Monday, September 09, 2013

Irwin's Alchemists

I've finally made my way through Neil Irwin's The Alchemists, and it's been a worthwhile trip. Well: it's been a long slog actually, but that remark isn't nearly as negative as it may sound. In many ways it's a very good book, sometimes spectacularly good. And while it has its limitations, I have to admit I'd be hard put to know how to make it much better.

Anybody who reads this far will already know the terms of engagement: Irwin proposes to bring us up to date on three central bankers: Ben Bernanke (of course); Jean-Claude Trichet, president of the European Central Bank from 2003 to 2011; and Mervin King, governor of the Bank of England from 2003 to just this year. In short, the three most powerful voices in banking during the late uproar (for extra credit: who is the Ben Bernanke of China?).

It's a promising framework and it almost works, with the qualification that the institutional limits on Trichet were strong enough that it makes him hard to compare. And like it or not—the Brits will not like it—the hard fact is that Britain comes across as a second-tier player, mostly mired in its own problems, sometimes buffeted by its larger neighbors.
There's an additional problem that I will specify in the moment, but first the good stuff: Within the limits of the engagement, Irwin has done a splendid job of marshaling and presenting so much abstruse material. Clearly, his time out at Columbia Business School served him well: he's got a (seemingly) easy mastery of arcanae of central banking, with a good teacher's knack for making the tough stuff accessible. If nothing else, you could do worse than pull this one down whenever you need to pretend that you understand the virtues and limitations of, say, inflation targeting or the twist. [Just as an aside: would I be right that financial journalism has improved markedly since 2008? Back in the old days, we had Greg Ip: now we have half dozen or more first-stringers who can go pretty much toe to with their sources. Brad DeLong likes to ask why we can't have a better press core. I wonder if maybe we have one).,

There's a limitation, as I've already suggested, in that the three stories are not quite comparable: even though they overlap, each faced his own issues with his own tools and institutional limitations. A bigger problem is the focus on central banking. For good or ill, the point (which the book makes abundantly clear) is that central banking could serve at best as only part of the solution. If you're an American reader, you probably already understand that; you whatever fiscal policy emerged in Washington between 2008 and today was a joint effort of the Fed and Treasury. You can't really blame Irwin for not telling the whole story—his book would have been twice as long and many times as unwieldy had he tried—but you really are getting only part of the picture without it. The European situation is even stranger, what with its multiple sovereignties and its single currency. I don't feel I have much of a handle on it, but my consolation is I really don't think anybody else does either. The British experience is simpler, but perhaps starker. King seems to have been unconstrained about dipping his finger into the political pot (you get the impression that Irwin really doesn't like King very much). British leaders do seem to have made some catastrophically bad decisions lately, but for the most part, hey, it's only Britain and how much can it matter?

In short, I'm just as glad Irwin didn't try to tell us "the full story.” But if we want “the full story,” we'd better have read—or be prepared to read—somebody else.
A difficulty, less important than the others, but it may account for my feelings of slog. Irwin shares a vice with a number of journalists-turned-bookies, and that is: the closer you get to the present, the more you feel like you are reading the pages of his notebook, the less you get by way of sustained analysis. At times, I found myself remembering what Dr. Johnson said about Paradise Lost. On the other hand, I'm glad I read that one, too.

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