Notices Other Countries

controls, introduced in the economic recovery report such figures to the World Bank, in- of the early 1970s, would have succeeded creased from $1.2 billion in 1967 to $8.3 except for the world crop failures, the price billion in 1973. At the same time, the propor- increases due to the devaluations of the dollar, tion of such lending commitments by com- and the inevitable inflationary pressures as the mercial banks to the total commitments by all recovery turned into a super-boom. private lenders rose from 29.4 per cent to 70 Book The U.S. inflation and associated weakenin per cent. U.S. commercial banks may be said to of its balance of payments is considered to have have directly and indirectly (through branches, been a major factor in causing the inflation in subsidiaries, and affiliates overseas) played a notices other countries. This was partly because other very important part in this expansion of such countries were reluctant to make the appro- private lending both in quantitative and qualita- priate upward valuations of their currencies for tive terms. fear of losing the export advantages gained This book, written by 12 U.S. commercial vis-a-vis the United States, and partly because bankers and one professor, is admirably edited their central banks could not [would not3 by another banker. It is advertised as "a basic insulate their economies sufficiently from the reference and training source," which is saying expansionist effects of the associated large a lot but maybe not enough. That the blurb inflows of money from the United States. says too much has nothing to do with the book Seeking cures The author explains that the current severe or these authors. It does lack a quantitative recession began in 1973 as demand for auto- dimension because statistics in any detail about mobiles fell and high interest rates restricted offshore lending by banks in the United States Solomon, Ezra, The Anxious Economy, San demand for housing; but it went unrecognized or their overseas branches, subsidiaries, and Francisco, California, U.S.A., W.H. Freeman and untreated because for nearly a year an affiliates do not exist. Although U.S. bankers and Company, 1975, 119 pp., $3.50 (paper). unsustainably high rate of inventory hoarding engaged in offshore lending are very interested in anticipation of rapid price rises was ignored in having a great deal of detailed information Life is breathed into the tools of economic by the available statistics. A noninflationary about the financial position of their clients, analysis when they are set to work interpreting recovery from the recession is possible ac- that interest does not seem to create much recent economic history. This is especially true cording to Solomon, but it depends on a enthusiasm for statistical reporting of their own when that history is the turbulent one ex- slowing of the wage demands in order to catch activities. This also seems to be true of bankers perienced by the developed countries over the up with past price increases, reinforced by the in other countries. The resulting ignorance past decade. I n The Anxious Economy, Profes- downward pressure on prices from rising pro- which can only partially be reduced by esti- sor Ezra Solomon, whose own history extends ductive capacity to meet insufficient money mates based on inadequate data may contribute from command of a British navy gu.nboat to demand, and followed by a sufficiently prompt to some of the uncertainties and difficulties of membership in the three-man Council of Eco- upturn in employment to forestall adoption of which the authors speak. nomic Advisors to the President of the United very strong expansionist policy measures. This important element aside, the adver- States, interprets the economic events of the Resort to the last measure would prove infla- tising blurb says too little because the book past 15 years and extends his analysis to the tionary and lead to pervasive wage/price con- contains some very interesting and in places alternatives for getting through the present trols. original analysis of problems in an area of recession. While the analysis is concentrated on Economists may find The Anxious Eco- international finance of which this is possibly recent events in the United States, the interna- nomy lacking in substance as far as Solomon's the first comprehensive account. Three chapters tional character of the problems faced by the positions on controversial issues are concerned. in particular deal with analytical problems United States and the impact of its problems on But for the non-economist who has some which are unfamiliar to most persons. They other economies should make the book appeal familiarity with economic concepts the deal with "Country Risk," "Foreign Credit to a wider audience. authority given to the author's views by his Analysis," and "Loans and Placements to For- The author attributes the succession of strategic position as an Economic Advisor, and eign Banks." The chapter on country risk economic problems experienced by the United the brevity in his survey of such broad scope, includes a section on "indicators of economic States, including inflation, exchange deprecia- will justify the chosen approach. growth and creditworthiness." It is a concise, tion, and recession, chiefly to the easy fiscal William H. White critical review of the validity and applicability and monetary policies of the 1960s. The desire of a number of indicators often used uncriti- to improve social welfare, to attain fuller cally. Here as elsewhere in the book it is clear employment, and to block incipient increases in that the authors are keenly aware of the unemployment caused a cumulation of budget Basic banking rewards (profits) and penalties (losses) to which deficits. These deficits created an environment they are subject. These induce an unusual of excess money demand for goods and serv- concern over the meaning of measurement and ices, and led to the conviction that the inevit- Mathis, F. John (editor). Offshore Lending by a sensible skepticism about the predictive able episodes of rising prices would not be U.S. Commercial Banks, Bankers' Association power of the results of quantitative analysis. countered by any significant periods of price for Foreign Trade and Robert Morris Asso- The chapter on foreign credit analysis is an decline. Given the expansionist budgetary ciates, Washington, D.C., and Philadelphia, Pa., extension of the discussion from country risk trends, a restrictive monetary policy of the U.S.A., 1975, viii + 311 pp., $16. to the apparently more familiar corporate required intensity was politically unattainable. financial analysis. But these corporations are Excessive wage demands are, for the most In the past six years, a rapidly increasing foreign to the U.S. banker. So the author takes part, ruled out by Professor Solomon as a cause amount and proportion of external finance for the reader through the unfamiliar area of alien of the inflation, although demands for wage developing countries has come from com- accounting concepts; inflation and departures increases to catch up with prices prolonged the mercial banks. The commitments by these in inventory accounting (although these are inflation. The author also feels that wage/price banks to lend to 86 developing countries, which getting more familiar by the day); and the 47 ©International Monetary Fund. Not for Redistribution problems which arise from changes in the rate Income determination by birthright, labor of exchange. His concluding remark that "an Meade—radical? market conditions or profit-making is attacked undue appearance of analytical precision is with thoroughness almost uncharacteristic of a dangerous" in dealing with a corporation (let neoclassical economist. Meade proposes several alone a country) bears restating. The chapter on revisions to inheritance taxes, which would vary "Loans and Placements to Foreign Banks" sets Meade, James E., The Intelligent Radical's with the age differentials between bequeather out the problems of interbank loans. Some of Guide to Economic Policy: The Mixed Econ- and bequeathed, and encourage the dispersion them, like country risk and the analysis of omy, London, England, George Allen & Unwin, of large estates. Of prime importance for foreign firms are already familiar, but the Ltd., and New York, N.Y., U.S.A., Crane, immediately effective redistribution is a pro- growth of international banking and of the size Russak & Company, Inc. (distributors in posed "social dividend scheme" closely resem- and multiplicity of transactions among banks U.S.A.), 1975, 160 pp., $6.75 (paperback). bling a negative income tax. Although a require a broader framework of analysis than minimum income tax and a progressive tax on may be necessary in dealing with a single The title of this book when seen with the consumption are advocated, specific qualitative enterprise or even a single country. author's name is startling enough to require and quantitative goals of the redistribution Some other subjects covered by the book that one read it. Although the title is thor- scheme are left vague. Indirect measures, such which may be unfamiliar to students of finance oughly misleading since both the approach as provision of more equal educational and and development, and even to those working in and objectives of the book are not at all radical professional opportunities, are also an impor- the field are legal aspects; the financing of but entirely reformist, it is indeed a stimulating tant part of Meade's program. trade; and financing multinational corporations. and important book. In a slim volume, James Finally, Meade makes the long-standing and There are also detailed chapters on the prob- Meade has managed to set out a comprehensive obvious case for government intervention super- lems of lending to foreign local governments. policy program, which he feels can achieve an seding the price mechanism, in order to provide They deal at length with institutional problems optimum combination of economic efficiency public goods, plan for structural change of the and contain an interesting aside about the and income redistribution.

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