Losing Control

Losing Control

STEPHEN D. KING
Copyright Date: 2010
Published by: Yale University Press
Pages: 304
https://www.jstor.org/stable/j.ctt1npf6g
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  • Book Info
    Losing Control
    Book Description:

    As the economic giants of Asia and elsewhere have awakened, Western leaders have increasingly struggled to maintain economic stability. The international financial crisis that began in 2007 is but one result of the emerging nations' increased gravitational pull. In this vividly written and compellingly argued book, Stephen D. King, the global chief economist at HSBC, one of the largest banking groups in the world, suggests that the decades ahead will see a major redistribution of wealth and power across the globe that will force consumers in the United States and Europe to stop living beyond their means.

    The tide of money washing in from emerging nations has already fuelled the recent property bubble in the West, while new patterns of trade have left the West increasingly dependent on risky financial services. Unless things change drastically, King argues, the increasing power of emerging markets, when coupled with poor internal regulation and an increasingly anachronistic system of global governance, will result in greater instability and income inequality, accompanied by the risk of a major dollar decline. And as Western populations age and emerging economies develop further, the social and political consequences may be alarming to citizens who have grown accustomed to living in prosperity.

    eISBN: 978-0-300-15433-7
    Subjects: Economics, Business, Political Science

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. ACKNOWLEDGEMENTS
    (pp. vii-x)
  4. PREFACE
    (pp. xi-xxii)
  5. PART ONE SCARCITY AND HISTORY
    • CHAPTER ONE WIMBLEDON, THE OLYMPICS AND SCARCITY
      (pp. 3-24)

      For Margaret Goodson, my inspirational teacher at school, economics was about the allocation of scarce resources. The costs of using resources in one particular way were the opportunities foregone. These were ‘opportunity costs’. Having more of one thing meant having to forego something else. Economics was, therefore, about the choices to be made in a world of scarcity.

      Scarcity and choice dominate our lives in all sorts of different ways. I chose to go to university to study economics, thereby forfeiting any hopes of becoming a professional musician. By choosing one subject, I let go of another: both time and...

    • CHAPTER TWO THE SECRETS OF WESTERN SUCCESS
      (pp. 25-44)

      The Western world’s economic development over the last five hundred years was not the result of productivity gains or market forces alone. Western nations became wealthier because they were increasingly able to rig the global economy to suit their own aims, using a combination of economic, political and military power. Specifically, they were able to engage in what economists call ‘rent-seeking behaviour’. In very simple terms, those who successfully seek rents are paid above the free market price. Most of us are rent seekers. We like to be paid more even if there has been no rise in demand for...

  6. PART TWO BROKEN ECONOMIC BAROMETERS
    • CHAPTER THREE THE PLEASURES AND PERILS OF TRADE
      (pp. 47-66)

      Black holes cannot be observed directly. Their effect can be seen only through their gravitational pull. Celestial objects that used to behave in a predictable manner begin to act differently as they approach a black hole. They may start to move faster than normal. They may heat up and emit radiation as they’re sucked in to the void. The presence of a black hole can be detected only through these indirect routes.

      The emerging nations are a bit like a black hole. There is little available data, the data that is published is often deemed unreliable and historical comparisons are...

    • CHAPTER FOUR INTERNATIONAL ROULETTE: ANARCHY IN CAPITAL MARKETS
      (pp. 67-92)

      While emerging economies have had a huge influence on capital market performance, it has not been the influence expected by the majority of investors. Many thought a gold mine of investment opportunities awaited them. On the whole, these hopes have been dashed. There has been no gold mine. Instead, we have been living through a modern-day version of the Californian gold rush. Too often, only fool’s gold has been on offer. Capital markets have not delivered decent returns while financial systems overall have become increasingly unhinged. The gravitational pull of the emerging nations has left interest rates and the prices...

    • CHAPTER FIVE PRICE STABILITY BRINGS ECONOMIC INSTABILITY
      (pp. 93-122)

      For many years, policymakers have pursued low and stable inflation with virtuous zeal. Understandably, they have no desire to return to the dark days of the 1970s and early 1980s, a time when inflation in all its many forms was rampant and economic performance in the Western world was, at best, disappointing. Low and stable inflation is now typically seen as a necessary condition for economic stability.

      Yet, with the rise of the emerging nations, it is no longer so clear that the single-minded pursuit of price stability is delivering the goods. If anything, in a world where price disturbances...

  7. PART THREE THE RETURN OF POLITICAL ECONOMY
    • CHAPTER SIX HAVES AND HAVE-NOTS
      (pp. 125-148)

      Part Two argued that traditional barometers of economic success are giving out faulty readings. The emerging nations have become an increasingly important destination for Western exporters, but it’s hard to argue that higher exports, on their own, are a sign of Western success. Capital markets have become significantly bigger, but they have also become increasingly distorted through the dominance of decisions made by sovereign nations as opposed to the decisions of millions of underlying investors. Inflation targeting is now a cornerstone of Western policymaking, yet is often poorly positioned to deal with the real and monetary shocks stemming from economic...

    • CHAPTER SEVEN WHO CONTROLS WHAT? THE RISE OF STATE CAPITALISM
      (pp. 149-172)

      Globalization creates winners and losers. The benefits and costs of globalization are randomly distributed by the market’s invisible hand across and within sovereign states. State capitalism, arguably, can be seen as an attempt to overrule this process. It offers a chance to exert government control over resources that might otherwise be lost through market forces to higher bidders elsewhere. State capitalism can be used to ensure resources are either retained for domestic consumption or used as bargaining chips in the exertion of global economic and political power. Whether to guard against income inequality or to pursue geopolitical objectives, almost all...

    • CHAPTER EIGHT RUNNING OUT OF WORKERS
      (pp. 173-196)

      The developed world is running out of workers. Most of the emerging world is not in the same position, at least not yet. The baby boomers who flooded Western and Japanese labour markets in the 1970s and 1980s are now heading into retirement. They’re expecting someone, somewhere, to look after them. People in the developed world are about to become economically dependent on workers in the emerging world.

      We’ve been here before, of course. As I argued in Chapter 2, Europe and its offshoots in the Americas and Australia would never have made so much progress over the last five...

  8. PART FOUR GREAT POWER GAMES
    • CHAPTER NINE INDULGING THE US NO MORE
      (pp. 199-216)

      Time and again, I have returned to the key issue of cross-border capital flows, whether to explain the growing instability of financial markets (Chapter 4) or the rise of state capitalism (Chapter 7). Indeed, these two themes are connected. After all, the huge expansion of cross-border capital flows alongside the proliferation of nation states have become the defining features of modern-day globalization. The stock of foreign investment, which stood at an already high 20 per cent of global GDP in 1980, rose dramatically to over 100 per cent of global GDP twenty years later, a huge increase that dwarfs anything...

    • CHAPTER TEN COPING WITH THE WEST’S DIMINISHED STATUS
      (pp. 217-238)

      For the Western world, major challenges lie ahead. Economic life is increasingly unpredictable and (dare I say it) unfair. Markets cannot easily resolve the key issues – economic instability, income inequality, state capitalism, demographic change – that are now confronting policymakers in both the Western and emerging nations. The choices open to nations vary, however. In this chapter, I spell out some of the good, bad and downright ugly options open to Western policymakers. We are, I believe, living in a highly unstable world where Western policymakers will be tempted to choose options that, while offering short-term political advantages, could...

  9. CONCLUSION
    (pp. 239-246)

    For many people, the collapse of Soviet-style communism and the reform of Chinese communism signalled the triumph of free market thinking. An economic and political nirvana beckoned. Liberal markets were the secret behind the West’s economic success over the last few hundred years. It seemed to follow that, with the spread of market capitalism far and wide, other nations and their people could look forward to a future of Western-style economic progress. The West, meanwhile, would continue to advance, making profits from its investments in the emerging world while delivering continued productivity advances inspired by the enlightened values of liberal...

  10. NOTES
    (pp. 247-258)
  11. SELECT BIBLIOGRAPHY
    (pp. 259-262)
  12. INDEX
    (pp. 263-280)