THE SHORTEST HISTORY OF ECONOMICS  by Andrew Leigh

Black Inc, February 2024

ISBN:  978-1760644000

RRP: $27.99 (pb)

Reviewed by Gerard Henderson

 

 

Is there anything that can stop Andrew Leigh? – the Australian Labor Party member for  Fraser in the Australian Capital Territory who is the Assistant Minister for Competition, Charities and Treasury and Assistant Minister for Employment in the Albanese Labor government. Dr Leigh holds a Ph.D. in Public Policy from Harvard University and has just written his latest book The Shortest History of Economics (Black Inc, 2024). It carries an endorsement from Professor Claudia Goldin of Harvard University – the Nobel Laureate in Economics.

A brilliant career, so far, to be sure.  But the answer to the question is “Yes”, Andrew Leigh does not belong to one of the Labor Party factions.  This means that he cannot become a full minister in the Labor government – since the factions determine who will be ministers and the Prime Minister allocates the portfolios.

Andrew Leigh is very much a Labor Party true believer. It’s just that he won a heavily contested pre-selection defeating, among others, Professor George Williams – with a promise not to belong to a faction. And he’s the kind of politician who keeps promises.

Still, Leigh has very much a full-time job as a local member and an assistant minister. He also manages to run marathons at very impressive times for a 52-year old and competes in triathlons. And he writes books.

It would seem that the changing nature of work during the COVID-19 pandemic and the consequent lockdowns provided the necessary time for Leigh to put his 200-page book together covering world history from pre-historic to contemporary times.

Early on, the author states: “This small book tells us a big story; it is the story of capitalism – of how our market system developed.” In the final chapter, he repeats this – and adds that the work discussed “the key ideas and people who shaped the discipline of economics” and outlined “how economic forces have affected world history”.

Andrew Leigh achieved his aims – from his perspective.  He is a genuine social democrat within the labour tradition.  The author supports free markets but sees a key role for government.  Early on, he refers to critics who think economics is bleak, money grubbing or narrow-minded and like to quote Thomas Carlyle’s description of economics as “the dismal science”.  But Leigh makes the point that Carlyle, writing in the 1880s, “was a racist who believed that slavery should be reintroduced in the West Indies”.

The strong point of the book is the run-through of economic history.  The reader hears about the economic effect of the Agricultural Revolution, the Industrial Revolution, World War I, the Bolshevik Revolution, the Great Depression, World  War II and more besides. At a time when many young men and women do not get taught history to the extent that once was the case, Leigh’s work provides a useful historical framework.  And he does so without preaching.

The construction of the Grand Canal to the significance of printing, the impact of the Plague, the advent of sailing, the importance of elevators in building construction, the pandemics of 1918/19 and 2020/21 – it’s all here.  Leigh’s style is to state facts from which he encourages readers to draw certain conclusions.

At times, the Albanese government’s assistant treasurer makes some comments that query the certitude of government policy. For example, Leigh has this to say about economic modelling:

Academic economists tend to be dubious of forecasts, noting that crises are often precipitated by unexpected shocks.  Conflict, pandemics, famines, bankruptcies, defaults and trade wars are often missed by economic models that concentrate only on slow-moving variables.

And this about global emissions, with respect to China:

Economists have worked with governments to design a variety of schemes to reduce emissions – which are now falling in most advanced nations.   A central challenge is China’s greenhouse emissions, which account for one-third of the global total and have been steadily rising over recent years.  Encouraging more low-income nations to reduce emissions is now central to addressing the world’s biggest market failure.

This reads as an admission that modelling is an inexact “science” and that it is most unwise for the likes of Australia to believe that China will reach its emissions targets anytime soon.

As a social democrat, it’s to be expected that Leigh will line-up with the English economist John Maynard Keynes rather than with the Austrian Friedrich von Hayek. Here’s how he sees the difference:

To Hayek, recessions represented a clean-out of bad investments.  Keynes saw recessions as painful and unnecessary. Hayek believed that government intervention would only make things worse.  Keynes thought that government had a valuable role in smoothing the economic cycle.  Hayek feared that democratic governments could erode liberty and believed that transitional dictatorships were sometimes necessary.

As a break from economic history, the author writes that the difference between Hayek and Keynes also extended to their private lives.  The former was austere, cold and reserved.  The latter a self-confident art collector and investor who kept diaries of his sexual exploits with men and women.

The book also contains interesting reflections on the British left-wing economist Myra Robinson whose early work focused on microeconomics with special attention to monopolies and oligopolies and the English-born Collin Clark who published pathbreaking estimates of national income.  Clark settled in Australia, having clashed with former Australian prime minister Bob Hawke when Hawke was a student at Oxford University, and became close to the anti-communist activist B.A. Santamaria.

Leigh does not cover Robinson’s final years when she became a fan of the communist dictator Mao Zedong. But he does nail the leftists Paul and Anne Ehrlich:

In 1968, biologists Anne and Paul Ehrlich declared that “the battle to feed all of humanity is over”.  They went on to forecast that “in the 1970s the world will undergo famines – hundreds of millions of people are going to starve to death”. The Ehrlichs callously advised ending all food aid to India, a nation that was “so far behind in the population food game that there is no hope that our food aid will see them through to self-sufficiency”. India’s population is now more than twice as large as it was when the Ehrlichs wrote their book.

There are numerous insights in Leigh’s work.  He writes that the victors in major wars (such as the American Civil War and the Second World War) are those with the stronger economics.  He makes valuable comments on the economic impact of religious beliefs.

The overwhelming message of The Shortest History of Economics is that democratic governments and free trade deliver the best economic outcomes. However, as a social democrat, Dr Leigh believes that government should remain a key player in the economy – based on this history of economics extending back two millennia.

Gerard Henderson is Executive Director of The Sydney Institute & author of Cardinal Pell, The Media Pile-On & Collective Guilt (Connor Court, New Updated Edition, 2023)