Economics and economic theories are both a passion and a livelihood for Paul Gambles, an expatriate Briton who heads up the MBMG Group in Bangkok. For this reason, he appears regularly on such television channels as CNBC, as an expert commentator on the day’s latest economic news.
Here, he shares his thoughts on the latest book by Australia-born economist Steve Keen (pictured above) – whose writings, Gambles admits, he has been following with interest for years.
The recent twentieth anniversary of the Asian economic crisis reminded me just how limited the information available on the Internet actually was back in the mid-1990s. Today, thanks to the steady evolution of technology that as early as 1965 prompted Intel co-founder Gordon Moore to observe that the number of transistors per square inch of integrated circuits had been doubling every year since they were first invented (“Moore’s law”), data and commentary have expanded to a degree that’s almost incomprehensible.
Yet as Robert Wilensky, another pioneer of computer science, put it some three decades later, in response to what he saw as the immeasurable volume of content being spewed out, the quality of the information on offer hasn’t improved at nearly the same rate as the amount of it: “we’ve all heard that a million monkeys at a million keyboards could produce the complete works of Shakespeare; now, thanks to the Internet, we know that isn’t true.”
Certainly there aren’t many golden needles to be found nestled in the world’s digital haystack when it comes to the field of economics.
(Which is why HM Queen Elizabeth II’s now-famous “Why did nobody notice?” question, to the London School of Economics in 2008, about what Kingston University professor Steve Keen calls “the most significant economics event of our lifetimes” – remains as valid today as it was the day she posed it.)
Australian Steve Keen was, in fact, as a few readers of this publication will no doubt already be aware, one of just 18 registered economists, out of a global total of around 36,000 (yes that really comes out as 0.05%), who actually anticipated the global financial crisis.
Knowing this, I think it’s almost impossible not to want to read his latest book, especially given that it’s entitled Can We Avoid Another Financial Crisis?
Who, after all, can resist wanting to know the answer, from one of the few people on the planet who predicted the last crisis?
I certainly couldn’t: but then, I’ve been a fan of Keen’s published work for some time.
I first came across his writings online, beginning sometime in the late 1990s; I then quickly devoured his first book, Debunking Economics: The Naked Emperor Dethroned?
Before long I found myself keeping an eye out for his latest online articles and, as the content of the Internet changed, for Steve Keen videos, which at a certain point began to appear as one of those rare golden needles in the exponentially increasing haystack of digital economic content.
I even reached out to him in person around five years ago, when looking for answers about the likely impacts of the various economic stimulus policies, adopted in response to the global financial crisis. (He replied quickly, clearly and extremely helpfully.)
Not long after this, he was the keynote speaker at an event organised by MBMG in Bangkok (where we’re based), addressing the question “WTF! What the future holds!”.
‘Not magnum opus’
Most recently, when Steve mentioned to me in passing that Polity Books would shortly be publishing his second book, Can We Avoid Another Financial Crisis?, he indicated that this would be a much smaller and less academic work than the magnum opus I continually nag him to produce, as the follow-up to Debunking.
Having now read it, I can confirm this.
However, it might be just as influential and significant, if not even more so, than if it were a weighty academic tome. Because what Professor Keen has done here with his latest book is to recognise and highlight the barriers to wider economic and financial understanding that are caused by jargon, theory, abstruse mathematical formulae, and sheer length of argument.
It would be wrong to sub-title Can We Avoid – even though one arguably might – as “debunking for dummies”, (since most of the first few chapters focus on pulling the rug out from underneath the multiple fallacies of conventional economic theory), because it quickly moves on from debunking, and it is the subsequent material which really comprises the heart of the book.
In the initial “debunking” section, Keen indulges in puncturing once and for all many of the economic myths those of us who follow his writings know that he has previously railed against – although here with the added perspective of nearly a decade since the first signs of the pending global financial crisis were beginning to become undeniably obvious to wider audiences.
The first part of Can We Avoid, therefore, ends up being, really, an explanation of just how conventional economics has failed us, and why.
In the second and meatiest part of his book, Keen proceeds to examine the global macro-economic conditions as they stand today, initially by segregating countries into:
i) Those that joined Japan in the “Debt Zombie” category as a result of the GFC, and have stagnated since then (these include the USA, UK, Denmark, Ireland, New Zealand, Portugal and Spain);
ii) those that are in imminent danger of a crisis (Australia, Belgium, Canada, China, Hong Kong, Norway, South Korea and Sweden);
iii) those that aren’t yet in danger, but soon will be if they don’t change course (Finland, France, Holland, Malaysia, Singapore, Switzerland and Thailand).
Keen concludes by examining what he says are the necessary policy actions needed to be taken to prevent a future crisis.
In my opinion, this is the weakest part of an otherwise excellent book, largely because the complexity of finding a successful formula for keeping the inherent instincts of free-market capitalism from tipping over into excess is much more difficult to condense into easily understood demonstrable thinking.
(This, it seems to me, would be the obvious preserve of Keen’s eventual magnum opus – which I’ll continue to lobby for.)
As a long-time admirer and more recently, friend of Professor Keen, I’m personally slightly disappointed that we may have to wait a little longer for his full and definitive pronouncement on what is ultimately needed to force policymakers and the greater, global Economics Establishment to change the innumerable errors of their ways.
On the other hand, knowing what we do now about Thomas Piketty’s Capital in the Twenty-First Century – a 650-pages-plus volume bought by more than 3 million people but, if reports are to be believed, actually read cover-to-cover by rather fewer – it might actually be just as well that we have this shorter, practical, easily-understood guide to what’s wrong with economics and policies to hand.
Particularly right at the moment, as a growing number of economists and “experts” seem to be tripping over one another in their efforts to be among the first to intone that the next crisis is imminent, and that it will make the last one look like a walk in the park on a sunny day.
Because unlike a lot of other economics treatises, this is a book everyone can read, and understand.
So there really is no excuse now for investors or investment professionals to get caught off guard by the next crisis, nor for electorates to tolerate the appallingly misguided policies of pretty much all the political parties out there.
(With respect to that point, Keen quite rightly casts Margaret Thatcher and Ronald Reagan as the villains of the piece, in terms of bearing most of the responsibility for the GFC. However, he also shows his political impartiality by eviscerating the economic policies of Bill Clinton with equal disdain.)
As for whether we can or cannot avoid another financial crisis – this is the main reason you’ve read this far, right? – the short answer, perhaps not surprisingly, is “yes, but…”.
To do justice to Professor Keen’s nuanced conclusion, it would be better to say that he says we can in theory avoid another financial crisis, but that it would require such a major change in mindset that, in practice, we almost certainly won’t.
Even knowing this, non-academics interested in economic or financial markets should, if they read only one book on the topic, absolutely read this one.
Can We Avoid Another Financial Crisis? (The Future of Capitalism)
By Steve Keen
Polity Books, 140pp
ISBN- 978-1-5095-1373-4 [Paperback] UK RRP £9.99
ISBN- 978-1-5095-1372-7 [Hardcover] UK RRP £40.00
This review originally appeared in the July/August issue of International Investment’s sister publication, Offshore Investment.
About Steve Keen
Steve Keen, who hails from Australia (as noted above), is Professor of Economics at Kingston University in London. Prior to Can We Avoid Another Financial Crisis?, he wrote Debunking Economics, in 2011.
He is known for having been one of a handful of economists who officially anticipated the Global Financial Crisis of 2008, and won the Revere Award from the Real World Economics Review for being the economist who “gave public warning of the Global Financial Collapse, and whose work is most likely to prevent another GFC in the future”.
Prof Keen’s main research interest is complex system models of financial instability. He has authored more than 70 articles on such topics as money creation, empirical analysis of credit dynamics and mathematical flaws in conventional economic theory.
Despite being a critic of the mainstream in economics, he is ranked as the world’s 18th most influential economist by Richtopia.
He designed the Open Source system dynamics programme Minsky, which is said to be the first programme to allow monetary models to be designed visually.
He is active on Twitter (@ProfSteveKeen) and is crowd-funding his non-mainstream research into economics via Patreon (“realistic economics for the post-crash world”).