Stephen D. King, Chief Economist and Global Head of Economics and Asset Allocation research at HSBC, was paged at an airport a few years ago. When he showed up at the information desk, the obviously disappointed attendant said, “Oh, you’re not the Stephen King that writes books.”
“Yes, I am,” Mr. King responded, pulling a book from his bag.
The book, his first, was called “Losing Control: The Emerging Threats to Western Prosperity.” The cover showed a picture of a city on a stormy night. It looked like a bit of a horror story. Mr. King says the attendant was duly impressed.
Mr. King’s second book, “When the Money Runs Out: The End of Western Affluence,” is another attempt to scare people, and governments, into making better decisions.
This books describes a real-life economic horror story, picking over the bones of the global financial crisis with the professional detachment of a forensic scientist examining the scene of a crime.
The Western world has experienced extraordinary economic progress throughout the last six decades, a prosperous period so extended that continuous economic growth has come to seem normal. But such an era of continuously rising living standards is an historical anomaly, economist Stephen D. King warns, and the current stagnation of Western economies threatens to reach crisis proportions in the not-so-distant future.
Praised for the ‘dose of realism’ he provided in his book ‘Losing Control’, King follows up in this volume with a plain-spoken assessment of where the West stands today. It’s not just the end of an age of affluence, he shows. We have made promises to ourselves that are only achievable through ongoing economic expansion. The future benefits we expect – pensions, healthcare, and social security, for example – may be larger than tomorrow’s resources. And if we reach that point, which promises will be broken and who will lose out? The lessons of history offer compelling evidence that political and social upheaval are often born of economic stagnation. King addresses these lessons with a multifaceted plan that involves painful – but necessary – steps toward a stable and just economic future.
King is a tough-minded economist and his approach is analytical and brilliantly educational. This book assesses the problem of our economic expectations; Instead of believing that everything is once again on an upward trajectory – however slow – after the banking collapse, King argues that stagnation could well become the norm and we should therefore lower our expectations.
King points the finger at the breakdown of trust – closely related, as he reminds us, to the word ‘credit’. But he does not mean financial credit alone – it goes deeper than that. Trust is the glue that makes possible all the higher functions of society. Without it, nothing works. And trust, he argues, is undermined by three current ‘schisms’ in society: between the rich and the poor; between the old and the young; and between lenders and borrowers.
All three are closely related. To paraphrase Clint Eastwood: there are two kinds of people in this world, my friend – those who have savings and those who work. Savers provide the capital to make wealth creation possible, and are rewarded with a share of that wealth. Savers tend to be (relatively) rich and old; borrowers (relatively) poor and young.
Nothing new here. But King’s argument is that increasing discrepancies between savers and borrowers, in terms of the relative standards of living they can expect to enjoy, lead to a breakdown of trust, without which savings cannot be allocated efficiently. Everybody loses, growth suffers, and the strains between borrowers and lenders become ever more pronounced.
He believes that the future is not what it used to be; we have made promises to ourselves we cannot afford to keep. Economists always think growth is coming but they can’t point to the source. They basically say that the economy will figure it out.
How do we cut this vicious circle? In part, by shedding the sense of moral superiority we attach to saving that stands in the way of a benign redistribution from savers to borrowers and which would heal the schisms in society and create the scope for renewed growth.
The book should appeal to a wider audience than just economists. The author is a newspaper columnist as well as a professional economist, and it shows in the crisp and easy style of his prose.
Other Reviews:
‘King writes with an authoritative and erudite voice, making him an excellent guide through the convolutions of the financial crisis.’ –Iain Morris, The Observer, 26th May 2013
‘His clear-eyed assessment of the problems ahead makes the book essential reading.’ –The Economist, 9th May 2013
‘King’s clear sighted and highly readable book is a timely reminder of just how challenging Britain’s problems still are…the economic equivalent of post-apocalyptic fiction’. –Philip Aldrick, The Sunday Telegraph, 19th May 2013
‘…beautifully written.’ –Hamish McRae, The Independent, 4th June 2013
‘…lively and provocative’. –Ferdinando Giugliano, Financial Times, 10th June 2013
‘It is it alarmingly difficult to disagree with Stephen King. All one can say, perhaps, is that one of the great errors of human nature – strongly displayed before the credit crunch – is the belief that a prevailing trend will continue indefinitely. The crunch is surely a reminder that what goes up must come down’. –Charles Moore, Daily Telegraph, 24th June 2013.
| Title | When the Money Runs Out: The End of Western Affluence |
| Author | Stephen D. King |
| first published | January 1st 2013 |
| Publisher | Yale University Press |
| ISBN | 0300190522 |
| Language | English |
