Make Books Great Again

In a topsy-turvy world marked by high drama political events such as the recent French election, the turmoil in American politics and the promise of the new government in the UK, not to mention the spectacle of the Olympics, only one event really matters – the onset of the holiday season.

My next-door neighbour, as she packed her bags, asked for a few book recommendations, which I had started to provide by text, but as that got overly lengthy, have written them down here instead (with apologies for the focus on finance and economics).

Regular readers will know that in last week’s note I tackled American politics, and specifically JD Vance, and would recommend his book ‘Hillbily Elegy’ as a text that will help us better help us understand him, and America.

As mentioned, if I were to recommend two books to him – as he ambitiously thinks of the vice presidency, I would highlight Chris Whipple’s ‘The GateKeepers‘ which explains how seventeen chiefs of staff to American presidents have marshalled their leaders, as well as Robert Reich’s ‘Locked in the Cabinet’ which is a wonderful, humorous study of how power really works in Washington. Two other books on American politics have been recommended to me, and as I trust the judgment of the friends who have highlighted them I want to pass on ‘When the Clock Broke’ by John Ganz, and ‘An American Dreamer’ by David Finkel.

Sticking with politics, there are a few ‘tomes’ worth noting for the really serious aficionados’ Robert Caro’s books on Lyndon Johnson could take a long time to read, and Ron Chernow’s ‘Hamilton’, which I would class as a must-read. Crossing the Atlantic, in a more gossipy sense, I often recommend Chip Channon’s ‘Diaries’, and Alan Clark’s ‘Diaries’ is a more tawdry follow up. In a more modern setting, Rory Stewart’s ‘Politics on the Edge’ is decent.

In my experience, the world of finance has been badly neglected by writers – fiction and non-fiction, and it might be that very few people with a literary bent are tempted by finance, and of course, fewer bankers can write well. There are a few exceptions – William Cohan (I enjoyed his book on Lazard, ‘The Last Tycoons’)), Michael Lewis (e.g. Liar’s Poker), Amor Towles – who spent most of his career in investment management but emerged sane enough to produce the exquisite ‘Gentleman in Moscow’, ‘Rules of Civility’ and his latest book, ‘Table for Two’; which I have bought and squirrelled away for later in August.

Another writer in this rarefied group is Irish writer Aifric Campbell, who worked in a very senior role in the City, and has produced a number of books – of which ‘The Lovemakers’ is a must read for anyone with an interest in understanding how AI driven robots will interact with humans.

Some of the more interesting books on finance relate to deal making in corporate finance and private equity – ‘Barbarians at the Gate’ was perhaps the first blockbuster here, and my private equity friends have also flagged ‘King of Capital’ (David Carey and John Morris) which sketches the rise of Blackstone and the private equity industry.

Another asset class that is captivating is art, and here Don Thompson’s – The $12 Million Stuffed Shark – The Curious Economics of Contemporary Art’ is fun.

There is a useful set of books that link the economy to changes in society, and vice versa and notable recent books here are ‘Finance and the Good Society’ by Robert Shiller, and ‘Ultra-Processed People’ by Chris van Tulleken. In this field, James Scott, a highly accomplished social scientist, died last week and of the books of his I have read ‘Seeing Like a State’ is a very good illustration of the collision of state institutions with social complexity. A not unrelated and more entertaining take on this is William Newman’s ‘Things are so bad they can’t get worse’, the story of the institutional collapse of Venezuela.

Finally, I am stashing a few books away for the holidays, Yoko Tawada’s ‘Memoirs of a Polar Bear’, ‘Le Barman du Ritz’ by Philippe Colin, I have pre-ordered Marietje Schaake’s ‘The Tech Coup’ and for old times sake a few Agatha Christie novels. In addition, my wife tells me that Francois Mauriac recommends the biography of Leon Trotsky, which the Marxist society has helpfully put online here.

Have a great week ahead,

Mike

JD Goes to Washington

I have twice shared a stage with J.D. Vance, which at the time of writing puts me one ahead of Donald Trump. On both occasions, Vance’s book ‘Hillbilly Elegy’(I managed to get a signed copy, for my mother-in-law) was seen as offering people a glimpse as to why working class America was switching their traditional allegiance from the Democrats, towards what they perceived to be ‘system-smashing’ politicians like Donald Trump. Indeed, to my own reading, a large section of Irish-America has recently made this political journey.

I thoroughly enjoyed Vance’s book, had widely recommended it, and would continue to do so. He has had a fascinating life, which I am sure will get ever more interesting. Somewhat ironically given the Trump political program, Vance’s success in life is testament to the role of institutions (US Marines and education (not unlike Barack Obama)) and in my view is an argument for greater government spending on education and more open access to elite education in the US.

When I spoke (at two separate conferences) with him, my unkind thought was that he expressed himself better – more thoughtfully – in writing than in the spoken word. That seems to be changing, and Vance has clearly crafted an ability to provoke. Much has been made of his intellectual journey to the extreme right of American politics, something that has become the norm as the Republican party has become shattered by Trump (a contemporary of mine – an elite soldier and former governor – has also veered off to the extreme right). As a result, the press is full of speculation on Vance’s views on the dollar and Ukraine.

Vance is in many respects the opposite of Trump in terms of his life story – he started poor, became a soldier, ‘pulled himself up’ through education and has now converted to Catholicism (thanks in part to the Dominicans). Trump had a privileged upbringing, disdains learning and the military (‘losers’), and could not possibly be more irreligious.

Curiously, the Catholic Church in America, which is much more conservative than that outside the US, appears to be attaching itself to the coattails of the Trump movement, a tactic that helps to explain why it is the largest, oldest institution the world has known.

Vance may now reflect on the role of vice-president, and what this will mean for him. In general, it is a political graveyard, populated by token political players. That Kamala Harris has not carved out a serious role in American public life is testament to this. There are, however, two examples of very effective vice presidents – George W Bush, who was more like a prime minister to Ronald Reagan, and Joe Biden, whose experience and vast range of political relationships meant that Barack Obama was tethered to the political establishment.

In this context, Vance, the critic of elites, is at an interesting point. Since ‘Hillbilly’ was released, he has been mixing more with the American elite, in the technology, policy and venture capital worlds. If he enters the White House with Trump, he will come up against the full complexity of the American power machine.

Here I recommend Robert Reich’s excellent book ‘Locked in the Cabinet’. Reich, a professor of labour economics, was appointed Labor Secretary by Bill Clinton, and the book recounts how his optimism and idealism left him outmanoeuvred by those who ‘really ran the world’ (Robert Rubin).

Another book that I know Vance has, is Chris Wipple’s ‘The GateKeepers’ which is. fascinating study of seventeen chiefs of staff to American presidents. Trump notoriously went through several chiefs of staff, but in many cases the chief of staff can be the most important player in an administration (Jimmy Baker is the most often cited example).

So, for all the clamour around Vance, he might well – like Robert Reich – find himself sidelined by the team around Trump. With the European press over-obsessing about Vance, this is where the real risk lies. The first Trump presidency was chaotic. The second will come armed with a mission to transform America, potentially along the lines of the Heritage Foundation’s Project 2025’. I will devote more time to this, but in short it is an aggressive plan to re-make American government (politicised), society and the foreign policy. As a recent article in Foreign Affairs put it, this will be an ‘Imperial Presidency’, shorn of the constraints that have shaped American public life for the past two hundred years.

To Europe, the US under Trump will look more like China – driven by a single, imperial leader, obsessed with the viability of domestic industry, slow to help allies and much more transactional in foreign policy, and will use financial policy in a more selfish way. Consistent with the end of globalization, there will no longer be an effort to transmit American values, a la George W Bush and Bill Clinton.

In short, it will be an America that few of us will recognise.

Have a great week ahead,

Mike

The End of Globalization

In last week’s note(s) I focused a lot on France, to the exclusion of mentioning other debates that are live around the world. One that preoccupies me is that of globalization – which for most readers will seem so esoteric and distant, that they may rightly care little about it. It is in my view worth stopping to think about the direction of globalization – given the way it has shaped the past thirty years. I sense that as globalization crumbles, we are already starting to miss its notable characteristics – peace, low inflation and international prosperity.

Three things happened last week that have globalization, or its demise, back on my mind.

First at the Rencontres Economiques, I had a row with a former German economic minister who claimed that a new wave of globalization was about to start. This claim seemed fanciful, not least that the German economy is cleaven between a reliance on China, a need to be better aligned with the US, a disastrous energy policy and a fascination with Russia that has still not been broken by the war in Ukraine.

Granted that globalization refers to a world that is interdependent and interconnected, it is wrong to hold that we live in a globalised world when dependencies are shifting (the US and Europe want to be much less dependent on China for instance) while the US and China barely have any political and policy connections, and are, in the minds of many, about to embark on war.

The second encounter that set me thinking about globalization was that I ran into Prof Barry Eichengreen, the international authority on foreign exchange, financial flows and who was passing through Europe on his way back to the US from India, where he had delivered a paper entitled ‘Globalization and Growth in a bi-polar world’. Whilst I believe it impossible to enjoy globalization in the context of a world that is severely divided, I was much more careful to pick an argument this time, given Barry’s great mind.

In the paper he charts how trade (relative to GDP) – one of the tenets of globalization – has faced severe headwinds but remains at high levels and has changed course somewhat (trade and investment flows have pushed out to countries like Mexico and Vietnam). Capital and financial flows have retraced even more, and the Eichengreen paper details China’s efforts to deepen its financial markets and boost the use of its currency (though its political economy is a major obstacle to this).

The Eichengreen paper, based largely on what we see in trade and capital flows, paints a picture of the contours of globalization as we have come to know it, as remaining in place. However, I would add to the argument other metrics of globalization – the flow of people, the flow of tourism and overseas education, the flow of ideas and of political and diplomatic discourse between nations. On many of these criteria, walls are going up, and it is impossible to speak of there being a consensus on one global system or way of doing things. Markedly, most of the institutions of the globalised world order (IMF, WHO, World Bank to name a few) are defunct.

My argument is that globalization is not to be confused with the ongoing growth of trade, or the business cycle, it is a very specific form of interconnectedness of nations and regions that is breaking down. It started with the fall of communism, and mostly likely died with the snuffing out of Hong Kong’s democracy in 2020.

This idea was part of a great discussion I had with Chris Watling of LongView Economics as part of their podcast series. LongView is perhaps the best independent markets and economics research firm, and one of the elements they tend to capture very well is the idea of (short and long-term) cycles of risk appetite in markets and economies. In that context, the idea that we are passing from one long-running economic ‘regime’ (globalization, to something else, was apt.

The Interregnum will be a period of breaking (down the imbalances that have built up with globalisation such as climate damage and debt) and making (new world institutions and the integration of technology into economies and societies). It will be a noisy, chaotic process and its success is not yet a given.

For the moment, the very least we should do is accept that globalization has passed and start to think about the future.

Have a great week ahead.

Mike

The Contagion of Chaos

It is holiday season in France, and not wanting to miss out, we have headed down to Aix en Provence for a long weekend. But, it’s not all fun and games, as there is the excellent ‘Rencontres Économiques’ to attend. The Rencontres is where the French establishment come to discuss the state of the political economic world, in the sun (think of it as Roland Garros for economists). For their troubles, the French have to listen me preach to them on democracy, which is timely to say the least.

The weather was too good and the company so interesting that it would be unfair to define the mood as ‘fin de regime’, but with the second round of the election happening on Sunday 7^th, the sense is all about ‘rupture’, and it is hard to believe that there can be a positive scenario for France in the next year or so. As a quick aside the two major pre-occupations of the speakers were the manipulation of social media content (by Russia and other actors) and a sense of frustration with the phrase ‘America innovates, China copies and Europe regulates’.

In this week’s Irish Times, I wrote on the implications for Europe of Emmanuel Macron’s demise. I believe that he is finished as a political force, and the implications of this will ripple across Europe.

Macron as a ‘lame duck’ will no longer carry as much sway as he did in Europe, and from the point of view of countries like the US, may no longer be regarded as the prime mover in EU politics – in that respect Tusk, von der Leyen, Kallas and Meloni are relative winners. The other risk is that Germany in particular finds it hard to cooperate with a RN led government if that transpires, and this will also change the dynamic in EU politics.

Domestically, Macron has twice remade the French political landscape, first creating and energising (but not rooting) a new centre, and then recently, destroying that centre. France now faces an illiberal form of democracy, perched on the very unstable pillars of the far-left and far-right.

The upshot is that the Rassemblement National will be the largest party in the Assemblée, menacingly close to a majority, and now part of the political establishment. On the other side, stepping over the bodies of the few remaining members of the parties of the centre, is an inchoate far-left grouping, with few realistic ideas as to how to improve France’s economy or mend its society.

As such, the likely outcome of this Sunday’s election is a technocratic government in the context of a constitutional crisis. In recent times, France has had three cohabitations (Mitterand-Chirac, Mitterand-Balladur, Chirac-Jospin) but never had to assemble a technocratic government, in the same way that Italy has managed for example (Mario Monti and Enrico Letta were interesting speakers at Aix).

French media is now increasingly featuring constitutional experts opining on how the constitution might steer the formation of a technocratic government, and in some cases, also speaking on the future of the president in the context of this unprecedented political crisis.

The French constitution was never designed with this kind of exercise in mind, it was crafted to form majority governments. Therefore, forming a caretaker technocratic government is an experiment and I suspect that there will be a lot of behind the scenes debate as to who might be best to lead such a government – if that is to be the case.

Formally, the process is led by the president, but with Macron damaged by the detonation of his own political grenade, this now becomes more complicated. Indeed, it will be interesting to see how he can recover from this. France has a difficult year ahead, a constitutional crisis likely punctuated by unrest and the risk of an economic shock.

With a sense of calm and normalcy now finally returning to the UK on this momentous weekend, there is a sense that Macron has caught the ‘contagion of chaos’. He has made an ill-considered decision, in the manner of David Cameron or Rishi Sunak.

If France is having its ‘fin de siècle’ moment then the UK is turning the page. Thursday’s momentous election has swept the Tories out of power, led to a recovery in the Lib Dem vote, sanctioned the Scottish Nationalists and the unionists in Northern Ireland. A major positive was a rise in the number of female MPs (41% of parliament). While Labour only received a third of the vote, Keir Starmer has a huge stock of political capital in parliament.

Like many others I have caricatured him as steady and boring. My sense is that Labour will remain so for the foreseeable future, until they are familiar with the levers of power.

The striking, first task of Keir Starmer will be the NATO summit (July 9-11) where I expect that he will re-affirm the UK’s commitment to its existing military-security goals, especially on Ukraine (compared to the Tories the one area that may change is Israel/Palestine where there will be more emphasis from Starmer on finding a negotiated peace). Notably Starmer will have the luxury of being the most popular of the major NATO country leaders, and one with a fresh start.

From a foreign policy point of view, I expect him to stress better relations with the EU and Ireland specifically, but it is far too early to expect any initiative on trade. I also expect that the tenor of early policy announcements will be focused on the reform of ‘public life’ (House of Lords, corruption).

If he is really daring, he might visit France.

Have a great week ahead,

Mike