I've spent some quality time the last couple of days with Yanis Varoufakis' The Global Minotaur—an account of our modern economic history as seen by one of the chipmunks in the path of the great steamroller. It's a refreshing read, a familiar story told in a somewhat unfamiliar way. It has many merits and some provokes a few unevadable reservation—reservations which I may or may not get to in this post.
The spine of the book is V's account of global economic policy from Bretton Woods forward and in particular, how the US came to dominate world economic policy for a generation in a structure that (surprise) the US had created. As V shows, it was a structure that depended on the US continuing to function as a creditor nation—which it certainly did, resoundingly, for the first few post-war years (for convenience, call these “phase I”).
His account of what you might call “phase II”--the years after Nixon dumped Bretton Woods and OPEC jacked up oil prices—is intriguing but less universally plausible. A difficulty with his discussion of both phases—but more urgent in phase II—is the degree to which V credits his story to calculation, instead of mere chance. Grant that Bretton Woods was an act of calculation on the part of the US (or more precisely, on the part of Harry Dexter White). Still it is hard to believe that anybody could have—or even presumed to—forecast in detail all of what actually came to pass. As with the story of any major policy initiative, there seems to be a lot more of good luck, bad luck, and sheer blind randomness than V seems willing to credit.
The concern is more urgent in “phase II” when, in the standard narrative, the wheels more or less came off the bus. So much of post-1971 policy seems to be a mix of improvisation, blind flailing and serendipity. But remarkably, V seems to try to turn this all into some kind of grand plan. He has resurrected a speech by Paul Volcker from 1978 in which Volcker said (per V):
[A] controlled disintegration in the world economy is a legitimate objective for the 1980s.
Now, I don't know what the hell Volcker thought he was saying in this remark—was it off the cuff? Was there a context? Was it (one is genuinely tempted to wonder) an attempt at bleak humor, however out of place for one in such high office? Whatever. The point is that V seems to treat it as a statement of considered policy—as if the Wise Men sat around the polished oak conference table in the Treasury Department situation room and said “it's agreed then—we'll have a controlled disintegration.”
Well of course you can't prove a negative and anyway I wasn't there. But if it is/was considered policy, you'd have to concede that it was one that achieved its successes (if any) much more by good luck than by calculation, and in many cases, did not achieve successes at all (one can just hear Jimmy Carter when he gets news of the helicopters crashing in the desert saying “Oh good! Controlled disintegration!").
So, modified rapture. Still, you'd have to credit V with important insights you don't often find elsewhere. One, perhaps most important, is that it gives you some hint of how we got ourselves into the mess where we are the world's only banker—and, worse, where we don't do anything else. The point is, we got here because we made it so. We created a system in which we are the banker-of-bankers; having done so, it's a bit rich for us to be surprised to find ourselves where we are.
There's more, and actually I haven't yet finished the last few pages where he discusses the Europe meltdown which might well be the center of his expertise. And even though I find a lot of this helpful, he does go off on one particular tangent which has my head reeling. But I think I'll leave that one for another hour, or day.