St Vince calm in the Storm

3rd May, 2009

The Storm: The world economic crisis and what it means – Vince Cable Atlantic Books £14.99
Review by Tim Harford for Management Today

The chief treasury spokesman for the Liberal Democrats occupies a curious niche in the political landscape. At one time scorned as ‘Dr Gloom’ for his warnings of a debt crisis and a property bubble, Vince Cable has now acquired cult status. One sketch-writer depicted the ‘in-Vince-able tour’ and a crowd of screaming groupies, ‘the Vincettes’ (I should say I am something of a fan myself, having briefly worked for Cable while he was chief economist at Shell.)

Journalists bewildered by the credit crunch developed the habit of turning to Cable, not for a political soundbite but for a neutral and straightforward explanation of what had just happened. That’s exactly what The Storm offers.

The most striking fact about the book is that it is not a political tract; indeed, it betrays few traces of having been written by a politician at all. References to Cable’s political activities are fleeting and, with those excised, I’d defy anyone who does not already know Cable’s reputation to read the book and identify the author’s profession. It seems to be far more the work of an academic with a deft touch than of someone who wants to be chancellor of the exchequer.

All this is a testament to Cable’s intellect and his distaste for cheap populism. Still, at times the neutrality is so studied that one longs for a bit of political knockabout. After pointing out the odd situation whereby the poor Chinese lend money to the rich Americans, he comments: ‘The explanations for this strange phenomenon are several and tend to vary according to whom the author is seeking to blame.’ Just so, yet Cable does not presume to adjudicate. Readers seeking enlightenment about global financial imbalances should be pleased; potential Liberal Democrat voters will be none the wiser about what they’re voting for.

Where Cable espouses political views, they are a study in moderation. He worries about protectionism and anti-immigrant sentiment, and argues that we shouldn’t throw out the open-markets baby with the banking-system bathwater. He expresses these concerns in the most impersonal terms imaginable. ‘There is a middle position – broadly that of the author – which acknowledges that financial markets are subject to repeated bubbles, panics and crashes, and maintains that they should not be confused with markets in goods and services within and between countries. The worry some of us have is that legitimate arguments for re-regulating financial markets become confused with a generalised movement towards dirigisme.’

Even if Cable worries in the third person, he is right to worry. Yet lip service is paid to such views daily, by politicians of all stripes.

The Storm, then, is best judged not as polemic or manifesto but simply as a piece of analysis. The subject is the post-Lehmans world economy, from the credit crunch to the rise of China. The book is wide-ranging, informed, balanced, calm and well-paced. The logic is always clear and the explanations are cogent, even if the writing is not especially gripping. Cable has often been ahead of the curve, but publishing a book in the teeth of a fast-moving crisis does not allow him that position here. Yet his analysis seems up-to-the-minute.

Despite the time he spent sketching possible futures in Shell’s scenario team, Cable’s book is written almost entirely in the past tense. We are told what has happened so far and what experts think about it. There’s not much about what should happen and less still about what will happen, even in the final chapter entitled ‘The Future: A road map’. Such modesty is becoming, but a little disappointing.

The Storm covers the credit crunch in full, explaining what went wrong and sketching out possible remedies. This slim book also devotes about half its space to other big issues in macroeconomics today: the oil shock, food prices, the role of China and India, and the risk of a political backlash. In each case, the argument is solid and wide-ranging.

The best chapter picks apart the way oil markets work. It deftly covers the history of oil, explains the theory of ‘peak oil’ and offers reasons to be sceptical about it – and skewers the popular notion that speculators were responsible for the price spike of 2008. Right on all counts, and a superb primer for anyone wanting to understand this unglamorous but vital slice of the world economy.

This book will not surprise those who have followed the crisis closely, but it should find a receptive audience of people who feel the world economy has changed faster than they can follow, and who are willing to read carefully and think hard to figure it all out. They could do a lot worse than read The Storm.

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