Saturday, 12 March 2016

Book Review: 'The End of Influence', by Stephen S. Cohen and J. Bradford Delong

The End of Influence: What Happens When Other Countries Have the Money, by Stephen S. Cohen and J. Bradford Delong

First, a gripe: the book contains no footnotes or endnotes, or even a bibliography. If you want that information you have to go to the website for the book. This is irritating. I can understand why it’s done, it helps keep the book short, stops it cluttering up the page with little notes, in-text citations or having to keep one finger in the back to check a source. Despite that, though, it is more irritating to have to look up something online, particularly if you happen to come across an interesting bit of information and just want to quickly check the source before carrying on. But, anyway, with that little rant out of the way onto the book itself.

The basic premise here is that, from the period following the end of World War II, the United States became the largest and the dominant economy in the world. It had, in other words, the money which it lent out to others and which people bought in the form of treasury securities. With this money came influence. Because of the United States' position it was able to influence the rest of the world in everything from politics and economics down to culture. This is not a new phenomenon, before the United States Britain had the role. And now, with the United States on the wane, China appears to be in the ascendancy. Cohen and Delong don't use the term but what they are talking about here is basically the concept of a hegemon - to take the term from Immanuel Wallerstein - that is a leader in the world who exerts both a direct and indirect influence over it (and you can accept that point as being true without going the whole hog with Wallerstein and assume the existence of a world-system.) The power afforded to the one with the money is therefore quite powerful: they get to promote the 'good' which, as Cohen and Delong somewhat wryly note, is whatever the hegemon decides it to be. Of course what the USA promoted was largely good, democracy, liberty, rule of law etc. are all objectively speaking good things and are certainly better, politically and economically, than what was coming from the Soviet Union. Their practice of promoting in many cases left a lot to be desired, and in quite a few places was probably counter-productive (looking at you Chile and Pinochet), but that shouldn't short on the fact that it helped spread some of the ideals and that was, mostly, a good thing.
What else was promoted was the idea of neoliberalism; that is the economic idea that countries function better and become richer when their markets are freer of regulations and the government steps back and lets them function. The neoliberal 'utopia', as they call it, is one where the increases in growth and productivity have a beneficial effect on all peoples, giving more jobs and more money. There will be gaps in inequality, but the rise of inequality is offset by the overall rise that is fed into the system, a sort of Rawlsian approach to the idea where any rise in inequality makes the worse off better off than they otherwise would be. The USA promoted this and exported it to other countries of the globe; some of which took in on-board (e.g. Britain) others of which were more resistant (e.g. France), but generally speaking the ideas infiltrated in to a greater or lesser degree in one way or another. 

At this point it’s worth noting a little niggle I had: at one point Cohen and Delong make the suggestion that Britain's growth post 1945 was not so great because of the decision to nationalize a lot of industries and increase state involvement. However they later say that France's growth was very good because the state had got involved and to a larger extent than it had in Britain. They don't elaborate on this in the book, it is admirably short, but this is a passage that would have benefited from being expanded on. I suspect the line taken would be that you can do state interventions well or badly (true) and that perhaps other factors such as institutional structure, history and culture play a role (likely also true), but the failure to elaborate does make the point stick out somewhat bizarrely. 

It is also worth pointing out that whilst both authors, as far as I am aware, are neoliberals that doesn't mean they're of the 'market good, government baaad' variety that you see around. Indeed they devote a very good chapter to pointing out the many ways in which states have contributed to innovative inventions, investment and such, even noting that a country such as the USA, which is typically seen as shining example of no-government economy, intervened in a variety of ways, with the resulting invention of the internet and the Boeing commercial jet, both of which were offshoots of military research. 

The general focus of the book, then, is on the way in which the USA has lost influence as other countries have gained the money. These other countries did so, basically, through having sovereign wealth funds - that is the countries with assets and good growth (the oil-rich Arab states, Norway, China, Taiwan etc.) invested some of their surplus in both pension funds and US treasury bills, a safe deposit that will keep incurring interest for them. The result is that the US owes a lot of people a lot of money, none more so than China. This was good for the US as it allowed them to fund their own projects back home and overseas. But in a sense it’s bad as it means their influence has declined and they're also in trouble if their creditors call in the cash. This, as the authors point out, is unlikely to happen: China and the USA are locked in a kind of death embrace as neither can do without the other. China needs USA spending to stay high, so that it can continue to export the goods that drive its own growth (as China's own population does not spend a lot) and the USA needs China to keep buying its securities so that it can continue to buy things. So whilst the influence is shifting to China, and the authors both express the hope that USA can influence the direction China will take for the benefit of the world (as they argue Britain did with the USA), it’s not completely gone yet. Some kind of managed decline will be in order, so that both the USA and China can deal with their respective problems without causing a catastrophe, but what that exactly is and how it should happen the authors are, unfortunately, somewhat scanty on. 

That is perhaps a problem with the book. It describes the system very well and its history but it’s somewhat lacking in terms of advice on what should happen next or what the proposals for it should be. I get that that is not the point of the book, but it does unfortunately seem to be something that is notable by its absence. It's a shame as I would have been interested in reading a proposal for how that should or could happen. On the other hand, it is a complicated scenario and one that probably doesn't benefit from a short, or speculative, idea about how to solve it. Best leave that for the political pundits with airport lounge bestsellers to hawk. 

Overall then this is a very good and short book by two very, to borrow Delong’s terminology, sharp people. I learned a lot from it. It's an enjoyable read, written in plain English and with a good narrative style. Things are explained in laymen's terms pretty well and it has some good moments of humour to keep it bouncing along.

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