Money and Power: Paschal Donohoe on Vince Cable’s new book

Money and Power: The World Leaders Who Changed Economics

Author: Vince Cable

ISBN-13: 978-1786495105

Publisher: Atlantic Books

Guideline Price: £20

To be an economist and a politician is a rarity. To be both and to appear on Strictly Come Dancing and foxtrot into national celebrity is so rare as to be faintly exotic.

Vince Cable, a former British minister and former leader of the Liberal Democrats, is that rarity. He was catapulted to prominence by his parliamentary performances during the Great Financial Crisis. Prominence turned into celebrity when he donned his dancing shoes and black tailcoat. He was an effective government minister and a leading opposition politician, though a difficult experience as a party leader and the current challenges of the Liberal Democrats overshadows those achievements.

Among Cable’s lesser known achievements are his books; two on the crisis stand out for their incisiveness, and Free Radical is one of the finest recent political autobiographies.

Money and Power: The World Leaders Who Changed Economics is his first book since stepping back from active political life. As the title indicates, it is a collection of essays on the lives and influence of policymakers who decisively changed their economies. This is more nuanced than a series of biographies. Cable believes that ideas matter and that concepts of political economy influence politicians and their decisions.

As expected from a former cabinet minister, Cable is clear where power resides. He argues that “it is the politicians who set the framework of public debate and its tone; who set the level of expectations; who pass laws and regulations . . . And their political power goes with responsibility for its success or failure”.

A high standard is set for inclusion in this analysis. The collected policymakers “could be credited with radical or even revolutionary change in the way economic policy was conducted”. The introduction to these essays acknowledges a different view. Is the role of the individual overstated? Is it not institutions that really matter, that can make a difference to the living standards of generations?

Political scientists such as Francis Fukuyama argue that the existence of an effectively functioning state is what really matters. The rule of law and stable political order depend on the modern territorial state. These are vital ingredients for economic development. Institutions are ingrained habits, anchored in law and social norms. The catalyst for new habits and changed norms can be the action of a single individual. The politicians in this collection demonstrate how this happens.

The sweep of the collection is impressive. The essays start with Alexander Hamilton and end with Donald Trump. One of the merits of this work is the focus on very influential but less famous political leaders. These include Ludwig Erhard, who advocated for competition and consumer choice in a Germany devastated by world war. The concept of a social market economy was central to his decisions as an administrator, economics minister and chancellor.

Tage Erlander as a Social Democratic prime minister of Sweden laid the foundation for the Nordic welfare state. Leszek Balcerowicz led the rapid change by Poland from a centrally planned to a market economy. This influenced similar transitions in other central and eastern European economies. Their lives, work and influence deserve this recognition.

The stories of more famous leaders are also well told. The essay on Robert Peel lucidly explains his pioneering influence on the politics of trade. Similarly, the chapter on Juan Peron is an excellent summary of his political career as prime minister and the Peronist model of government and economics. Peron strengthened the ability of the state to support the domestic economy through trade protection policies and state monopolies. This laid the foundations for economic nationalism, and the influence of this concept is felt well beyond Latin America.

The vulnerability of this collection is suggested in the title of the concluding chapter: “Sixteen Politicians: Sixteen Varieties of Economics”. Cable is emphatically correct to identify that economic policymaking is conducted with a social and political framework: “Economic policy is not just applied economics; it is applying economics in a world where political constraints, incentives and outcomes are quite different from standard economic models of consumers and firms.”

However, the author does not make deeper conclusions about lives that were vividly animated by thinking on the nature of economies. Profoundly different views on the nature of money, the role of government and the relationship between societies and economies are implicit in this book, but it is not teased out. This is a missed opportunity as Cable possesses both wisdom and an accessible writing style.

This collection is more than an introduction but a bit less than a fully developed consideration. It has much to offer, but I suspect that Vince Cable will offer even more in the stream of books and essays that will follow as the political sword is rested and a prolific pen takes its place.

Paschal Donohoe is Minister for Finance and president of the Eurogroup