Communists, Welfare Queens, and Entrepreneurs

Sylvia Nasar is best known as the author of A Beautiful Mind, which the New York Times called ‘perhaps the best economics-related book of the past quarter-century’. In her latest book, Grand Pursuit, she traces the birth and progress of modern economics – from Dickens in nineteenth-century London to Amartya Sen in contemporary India.

She was recently interviewed by Allan Gregg about the book and its ideas.

Sylvia Nasar On The World's Most Influential Economists.

Sylvia Nasar, interviewed by Allan Gregg.

‘For the first 200 years of recorded human history, for the bottom nine tenths of humanity, living standards never changed. The average Englishman in Jane Austen’s lifetime lived no better than a Roman slave.’

Nations could get richer – but the wealth of a nation made no difference to the average standard of living.

Charles Dickens: Journalist and observer

‘Dickens, like so many of the great Victorian writers, was a journalist and an observer,’ Nasar said. At the time he was writing, in mid-nineteenth-centry London, interest in economics was starting to spread.

‘People had started to look at social problems that previously had only been seen as political or moral or theological, and redefine them as economic problems.’

A Christmas Carol was ‘a critique of the pessimistic political economy that had prevailed up to Dickens’ lifetime’.

Marx, Engels and The Book of Revelation

Nasar called Freidrich Engels the ‘sugar daddy’ of Karl Marx. Engels, a fundamentalist Christian, was greatly enamoured by the Book of Revelation.

‘It was one of the grand narratives. And what it said was: The world will be split into two, there will be a final confrontation, evil and injustice will be triumped over, and history will end.’

This narrative is central to the pair’s 1848 bestseller The Communist Manifesto.

‘Modern society can’t work. It’s going to be cleaved in two. There’s going to be a final battle, and justice will prevail and the Christians will overcome the Romans and history will end.’

‘It was Biblical.’

Marx was ‘wrong’

Nasar said that not only were Marx’s predictions wrong, but his observations about the time he lived in were wrong too.

‘By the time he finished the first volume of Das Kapital, mid-Victorian England had gone through a 20-year boom that was unprecedented. For the first time in history, the average living standards of the bottom 90% were rising. Exactly what Marx said not only hadn’t happened, but could never happen.’

‘He never went to a factory floor. He didn’t know any British trade union people who were involved.’

Beatrice Potter Webb: Invented the welfare state

London was the world capital at the time. ‘Everybody who was interested in where society was going either lived in London or came to London. There was this incredible conversation going on.’

One of those instrumental to achieving economic change was Beatrice Potter Webb, the daughter of a railway magnate – whose sisters were all married to influential politicians.

‘That would seem to have been Beatrice’s destiny also, except that she wanted something different – a career, which was really unheard of, especially for an upper-calls woman.’

She was a social worker, then an investigative journalist – she went undercover to work in a sweatshop. She invented the think thank and – most significantly – the idea of the modern welfare state.

‘She took the young Churchill under her wing and basically gave him the political platform he and Lloyd George used in around 1908 to implement some of the first ideas associated with the welfare state.’

Joseph Schumpeter: The entrepreneur

Joseph Schumpeter is an economist having a real resurgence today – especially in the technological community.

‘His great insight was that nations really made their own destinies. That it wasn’t about what you had, or how old your pedigree was, or if you were in the North Atlantic – it was what you did with what you had.’

‘Ingenuity, being able to do more with what you have, is another way of saying raise productivity.’

It was about the culture of the entrepreneur – finding new uses for existing resources.

John Maynard Keynes: Getting the blood flowing

John Maynard Keynes is ‘the pivotal figure’ in Grand Pursuit, because his influence straddled the two biggest challenges to modern civilisation – two world wars and a depression.

Nasar says Keynes and Irving Fisher (a figure celebrated by economists and unknown to the general public) developed the idea of the economy as a whole – and looking at how it worked at one point in time.

When the Depression hit, ‘they knew what was wrong – it was as if somebody had a stroke. The flow of money had been disrupted.’

‘And they had a very clear solution, which they advocated in every way, shape or form – which was to do what Ben Bernanke, who is the head of the American Central Bank, and happens to be a great student of the Depression, is doing now. Which is to get the blood flowing again.’

Amaryta Sen: Overcoming Poverty

Nasar ends the book with the Indian Nobel Prize winner Amaryta Sen, whose ‘whole career is about overcoming poverty’.

‘This idea that was born in the 1840s is spreading – and continues to spread. And right now, the most dramatic changes are happening in India and China.’

Sen witnessed the Bengal famine as a boy, and the partition of India and the violence that accompanied that.

‘His whole economics has been a version of, It’s not what you have, it’s what you do with it.

He observes that famines are not natural disasters – they’re not about a shortage of food.

‘There was no shortage of food in the Soviet Union in the 1930s, or Ireland in the 1840s, or even in Bengal during the war, or China in the Great Leap.’

‘It was that the people who starved in their millions had no access to food.’

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