The Edward Luce Review (Financial Times)

Edward Luce wrote a compelling review of BALANCE in the Financial Times.  He offers a full spectrum of adjectives, describing the book in turns as readable, data-rich, instructive, original, bizarre, eccentric, and entertaining.

Which brings me to the book’s two chief problems. The first is the history, which, while engagingly rendered, is too obviously retrofitted to the present. The authors’ choices tell a story in themselves. Rome, dynastic China, imperial Spain, the British and the Ottomans make sense. Each was the great power of its day. But the inclusion of Japan, the European Union and California is eccentric. The EU and California have no greater claim to having been great powers than Sacramento or Strasbourg have to being imperial cities. By including two relatively high tax and politically dysfunctional entities, Hubbard and Kane show their hand.

In response, I’d counter that selecting the case studies was one of the biggest challenges we faced, and one we took seriously. To the charge of selecting cases that would help sell books, I plead guilty, but I don’t think that makes us eccentrics, nor should you buy the argument that these contemporary cases are irrelevant. Indeed, one could make a stronger argument that Great Powers pre-1900 are eccentric given the new technological world in which we live. Nuclear weapons are a sea change in the strategic landscape, as is industrial organization, computerization, modern democracy, and mass literacy. But I digress. Luce’s three objections can all be met by recognizing that each of the challenged chapters has a deeper message.

I find it hard to accept an argument against the inclusion of the Japan chapter because it may be the single most important contribution BALANCE makes: the idea of its Development Fuseki supermodel which is the standard growth strategy across Asia and arguably the rest of the world. Glenn and I also point out the limits of that supermodel, which is vital to understanding modern China (Luce’s main objected omission) and why America’s power is not threatened externally. America’s internal threat, however, can only be appreciated by examining failing modern welfare states in Europe and, importantly, California. Here we find the “new Praetorians” that are locking governments into fiscal imbalance with unfunded pensions on a vast scale. And when we explore the fiscal crisis in America, it has to include more than just federal budgets. No state embodies that better than California (which we illustrate has a 2010 GDP equal to Italy, and also has more “economic power” than the UK or Germany). Finally, the Europe chapter is, in our defense, about more than the EU. It includes a section about the failure of statism, Nazi and Soviet, which many will understand as rival Powers in the 20th century that must be addressed, as well as the distinction among three supermodels in Europe today. I think that latter distinction is one Luce shares wholeheartedly, as do most Brits.

The second problem is the book’s diagnosis of what is ailing the US. Hubbard and Kane are right to see gridlock as a big problem. But their view of what is causing it is bizarre. …Forget the rise of China, the stagnation of US middle class incomes, or the drop down the ranks of international education tables. The biggest threat to US power comes from the mild (and ineffectual) attempts to curb how much money the rich can spend to influence elections. It is hard to know how to react to such reasoning, except to say that it is a pity.

No, I’m afraid I can only disagree squarely on this matter. Gridlock is a symptom, not the core problem, which I hope we made plain enough in the text. There is a weakness in any democracy to tend away from responsiveness to the people and toward special interests, either rich external groups or incumbent internal groups. We finger both, attacking the power of speech limits (aka campaign finance “reforms”) to protect incumbent legislators and the enhance the ideological narrowness of monopolistic parties. But we also critique the following: budget process rules, gerrymandering, term limits, and the demise of federalism (state diversity). This is all made relevant by the preceeding two hundred pages of historical rhymes: incumbency and rent-seeking that undercut the economic dynamism of every major Great Power before.

In fairness, Luce strikes many other points into our narrative that should give you, as they gave me, pause. More attention to Germany is deserved, and more as well to the attitudes of the voters and protesters in southern Europe. It may well be wishful thinking to imagine that the young realize the folly of welfare states erected by previous generations. I am guilty of hope, but also vigilance as the reason to hope. In other words, I remain confident that better days are ahead for America and Europe — though perhaps not immediately ahead.

3 responses to “The Edward Luce Review (Financial Times)

  1. FYI Niall Ferguson (Hoover Institution) is out with a book called
    “The Great Degeneration”. with the theme that Western civilization has entered a period of decline due to all the usual suspects – greater regulation, higher debt, the “rule of lawyers” instead of the “the rule of law”, the decay of of private, voluntary organizations, etc. You are probably aware of the book anyway but I saw a review in the WSJ today so thought I would pass along. He doesn’t provide the interesting and entertaining history you provided in “Balance”, nor does he apparently provide some ideas and some reasons for optimism (as you do). Therefore the book it is nothing new for most of us. But thought you should be aware since the negative theme is similar to yours and someone might ask you about it.

  2. Tim, my complements to you and to Dr. Hubbard for a book I’ve been hoping someone would rigorously research and skillfully write. Halfway in, my view of the book is that it is a resonant application of public choice economics and of relevant history that finally clarifies gaps not fully satisfied in “Why Nations Fail” by Acemoglu and Robinson; it is also in my view a worthy complement to Bernstein’s “The Birth of Plenty” in helping complete the picture of what elevates civilizations to prosperity and then what typically precipitates their decline or collapse. On that note, it seems to me that parts of your premise are complemented by “The Collapse of Complex Societies” by Joseph Tainter, which I think you’d find a good read if you’ve not encountered it previously. I also think there is a potential fusion in the concepts that you two present and the axiomatic analysis and prescriptions for the USA’s current challenges as offered by Dr. Woody Brock’s “American Gridlock.”

    This book looks destined to be in a favored position on my bookshelf. Should it finish as well as it starts, I will be recommending or gifting to my thoughtful friends and colleagues this Christmas. Thanks!

    • Tim

      Thanks for your kind and thoughtful comments. I felt this filled a gap, too, and was happily surprised when Glenn told me he had a dusty book proposal three years ago that was similar to my own ideas. Even with that spark, it was the intervention of Andrew Wylie that nudged us. Even so, much as I love the material, I wonder if it is fully realized. To date, reaction to our notion of measured power has been negligible, compared to other sections, but my hope is that that idea grows stronger in time.

      I will look up you book recommendations. Am reading Cloud Atlas right now to relax, and Foreign Affairs, of course! Stay in touch!

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