It is not very often that I have the privilege of reading a book which completely changes my perspective on some key topic. Daniel Alpert’s 2013 book “The Age of Oversupply” has managed to do just that.
Alpert postulates that “the central challenge facing the global economy is an oversupply of labor, productive capacity, and capital relative to the demand for all three.”
The root of this oversupply is in the historic opening up of the former Soviet states, the Peoples Republic of China, and India to the global market. This has effectively added three billion people and trillions of dollars of wealth onto the world scene. The global economy has never experienced such an “earth-shattering” change in such a short period of time.
Alpert observes that “the developed world has descended into a waiting game punctuated by intermittent (mostly monetary) stimulus-induced economic activity and periods of relapse as the underlying economic disease remains largely undiagnosed, misunderstood, and inadequately treated—much in the way a doctor treating the wrong illness can cause his or her patient’s health to rally temporarily as a veiled core problem continues to worsen.”
Alpert explains that “monetary policy—historically a critical tool for fighting economic downturns—simply doesn’t have, in a world of easy money, the bite it once had.” He further argues that fiscal stimulus can help restart growth, but developed nations need to use fiscal stimulus “on a much larger scale than ever before if we are to put the advanced nations’ huge surplus of workers back to work.”
Alpert offers detailed recommendations to address the current economic situation and restore balance to the global economy. I was especially fascinated to read about Keynes “Clearing Union” plan, presented at the Bretton Woods conference in July 1944, to prevent global hoarding and to ensure balanced, sustainable growth worldwide. Basically, the Clearing Union was a “an incredibly well-thought-out plan for the creation of a global central bank for central banks. But unlike the European Central Bank (arguably, the closest thing we have to a regional super-central bank), Keynes’s International Clearing Union (ICU) would have required a relatively continuous trueing up of large trade imbalances among fully sovereign independent currency-issuing nations.”
Alpert does a great job of introducing and explaining many complicated macroeconomic concepts. He provides a great deal of evidence to support his observations and opinions. Overall, I found his book to be very interesting, worthwhile, and thought provoking. Highly recommended reading!