Norman Stone, professor of modern history at Oxford, is not convinced that gloomy forecasts now coming from the right have any more justification than earlier leftist predictions.
Riding the Business Cycle
By William Houston
Little, Brown; 304pp; £17.50
There was a crisis at Barings in 1890. It was caused by unwise dabbling in commodities in the Argentine at a time when their prices were going down and the country was reneging on its debts. Britain's banks passed the hat round. The line was held, but the Barings' troubles initiated a period of six years of lean kine for the world's economy. There were strikes against wage cuts; there was unemployment; interest rates went down; there were bankruptcies. In politics the usual combination that came to power was centre-left, wishing to use the state to redistribute income towards poor consumers. In Britain, in 1893, a Liberal chancellor, Sir William Harcourt, introduced death duties saying 'We are all socialists now'.
Things picked up again after 1897. There was a boom in most places - one that can be associated with all sorts of new technology. A quarter-century before, Europe had been mainly illiterate and had moved by horse-and-cart, if at all. By 1900 omnibuses were jamming the streets along with more advanced forms of horse-and-cart. The aircraft was just about to fly. Telephones and, soon, radio, made for an 'information revolution' that, relatively speaking, was greater than today's.
The parallel with today may be illustrative. There is a clear connection between money crashes at one stage of the cycle and technology-or export-led recovery at another stage. In fact the clear evidence of a cycle in the 1890s caused economists to consider the idea of 'growth' for the first time. It appeared in a technical journal in 1902, and within a few years John Maynard Keynes was applying a well stocked mind to its implications. On the whole, the existence of a cycle made for optimism: there would always be a silver lining, no matter how difficult present circumstances might be.
Oddly, books about business cycles are not now optimistic. In the early 1980s they tended to come from the Left. 'Capitalism in Crisis' was the refrain from those academic economists who had seen the failure of pay policies in the '70s yet regarded 'Thatcherism' as primitive. But Communism collapsed whereas the western world boomed. The fashion for doom-and-gloom books about the business cycle has shifted towards the Right. William Houston's is an excellent case in point. Before attacking it I must grant it a brilliant victory: it predicts an earthquake in Japan for the turn of 1994-95.
Houston writes well, but he lays down the law about history in a way that I, as an academic historian, would not do - partly because books that establish great patterns in history have a bad track record (they include Mein Kampf). Houston is interested in longer-term developments and points to various cycles, long and short. One is to do with the weather: there is a (roughly) 200-year cycle in which the gravitational forces affecting us revolve. At particular points this makes the world cooler or hotter or wetter; at others, the tectonic plates of the planet's surface grind hard against each other, and we have vast volcanic eruptions or hugely destructive earthquakes. The Kobe earthquake is still affecting the Japanese markets as I write, as Barings have discovered to their cost.
Other cycles are better known - investment, technology, etc. One is intriguing, though speculative. The Russian economist Kondratieff noted that the world moved in roughly 50-year cycles - so boom to 1920, bust to 1950, boom to somewhere in the 1990s. According to Houston, all the cycles are now coinciding. He adds a further one. Every five centuries, he says, the East and West change places as world dominators. Islam and China ruled the roost from 1000AD. Then, five centuries ago, Columbus discovered America and Vasco da Gama landed on the Indian coast. With the rise of China - fuelled by Japan - are we not arriving at another turn in world affairs?
Houston, although the author of Meltdown, is not hopelessly pessimistic - he thinks that adversity brings out the best in people. Others in his camp, Sir James Goldsmith and George Soros, are convinced meltdown men. So is Lord Rees-Mogg, who contributes his customary elegant preface to Houston's book. Underlying all their expectations is, I think, a certain moralism. 'Money corrupts' is a sentiment as old as the Bible. In the past 50 years we have seen a huge wave of prosperity. Verities that were second nature in past centuries are now of little account. We pretend that women are the same as men, reward ephemeral pop musicians vastly more than schoolteachers and subsidise the destruction of the family. And so on.
Now, you can say - as Rees-Mogg does - that, long-term, this is going to lead to disaster. My trouble is that a century and a half ago commentators were equally pessimistic. However as society became more liberal, prosperity increased. There were blips in the trend and there was the tremendous depression of the '30s. However, on the whole, I do not believe we should interpret the Slump as a sign of things to come. Its chief cause was the collapse of the world's money. And the chief cause of that was that there had been a world war, and that Germany, the most powerful economy in Europe, had gone amok. In other words, short of world wars, you can expect the liberal formula discovered in the 1860s to go on spreading prosperity, whatever the leads and lags. I often think that as an academic I should have been happier in 1900. But then I think how much easier it is to go to the dentist now. So there's something to be said for 1995 after all.
THE TOP TEN BUSINESS HARDBACKS
1 THE STATE WE'RE IN
By Will Hutton
Jonathan Cape; 352pp; £16.99
2 RIDING THE BUSINESS CYCLE
By William Houston
Little, Brown; 304pp; £17.50
3 ALL TOGETHER NOW
By John Harvey-Jones
Heinemann; 211pp; £15
4 RE-ENGINEERING MANAGEMENT
By James Champy
HarperCollins; 256pp; £17.99
5 COMPETING FOR THE FUTURE
By Gary Hamel & C K Prahalad
HBS/McGraw-Hill; 288pp; £21.95
6 RE-ENGINEERING THE CORPORATION
By Michael Hammer & James Champy
Nicholas Brealey; 223pp; £16.99
7 VIRGIN KING: INSIDE RICHARD BRANSON'S BUSINESS EMPIRE
By Tim Jackson
HarperCollins; 383pp; £17.50
8 THE LEADER IN YOU
By Dale Carnegie
Simon & Schuster; 288pp; £16.99
9 THE NAKED MANAGER FOR THE NINETIES
By Robert Heller
Little, Brown; 390pp; £17.50
10 THE ZULU PRINCIPLE
By Jim Slater
Orion; 224pp; £20.