Kwasi Kwarteng is the shortest serving British Chancellor since Iain MacLeod, a man who died after serving only a month in office. Having served 38 days in the role, his tenure ended with him being recalled from an international conference so he could be sacked by his closest political ally, Liz Truss. His claim to fame, or rather infamy, will be that of being a man who once wrote a PhD thesis on the links between the political and economic dimensions of a currency crisis, who was himself being fired for causing a currency crisis.
During his time as a backbencher Kwarteng wrote War and Gold, a very well received history of currency, debt, and the gold standard. The book was initially published in 2014 during the coalition government that followed the 2010 General Election. Kwarteng spent this entire period without any ministerial office, and used this time to produce a string of books, including his contribution to the now infamous Britannia Unchained, and Ghosts of Empire, a history of British imperialism.
War and Gold is actually a slightly truncated history of money. It does not, unlike most histories, attempt to explain how and why humans developed a system of currency or explore the earliest monetary systems. Instead the book begins during the 16th century, beginning with the Conquest of the New World, and continuing in roughly chronological order up to the Greek Debt Crisis. Kwarteng is quite scrupulous in making sure to cover as much as possible, but there is still a bias towards modern events. More time is spent for example on the post World War II world than the Victorian era.
The impact of the then contemporary Greek debt crisis arguably shapes the central thesis of the book, which consistently emphasises the importance of balanced budgets and prudent fiscal management. The first sections of the book discuss both the wealth Spain would gain from the looting of the New World and how a lack of fiscal discipline eliminated any advantage from this. Kwarteng assures us that “Spain with its extensive commitments and reckless government spending failed utterly to derive any lasting strategic benefit from the feats of the conquistadors.”
The basic argument which appears in almost every case study that Kwarteng delves into is a familiar one. Balanced budgets and sound money, he explains, built the Industrial Revolution, brought victory to the allies in World War I, and drove Truman’s post-war boom of the 1940s and 1950s. Kwarteng does not make his case in polemical fashion. Instead he deploys a clipped, scholarly, and rather understated tone, dispensing a conventionally conservative economic message that focuses on the need for balanced budgets and fiscal restraint.
The book is also keen to show how ideological extremism or political commitments can lead to people disastrously choosing to ignore the need for responsible fiscal management. His treatment of World War I is a particular example of this, with the German refusal to balance the budget even while fighting the war for reasons of political expediency framed as a key part of the country’s defeat and the disastrous aftermath.
Kwarteng is very comfortable with the notion that there is often a tension between politics and economics, and sees the economy as driven by politics and vice versa. Kwarteng avoids technocratic cliches, and establishes economic policy as essentially the skill of balancing competing political and economic tensions, preserving sound economic management even in the face of ideology.
This reflects then particularly oddly on his own tenure as Chancellor. Kwarteng’s only major policy statement, now known ominously as simply ‘the fiscal event’, was an extremely ideological affair. In fact he specifically refrained from having any organisations such as the Office for Budget Responsibility comment on his plans or even offer forecasts. As a result the budget was an intensely ideological disaster that ignored practical economic concerns.
Kwarteng actually has a gift, in print anyway, for communicating quite dry facts in a neat and understandable way. For example, his explanation of the Asian banking crisis of the 90s manages to explain in very readable terms the causes of a quite complex crisis, as well as the exceptions to the crisis such as China. This ability to make complex events understandable is particularly important to the success of the book, as he is able to convey relatively complex, but historically important, events such as the Great Depression in simpler terms.
The unfunded tax cuts of the George W. Bush administration come under particular attack as having led to a deficit happy culture that undermined balanced budgets and caused the 2008 financial crisis. The book’s attack on the Bush tax cuts is both extremely well developed, in many ways one of the most coherent parts of the book, and also retrospectively hilarious. Kwarteng explains how;
What was particularly galling to older traditional conservatives was that increased spending was allied, in Bush’s first term, to tax cuts. Bush seemed to combine the worst of all approaches to public finance. A traditional conservative, like Eisenhower, would be inclined to raise taxes to balance the budget. A supply-side advocate for lower taxes, like Jack Kemp, would have sought to cut spending while cutting taxes at the same time. Bush, on the contrary, as we have seen, increased spending and cut taxes, both of which would exacerbate any deficit, at least in the short term.
Kwarteng even manages to skewer his own attempts to later rectify the damage done by his budget. The book comments rather acidly on the tendency in the Bush era for politicians to rely on dubious forecasts and a belief that the deficit would solve itself despite tax cuts. Kwarteng however simply did not follow his own advice, and instead allowed the debt to balloon to fund tax cuts. There is a certain level of irony that a book Kwarteng wrote as a backbencher shows why he should have been left there.
War and Gold is, despite its occasional lapses into the political, a well-written book, succinct and clear eyed. Although highly derivative, it is an impressive synthesis of an immensely complex subject. Despite Kwarteng’s sometimes evasive tone, it has a clear theory of how money and debt works, and the need for restrained government spending. Furthermore Kwarteng is able to effectively buttress these arguments by relying on well-explained historical examples.
The book is the work of a very skilled historian with a good command of his material and an apparently conservative, but still thoughtful, understanding of economic history. Again and again the book returns to its basic thesis, the necessity of fiscal discipline and how negligent politicians can too easily unleash economic ruin and squander riches. In other words, it is exactly the sort of book one would recommend that Kwarteng’s successors read to understand the damage he did.