Book Review: The Power of Capitalism

In a break form our usuel dirge of Brexit non-news, I wanted to share a book review.

As you may expect from the title of the this blog, I thoroughly enjoyed reading this book. For me as an amatuer armchair historian this book really hit the mark. Rainer Zitelman is a historian rather than an economist or political scientist. 

In the book he start by giving over several chapters the real world examples of how Capitalism has worked across the whole worked in the last century or so. However, in a clever touch he selects pairs of countries that are obviously comparable where possible to show the distinction between the impacts on an economy of socilaist or capitalist policies. 

Easy to understand and contrast examples include North and South Korea as well as West and East Germany. There is no need to hold back an the ample statistics show for themselves. East Germany lost nearly 1/3rd of it population escaping to the West during its short lifetime. North Korea became the unlovable basket case it is today whilst South Korea - with no natural resources bootstrapped itself to be better than many Western European countries.

Interestingly when discussin China's move to economic Capitalism and also South Korea's, there is plenty of room for adaptation and moderation. Korea had and has the Chaebol families and orgnisations, China the communist party and State Owned Enterprises. Nonetheless, by using the simple manta of free markets, low taxes where possible and reducing state interference in the economy the largest transformation ever in world history was completed. All without democracy impinging too much and I found it left me wanting to explore more about how the different approaches to capitalism would work out in the long-term. For many years, neoliberals have tied capitalism to democracy saying you need both to survive, but the world shows us there is little inherent link as long as the rule of law around private assets is maintained. 

50% of people have been lifted out of extreme poverty in 50 years. The world has immeasurably improved where capitalist policies have been followed. The section on Africa, showing the dea hand of aid has likley held it back is also interesting, if less controversial than a few years ago. 

The last chapters on why intellectuals always favour socialism (envy, for the mot part) is useful if not that helpful. 

Overall all though, it is a superb read, easy to digest and full of uncontroversial statisctics that remind one of why capitalism is so succesful and why socialism is doomed to fail. There are other books that can get into the policital analysis of why Socialism or Capitalism appeals to human nature etc. For this book, it is more than enough just to historically explain the sucess of capitalism and why we must defend it and nuture it today. 

Weekend Reading: A Strong Capitalist Recommendation

A couple of weeks ago an old mate of mine (from *ahem* Enron days, since you asked) let me know he was putting out a book - on investment, trading, entrepreneurship, business in general, gambling - and Enron.

Now of all the stuff written about Enron - and that's a few forests' worth - not a single book has come from a true Enron insider.  The omerta has been 100%.  (And before anyone cites Sherron Watkins against me, she wasn't very deep inside at all - double meaning intended.)

So I was quickly into Kindle for Lucky and Good: Risk, Decisions & Bets for Investors, Traders & Entrepreneurs, by John Sherriff.   (At mates' rates it was free, but it'll only be pence anyhow.)  Sherriff was a true Enron insider, as well as being the most creative, energetic deal-maker I have ever met, with the best intuitive feel for risk / reward trade-offs   - and that's from a cast of very many fine dealmakers at the Crooked E.  He's a damn' good poker player, as well ...

Sad to relate, though he peppers the book with Enron stories to illustrate his many excellent points he tells nothing about the scandalous stuff: so the true insiders' book is still to be written.  But that's the only disappointment in an otherwise truly first-class read.  I can't recommend it highly enough for the typical C@W reader (and not just for the traders and investors), who won't just enjoy it tremendously but will probably do better business having done so.  There are so many powerful - and practical - points made, all of which are IMHO entirely correct, on critical issues such as market pricing, liquidity, how to think of sunk costs, macro-trends, marginal advantage, fast feedback, long-term vs short-term, finding free options, understanding what your long and short positions are: and he goes as far as it's probably possible to go in helping people learn to be commercially creative.

In summary, the whole Enron arsenal.

Even better, it's written with a very light touch - for an American (if I dare say this) Sherriff has a very Anglo-oriented sense of humour.  (He's complimentary about several aspects of our regulatory and legal systems as well.)

And he's brutal on the subject of the legal profession ...

Whenever I find myself teaching on business-related topics, students always ask what they should read before attending the course.  I've never before had a single book to recommend, but now I do.

ND

Weekend post - Extreme Money Book review

 

 Satyatjit Das has delivered an epic work here. This book has not even taken me very long to read, which considering ho little time I get to myself is quite impressive.

The book is a tour de force through the history of modern money, but with the focus being on the 'financialisation' of the last 30 years. The book is split into four parts and each has a different angle.

Das is in many ways writing a text book and he tires to turn it into a readable story. For my money he succeeds even though the subject is the complex world of finance and he is delving into the workings of derivatives, securitisations, the sub-prime crisis, economic theories of money.

Whilst readable in its own right due to the elegant way he describes such complexity, Das lightens the tone with a cacophony of quotes from everywhere.Although I can imagine some will find these off-putting, they do help to deliver insight and comparisons. Das' own insights are clear and incisive, someone who has worked deeply in the industry and has the clarity denied to us as outsiders:

"Complex chains of transactions allowed risk and debt to move from a place where it was observable to places where it was hidden and unregulated"

"Short-term profits were pursued at the expense of risks that were not evident and would only emerge later. Financiers entered into increasingly destructive transactions, extracting large fees and leaving taxpayers to cover the cost of economic damage"

Perhaps to those who have followed the financial world of the past few years, this book will seem like something of a collation and with the same prognosis of a dark future as can be found elsewhere. But if you really want to understand the pointlessness of hedge funds, why bankers don't deserve their bonus' and why the Government's are so powerless this is a great read and text book background.

Das wrote in 2006 a book which predicted the credit crunch as it saw the issues in leverage and derivatives; this book sees the future as the Government try to reset the same system for as long as they can. It is not a book that will make you feel at ease with the world, but at least it is a cure for naivety.