets & Ethics. For more information about Andrei please click here.

Global Discord does not fit neatly into any of the categories of book that are reviewed on this website. It is not primarily a book about business, capitalism or wealth and poverty. In fact, it is not primarily about economics. However, its focus is on something of crucial importance to all of these things: the global political order. Its author, Paul Tucker, the former Deputy Governor of the Bank of England, suggests that “the deep architecture of the international economy [is] influx for the first time in decades” (page 3) and he sets out to analyse both the causes of this and potential responses to it.

He never expressly identifies his intended audience. The primary audience is doubtless those responsible for formulating the policies of Western nations in relation to international affairs, including, in particular, international finance and trade. The issues that he discusses are, however, of crucial importance to a far wider audience. Unfortunately, the book is dense and heavy going in parts. This will limit its appeal but those who take the trouble to study it carefully will find it rewarding, particularly if they seek to reflect on how his suggested approaches to international engagement might be applied in their corner of the global political, financial or business world.

Tucker identifies three major differences between the kind of globalisation that we are now witnessing and that which existed in the past: first, derivative markets have separated cross-border flows of funds from flows of risk; secondly, after accumulating vast sovereign wealth funds, some states have acquired great influence in global capital allocation and, taken with state-owned enterprises, state-capitalist actors are operating on a scale that has not been seen “since Europe’s merchant companies traded and intervened around the planet half a millennium ago” (page 7); and, thirdly, today’s infrastructure for cross-border financial transactions create vulnerabilities that can be weaponised.

Tucker suggests that there is “a deep cleavage in modern international affairs” (page 78) and his overwhelming concern is China. He argues that the West needs to face up to the fact that, far from China moving in the direction of a liberal economic and political order, it is moving in precisely the opposite direction. Quoting the now well-known “Seven No’s” of the Chinese Central Committee, he points out that, “While Western states took different paths to [wielding power across their territories, the Rule of Law, and accountability], for China the destination is different” (page 220). Thus he argues, surely correctly, that “commentators in the West who insist current tensions are not ideological – and should not be allowed to become so – are deeply mistaken, while nevertheless pressing an important practical question: What to do?” (page 461).

He repeatedly accuses Western policy makers of wishful thinking in their dealings with authoritarian states and China in particular and he has many criticisms of current global institutions pointing to both specific design flaws and more general issues. Some of these criticisms relate to specific institutions: he describes the second Basel Capital Accord as “deeply flawed” (page 98) and suggests that the WTO is based on unrealistic universalistic rather than pluralistic concepts. Other criticisms are more general: he points to the hazards of delegation to international organisations, particularly in a world in which international treaties are what economists call “incomplete contracts”, and the dangers of what he refers to as “judicialization”.

His concern in relation to the latter is that international courts and tribunals are ruling on matters that ought to be left to political negotiation and are applying interpretations of treaties and even “natural law” concepts in a way that results in states being bound by things to which they do not believe they ever agreed. Some might argue that this is simply the concept of the Rule of Law applied in an international context but, as is the case in relation to some domestic systems (e.g. the role of the Supreme Court in the USA), it gives rise to a situation that is dangerously close to the Rule of Judges. In short, it is an example of judicial overreach and it has potentially serious political consequences for the perceived legitimacy of the world order, particularly when set against the context of the ideological divide to which Tucker draws attention.

Much of what Tucker says is thus critical of the existing order and those who have contributed to its creation. However, Global Discord is not a negative, destructive book. Tucker’s main aim is to assist in the building of a new global order that is based on coherence defensible principles whilst being capable of surviving in the real world. To this end he devotes a lot of space to analysing the theory of international relations and he suggests that we need to contemplate four broad scenarios for the next quarter to half century: “Lingering Status Quo (continuing US international leadership); Superpower Struggle (the scenario most resembling the long eighteenth century’s French-British contest); New Cold War (autarkic rival blocks); and Reshaped World Order (more Vienna 1815 than Washington 1990)” (page 115).

Against this background, he moves to more specific, concrete issues. The final part of the book includes chapters on the international economic system, the IMF and the international monetary order, the WTO and the system for international trade, preferential trade pacts and bilateral investment treaties and Basel and the international financial system, and the book concludes with an eight page appendix setting out, in numbered pithy points, Tucker’s suggested principles for constitutional democracies participating and delegating in an international system. No-one can accuse Tucker of merely dealing in abstract theory!

Tucker describes his approach as “realist” in the sense that it is “not a morality-first account deriving duties, rights, and legitimation principles from fundamental, externally given, universal principles, with some kind of morality system providing ultimate foundations” (page 268). However, he suggests that his approach does not “consign moral values to the side lines” since it requires “sociability with path-dependent, problem-solving norms, which leaves something to be said about the sources or mechanisms of normativity” (page 268).

Many will criticise this approach. Some will do so on the basis that it is insufficiently “realist”. Many others, especially Christians and others with strong moral compasses, will worry that morality plays an insufficient part in it and Tucker concedes that, in his view, the West has to adopt a “live and let live” policy and accept that engagement with illiberal regimes is necessary despite a possible desire to promote a universal morality-based international order.

Tucker is not a moral philosopher and he does not engage in detail with the moral issues. However, one does not have to accept moral relativism to conclude that there is a good moral case for his overall approach. A purist approach is highly unlikely to have the outcomes desired by its protagonists and could well result in outcomes that cause much suffering, whether by resulting in war or, more likely, by preventing co-operation over issues such as pandemics, mass-migration and climate change and by stifling international co-operation and trade, with the result that prosperity declines and poverty increases. Furthermore, Tucker bases his thesis on some fundamental tenets that are, at heart, moral: the desirability of peaceful co-existence; the idea that “order is not to be sniffed at: war and instability are quite a lot worse, as is fear of them” (page 323); the need to “stake out the ground that constitutional democracies should insist on to avoid sacrificing our deep domestic norms: to remain who we are” (page 356) whilst accepting that illiberal states will remain who they are; and the idea that perfection cannot be demanded, legitimacy is not binary and “Authority can be legitimate if it is the best realistically available” (page 287). Whilst this may not go far enough for some moral purists, there is, at least a strong argument to the effect that Tucker’s overall approach is likely to produce the best realistic outcome for the world political and economic order and is thus fundamentally ethically defensible.

The purists will also have difficulties with some of Tucker’s more specific statements. In particular, his suggestion that “We need to make judgements about the past only insofar as they materially affect the present (through institutions, norms, values, embedded habits, and so on)” (page 316) will not resonate well with those who are urging ever more delving into past wrongdoings. However, the purists have never explained how their approach leads to a world in which people are able to live together harmoniously and productively. Indeed, the proponents of the recent trend in legislation in the UK towards there being no time bar in relation to the raking up of the past should reflect on whether their proposals are as ethically pure as they like to believe. For example, Tucker suggests that “it is simply no good looking back to the Gulag” or various other dreadful episodes of the twentieth century (page 316) but this is precisely what the UK Prevention of Crime Act 2002 requires: it, unrealistically, regards an enterprise that has once been tainted by crime (e.g. those that benefitted from contracts with slave labour in the Gulags or those that assisted the Nazi regime) as forever tainted.

In developing his arguments, Tucker analyses in some detail different philosophical approaches to international affairs and different concepts and models of international co-operation (e.g. the nature of international law). He largely dismisses Thomas Hobbes’s extreme “realism” and criticises John Rawles’s demand for what he regards as an unrealistically “thick” and binary (“in or out”) international order, while acknowledging his debt to David Hume and Bernard Williams.

This analysis of the philosophical underpinning of Tucker’s concepts will enhance the attractiveness of Global Discord for some more academically minded readers. However, it is the primary reason why the book is dense and, in parts, heavy going. Tucker would doubtless argue that the analysis is essential to the development of his case and this is doubtless true. However, on occasions, the reader is left with the feeling that the analysis is a bit laboured and that the language could be simpler. This is a pity because it mars an otherwise excellent and important book that deserves to be widely read.

“Global Discord: values and power in a fractured world order” by Paul Tucker was published in 2022 by Princeton University Press (ISBN-13:9780691229317). 483pp.

Richard Godden is a Lawyer and has been a Partner with Linklaters for over 30 years during which time he has advised on a wide range of transactions and issues in various parts of the world.

Richard’s experience includes his time as Secretary at the UK Takeover Panel and he is currently a member of the Panel. He also served as Global Head of Client Sectors, responsible for Linklaters’ industry sector groups, and was a member of the firm’s Executive Committee.