The war in Ukraine was probably one of the biggest shock moments in the last year. This was followed by the energy crisis and mega-inflation.
(Photo: dpa)
The only thing that is still booming in crises are crisis scenarios. First growth figures shrink, then forecasts, finally the messages of hope. When, as is currently the case, several major threats emerge simultaneously, such as a geopolitical cold war, the long-term effects of Corona, the Ukraine war, the associated energy capers and mega-inflation, “Armageddon” is not far off in the accompanying literature and journalism. mood of doom.
In the midst of this pro-cyclically prosperous negative view, one of the best-known economic historians expresses himself in a completely different tone. Harold James, 66, British professor at Princeton University in the US, analyzes the effects of major economic crises in a pleasantly calm manner.
Based on seven epochal events – beginning with Karl Marx, famines and workers’ uprisings – he describes how economic upheavals not only create new problems, but rather harbor the seeds of recovery and modernization.
Commonly, James explains, new institutions are the observed response to supply crises and shocks. Supply shocks would create and then reshape globalization.
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Here he mentions the OPEC cartel crisis five decades ago with rising oil prices, which led to the production of modern, fuel-efficient cars in Japan. A distinction should be made between demand crises such as the “Great Depression” of the 1930s, when the state had to get involved with spending programs and a “deglobalization push” followed, or the global financial crisis of 2007/08. Economists would respond to such demand shocks by thinking in large aggregates, see John Maynard Keynes.
Harold James: Moments of Shock
Publisher Herder
Friborg 2022
544 pages
35 euros
Translation: Sigrid Schmidt, Andreas G. Foerster
Historically, however, according to James, some globalization crises have led “not to less, but to more globalization”. Currently, the protectionist turn in many states (for example in the USA) and the sharper competition between the countries would provide the background for “the first aggressive extortion use of energy supplies and for Russia’s aggressive war against Ukraine”.
From this point of view, the economy of 2022 is the accumulation of problematic economic events as a result of gigantic supply shocks. They would reveal profound bottlenecks, such as those currently affecting health protection in the Covid era or with energy.
We learn that in this situation, microeconomics (and thus data) and relative prices matter. Price increases – a logical consequence for scarce commodities such as natural gas – combined with the need for new sources of supply would trigger a development spurt in the technology.
Procedures are used that are basically already known, but now – in moments of need – could unfold their revolutionary potential. In the Marx years, these were the steam engine, in the 1970s container ships and computers, and in 2020 nanotechnology, artificial intelligence and mRNA vaccines, with Biontech from Mainz as a pioneer.
It remains unclear in this fascinating history book to what extent the current upheavals will ultimately lead to more globalization. Apparently, “autarky” or, to put it mildly, “strategic sovereignty” is the word of the hour.
More about the global economy:
A thinking in blocs of friendly states develops. James largely omits such questions of power – as well as the question of whether the rapidly increasing debt will not automatically lead to the next crisis, to the next moment of shock.
James, the strict market economist, does not give up hope. He quotes Keynes from the post-war year 1919 with his realization that “things have to get worse before they can get better”.
The author interprets this like a learned student: “We learn most when the present is at its bleakest.”
More: From Stalin to Thatcher to Gorbachev: How great personalities shape history