John Kenneth Galbraith would probably include Alan Greenspan among men of wisdom that missed the point.

Sir, Robert Gordon, reviewing Alan Greenspan’s and Adrian Wooldridge’s “Capitalism in America: A history” writes: “Three themes are highlighted — productivity as the measure of economic progress; the “Siamese twins of creation and destruction” as the sources of productivity growth; and the political reaction to the consequences of creative destruction.”, “After the gold rush”, October 20.

I have not read that book yet, I will; creative destruction plays absolutely an important role in the acceleration and sustainability of growth.

I do not know Adrian Woodridge, but, when it comes to the former Fed Chairman Alan Greenspan, I have an inkling that if John Kenneth Galbraith was still around, he would suggest Greenspan does not have all what it takes to write that book.

Let me explain that by quoting from Galbraith’s “Money: Whence it came where it went” 1975: “For the new parts of the country [USA’s West]… there was the right to create banks at will and therewith the notes and deposits that resulted from their loans…[if] the bank failed…someone was left holding the worthless notes… but some borrowers from this bank were now in business...[jobs created]

It was an arrangement which reputable bankers and merchants in the East viewed with extreme distaste… Men of economic wisdom, then as later expressing the views of the reputable business community, spoke of the anarchy of unstable banking… The men of wisdom missed the point. The anarchy served the frontier far better than a more orderly system that kept a tight hand on credit would have done…. what is called sound economics is very often what mirrors the needs of the respectfully affluent.”

Alan Greenspan clearly fits in with those “Men of economic wisdom” (of the East) who are distasted by unstable banking. To make banks stable, he supported risk-adverse risk weighted capital requirements, much lower for what’s perceived safe (the present) than for what’s perceived risky (the future). 

Sir, and if one is to tellthe real “full, epic story of America's evolution from a small patchwork of threadbare colonies to the most powerful engine of wealth and innovation the world has ever seen”; which is how this book is being promoted, one would need to begin with the willingness of its people to take risks.

What would have happened to America if banks with risk-weighted capital requirements had met its immigrants? Probably that imagined 1620 meeting in Davos about the future world, in which “one region goes unmentioned: North America. The region is nothing more than an empty space on the map” would not have found its way into this book.

The saddest part of all this is that our current generation of central bankers and regulators, like Alan Greenspan, those who prioritized bank stability over growth, as if these two aspects could be separated, anyhow did it totally wrong. With their risk weighted capital requirements, they only guarantee that banks will end up with especially big exposures, against what’s perceived as especially safe, against especially little capital; something which can only cause especially big crises, like that of 2007-08.

PS. Galbraith’s book also explained that, de-facto, regulators had also decreed inequality

PS. Gordon writes about “millions of immigrants being drawn in from Europe as the ever-expanding railroads, enjoying massive government subsidies in the form of free land, in turn subsidised the new arrivals so that they would populate the west.”.  I am not sure that amounted to “massive government subsidies”. If not zero, most of it must have been extremely low valued land. It was those migrants who with their sweat, inventiveness and willingness to take risks built up the value of that land.

PS. Gordon complains the book has “only a page or two reckons the human cost of underpaid labourers, including the consequences of malnutrition [and on] labour unrest”. That reads just like political correctness’ flag waving; and belief in that if only the task of development was assigned to the right kind of central planners, his kind, it would be achieved in a nice and fair way, with no sufferings and no inequality.

PS. In Venezuela, during a conference, 1978, forty years ago, John Kenneth Galbraith autographed “Money” for me. Mine was the only one he signed explaining he did so because it was a pocket book and much underlined  J His book inspired the first Op-Ed that I wrote, more than twenty years ago.

@PerKurowski

Gillian Tett, a functional bank system is a much more powerful instrument of change than a violin, even if Joe’s

Sir, Gillian Tett writes beautifully about “Joe’s violin… an instrument soaked in 20th-century immigrant memories was launching a new 21st-century immigrant dream, forged with struggle, risk and hope”, “An instrument of change” February 24.

But 20th-century immigrants, when needing the opportunity of bank credit, though they of course had to confront that risk aversion described by Mark Twain with “bankers lend you the umbrella when the sun is out and want it back when it looks like it could rain”, they did not have to face risk weighted capital requirements for banks.

So Ms. Tett should reflect on the possibility that had a Joseph Feingold’s livelihood depended on receiving the chance imbedded in a bank credit, in the 21st century, he might have needed to part with the violin bartering it for something more useful, and would never have had the chance to donate it.

Our future is to be “forged with struggle, risk and hope”. Yes indeed Ms Tett, “God make us daring” and save us from loony technocrats.

@PerKurowski

If we are to avoid Nazi mentalities to take over, citizens need to be able to express their deeper inner concerns

Sir, I refer to Richard Milne’s “Rise of populists poses dilemma for Nordic mainstream” February 14.

As a son of a polish citizen who had to suffer concentration camps for almost five years, I am as far away as can be with sympathizing with Nazis. And of course I see with disgust anyone “pictured with Nazi memorabilia or uttering racist comments”. But Sir, that does not determined them to be, in any way, “uniquely awful”.

To argue so just opens the door to the exercise of dangerous political hypocrisy while closing the door on the possibilities of citizens to express their usually not at all bad meaning, deep concerns.

For a citizen, in a fairly small society like Sweden to be worrying about immigrants does not make him a bad citizen… it makes him just a citizen worrying about immigrants. Is that so hard to understand or is that what some do not want to be understood?

Sir, the repression of citizens’ feeling and worries, is precisely the best fertilizer for movements that can be taken over by Nazi type mentalities. Healthy societies need to be able to discuss, to ventilate, everything that bothers them, not only what’s political correct to discuss. 

A personal PS: My mother was Swedish. 93 years old, she passed away last Friday. On Thursday night, two not at all Swedish looking immigrants, vociferating in a totally foreign language, transported her home. I have rarely met a person more open to treat all without any kind of distinctions than my mother, but had she not the right not to feel totally at ease?

@PerKurowski

Emigrants/Immigrants of the Whole New World Unite!

Sir if John Gapper can ask “Workers of the New World Unite!”, December 13, when referring to scriptwriters and designers then clearly the same rights should be bestowed on those that voting with their feet and with their remittances are perhaps even more the real workers of the New World, though they still lack a unison voice…. Emigrant/Immigrants of the Whole New World Unite!

Since in gross earnings the emigrants/immigrants definitely represent one of the major economies in the world, they (and the global corporations) are really the ones who should next be empowered with Chairs at the Executive Boards of the World Bank and the International Monetary Fund.