Product Details

• Amazon Sales Rank: #14143 in Books
• Published on: 2004-04-29
• Original language: English
• Binding: Paperback
• 496 pages

Review
Why does a country such as Switzerland with a population of 5 million have the same total productivity as India with a population of 600 million? In this book, economist John Kay sets out to explain this to the reader with no training in economics. His central theme is that economic systems are inextricably linked to their social and political environment, and that economic outcomes are largely the result of political structures. John Kay defines economic institutions functioning within a social, political and cultural context as embedded markets, and introduces the concept of the American Business Model as the most successful example of an embedded market. The Truth About Markets hits the mark by making a serious subject accessible without needless simplification. But just as economic systems are linked to political systems the message of the book is linked to the author's clear admiration for the American Business Model. Enron and WorldCom are viewed as minor traffic accidents on the financial superhighway, while inexplicably for a book written and published in the UK (although clearly heavily targeted at the US market) the problems of Equitable Life and the upheavals in the pension and life assurance markets pass unremarked. The relative coverage of European versus US economies is unbalanced; the arguable success of the French political economy is given two pages coverage out of a generous 479, and is summarized as 'social democracy's best shot'. Discussion of the emerging market for Intellectual Property is lightweight, while ethical topics such as the environmental impact of economic activity are not viewed as relevant. Markets are viewed as strictly for serious financial players; important experiments in creating micro-markets using alternative models such as Local Exchange Trading Systems are simply not covered. The author justifies these omissions with the disclaimer that 'this is not a book about moral philosophy or the ethics of markets'. But it is difficult to reconcile this with his description of opponents of the American Business Model in London on May Day 2000 as 'sandal-wearing, bicycling protesters'. John Kay has produced a spirited, informative and very readable justification for the American Business Model. But an economic system based on what the author defines as 'self-regarding materialism' depends heavily on internal checks and balances. More robust self-regulation in The Truth About Markets would have moved it from the 'recommended' to 'essential' market. (Kirkus UK)

Richard Lambert, The Times
'an ambitious and brilliantly executed book...It is accessible and witty, and it sheds light on the way the world works'

Martin Vander Weyer, the Telegraph
'written with wit and subtlety...an important contribution to the post-1990s reassessment of capitalism'

Customer Reviews

Not for economics virgins
I'm sure there were great ides in this book, but I did not find them. Ignorant of economics I wanted and introduction - This was not it. Too many terms were undefined, and throughout the text there were paragraphs that to me at least had no relevance at all to the subject under discussion. A real disappointment.

Excellent regardless of your economics knowledge
This is an excellent read for any person who wants an understanding of the bigger picture of the world and how it relates to our everyday lives. Novices and experts could all read this book and learn something.

Having your cake and eating it
John Kay has little time for the ultra-free market madcaps that seem to have taken a stranglehold on US economic and political ideology arguing, as does John Gray (albeit from a different perspective), that as an ideology it promises to be as destructive of society as Marxism. As he points out, the belief that a company's paramount responsibility is to its shareholders ends in the graveyard marked Enron.

As M&S shareholders were to find, when a CEO decides that his focus should be on the company's share price rather than the product or service it's offering, it's time to sell!: "It is not true that profit is the purpose of a market economy, and the production of goods and services is a means to it: the purpose is the production of goods and services, profit the means." The fact that such a truism needs repeating shows just how completely the lunatics have taken over the asylum.

The promotion of self-interested, self-regarding capitalism at the expense of the other factors that influence human behaviour becomes a self-fulfilling, but ultimately destructive dead-end: "Market economies are not about harnessing greed, and the elevation of greed as their dominant value undermined them." Unfortunately, Kay talks about this in the past tense - as if the `American Business Model' is past its sell-buy date. While this may be true in terms of theory, in practice it remains in the ascendant and is in the process of cutting swathes through the provision of public services.

Kay is very good at presenting the paradox that `market failures' are, in fact, a sign of the triumph of `disciplined pluralism'. It's a kind of `heads I win, tails you lose' argument for those who are not as enamoured of the power of markets. When the dot.com bubble burst, or Enron imploded this was proof of the robust nature of the market. Market failures prove just how invincible the market really is.

As a defence of market capitalism it is well worth reading (and John Kay is an excellent writer with an engaging sense of humour - which is a bonus), but Kay's emphasis on the `small stories' in reaction to the meta-theories of the neoliberal fantasists leaves a lot of questions unanswered. He rightly points out how health insurance will struggle to survive the advent of genetic testing but can't bring himself to endorse a publicly funded service. He rejects comprehensive education but doesn't suggest an alternative. He extols US-style higher education (which he curiously claims remains accessible to those on low incomes), despite the fact that grafting a system from one economy, with its own particular history/culture, onto another seems to run counter to his central thesis.

He seems to accept that unemployment insurance, pensions and the relief of poverty have to be addressed by the state, without quite endorsing it. He rejects state planned energy policy, but accepts that private provision will mean the lights can go out. His optimism convinces him that the market will provide alternatives to fossil fuels. He seems to accept the case for a minimum wage, but argues that the norms and values of a society can never be substituted by statutory controls. It doesn't take much thought to consider instances where statute has proactively shaped the norms and values of a society (slavery, seat belts, drink driving, drugs, homosexuality), just as a minimum wage can both reflect and reinforce acceptable standards.

This is indicative of his downplaying of the role of the state in the emergence of many of the major developments in 19th/20th century economies (road/rail/aircraft/communications/the space programme/information technology/protecting emerging sectors and so on). Certainly, as he argues, history is littered with govt-sponsored failures, but another reading would give more credit to the power of govt. to institute and encourage nascent economic development than he allows.

Ultimately, the author is much better at saying what he's against: neoliberalism, socialism, social democracy, the Third Way, Will Hutton, than what he is for - a kind of woolly laissez-fairism that seems to plump for the rather circular argument that what works is what works! I suppose my gripes are down to the fact that I was hoping the book might, as Joseph Stiglitz claims on the dust cover, tell us what should be the role of the state, it's never quite that clear cut. We are told that there are things the market won't (indeed can't) do, but Kay isn't quite able to advocate state intervention.

Oh... and the answer to why some countries are rich and others poor? That's just the way it is. No need to feel guilty about it. They'd be poor anyway. Dr Pangloss is alive and well!