Saturday, August 17, 2019

My Amazon Review of Shlomo Avineri's "Karl Marx: Philosophy and Revolution"

A False Prophet

Hebrew University political scientist Shlomo Avineri has written a sympathetic biography of Karl Marx under the auspices of the Yale University Press’ Jewish Lives series. Although Marx came from a family of Rabbi’s, he was not Jewish. His father converted to enjoy the benefits of post-Napoleonic Prussia.

Instead of portraying Marx like his all too many dogmatic disciples, Avineri’s Marx is not of the one size fits all school. Hence in witnessing the advances in democracy in England and later on the continent his Marx become more open to realizing his working class dreams through the ballot box rather than revolution. Hence he learned from the failures of the 1848 revolutions and contrary to Engels’ later writings, he was critical of the Paris Commune. Further he was very ambivalent about the prospects for revolution in Russia, Indeed aside from 1848-49 Marx never directly participated in revolutionary activity; his role was to be theorist studying the inner workings of the capitalist system.

He rarely discussed Jews and Judaism. Early on in 1844 he associated Judaism with the worship of money in a typical anti-Semitic trope. Nevertheless in 1854 in his dispatches on the Crimean War to the New York Tribune he noted that Jerusalem was majority Jewish. This was 40 years before the establishment of Zionism as a political force.

For someone so focused on the working class Marx never lived among, worked with or studied directly real factory workers. He got his insights from the works of Engels and book learning. In a very real sense he was someone who loved humanity, but didn’t really like individual people; not too different from many liberals today.

What Avineri doesn’t touch on is that fact that in order to equalize society, the state doesn’t wither away, but rather it requires brute dictatorial force to keep people equal. Nevertheless for those readers interested in a short biography of Marx Avineri has offered up a very readable book.    

Sunday, August 11, 2019

My Amazon Review of Donald Sassoon's "The Anxious Triumph: A Global History of Capitalism 1860-1914"

Global Capitalism 1.0

University of London history professor Donald Sassoon could have written a great book for the lay reader describing the first global epoch of capitalism. Unfortunately he took all of the drama out of one of the most dramatic eras in world economic history. Perhaps I am being too harsh because of my amateur status, but his 768 page book, although loaded with information, is a long and difficult slog.

Sassoon’s book lacks the drama of Marx’s 1848 “Communist Manifesto” where praises how the rising capitalist bourgeoisie was transforming Europe. Where Marx showed excitement Sassoon is plodding. Much later Keynes’s “Economic Consequences…” highlights what was available to England’s pre-war bourgeoisie with the mere dialing of a telephone (no telephones in 1860). It would have been nice if he described the life of the bourgeoisie and the working class of 1860 and compared it to that of 1914. The world changed for better for both classes. It would have helped if Sassoon studied Robert Gordon’s “The Rise and Fall of American Growth.” Remember that the first global age began with the telegraph and the steamship and ended with the telephone, electric lights and the internal combustion engine, all three invented around 1879. It was those three inventions created under capitalist auspices that changed the world.

For a history of capitalism, very few capitalists are mentioned. I was hoping to learn about the methods and vision of the European and Japanese capitalists who built their societies, but came away disappointed. The author describes the rise of capitalism in a host of countries, but he doesn’t put flesh and bones on it. He seems to be more interested in the political leadership than the rising capitalist class.

He further sets up a straw man by arguing that the neo-liberals of the 1980s harkened back to a capitalist nirvana of the 1860s when government’s role in the economy was small. He rightly states that government played a major role in capitalist development everywhere and practically all neo-liberals knew it. Sassoon favored more government involvement and he appears to be very sympathetic to the German protectionist of the 1840s Friedrich List.

Where Sassoon is good is his discussion on the huge profits Britain generated from the sale of opium to China and that colonialism, especially in Africa, wasn’t all that profitable for Europe. Most trade took place among the more developed countries. He also highlights that much of 19th century America was built with European capital.

My sense is that only the nerdiest of lay readers will find this book of interest. There is a lot here but it takes time to plow through.

Wednesday, August 7, 2019

My Amazon Review of James Grant's "Bagehot: The Life and Times of the Greatest Victorian"

The Oracle of Lombard Street

I knew Jim Grant in the late 1980s and early 1990s when he was chronicling the commercial real estate debacle of that era is his eponymous “Grant’s Interest Rate Observer”. Grant, the author of several books, has turned his excellent wordsmithing to write the biography of the mid-19th Century editor of the “Economist”, Walter Bagehot. During the financial crisis of 150 years later, Bagehot’s “Lombard Street” dictum during a crisis of lending freely at a penalty rate against good collateral was widely quoted by central bankers, most notably by the then Fed Chairman Ben Bernanke. According to Grant Bernanke got the lend freely part right, but it was at low rates against less than stellar collateral.

Grant’s Bagehot is very impressive. A polymath country banker who married James Wilson’s daughter, the founder of “The Economist.” On Wilson’s death Bagehot succeeds Wilson as editor. From that post Bagehot wields great influence in Britain’s Liberal Party becoming a key adviser to William Gladstone who would become Chancellor of the Exchequer and later Prime Minister. Bagehot cut his teeth during the 1866 Overend Gurney bank failure that froze the London money market, then the largest in world. London had three times the deposits of New York and eight times the deposits of Paris. In the teeth of the crisis the Bank of England violated its statutes and intervened in the market to stop the bank run.

In 1873 Bagehot wrote “Lombard Street,” his primer on central banking. Grant is sympathetic to his main critic Bank of England Director Thomson Hankey, who argued that to have the central bank be the lender of last resort you create an environment that large banks are too big to fail. We live with that to this day.

There is far more to Bagehot than central banking. He wrote “The English Constitution” and commented on all sorts of developments including his belief that the South would win the Civil War. Grant has written a worthy biography of this truly eminent Victorian.

Sunday, July 28, 2019

My Amazon Review of Tom Nicholas' "VC: An American History"

An Ode to Risk Taking

Harvard Business School Professor Tom Nicholas adds some new insights into the history of venture capital in general and the role of the Silicon Valley venture capitalists in particular. The story has been told many times before, but Nicholas adds some new insights. Especially interesting is his view that the 19th Century whaling industry operated in a similar manner of venture capital today where specialized agents booked the captains and the ships and received funding from investors willing to take a chance for a big payoff. Just as today the agents were experts in their field and were very active in recruiting talent and what is most interesting the level and pattern of returns in 19th Century whaling was very similar to that of the recent history of venture capital.

Nicholas also discusses the all-important role of government, first as a purchaser of high technology equipment and second in creating legal structure that enabled pension funds to invest in venture capital and allowing carried interest gains to have favorable tax treatment for the venture capital promoters. He also discusses the now forgotten role of government sponsored small business investment companies that both created an interest in venture capital and developed executives who would go on to bigger and better things.

He is quite good at describing the early roles of Georges Doriot’s American Research and Development who hit it out of the park with its $70,000 investment in Digital Equipment (later worth $350 million) and such Silicon Valley greats as Arthur Rock and Tom Perkins. He highlights the key mantra of the Silicon Valley venture capitalists as “people, technology and markets.”

Where he goes astray is that either some of his numerical examples of the gains achieved by the venture capitalists versus the market as whole is wither not clear or may even be wrong. He also shines on the huge investor losses taken by public investors as a result of the 1990’s bubble. The VC’s were hardly innocent in this process. Further he doesn’t really go much beyond 2000 to gives us a picture of where venture capital is today. To me it seems most VC’s are chasing asset-light software and although they talk a big game on green technology they are not really there. Why? Green technology especially carbon capture is extraordinarily capital intensive. Lastly Nicholas has to make his obligatory pitch for more gender diversity in the industry.

Simply put Nicholas has given us a good history, but it could have been better.

Thursday, July 25, 2019

My Amazon Review of Tobias Straumann's "1931:Debt, Crisis and the Rise of Hitler"

Annus Horribilis

Although most scholars put the focus of the Great Depression on events in the United States, Swiss historian Tobias Straumann turns his keen eye on the role Germany had in making the Great Depression “Great.” In fact the 1932 annual report of the Bank for International Settlements noted “In the circumstance of the German problem- which is largely responsible for the growing financial paralysis of the world – call for concerted action Governments alone can take.” To Straumann there is a straight line from the May 1931 failure of the Credit Anstaltt, to Germany suspending convertibility in the wake of bank runs in July, to Britain abandoning the gold standard in September which was followed in September and October by the Federal Reserve raising its discount rate for 1.5% to 3.5% in the teeth of the depression.

He tells part of his story through the eyes of Viennese economist and Swiss banker Felix Somary. As early as 1926 Somary was warning about the unsustainability of the reparations regime establish after the Dawes Plan and as the 1920s roared on he became even more bearish. Unfortunately to be right early is sometimes viewed as being wrong. Trust me, I have experience with this. As a result his warnings went unheeded, even from Keynes.

Although the title of this book is 1931, it really starts in 1930 with the adoption of the Young Plan which modestly reduced German reparations, but made the payment structure more rigid. The plan was predicated on a growing world economy that was quickly turning into a tailspin. From the outset both Hitler and the Communists became severe critics of the plan.

The man caught in the middle was German Chancellor Heinrich Bruning, a centrist. Straumann is more sympathetic to Bruning than many historians. Simply put he had limited options and was hemmed in by the gold standard which left him only one choice, austerity. As a result in the September 1930 elections the Nazi Party received 19% of the vote and becomes the second largest party in Germany. Although we now think of Hitler with his militaristic racist screeds, in 1930 he was offering very serious criticism of the Young Plan in his speeches. Hitler’s electoral gains terrify foreign investors leading to a run on Germany’s gold reserves. Put bluntly, Bruning was in a box and the countdown began.

By 1931 the downward spiral continued with even more austerity coming from Bruning. To maintain domestic popularity Bruning plays the nationalist card in returning the Rhineland to German control and proposing a customs treaty with Austria. Of course the French go crazy and that limits the availability of banking credits from France. Hence both German and French politicians were prisoners of their own electorates. The lesson here is that international agreements must have domestic support in order to work.

After the July 1931 banking collapse the way was open for Hitler. In the October election the Nazis receive 37% of the vote and become the largest party in Germany. With the Communists achieving 15% of the vote, the two extremist parties work hand in glove to bring down Bruning. And the rest as they say is history.

Straumann has written an important history that should be required reading in the capitals of Europe. Although the EU succeeded in Greece, at least for now, it might not be so lucky with Italy. It should heed the lessons of “1931.”

Wednesday, July 24, 2019

My Amazon Review of Tim Boverie's "Appeasement: Chamberlain, Hitler and Churchill and the Road to War"

Chamberlain in the Dock of History

In his first effort writer Tim Bovererie has written an extraordinary narrative history of the machinations of Britain’s ruling Conservative Party to first appease Hitler and then gradually turn toward a full confrontation with the evil dictator. Boverie is not a professional historian and is probably under 30 years of age, yet his book jacket has encomiums from such stalwarts as Margaret Macmillan, Ian Kershaw and Max Hastings. They are all deserved.

Although the story has been told many times before, Boverie brings us fresh sources that go to the motivations of the major players. He puts us in the room with Chamberlain, Halifax, Eden, Baldwin and of course, Churchill. The villains of the piece are Prime Ministers Neville Chamberlain and Stanley Baldwin. Baldwin ignored the peril of Hitler and while Chamberlain recognized the danger he simply did not want to fight. He truly was the architect of the appeasement policy thinking against all logic that Hitler could be reasoned with. By failing to heed the warnings of Churchill he sentenced Europe to the abyss of World War II.

One of the things I learned from Boverie’s book is that Anthony Eden was not the anti-appeasement hero I thought he was. In reality he was kind of a wimp. I didn’t realize that Hitler thought the abdication of Edward VIII was a big loss. In fact he was part of coterie pro-Nazi anti-Semites within the upper strata of British society. That along with their anti-communism made it very difficult for Chamberlain to make a deal with Soviet Russia.  

On the other hand, I would have liked to know more about how the Labour Party switched from its pacifism of the early 1930s to its full-throated opposition to Hitler by 1939.  This turnabout enabled Labour to become partners with Churchill in the unity government of 1940.

With this very well written book Boverie has proved himself to be a historian of the first order. I wish him well in his future endeavors.

Tuesday, July 23, 2019

The Gang of Four Insurgency within the Democratic Party

Although the press refers to them as “The Squad”, I refer to Congresswomen Ilhan Omar, Alexandria Ocasio-Cortez, Rashida Tlaib and Ayanna Pressley as “The Gang of Four.” For those of you too young to remember the original Gang of Four were leaders, one of whom was Mao’s wife, of the Maoist Cultural Revolution in China that lasted from 1966-1976 which nearly destroyed the Chinese economy as they sought to return to the Maoist ideals of the 1930s.  However within a month of Mao’s death all four of them were put on trial for treason.

Although the congresswomen are far from being rabid Maoists, they are serving a similar function in the Democratic Party as they seek to purge the Democratic Party of its more moderate members by first publicly attacking them and then by promoting primary challengers to incumbents. This is a formula for electoral defeat because the country as a whole is far more moderate than they are.

Just like the 2018 congressional elections the 2020 election will be won or lost in the suburbs and the more the Democratic Party is identified with The Gang of Four the easier it will be for Trump to win re-election  and for the Republicans to regain control of the House. Thus there was a method to Trump’s racist madness in calling for the Gang to go back to where they came from. While it is important to support the Gang as citizens it is even more important for the Democratic Party candidates to disassociate themselves from their ideas. Simply put, the “loony left” is not going to win in 2020.