I just realized that I haven’t written one of these posts in a while. Unfortunately, that means that I have quite a large backlog of books to cover. Today, therefore, I am only going to review my two favorite books of this summer. Hopefully I’ll get around to reviewing the others later. But for now, I hope this is sufficient.
Europe’s Orphan: The Future of the Euro and the Politics of Debt (by Martin Sandbu): This book was an absolutely fascinating revisionist history of Europe’s sovereign debt crisis that really forced me to reconsider a lot of my thinking on E.U. economics. Sandbu begins, unsurprisingly, by discussing the many benefits provided by the E.U.’s optimal currency area, the eurozone. He argues that the monetary union allows for easier cross-border investment, forces countries to deal with structural problems by preventing them from using currency devaluation as an easy way out, and creates predictability for businesses. He then pushes back hard against the near consensus among economists that the common currency was the primary culprit behind the E.U.’s sluggish recovery. Instead, he argues that Germany’s unwillingness to allow for debt write-downs was the biggest contributor to Eurozone instability. This might seem counterintuitive, as there is a wide-held belief that debt haircuts undermine a borrower’s credibility and therefore make credit harder to acquire. But Sandbu rather convincingly argues that this is – at least empirically – complete nonsense because lenders care more about a state’s fiscal position than its “credibility” as a borrower. He also makes a normative argument against bailouts without bail-ins; if creditors are going to get assistance from the government, they should have to provide help to their borrowers. Finally, Sandbu also offers several concrete policy solutions for the future, including shared Eurobonds to encourage risk-sharing, more aggressive debt restructuring during crises, and greater support for national counter-cyclical fiscal policy. While I believe that Sandbu overstates the benefits of the optimal currency area, his analysis of E.U. policy failures is cogent and clear. And I think that his broader point, that leaders’ actions and policy choices are as important as the institutions in which they operate, is as important as it is overlooked.
The Paradox of German Power (by Hans Kundnani): Germany is a very peculiar country in many regards. But perhaps the most perplexing aspect of Germany is that it’s a regional hegemon that seemingly doesn’t want to rule. In The Paradox of German Power, Hans Kundnani does a masterful job of tracing Germany’s foreign policy path since the unification of the country in 1871 in a remarkably concise, yet detailed, volume. The emphasis of the book is Germany’s current paradoxical position of being both too weak and too strong. As Kundnani explains, Germany isn’t “powerful enough to impose its will on the continent,” but it is “powerful enough to be perceived as a threat by other powers.” Kundnani’s book attempts to understand the development of this strange geopolitical position that limits Germany’s room to maneuver while also forcing Germany to play an active role in European affairs whether it wants to or not. This is particularly true in the context of Germany’s rising economic power, a topic covered extensively in the book. Kundani does an admirable job of attempting to couch his arguments in rigorous historical work. But I must confess that after finishing the book, I felt that Kundnani was probably too sympathetic in his treatment of German foreign and economic policy today. Nevertheless, his work offers a number of interesting perspectives and provides a well-written history of the development of German power. And that alone makes The Paradox of German Power worth purchasing.