Book Review

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Makers and Takers – Rana Foroohar

Ms Foroohar is a Time economic columnist and CNN global economic analyst who has written one of the most scathingscreen-shot-2016-10-31-at-15-14-50 books about the American finance industry I have read. It addresses the process of financialisation, a process as ugly as its name. In essence it is about the transformation of the banking sector from something that sustained Main Street businesses in a solid, if slightly boring way, to something which now dominates and, more importantly, sucks the lifeblood from the very businesses it previously supported.

One point which is worth stressing from the outset, Ms Foroohar is not anti-capitalist. She is one of a growing number of people who are supporters of free market capitalism but who are very concerned with the way it is evolving. As she states at the outset, Ms Foroohar is “…not in favour of a planned economy or a move away from a market system. I simply don’t think that the system we now have is a properly functioning market system.”

She begins by considering the way finance has expanded dramatically over the past 40 years and particularly how it has shaken off the shackles of post 1929 depression. One example is emblematic of the way banking has moved away from a highly regulated sector is a piece of legislation called Regulation Q. This prohibited banks from paying interest on current accounts and controlled the level of interest that could be paid on other accounts. Its purpose was to “prevent banks from competing too vigorously with one another … which might in turn push them into the sort of risky investments that had precipitated Black Tuesday in 1929.” The aim of this and other regulations like Glass Steagall was to ensure banking remained a “safe boring utility”.

This regulatory framework remained robust and effective throughout the 30’s, 40’s and 50’s. In the 1960’s however things began to change. Ms Foroohar illustrates the shift of the sector through the history of National City Bank which ultimately became CitiCorp, the classic too big to fail bank. Specifically she charts the career of Walter Writson the Chief Executive of Citibank/Citicorp from 1967 to 1984, one of the most influential commercial bankers of his time. In essence he wanted to move banking out from being a low risk, low profit, highly regulated sector to something much more glamorous.

Writson’s actions, in terms of challenging regulation, dreaming up increasingly complex products to get around the rules, increasing the leverage of the bank and changing the compensation structure were things that would be repeated across the sector undermining the commitment to regulation so that bit by bit it was repealed with Jimmy Carter deregulating interest rates (Regulation Q) in 1980 and then critically Bill Clinton repealing Glass-Steagall in 1999.

The result was an explosion in banks turnover and the development of increasingly sophisticated financial products and derivatives. This led to increasing  profit levels which in turn drove a series of behaviours to protect and develop those profits which were more or, increasingly, less legal. Even the activities which were perfectly legal changed the risk profile of banking and its relationship with the businesses it was supposed to be encouraging and generated enormous systemic risk which exploded in 2007/08.

Whilst the inherent risks of fractional reserves and complex debt instruments like Collateralised Debt Obligations, made famous by the credit crunch, are important, the less legal side of the industry should not be overlooked. It is a staggering fact the  industry paid £139bn in fines between 2012 and 2014 for: rigging Libor, insider trading and a great deal more (and of course this is just banks within the USA in a 3 year period!). In the massively profitable finance industry however the view seems to be that fines are simply another cost of business.

Over the period that the finance “takers” were in the ascendancy at the same time the business “makers” were under attack. The growing importance of finance was leading to the development of what some have called “quarterly capitalism”. This meant that stock price was everything and it had to move upwards every quarter. The heroes of shareholder value, like Jack Welch of General Electric (Manager of the Century according to Fortune magazine), came to be seen as the models for business leadership. These were people whose interest in engineering was more financial than mechanical. Ruthless cost cutting, getting rid of jobs and reducing investment in R&D to feed the ever demanding stock market.

Those businesses which did not employ the right staff to do this internally were targeted by what used to be called corporate raiders but are now more politely called “shareholder activists”. These individuals, like Carl Icahn, buy sufficient shares in companies to replace existing management with more aggressive mangers who will take the “hard decisions”, cut cost and increase shareholder returns. They may also sell off valuable assets or break up the company to extract value.

This might be seen as the kind of process that Schumpeter described as “creative destruction”, getting rid of the dead wood. However, a growing body of evidence suggests that the stripping out of value is actually undermining the economy not making it more efficient. Evidence is emerging that private companies, i.e. those that have not gone to the market and become public have better track records of investment in R&D, staff and capital and more critically long term profitability.

Public corporations are bizarrely now borrowing to fund shareholder dividends and share buy backs thus artificially pushing up the value of the remaining shares. Why borrow to do that? Like Apple, to avoid having to bring the massive pile of cash from profit you have made abroad back to the States where you would have to pay tax on it.  According to Foroohar corporations have invested around 10% of every dollar they borrow into their company and 90% into shareholder payouts. This means the role of stock markets has reversed. Instead of wealthy individuals investing in new productive capital, rather, companies have been making payouts to the wealthy individuals. This might be morally objectionable but more importantly it does not provide for sustainable capitalism. This is cannibalistic capitalism, its eating itself.

Over the years another phenomenon has emerged consistent with the old adage, if you can’t beat them join them. GE probably the most significant engineering company in the world, decided the finance department should become a profit centre. It created GE Capital which was to all intents and purposes a bank but not registered as one. Not just any bank, in 2013 the Financial Stability Oversight Council declared GE Capital to be a systemically important financial Institution and thus subject to Federal Reserve oversight. What could have made them come to this snap decision? Because in the 2007/8 crash it was bailed out by the American taxpayer to the tune of $139bn.

Ms Foroohar’s book explores the way “financial speculation is playing a greater and greater role in fueling volatility in commodities…”.  Since 2000 there has been a fiftyfold increase in dollars invested in commodity linked index funds. Several things are pointed to as having pushed this: Goldman Sachs creation of a commodity index fund; deregulation of commodity markets; the credit crunch that scared people out of stocks; and the $4.5bn QE exercise. This financialisation means that businesses now have to compete with their banks for commodities. If this sounds weird it’s because it is and one example makes the point.

Goldman Sachs bought up thousands of tons of aluminium which it then controlled the supply of. By doing this of course they were able to control the price and thus increase the value of their investment and any commodity trades that they had done in relation to aluminium. Whilst this was an issue for Coke Cola, in that it put up the price of their cans, the wider speculation in commodities had much more significant effects.

In 2003  big investors were putting $13bn into commodity index trading, by 2008 it had risen to $260bn. Over the same period the price of 25 commodities including cattle and heating oil increased by 183%. When asked whether institutional investors were contributing to food and energy price inflation the unequivocal answer given by Michael Masters, a hedge fund manager was “Yes”. This means speculators were gambling with products that meant people ate or starved, and many starved.

Ms Foroohar addresses the fact that many of the people and institutions that have been involved in this process of financialisation have benefited spectacularly with astronomical reward packages and profit levels. She goes on to review how they spend hundreds of thousands of dollars to avoid paying tax on their enormous earnings. She also looks at the phenomenon of the “revolving door”. This is the process whereby elected officials and appointed civil servants, charged with regulating the financial sector, move into their posts from the very sector they are regulating and move back into the sector when they retire from public life. She suggests the opportunity to sit on the Board of a large financial institution may colour the view of regulators whilst they are doing their job in the public sector. Whether this is true or not is increasingly beyond the point. Many Americans think it is true and that is what matters.

Financialisation is  one, if not the, most significant trends that has occurred over the past 30-40 years. Ms Foroohar’s claim is that it has sucked the lifeblood out of Main Street America, undermined investment in innovation and productivity and thus the future of the nation. Putting finance back in its place will not be easy. It means empowering the makers which would involve a genuine and major shift of power. Ms Foroohar sets out a sensible programme of reform. My concern is that people rarely give power back it is usually taken from them and the result of that is not always sensible. Lets hope this time it will be different.

 

Takers and Makers: The Rise of Finance and the Fall of American Business: R Foroohar. Crown Business 2016

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Hillbilly Elergy

This is a timely look at the viability of the American Dream. It is an autobiographical account of one hillbilly’s transition from a “broken home” childhood in a lower-working-class family, into a graduate of Yale Law School. I place “broken family” in inverted coma’s because the book challenges the glib labels that are placed on people and experiences. If this book does one thing it takes you into the complexity and contradictions of life amongst the poor white communities of the United States.

img_1542This is an insiders’ take on what it is like to live in a family where fierce loyalty and random neglect coexist. Where love and hate are two sides of an indivisible coin. Where parental violence is commonplace and serial relationships are the norm. Where a mother will demand a urine sample of her young son in order that she can pass a random drug test at work.

The author paints a picture which captures the ambiguity of the strengths of hillbilly life with its strong commitment to family and national loyalty. It describes how these strengths carried to extreme convert family loyalty into blood feuds and patriotism into a deep distrust of outsiders. Whilst the book is very much focused on the detail of the lives of individuals it is set against the economic backdrop of the migration of hillbillies from the poorer regions of Appalachia to places like Ohio, Indiana and Michigan.  The context is one where poor white Americans leave areas of decline to escape poverty and look for a new life in the industrial heartland of America being built just after the last war. This economically driven dislocation had its costs and casualties although the question is raised to what extent these were caused by the dislocation or were inherent in the codes of honour and double think of some existing aspects hillbilly life in the Appalachians.

Despite the fact his mother had a succession of partners and an addiction to prescription drugs, and despite the fact that she would occasionally threaten serious violence to her son and daughter, the author recognises that he was lucky in having a maternal grandmother and grandfather (Mamaw and Papaw) and a sister that provided points of stability, a permanent refuge and unconditional love.

Reading the book you feel the author would certainly have struggled had it not been for the unsentimental but solid support of his grandparents. He recalls how Pawpaw would spend hours helping him with his maths and taught him that, “…lack of knowledge and lack of intelligence were not the same. The former could be remedied with a little patience and a lot of hard work. And the latter? Well I guess you’re up shit creek without a paddle”. His Mamaw would always open her home and heart to him when he needed respite from his mother, even when she was in her seventies.

This is the same Pawpaw who had spent a large part of his early married life drinking and fighting with his wife Mamaw who herself was reputed to have killed a man. These are rough diamonds, at times, very rough. There is no sentimentality in this book, but there is an underlying theme of redemption. No one is all evil. People do good things even if most of their life they do the wrong thing. And most of the time when they do the wrong thing it is without either malice or forethought, and mostly to their own detriment. But to understand all is not to excuse all. Whilst the author records  Pawpaw recognises the extent to which he as failed his daughter in the past and is therefore in some sense responsible for her shortcomings as a mother this does not absolve her of all responsibility.

The ambiguity of reality is everywhere in this book. His mother, who he had, at best, a tempestuous relationship with, reinforced within him the view that education was important, taking him to the library and getting him a library card. She may not have nurtured it and created the best environment for it to flourish but she inculcated the benefits of learning into what was clearly a receptive mind.

A real strength of the book is the balanced and clear focus on the stresses and strains of life in poor families. Families where aspiration is a job not a career, where education is girlie, where arguments replace discussion and where fights replace arguments. Where the most innocuous of slights can become the subject of blood feud and where contradictory beliefs can be held, and fought for, without apparent hypocrisy.

The book has been picked up in the US by many on the right who claim it shows that individuals need to accept responsibility for their own failings.  The author may well be a patriot, he may well vote republican, he may still cling to the American Dream, but he has a clear view that the Dream is something that is getting harder and harder and that for folks from his background tantamount to impossible. Whilst he does argue strongly for personal responsibility, he also recognises the social, economic and psychological forces that weigh down upon and shape peoples actions. He does not offer easy solutions. He raises difficult questions and does so with an empathy and personal understanding for those that face the dilemmas of poverty.

His focus is on the cultural and personal issues, which undermine the Dream. This might be seen as a rerun of the “culture of poverty” thesis, which focuses responsibility for poverty on the communities that are poor. They are trapped in a culture of their own making which keeps them in poverty. I think his view is more subtle than this. I think he sees the interplay between the loss of employment in the rust belt and the decline into drugs and alcohol abuse and all that goes with that.

What he does do is wrestle with where one draws the line on personal responsibility. Whilst he recognises that not everyone has a Mamaw or a Pawpaw in their life he does not accept the view that people are simply the product of their environment and cannot be held to account personally for their decisions.

There is a touch of the Ayn Rand rugged individualism about his position. At one point he talks about the fact that his Mamaw could not leave bicycles locked up out on the porch for fear they would be stolen, or that someone had to sell his mothers house because he could not rely on his neighbours not to wreck it,  or that his Mamaw was afraid to answer the door to a neighbour who pestered her for money for drugs. He goes on to say, “These problems were not created by governments or corporations or anyone else. We created them and only we can fix them.”

Whilst some of us think there are things which governments and corporations do which directly contribute to these problems, it is a mechanical mind that thinks this is not tempered and mediated through real individuals making real choices which carry moral responsibility. Clearly, there are massive differences in the life chances of individuals and the author speaks very eloquently about the different environment, nay world, that “the rich” inhabit, a world full of social capital, and an understanding how to use it. But he also never loses sight of individual choice.

What is indisputable is that the author provides an intimate and clear-sighted view of what it is like to grow up in a family which has little money and a lot of uncertainty in the richest country in the world. He also describes the intimate stresses and strains of moving from a lower working class background to a solid middle class future. The constant fear of being “found out”, of discovering at university that a mistake had been made and your entry grades confused with someone else’s. If you have any experience of that transition the authenticity of the book will shine through.

Early in the book he says he recognises that he is a “hill person”. He goes on to say “So is much of America’s white working class. And we hill people aren’t doing very well.” This is certainly true and I suspect is part of the explanation for the popularity of Trump. I recommend this as an interesting and timely take on the life experience of poor white Americans.

JD Vance. Hillbilly Elegy: A memoir of a Family and Culture in Crisis. William Collins 2016

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The Hidden Wealth of Nations

Recently read a really interesting book on the issue of the moment following the leaking of the Panama papers. It is by Gabriel Zucman and in a very concise and clear 116 pages sets out the scale of the problem of tax havens, how they operate and what might be done about them.

He estimates on a conservative basis that some 8% of personal financial wealth amounting to $7.6 trillion is held in tax havens. By way of comparison the UK’s total GDP is about $2.5 trillion. Also this does not take any account of income that is hidden by corporations.

Zucman looks at the history of the growth of private banking in Switzerland at the centre of much of the operations that utilise other tax havens to make as opaque as possible who owns what and where it should be taxed. He addresses a number of myths about Swiss banking and illustrates that any reform predicated on the goodwill of the bankers is doomed to fail as it has done in the past.

He goes on to contrast the European Union’s Savings Tax Directive (STD) which he believes to be essentially flawed with the United States approach through the Foreign Account Tax Compliance Act (FATCA) (where is that final T?). Whilst FATCA might not be perfect it is having an impact and has much to recommend it.

Essentially if banks do not themselves let the US tax authorities know what holding US citizens have in their overseas accounts then the US will impose a 30% tax on all interest and dividends payments from the US to that bank. They can also levy substantial fines. To ensure bankers apply FATCA they encourage whistle blowers to let them know of abuses. What is more they pay them handsomely. Bradley Birkenfield an ex-employee of UBS was paid $104m for revealing the non-compliant activities of his former employer.

Whilst FATCA is a real step in the right direction Zucman identifies three other things that should be done on a global scale to address the problem of very wealthy people hiding their wealth from the tax man.

Firstly, he proposes a worldwide register of wealth that would be a public record of the beneficial owners of stock, share and bonds and ultimately all derivatives. In fact national and regional registers of stocks and shares already exist however they are private documents. By bringing them into a single, public register it would make visible the financial wealth of all individuals.

Secondly he recommends that sanctions against tax havens should be proportional to the losses that they impose on other countries. This is in essence what FATCA does with banks. By doing this the economics of being a tax haven break down.

Finally, he recommends that international taxation agreements should be amended for corporations. In essence this would mean taxation of multinationals should derive from their consolidated profits. So if Starbucks sells 50% of its products in the US and employs 50% of its people there and has 50% of its plant then it should pay 50% of its tax there. This gets around the issue of having transfer-pricing arrangements where subsidiaries, providing services based in tax havens, charge large fees to the US subsidiary thus reducing its tax bill their, shifting it to the lower rates in the tax haven.

It would also address the nonsense that a company like Apple with $500bn in the bank borrows money in the US to pay dividends because if it repatriated the profits from abroad they would be subject to tax.

Others have suggested that individuals should have a strict liability to inform the state of all their wealth and income. If they fail to do so and thus hide wealth from the state then they forfeit the right to state protection for that wealth. If it is found then 100% of it is immediately confiscated, and to assist the process anyone who reveals the existence of the wealth can claim 50% of it as a bounty. I do like something that is clear and simple.

We have had years of fine words about what we are going to do about tax evasion and tax havens it is time something started to happen. The governments seems to have two responses first “well Labour did nothing about it”. So what. Labour aren’t in power. Second, the Prime Minister has been spearheading the issue in Europe. Well the tax deals done so far with large multinationals suggest he might want to get his spear out over here.

The first step might be to appoint a few tax inspectors to replace those that have been made redundant since the government came to power. They are an unusual part of the government machine in that they bring in vastly more in tax than they cost. Surely austerity demands we maximise our income. What business, even one wanting to save money would sack people collecting more than they coast to employ?

If the MP’s expenses scandal was anything to go by, the press will probably have more interesting revelations to bring out of the 11m+ documents over the coming days and weeks.

Now is the time to push our politicians to do something significant about tax havens and tax evasion. If you want to get a good overview of the issue in a short but well argued book this is it.

The Hidden Wealth of Nations: The scourge of tax havens. G Zucman. The University of Chicago Press. 2015.

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The Rise and Fall of American Growth

This is a work whose central thesis is relatively straightforward but of immense significance not just for the United States but also for the rest of the world. In essence Mr Gordon argues that the growth rate of the American economy, which for so long has driven much of the world economy and transformed the lives of its citizens has its best days behind it. This is not because of a loss of entrepreneurial flair or lack of self-confidence. Rather, more substantive structural issues relating to an unprecedented and unrepeatable period of innovation mean that the levels of economic growth achieved over a period from 1870 to 1970 are unlikely to be recovered in the foreseeable future i.e. the next 25 years, or perhaps ever.

The book analyses economic growth in the States over three historical periods, first 1870 to 1940, then 1940 to 1970 and finally 1970 to 2014. For someone who has sat through more strategic planning meetings than I care to remember which have been peppered with phrases such as “the pace of change is unprecedented”, “learn to love change”, “change is here to stay”, it is absolutely fascinating to have pointed out how truly revolutionary was the first of the periods Mr Gordon addresses.

Part one of the book covering the period 1870 t0 1940 considers what people ate, how they dressed, how they got around, what their heath was like, how illness was managed, what their homes were like, how they communicated, and what working conditions existed. Each area is addressed in exhaustive and, one feels, loving detail. The book is a treasure trove of practical illustrations about how America has evolved over the past 150 years.

If we take the homes Americans lived in in 1870, they were lit by candle or paraffin lamp, which was inefficient, dangerous, required significant maintenance, and smelly. Water was provided by wells or other external sources. It had to be brought in and taken out of the home by hand, predominantly women’s. Human waste was deposited outside of the home in pits. Heating and cooking was mainly by open fire and centered on the main room of the home the kitchen/dining/living and occasionally bathing area.

To say life in such a home was “mean brutish and short” may be an exaggeration however compared with the home of the 1940’s not much of one. In a powerful use of language Mr Gordon describes the homes of the 1940’s as having become “connected”. I know that if our home lost its connection to the internet my youngest son would think the world was about to collapse and to be fair I would not be far behind him. However, it would be interesting to see how important the internet connection would be if it had to be traded off against connection to clean, running water, an effective sewage system or electricity.

One of the great things Mr Gordon’s book does is make visible the incredibly transformative function of advances which are now so ubiquitous in developed economies they are “invisible”.

One example from the book is the calculation of what a typical North Carolina housewife had to do to provide the home with water in 1886. She had to carry water 8 to 10 times a day meaning that over the course of a year she toted more than 36 tons of water over 148 miles. Washing, boiling and rinsing a single load of washing would require 50 gallons of water to be brought in and out of the home by hand. Running water and effective sewage were, of course, not just about convenience. Their impact on public health and urban development was immense.

In area after area a similar picture emerges. In 1870 transport was powered by horses or steam trains the internal combustion engine transformed this so that by the end of the period cars, trucks, electric transit systems and, even more spectacularly, airplanes were the norm. The germ theory of medicine and antibiotics extended average life expectancy significantly by reducing the high levels of infant mortality commonplace in 1870. Clarence Birdseye perfected the process of freezing food thus transforming the diets of the population. Electronic communications moved on from the telegraph to the phone to the radio, to the silent movie and by 1939 the release of The Wizard of Oz and Gone with the Wind.

The changes that occurred were overwhelmingly the product of the general purpose innovations of the second industrial revolution specifically the application of electricity to lighting and other uses, and the invention of the internal combustion engine. These reached into every aspect of peoples’ lives revolutionising how they lived.

Many of them were quantum shifts which were subsequently refined and developed but cannot be repeated. The provision of the first motorcar is such a paradigm shift. In the space of a few decades it meant the horse, which had effectively been the only mode of personal transport for millennia, was made redundant. This had enormous implications for areas as diverse as urban design, allowing suburbs to be “invented”, and public health with the removal of literally tons of animal waste from the streets of cities.

The productivity increases of the agricultural revolution and the growing application of steam power to production of the first industrial revolution were supercharged with the inventions of the second industrial revolution leading to the rapid and massive process of urbanisation. In every area productivity was increasing at a spectacular pace and the whole of the environment within which people lived was being transformed.

The Depression and the Second World War threatened all this and there was a fear that after the hot house of planned military production the post war period would lead to a collapse in productivity rates and a return to the stagnation of the 1930’s. What happened could not have been further from the truth. The period from 1940 to 1970 saw the rapid expansion of consumer capitalism as wartime production facilities were turned to peacetime white goods creation.

The era from after the war to the early 1970’s some have labelled as the Great Compression because of its redistribution of wealth transforming blue collar workers into what became, up until recently, the middle class bedrock of American politics. Trade unionism flourished, redistributive taxation with higher rates of 70% and 90% enabled the federal government to investment in infrastructure projects to do things like bring electrification to the South, establish social programmes such as Medicaid and Medicare and mount a war on poverty.

Whilst innovation continued it was largely about the more effective exploitation of the technologies that had been created in the earlier period from 1870 to 1940. Nothing was discovered that had the all purpose transformative power of electricity or the internal combustion engine.

Finally, we move to the era from 1970 to 2014. The story in this era is far less positive. The newly created middle class, who had experienced nothing but growth with living standards effectively doubling every 30 years, began to find their incomes stagnating or declining in real terms. Inequality began to grow and the pace of economic growth began to slow down.

This process was punctuated with the third industrial revolution around information and communications technology (ICT). This had a significant but relatively brief impact on productivity growth in the decade from the mid-1990’s to the mid-2000’s. There is a famous quote by Robert Solow, the Nobel prize winning economist that “You can see the computer age everywhere but in the productivity statistics.” This encapsulates what has become known as the “productivity paradox”, the fact that spectacular improvements in computer technology have had little impact on the overall level of productivity growth in the economy.

In essence Mr Gordon believes the period 1870 to 1940 saw a scale of transformation that is very unlikely to be repeated in the medium term and possibly never again. What it enabled was a period of economic growth unprecedented in human history. The speed of that growth was spectacular but has been in decline for over 30 years. If we take the annualised growth rate of output per hour in the period from 1870 to 1920 it was 1.79% per annum. In the period from 1920 to 1970 it was a very impressive 2.82%, but in the period from 1970 to 2014 it fell back to an average 1.62% per annum and of course this included the decade of growth between 1995 to 2005 associated with the ICT revolution. If this is stripped out the average growth rate in this period is 1.38%.

However Mr Gordon identifies four critical “headwinds” that might undermine even this rate and may mean “the future growth of real median disposable income will be barely positive and far below the rate enjoyed by Americans dating back to the nineteenth century.”

The headwinds he identifies are a) growing inequality which means that increasing amounts of whatever growth does occur is captured by a tiny fraction of the population; b) a faltering education system where the poor enter the system late and at a massive disadvantage leading to their early exit with all the negative career and income implications of this; c) a demographic shift with baby boomers retiring over the next twenty years reducing the supply of labour and increasing the dependency ratio; d) government debt to GDP ratio will inevitably increase as a result of these demographic changes and lead to the need for action in terms of cuts or tax increases to reduce the fiscal imbalance.

Taking account of the potential economic consequences of these headwinds Mr Gordon estimates that real GDP per person may grow at around 0.8% per annum over the next 25 years. This is a third of the rate achieved in the period 1920-1970, and barely half the rate achieved in the period 1970-2014. If the success of Mr Trump is in any way connected with the stagnation of the blue collar / middle class standard of living over the past thirty years what might a future of lower growth and more extreme inequality hold for politics in the States?

Mr Gordon ends his work with a number of policy prescriptions to mitigate the worst of the slowdown in economic growth. These include, a much more progressive tax system, a higher minimum wage, increased earned income tax credits, drug legalisation, improved pre-school education, a move away from the current property tax based system for the funding of education, increased but targeted immigration.

I suspect Mr Trump has not read this book, for if he had I am sure we would have heard the howls of condemnation from across the Atlantic. It is impossible to get across the quantity or quality of information contained within it nor the humane tone with which it is suffused. It is an important book that deserves to be debated widely amongst policy makers on both sides of the Atlantic. If even only partially correct its implications are profound for the economic, social and political future of the United States.

Further, one suspects the thesis has traction in the UK and Europe. This may mean any assumptions about future growth solving the UK’s current fiscal problems may be completely misplaced.

“The Rise and Fall of American Growth: The US standard of living since the civil war.” Robert J Gordon. Princeton University Press. 2016.