December Book of the Month: “Central Banking at a Crossroads”

CentralBanking

“This rigorous and novel investigation is a ‘must-read’ for all who either approve or disapprove of the unconventional instruments and practices used by central banks that have extended the mandate and blurred the traditional line between monetary and fiscal policy.” —Brigitte Young, University of Münster, Germany

“The book’s thought-provoking and sometimes controversial views are very welcome to the discussion even if one would not necessarily agree with all of them.” —Erkki Liikanen, Governor of the Bank of Finland

‘Central Banking at a Crossroads – Europe and Beyond’ is our Book of the Month for December. The book analyses the dramatic changes central banking has undergone post-Lehman Brothers and addresses the tougher questions: Have these changes allowed central banks to reach their inflation targets and ensure financial stability? One of the book’s authors, Jakob Vestergaard, a senior researcher at the Danish Institute for International Studies, agreed to answer a few of our questions.

Q: An alternative title to your book would have been, ‘Re-thinking Central Banking: Post-Crisis Successes and Remaining Challenges’. Could you explain to what extent we have to “rethink” the system of central banking?

Jakob Vestergaard: Three things are clear. First, unconventional monetary policy was necessary to handle the financial crisis of 2008 when widespread financial disruptions had rendered the key policy tool in conventional central banking, the short term policy rate, largely ineffective. Second, five years down the road it is difficult to discern whether any real healing has taken place: is the banking system more robust and resilient today, and has the global economy bounced back from the shock of the 2008 crisis? In many countries, banks are still not lending at a scale required to contribute to a pick-up in economic activity, and there is little to suggest that bank resilience to adverse macroeconomic shocks has significantly increased. This leads to the third point: with quantitative easing close to what many see as its limits in terms of positive effects on the economy, it does not seem obvious what central banks in core countries can do to escape the trap of disinflation and stagnation (such as is the current trend in the Euro zone and in Japan), nor how central banks in the periphery are to tackle a potential sudden reversal in capital flows. In my view, the practice of central banking needs a substantial rethink, to the extent of tearing down the walls – previously zealously guarded and policed – between fiscal, monetary and other macroeconomic policies. These policies must be developed and formulated in a much more integrated and coherent way, as opposed to well-intended, ex-post ‘coordination’. The era of ‘compartmentalized’ macroeconomic policymaking is over, or it will be soon.

Q: Can you highlight the key innovations that central banks have introduced since the financial crisis of 2008?

JV: Central banks replaced conventional tools with new instruments and practices beyond their mandates, thus blurring the traditional separation from private financial markets and from governments. For the past five years, central banks have intervened in both public and private debt markets, taking on functions of market makers or dealers of last resort. Some – as Bank of England – plan to formalize these interventions into their day-to-day toolkit. Our book offers meticulous examination of a number of the key innovations in central banking over these past few years, but it is also a book that takes a step back, to ask the tougher, more general questions: Have central banking innovations enabled them to reach their ‘traditional’ objectives in terms of inflation targets? From the Euro zone over Japan and to Brazil, that seems not to be the case. Have central banks, through their new unconventional tools, ensured financial stability? The concurrence of substantial asset price inflation with consumer goods disinflation and low, job-less growth in most Western countries, does not suggest to me central banking has been reinvented so as to be able to operate effectively in our post-crisis global economy. Banks that were too big to fail five years ago are even too bigger to fail today. Banks that were undercapitalized five years ago are still undercapitalized. To see progress in these important respects requires very strong looking glasses and a very generous eye too. Central banks have thrown trillions of dollars at dysfunctional financial markets, in ways that may or may not have been to some extent ‘innovative’, but the banking system is neither more robust or resilient, nor is it lending to the real economy at a significant scale. Shadow banking is growing in potentially destabilizing ways and there are few signs that central banks really know what to do about it; certainly, the notion that so-called macro prudential policies will come to our rescue in managing new unsustainable credit booms seems optimistic at best. In the meantime, most economies are either in recession, stagnating or experiencing a considerable slow-down of economic activity.There is still a long way to go, I think, before we have new modes of thinking that tackle the key problems, as opposed to just pushing them ahead of us, in a process that may well only makes them larger (even if, for a while, less visible).

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The Bank of England, London

Q: Why does there exist an observed reluctance to seriously recapitalize Europe’s banks by imposing a de facto ceiling on capital requirements?

JV: Europe’s most recent Capital Requirement Directive, the CDR4, stipulates that if countries wish to impose higher capital requirements than those laid out in CRD4, they must ask permission from European authorities. For me, this constitutes a de facto ceiling on capital requirements. National authorities will be extremely reluctant to take such as step, for a range of reasons, including the negative signalling effect to financial markets. It’s would be akin to officially declaring, ‘Our banks are in the deepest possible mess, much worse than anywhere else in the EU.’ So, it’s not going to happen. The political rhetoric that drives this part of the CRD4 is the ideal of an internal market in financial services and a level playing field for European banks. But this is just one of many expressions of the European reluctance to seriously recapitalize its banks. In negotiating Basel 3, it was the Germans and the French that most fiercely resisted adoption of a minimum requirement for equity funding to total liabilities (a leverage ratio). The result was that a very low leverage ratio was adopted, based on a too broad category of capital, to be binding on banks only by 2019. The largest German and French banks still fund themselves with only approximately three per cent equity and 97 per cent debt, and they are quite happy with this ‘business model’, and all the government subsidies that it comes with, whether directly or indirectly.

Q: If, as you say in Chapter 5, the recapitalization orchestrated by the European Banking Authority (EBA) ‘is considered shallow and fails to bolster Europe’s ailing banks’, what alternative method do you recommend to strengthen their resilience?

JV: I am not suggesting that Europe should do something else. I am suggesting that our European institutions should do what they say they do: recapitalize Europe’s banks. Only seven out of the 24 banks that allegedly were ‘recapitalized’ in the 2012 recapitalization exercise, actually increased their ratio of equity funding to total assets. This is the magic that capital ratios measured relative to so-called risk-weighted assets offer to banks and regulators: banks that have raised basically zero new capital can come out of a recapitalization exercise appearing to have been significantly recapitalized. Europe should recapitalize its banks such that its equity funding to total liabilities increase to at least seven per cent over the next three years, starting by reaching five per cent by the end of 2015. Impossible? Of course not. If banks fail to raise capital on their own, public funding can be provided to fill the gap. This would be a much better use of public money than the repeated provisions of cheap liquidity that we’ve seen in recent years.

Q: In Chapter 5, you state that the core problem of continued undercapitalization of European Banking lies in the core of the Euro zone: French and German banks. Could you elaborate what you mean by that?

8463683689_baa33ca431_mJV: Few banks in Europe are as poorly capitalized as the largest German and French banks. This remains the case following the latest stress testing and asset quality reviews of the European Central Bank and the European Banking Authority. The results were released in late October. Of course, these banks are also so much larger than any Greek, Portuguese and Irish banks, that to look anywhere else for the core of the problem makes little sense. If you take EBAs adverse scenario at face value (which you should not, because it is far too mild), the four largest French and four largest German banks would be more than 220 billion Euros short of a five per cent threshold for equity funding (according to calculations in an ongoing study). This corresponds to almost 40 per cent of the aggregate capital shortfall for all 123 banks included in EBAs stress tests. This is what I mean. Seen against this background – and bearing in mind the continued close interlocking of the European bank and sovereign debt crisis – the moralizing discourse in core countries of the Euro zone about the ‘problem countries’ in its periphery, is problematic.

Q: What will the European ‘recapitalization reluctance’ mean for the financial prospects of the European Union?

JV: ‘The main function of economic forecasting is to make astrology look respectable,’ Stanford economist Ezra Solomon famously said. I invoke Solomon here because I’m reluctant to make predictions about the financial prospects of the EU. Others are much better placed than me to do this. But a few points can be made. Several studies show a positive correlation between equity funding on one side, and resilience and lending on the other side. The longer European countries drag their feet on recapitalizing its banks, the slower will be the economic recovery in Europe (when eventually it comes) and the weaker its banks will stand in global competition for market shares. Thinly capitalized banks may be good for return-on-equity (ROE) performance, but they are good for little else.

JV: I stress that the views expressed are mine, not those of my co-editors or other contributors to the book. I take full responsibility for any errors and misjudgments committed.

For more information, check out the book’s webpage here.

Photos provided by James Pett and EpSos.de.

November Book of the Month: “The Spirit of Luc Boltanski”

LucBoltanski

 

“This is a book that is needed to understand the ideas and research dynamics of one of the greatest contemporary sociologists. This impressive collection of essays provides not only an introduction to his work, but also insightful analyses of its reception, critical discussions on its wider significance, and reflexive comments by Luc Boltanski himself, all of which will make this volume a classic.” 

Ève Chiapello, Research Director, School for Advanced Studies in the Social Sciences (EHESS), Paris

This November, we are proud to announce that The Spirit of Luc Boltanski: Essays on the ‘Pragmatic Sociology of Critique’ is our Book of the Month! Professor Bryan Turner and Dr. Simon Susen have contributed a collection of essays that explore the theories of French sociologist Luc Boltanski, a leading figure in the new “pragmatic” school of French sociology. In the following interview, Dr. Simon Susen gives us more insight into Luc Boltanski’s work by explaining why he is not a “social theorist” and how he relates to other theories in the field of sociology:

Q: What made you choose Luc Boltanski and his theory in particular as a topic for a book?

Dr. Simon Susen: In our view, Luc Boltanski has emerged as the most prominent, and also most innovative, French sociologist since the death of Pierre Bourdieu in 2002.

Q: Do your previous publications such as The Legacy of Pierre Bourdieu relate to the content of this book?

SS: Without a doubt. Along with Loïc Wacquant, Boltanski is Bourdieu’s most influential disciple. It is impossible to make sense of Boltanski’s work without grasping the considerable influence that his “patron” (Bourdieu) had on his personal and intellectual development.

Q: Can you explain to us why Luc Boltanski’s theory is so popular in German and French Circles of Sociology but not in American and English Circles?

SS: To begin with, Boltanski refuses to call himself a “theorist” or a “social theorist”. In fact, similar to Bourdieu, he is suspicious of “theory” or “social theory” if it is (mis)understood as a merely conceptual – that is, theoreticist – endeavour. His approach (rather than his “theory”) is starting to have a considerable impact on the social sciences, not only in continental Europe, but also in the US and in the UK, as well as in many other countries. This influence is reflected in the increasing number of scholarly writings grappling with the importance of Boltanski’s work.

Q: You speak of a “profound gap (…) between the French-speaking and the English-speaking debates on Boltanski’s sociology”. Can you explain what you mean by a “gap”?

SS: In a nutshell, the former tend to be “Franco-centric”, whereas the latter – even when dealing with French sociologists – tend to be “Anglo-centric” (in terms of citations, cultural reference points, etc.). Our volume seeks to bridge the gap between the two “camps”.

Q: What would you say has been Boltanski’s most important influence and achievement in the field of sociology?

SS: The development of “The Pragmatic Sociology of Critique”.

Q: How can Luc Boltanski’s theory of the “pragmatic turn” be applied to contemporary sociology?

SS: By taking ordinary actors seriously!

Q: Can you explain to us the difference or the parallels between Bourdieu’s theory and Boltanski’s theory of sociology with regards to human inequality?

SS: In essence, Boltanski maintains that ordinary actors are capable of understanding, problematizing, and criticizing structures of inequality; for Bourdieu, it is the job of social scientists to study these structures and the social forces – as well as the power mechanisms – sustaining them, because – in his view – ordinary actors are, to a large extent, seduced and misled by “doxic misrepresentations”.

Q: Is there a chapter or a specific area of focus in your book that you consider to be particularly significant? And if so, why?

SS: We think that each chapter makes an important contribution. Hence, it would be mistaken to suggest that one particular chapter stands out. It’s a huge volume…full of original contributions!

You can find out more about the book here or read an in-depth interview with Luc Boltanski himself!

 

 

AUTHOR EVENT: Professor Mariana Mazzucato | The New Statesman SPERI Prize Lecture

 

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The Anthem Press book stand was heaving with copies of The Entrepreneurial StateMariana Mazzucato’s latest book, at last night’s New Statesman SPERI prize lecture. No guest could possibly miss the bright yellow matte-copies emblazoned with an image of a lion as they entered the chapel-like foyer of the Emmanuel Centre.

It was an exciting opportunity for us to hear a lecture by one of our authors who had scooped up the inaugural New Statesman SPERI prize in political economy. Mariana was selected from a glittering shortlist including the celebrated French economist Thomas Piketty.

 

 

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Also shortlisted were Ha-Joon Chang (University of Cambridge); Wolfgang Streeck (Max Planck Institute, Cologne); Anne Wren (Trinity College, Dublin); and Simon Wren-Lewis (University of Oxford).

The prize was launched this year by the New Statesman magazine and the Sheffield Political Economy Research Institute (SPERI) at the University of Sheffield.

The Prize Jury was Helen Lewis, Deputy Editor of the New Statesman; George Eaton, Political Editor of the New Statesman; Professor Tony Payne, Director of SPERI; Professor Andrew Gamble, Professor of Politics at the University of Cambridge and Chair of the International Advisory Board of SPERI; Sarah O’Connor, Economics Correspondent at the Financial Times; and Gavin Kelly, Chief Executive of The Resolution Foundation.

 

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“Smart growth: an innovative way to tackle inequality”

Mariana’s lecture focused on opportunities for innovative state investment. The professor claimed the idea of a dynamic private sector versus a sluggish public sector is a myth. Instead, Mariana emphasised therole the state has played in successfully taking on high-risk entrepreneurial investments. For instance, she referred to the US government’s injection of capital into Apple products and praised Germany and Denmark for their portfolio of green technologies. 

 

In the Q&A session at the end chaired by Faisel Islam, the Political Editor of Sky News, Mariana highlighted how the UK government launched its own award-winning website rather than outsourcing the job as originally planned in a move which also showcased Britain’s design talent.

For more photos check our Facebook page.  

 

 

Book Publishing: 5 Key Topics of the Month

October, 2014: Every month, we highlight 5 key topics or new developments in the book publishing industry, with a special emphasis on academic publishing. Whether data, news or commentary, we aim to keep you informed.

 

We Need the Humanities As Much As Science to Solve the World’s Problems, said Paul Smith, Director of the British Council (USA) writing for the Huffington Post. The British Council is partnering with a range of organizations in the US and the UK, and eventually more internationally, in a new project called Mobilizing the Humanities. The humanities, the sciences and the social sciences need to work together to achieve “a total take on any issue”, Smith said, citing the environmental issue in Kano, Nigeria, as an example where “the engineer needs to work with the historian and the local theologian”.

Is Translation Stronger in France, Germany or the UK?
At the Frankfurt Book Fair, a panel of publishers got together to discuss international literature and translations, reported Publishing Perspectives. Pierre Astier, a Paris-based former publisher and now literary agent, said he was motivated to publish international literature after discovering authors from Africa and the Carribbean. Florian Höllerer, Director of the Literaturhaus Stuttgart, said a long-standing tradition of translation in Germany means the industry takes translators for granted. Christopher MacLehose founder of the British MacLehose Press described Hall 8 at the trade fair (the now-former traditional home of the English-language publishers) as “a sort of abattoir of culture.”

International Schools: Opportunities for UK Publishers 
UK publishers are right to invest heavily in the international school market, reported Book Brunch, which has grown exponentially from 2,500 schools in 2000 to 7,000 this year, according to the latest figures published by The International School Consultancy Group (ISC). UK publishers can build on their reputation for high-quality materials and a high standard education system to meet demand for the 42% of international schools that follow UK-based curricula.

Publishing Battle Should Be Covered, Not Joined, said Margaret Sullivan, Public Editor for the New York Times. After highlighting the dispute between Amazon and Hachette over the price of e-books, Sullivan addressed readers’ complaints that The Times is “demonizing” Amazon by admitting that the newspaper had “given a lot of ink to one side” and portrayed Amazon as “a literature-killing bully instead of a hard-nosed business.”

UK Publishes More Books Per Capita than Any Other Country
UK publishers released more than 20 new titles every hour over the course of 2014, meaning that the country published more books per inhabitant than anywhere else in the world, said The Guardian, citing a report from the  International Publishers Association (IPA). According to the report, UK publishers released 184,000 new and revised titles in 2013. This equates to 2,875 titles per million inhabitants.

BOOK LAUNCH: 28/10/14 Arab Development Denied | LSE, London

 

Dr Ali Kadri and Professor John Weeks

Dr Ali Kadri and Professor John Weeks

Anthem Attendee — Anna Ward, Marketing and Book Publicity Associate

I followed a crowd of students into Tower 2, Clement’s Inn, part of the London School of Economics campus located off the crescent shaped Aldwych Street in Westminster. Dr Ali Kadri’s book launch was about to begin.

We published his book, Arab Development Denied: Dynamics of Accumulation by Wars of Encroachment, in July this year and so far it has received interest across a range of journals including Arab Studies Quarterly and Heterodox Economics

Born in Lebanon but currently living in Singapore, Dr Kadri has extensive knowledge of the Middle East and economics. He is currently working as a Senior Research Fellow in the Middle East Institute at the National University of Singapore. Previously, he served as Head of the Economic Analysis Section at the United Nations regional office for western Asia.

The event was organised by the Laboratory for Advanced Research on the Global Economy (LAB), part of LSE’s Centre for the Study of Human Rights. Dr Kadri is member of the LAB’s panel of experts, known as a Sounding Board and he recently contributed an interview for their website.

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Dr Jason Hickel, a Leverhulme Fellow in the Department of Anthropology at LSE, chaired the event.

Also present as a speaker was Professor John Weeks, professor emeritus of economics, SOAS, University of London. We published Professor Weeks’ book, Economics of the 1%: How Mainstream Economics Serves the Rich, Obscures Reality and Distorts Policy, in January this year. 

The panel collectively raised a few key ideas but the focus was on the impact of neoliberal economics in the Middle East.

 

“Neoliberalism”

Neoliberalism, where control of economic policies is shifted from the public sector to the private sector, was a key topic during the panel discussion. Dr Kadri commented on the almost universal adoption of neoliberal policies by Arab governments from the 1990s onwards:

“Neoliberalism opens up valves of resource flows which drain out [of the Middle East] without much re-investment. Policies are serving as conveyor belts for sending resources abroad.”

Is this development? Adverts for more property building between Cairo and Alexandria, by David Evers

Is this development? Adverts for more property building between Cairo and Alexandria, by David Evers

 

Dr Kadri cited Egypt, lauded as a success story by some for neoliberal policies, as a key example where rising economic growth has masked social issues such as food shortages:

“Despite 5-6 years of growth in Egypt, a third of children are malnourished. There’s a story not being told behind a story.”

Between 2004-2008, Cairo aggressively pursued economic reforms to attract foreign investment and facilitate growth. However, since 2011, it has relied primarily on foreign exchange reserves and depended on foreign assistance, particularly from Gulf countries, according to the Central Intelligence Agency’s website.

Professor John Weeks

Professor John Weeks

Professor Weeks also highlighted neoliberalism, referring to the famous quote by the American economist Milton Freedman, ”free markets for free men.”

He went on to say that that neoliberalism is an instrument of authoritarian societies, adding that this approach was disenfranchising masses of the population across the Middle East, eliminating any role in decision making:

“This leads us to one of the most important points of Ali’s book: development, or a lack of it, conflict, struggle and class conflict.”

 

 

Conclusion

Tunisian flag by Tarek

Tunisian flag by Tarek

It was interesting to listen to the questions by the audience at the end. One I thought was particularly relevant was about Tunisia. Is Tunisia the poster child for democracy in the Middle East? Will the recent elections give it a chance to escape “de-development“, the phrase Dr Kadri coins in his book?

Dr Kadri responded by saying that if Tunisia wants to ration its flow of resources it will require more than a Tunisian effort, adding that he remained sceptical of one single country in the region socialising its assets.

 

 

 

October Book of the Month: “IB Music Revision Guide”

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We are happy to announce Roger Paul‘s first publication as our Book of the Month for October! The “IB Music Revision Guide – Everything you need to prepare for the Music Listening Examination” has been specifically designed for pupils of the IB Music Course and features a variety of learning techniques and helpful practice questions for both Standard and Higher Level. We talked to Roger Paul about writing his first book, from the challenges of the IB music revision course to his interest in progressive metal rock bands…

 

Q: Could you tell us a little bit about the International Baccalaureate (IB) Diploma Programme music course? Is it one of the most challenging courses of its type?

Roger Paul: The IB music course is a very demanding but rewarding course to teach and study. It contains coursework elements such as performing, creating and a musical links investigation (a comparison of two pieces from different cultures chosen by the student), and an examination which tests the students’ knowledge of the Prescribed Works and Musical Styles.

Q: What type of music do you cover for the music course?

RP: It is very diverse; on the one hand there is the breadth of studying music from many times, places and cultures. This can mean looking at Baroque music, hip-hop, African drumming, the list goes on! On the other hand there is the depth provided by studying the prescribed works (currently Prokofiev’s Classical Symphony and Xian’s Yellow River Piano Concerto, for 2015-16 they are Rossini’s Petite Messe Solennelle and Gershwin’s An American in Paris).

Q: How did you use your time teaching music at St Paul’s Girl’s School to help you write the book?

RP: The Key Stage 3 teaching programme at St Paul’s Girls’ School has proved to be very useful in that it contains practical modules on a variety of styles ranging from Indonesian Gamelan to reggae to opera, so we get to experience the music first hand. For the A level students, it has also been good to try out some of the listening and analysis techniques that cross over between A level and the IB diploma.

Q: What do you think makes your IB Music Revision Guide stand out?

RP: I think the analyses of the Prescribed Works are a stand out feature; there isn’t a lot out there that caters specifically for the IB music programme. Each movement of the music is broken down into elements such as structure, melody, harmony and so on, along with detailed examples and bar numbers so that the reader can locate them in their copy of the score.

Q: What was your most recent musical purchase?

RP: I don’t think many will have heard of them, but I recently bought two albums by the London-based progressive-metal band Haken, Aquarius and The Mountain. I have a very broad taste in music!

Q: What has been the most challenging musical composition you have ever played?

RP: Back in my university days I played drums and percussion on an electronic piece called Urgent Messages. Most of the music was a graphic score timed in minutes and seconds!

Q: Who are your favourite composers?

RP: Too many to choose from! It really depends on what I’m teaching or performing at the time. It can be anyone from Bach to Stravinsky to Hans Zimmer.

Q: Musical icons?Elvis

RP: Not really, but I think John Lennon once said ‘before Elvis there was nothing’…

Q: Which young musicians are exciting you right now?

RP: The musicians I get to work with at St Paul’s; some of the girls join us already at Grade 6-8 level, and they keep on developing. That’s pretty exciting to see.

Roger Paul IB Music Photo

Q: How do you calm your nerves before a performance?

RP: Usually by making sure I’m as prepared as I can be; then I go out and enjoy it!

Q: What are you most proud of achieving in your academic music teaching career?

RP: Enabling my students to achieve their potential. Getting published for the first time has to be up there as well!

You can find out more about the book here