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Book Review Group 14Presents Book Review on

The Commanding Heights: The Battle for World Economy

Dr. Joseph StanislawDr. Daniel YerginMeet the Authors...

Co-founder and chairman of Cambridge Energy Research Associates (CERA) Won Pulitzer for The Prize

Co-founder of CERA Financial Adviser

Dr. Daniel Yergin received his B.A. from Yale University in 1968, and Ph.D. in International Relations (1974) from Cambridge University. He is the co-founder and chairman ofCambridge Energy Research Associates (CERA), an energy research consultancy. His famous book The Prize: The Epic Quest for Oil, Money, and Power became a number-one bestseller and won the Pulitzer Prize for General Non-Fiction in 1992. Recently, in September 2011, Yergin published The Quest: Energy, Security, and the Remaking of the Modern World which continued his history of the global oil industry but also addressed energy security, natural gas, electric power, climate change and the search for renewable sources of energy. Dr. Yergin also serves on the U.S. Secretary of Energy Advisory Board.

Dr. Joseph Stanislaw holds a B.A. from Harvard University and a Ph.D. in Economics from Edinburgh University. He is a financial adviser on international markets and politics. He is also the co-founder along with Dr. Yergin, of Cambridge Energy Research Associates (CERA). Dr. Stanislaw advises companies and countries on strategies to deal with the risks and opportunities in the evolving marketplace. He currently serves on the Board of Advisors of the Nicholas Institute for Environmental Policy Solutions.3Basic theme of the book...Economic Regimes of Socialism vis--vis Free MarketsA riveting narrative through history describes these two issues... What Globalization really isThe Commanding Heights: the Battle for World Economy is an exceptional work which presents to the reader with a detailed account on two basic themes which have taken centre stage in the past few decades: firstly, the economic regimes adopted by various countries across the globe and their implications at large. Secondly, it strives to characterize the nature of globalization as a process and not an end in itself. Also, it strives to take up examples of people and nations throughout the world in order to substantiate their thesis on globalization and free markets. 4Title of the book...

Vladimir Lenins 1922 speech on the New Economic PolicyThe title of the book is interestingly attributed to Vladimir Lenins New Economic Policy of 1922 on how essential components (i.e. factors of production) of a nations economy (like coal, steel, cement, rail, etc.) should strictly be state-owned and completely managed by the governmentthus commanding the heights to which the nation can rise. The battle mentioned in the title of the book refers to the clash of ideologies between socialism and free markets, between Keynesian and Hayekian views, and between nations striving for growth and development. It is gradually revealed in the book that, ironically, a nearly unanimous opinion exists today that free markets and market forces have indeed taken over the same commanding heights.5Purpose of the book... Inform the reader of economic developments in different countries of the world.

Highlight the differences between the economic approaches of socialism and capitalism.

Clarify various risks and opportunities of globalization.

Appreciate the power and success of market forces and the role of state control.

Give food for thought for the coming years.This is aided by dedicating separate chapters on key players like: America, UK, India, China and Latin America. The book also tries to show shades of Socialism as Stalinism, Leninism, Marxism or Maoism...This is especially important for a dynamic subject like world economy, as to provide insights and possible risks and opportunities of the future. 6A Brief OverviewThe First Age of globalization (1870s-1914)

Rise of Socialism and state-control. (1914-1940s)

Success of command economies and Keynesian thought (1950s-1970s)

Decline of communism. Adoption of Hayekian model. (1970s-1980s)

Decrease in state control and large-scale reforms across the world (1980s-1990s)

Advent of the Second Age of globalization. (1990s-present)

Challenges to the new age.7Some ideas from the book...The first era of globalization took place from 1870s till 1914the fateful year in which began the First World War. This period of globalization was largely aided by three innovations: the steam engine, the steam ship and the telegraph. These inventions were instrumental in nearly instantaneous transfer of information and facilitated much quicker movement of people and hence ideas.

Here we have a part of the first Mickey Mouse cartoon in 1928 , titled Steamboat WillieFirst Age of globalization

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The War, and Communist revolutions

First World War (1914-1919)Communist Revolution in Russia

The First World War changed everything. It brought an end to the first wave of globalization. People were disillusioned and nations became suspicious. Growth in international trade became negligible and tariff barriers rose. Most nations started closing up their economies and a mixed-type economy model started being adopted in most countries. A powerful revolution rose as a direct reaction to the misery suffered by the common man: Socialism and communist philosophy based on the great thinker Karl Marx

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The Great Depression (1929-1933)America which had so far remain fairly unscathed by the war and was relying heavily on stock-market progress, came in for a nasty shock as the Great Depression, which was triggered by the collapse of the markets in 1929. Similarly, several other countries started being hit by this collapse across the globe. Government treasury was empty and there were no jobs. This intuitively was calling for socialistic implementation and proactive role of the state. Enter Keynes. 12

Clash of the Titans: The Battle of IdeasJohn Maynard KeynesFriedrich von HayekThe book illustrates how two key figures in world economics: Keynes and Hayek played central roles. While Keynesian economics that stressed on the active role of government in ownership and planning held sway between 1950s 1970s, Hayek with his candid support for free and unshackled market forces began to be accepted and largely replaced Keynes theory. Today a synergy of the two seems to be the best solution: while markets should be free, government shouldnt be done away withit should act as an enabler and provider.13Socialism and Keynesian thought rules

FranceIndiaRussiaThe Second World War period saw an adoption of Keynesian economics and government control. In 1945, Clement Attlee of UK and Charles de Gaulle of France supported that the state must hold the levers of command. Besides, Latin American countries like Peru, Bolivia, Chile and Argentina all advocated the socialistic dependencia theory of not being market-oriented in order to protect the domestic economy. Even India had a socialistic vision after independence. Globalization seemed further doomed with the beginning of the Cold War between Russia and America in 1947. 14Winds of ChangeAs the oil shocks of 1970s grabbed headlines, general slowdown in the world economy stared everyone in the face, and several nations started showing the cracks in communism, two Hayek-inspired political leaders came into the limelight: Margaret Thatcher in 1979 and Ronald Reagan in 1981.

Here, we have a video of the Iron Lady herself

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Britains Iron Lady PM Margaret Thatcher speaks on Popular Capitalism and lessening state control (1986)Change is here... The reforms of 1980s16Its not about government disappearing [...] It is about restructuring the role of the government. Getting government out of activities where governments are not very efficient [...] Getting government involved where [...] markets alone cannot provide the necessary amount of goods: [...] basic education, basic health care, environmental protection, basic social safety [...]In 1991, India too finally gave up its licensing policy and underwent major economic reforms: liberalization, privatization and globalization. Page 397 of the book quotes Manmohan Singh, then finance minister:The Dancing Elephant: India Surges

17Dawn of the Second Age of globalization

1991 not only was a defining year for India, but it also brought about a collapse in the Soviet Union, which was the last straw for communism. Even China had adopted reforms, and hence it survived and grew. Cold War ended and the second age of globalization finally began.18Weaknesses of the book...An over-simplification of the Keynes-Hayek Battle of Ideas. Also Keynesian economics is underscored, even though Hayek deserves more credit as later economic models emulated him.

Assumption that perfect competition would operate in markets.

Narrative in some places is fragmented as the theme switches between chronology, economics and countries.

Not enough emphasis on sustainability and inclusiveness.

Comparison between state-owned undertakings and large private corporations is absent. Only the former has been criticized.

Strengths of the book...Several original interviews of economists and political leaders.

Interesting anecdotes and behind-the-scenes approach to the development of socio-economic policies.

Fair coverage of a large number of countriestheir historical backgrounds and their main figures.

Clear narrative with comparisons of historical and contemporary decisions and also implications of the former.

Description of India vis--vis other countries gives fresh perspectives.

6. Examples of failures and successes of communism and market forces.

7. Optimism regarding the future of globalization and also market forces.

Illustrations to show the intricate relationship between political setups and economic philosophy.

A conspicuous balance in the use of jargon, which makes the book enjoyable both for the common person and for the economist.

RemarksThe book is an excellent read for everyone because globalization and economics touch everyones lives today. Civil servants should especially read it in order to understand clearly:

How market forces operate? What is the limit till which state-control should be exercised?What is the role of the governments world over as a provider and enabler?How has bureaucracy and private sector both contributed to ushering in globalization?Where does India stand in the coming years with respect to the rest of the world?What are the impending problems associated with globalization?Recommendations1. Commanding Heights has been made into an excellent 6-hour documentary available on the PBS website. It is a must-watch for everyone. Group 14 highly recommends it to all! The link is: www.pbs.org/wgbh/commandingheights/

2. Another book called Keynes Hayek: The Clash that defined Modern Economics by Nicholas Wapshott further explores the theories of Keynes and Hayek.

In our opinion, market forces are to be seen as forces of naturelike the wind and the tide. To flow with them is being reckless, and to resist them is futileThe only solution is to harness them for growth and development. It is in this context that inclusiveness and sustainability are the next challenges to globalization, which need to be met in order to have a truly equitable and connected world, and a prosperous humanity

ConclusionThank You!VariousFr Elise: Best of Romantic Piano Music, track 141994Classical223935.67