Journal Issue

Book notices

International Monetary Fund. External Relations Dept.
Published Date:
December 1981
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Martin Feldstein (editor)

The American Economy in Transition

The University of Chicago Press (for the National Bureau of Economic Research). Chicago. IL, U.S.A. and London. U.K., 1980. viii + 696 pp., $20

This volume provides a useful perspective of developments in most of the major markets and sectors of the U.S. economy over the past few decades, and of our ratiocinations about them. Balanced in groups of three, distinguished academics and nonacademics—usually with extensive experience in public policy—address postwar changes in financial and labor markets, international trade, population, income distribution, industry structure, technology and productivity, and government.

For the most part, the messages and insights provided by the volume remain compartmentalized. Although several of the sources of growth and the obstacles to efficiency are dealt with separately, for example, there are no chapters devoted specifically to the changing conditions of capital formation and U.S. economic growth. Nor are there any detailed descriptions or analyses of interactions between the different markets and monetary and fiscal policies over time, which would have been useful, for instance, for an understanding of the costs and untoward effects of inflation and how to reduce them. Martin Feldstein, in admirably choosing a more integrated approach in his introduction, ends up introducing only his own views.

Salient postwar events and statistics are presented in each chapter for purposes ranging from straightforward information to interpreting the roles of institutions and policy. However, as behooves an overview, any implied policy advice is carefully modulated and restrained by respect for the findings and conclusions of others than the contributing authors. Presumably as a result of this constraint, Arthur Burns’ conclusion at the end turns out to be no conclusion at all but a bland toast to the future.

Most of this volume would gratify noneconomists interested in recent U.S. economic history and its possible lessons. Economists and noneconomists alike will savor the stimulating chapter on the evolution of ideas about macroeconomics by Robert Gordon, Arthur Okun, and Herbert Stein. In addition, economists of the relevant subdisciplines may be particularly interested in the analyses and well-considered judgments delivered by Benjamin Friedman (money and finance), William Branson (international issues), Richard Freeman (labor market developments), and Alan Blinder (income distribution) in their lead articles on traditional issues, some of which are currently receiving less attention than they used to. By contrast, those chapters dealing with areas of growing concern in political economy and politics—with industry structure, technology and productivity, and the role of government—appear less inspired to this reviewer. The reflections on the intellectual ferment surrounding these subjects often appear locked in a vortex of statistical recitations, although the second or third contributors to each chapter provide some relief.

George M. von Fürstenberg

Kim Woodard

The International Energy Relations of China

Stanford University Press, Stanford, CA, U.S.A., 1980, xxi + 717 pp.. $50.

This is a superb first book by a young scholar for whom it should earn an immediate international reputation. Its 24 chapters are divided equally between (1) the energy policies of the People’s Republic and their expression in China’s trade relations with individual countries and (2) the presentation, for the first time, of supply and demand balances of tradable energy for the world’s third largest energy producer and consumer. (The book says little about the nontradable and nonconventional forms of energy that have attracted much outside attention.) Computer simulations are used to construct low, medium, and high projections of how much oil and coal China is likely to have for export, and for how long, and when it may become a net energy importer (in the late 1990s, under the median projection).

Laymen and experts share a curiosity about China’s future as an energy exporter. Woodard reviews the history of China’s production and trading strategy since 1949 and analyzes (with the help of a computer simulation) the likely interaction of future domestic requirements and production levels. Over the past quarter century, per capita energy consumption in China has risen at the relatively high rate of 9 per cent a year. Today, “the PRC has the per capita energy life-style of a Third World country and the aggregate energy capabilities of an industrial country.” In terms of both consumption and production, China is already an energy giant. But the bottom line so far as exports are concerned is that the giant “will be bound hand and foot by the size of the Chinese population…. The task of raising a fifth of the world’s population to modern levels will leave very little energy for export.”

Already it appears that Woodard’s late- 1980s date for a “topping out” of petroleum exports may be too late, as production from the Taichung field in northeastern China (which provides half the country’s output) has turned down somewhat sooner than expected since there had been no exciting new finds at the time of writing from the promising continental shelf. (Incidentally, the book provides excellent coverage of the often controversial geopolitics and the exploration activities undertaken recently by all countries.) The outlook for rising coal exports is much brighter: from a minor level of under half a million tons in 1978. Woodard predicts exports of 10-15 million tons by 1985 (Australia’s current exports are around 30 million). Since domestic demand for coal is much nearer saturation than demand for oil. there will be more room for expanding exports. Still, oil, which in 1978 paid for about 10 per cent of China’s total imports, is likely to remain China’s number one export throughout this decade.

The 12 chapters that make up the book’s Statistical Profile provide “in compact and standardized form the most basic measures of primary energy resources and reserves, primary energy production, secondary energy production, aggregate consumption, per capita consumption, trade, and projective analysis.” The Chinese data are linked to standard international energy data through the application of “conversion factors” that express the heat value of each form of primary energy in a single standard energy unit (metric tons of coal equivalent). Some idea of the trickiness of such calculations—and of the dominance of coal in China’s energy economy—can be gained from the fact that dropping the coal conversion factor from 0.9 to 0.7 wipes out as much coal energy as if one omitted the total contributions from oil, natural gas, and hydropower combined!

Constructing such an authoritative and convenient series of energy statistics is a triumph. Less visible but perhaps even more impressive is Woodard’s laborious construction of trade figures over the past two decades. China does not publish such figures, so the author had to build them up indirectly from figures published by China’s trading partners. They document a revealing story of China’s energy (mostly oil) trading policy toward the Third World, the U.S.S.R. and Eastern Europe, the West and Japan, and domestic policies regarding the continental shelf. “Trading policy” covers not only exports and imports (China has, for instance, a chronic need to import gasoline) but also the import of energy plant and equipment and China’s attitude toward foreign oil companies. Two policies have dominated everything: preserving Chinese sovereignty over its natural resources and maintaining self- reliance (“the PRC is totally free of dependence on foreign energy supplies or markets”). The policy of constraining consumption to levels supported by national production is one Woodard greatly admires, an autarky born of determination to avoid energy-dependence.

The book contains 92 tables, over 70 pages of footnotes and references, a 14-page index, and 4 maps. The text breaks up and organizes the huge topic into highly readable units that make the book far more than the “reference book” it primarily claims to be. Woodard writes with a range of political, technological, and country knowledge, and with a sympathetic objectivity and lack of pedantry that stamp his views with maturity and authority. An ability to read Chinese has given him access to much material beyond the reach of others. Some may challenge Woodard’s (well-qualified) conclusions; others may regret that he had to cut off his data at the end of 1978 just before much additional data became available. (Although readers are referred to more up-to-date statistics that are now available from the author.) But only the most innocent or churlish of critics could fail to recognize what an impressive achievement this book is, a monument to seven years of toil through and beyond the doctoral dissertation. Even at its price the book is “dirt cheap” for anyone seriously interested in world energy, Asian energy and development, or China.

George B. Baldwin

Malcolm Gillis and Ralph E. Beals

Tax and Investment Policies for Hard Minerals: Public and Multinational Enterprises in Indonesia

Ballinger Publishing Company, Cambridge, MA, U.S.A., 1980, xx+ 294 pp., $35.

The authors present a comprehensive description of the taxation and investment policies for minerals in Indonesia, following the lines of an earlier study of Bolivia by Gillis. They include analyses of the various forms of mining taxation—and their effects on the investment, concentration, and production decisions of firms—the ease of their administration, and the magnitude of revenue they generate for the Government. The discussion is clear, mathematically undemanding, and aided often by numerical examples.

There is a full discussion of the taxation of public enterprises. The problem of negotiating minerals contracts with multinationals takes up more than half the book and is replete with numerical examples, hypothetical and actual. The historical review of evolving contract forms, the changing bargaining strength of developing countries, and the impact of revenue provide the reader—albeit with some repetition—with a considerable volume of information on the Indonesian experience.

Sayeed Sadeq

Other books received

Alberto Valdés (editor)

Food Security for Developing Countries

Westview Press. Boulder, CO, U.S.A., 1981, xxii + 351 pp., $26.25.

A collection of papers that delves into issues of food security in developing countries and weighs the effectiveness of various recent programs, national as well as international.

The Brandt Commission Papers

Independent Bureau for International Development Issues. Geneva, Switzerland, 1981, xvi+674 pp.. $15.

A useful compendium of papers prepared during 1978–79 for the Brandt Commission on International Development Issues by the staff of the Commission’s secretariat on the basis of reports from various international organizations and research institutes.

Manual Bridier and Serge Michailof

Guide pratique d’analyse de projets

Economics. Paris, France, 1980. xii + 264 pp., FF74.

A manual for the practitioner combining a review of the basics of financial and economic project analysis with a good number of practical examples. There is an absence of advanced mathematics and economic theory.

Henry R. Bungay

Energy, The Biomass Options

John Wiley and Sons. Inc., Somerset, NJ, U.S.A., 1981, ix + 347 pp . $29.95.

A timely book on energy from renewable sources such as wood, agricultural residues, crops, and municipal wastes. The author discusses various available technologies and the costs of producing energy with these methods. Although it contains a fair amount of technical detail, this volume remains accessible to the persevering general reader.

Emilio Ontiveros Baeza

Mercado de eurodivisas;

análisis de su evolución e Implicaciones

Oyauri, S.A., Madrid, Spain, 1980, 500 pp.

This book offers a review of developments in the Eurodollar market until 1978. The study deals with theory, evidence, and policy. The author views the market’s growth as an outcome of the increasing integration of world financial markets and does not share the fear that the expansion of this market may be inflationary.

William G. Tyler

The Brazilian Industrial Economy

Lexington Books. Lexington, MA, U.S.A., 1981, xvii + 152 pp., $17.95.

A slim but informative volume on the largest component of the Brazilian economy (by 1978, industry accounted for 37 per cent of Brazil’s gross domestic product). It analyzes recent policies affecting promotion and incentives, the development of small-scale industry, and technical efficiency.

Sven Grassman and Erik Lundberg (editors)

The World Economic Order:

Past and Prospects

St. Martin’s Press, New York, NY, U.S.A., 1981. x + 599 pp.. $37.50.

H. W. Arndt. et al.

The World Economic Crisis

Commonwealth Secretariat, London, U.K., 1980, vii+101 pp., Alasdair MacBean

A Positive Approach to the International Economic Order. Part I:

Trade & Structural Adjustment

British-North American Committee, London. U.K., 1978, xx + 61 pp., $3.

Alasdair MacBean and V. N. Balasubramanyam

A Positive Approach to the International Economic Order. Part II:

Non-Trade Issues

British-North American Committee, London, U.K., 1980, xiii + 100 pp.. $5.

Jacques Nusbaumer

L’enjeu du dialogue Nord-Sud

These five volumes attempt to explain issues and possible solutions to some of the major international economic problems of today, mainly in the context of global negotiations between the industrial “North” and the developing “South.” Useful background information for readers seeking a relatively rhetoric-free diet on this topic.

The Grassman and Lundberg book represents a collection of conference papers presented by a host of distinguished economists from around the world at the Institute of International Economic Studies of Stockholm University in 1978. The treatment is broad enough to withstand the effects of time.

The World Economic Crisis was prepared mainly for the August-September 1980 United Nations Special Session on a New International Development Strategy for the 1980s and offers a compact analysis and list of actions that need to be taken to alleviate the problems of the developing countries.

A similar approach is taken in the two-part study undertaken by MacBean and Balasubramanyam for the British-North American Committee. Major trade and other issues such as external finance, private investment, and the international monetary system are examined from different points of view to present a concise summary of the positions taken by the North and the South.

Nusbaumer, a senior official of the General Agreement on Tariffs and Trade (GATT), also presents a two-part analysis: first, on the question of stabilization of markets of basic commodities and, second, on broader issues such as debt, energy, transnational, and official development assistance.

Louis Turner, Colin I. Bradford Jr., Lawrence G. Franko, Neil McMullen, and Stephen Woolcock

Living with the Newly Industrializing Countries

The Royal Institute of International Affairs. London, U.K., 1980. vii + 53 pp., £5.

Bela Balassa

The Newly Industrializing Countries in the World Economy

Pergamon Press. Inc., New York, NY, U.S.A., 1981, xxiii + 461 pp., $45 (cloth), $8.50 (paperback).

The newly industrializing countries, or NICs as they are called in the current jargon, are a small number of developing countries that have become important exporters of manufactured goods and therefore competitors with the industrial countries on world markets, largely in the last 15 years. Their rapid growth in the face of the difficult international economic circumstances of the 1970s has led both developed countries and other developing countries to study the economic plans and policies behind their growth.

The Royal Institute’s report is a fresh, succinct review of the issues in the debate on how best the industrial countries can accommodate themselves to the competition from the newly industrializing countries.

The Balassa book is an extensive collection of previously published work. It principally covers the changes that newly industrializing countries have effected in their economies since the oil price increases of 1973-74 and analyses the policies adopted by individual countries.

Otto Eckstein

Core Inflation

Prentice-Hall, Inc., Englewood Cliffs, NJ, U.S.A., 1981, v + 121 pp., $12.95 (cloth), $7.95 (paperback).

This book presents a fresh approach to the analysis of inflation in the United States but no new insights into policies to counter this phenomenon. For analytical purposes, inflation is subdivided into three elements: (1) excess demand; (2) temporary price shocks, such as abrupt advances in food and energy prices; and (3) a “core” component associated with the general upward movement in prices for the two primary supply factors: labor and capital. Because the trends in wages and long-term interest rates are based on stubbornly held expectations of workers and investors, the author is pessimistic about the U.S. inflation outlook and concludes that the core inflation rate can be lowered only if cautious demand management policies are complemented by measures designed to augment supply. In this area, the author’s suggestions run along the familiar lines of attempting to expand industrial capacity by liberalized investment tax credits and depreciation allowances. Since the book was written, however, the current U.S. administration has embarked upon a much broader program of supply-oriented measures, including a major use of tax incentives to encourage personal savings—which, in turn, can be used to reequip industry and, thereby, contribute to gains in productivity broad enough to slow down the core inflation factor, which is the central preoccupation of this work.

Michael Beenstock

A Neoclassical Analysis of Macroeconomic Policy

Cambridge University Press, New York. NY, U.S.A.. 1980, xii + 231 pp., $32.50.

With Keynesian stabilization policies under attack, the hunt for new paradigms continues to gather momentum. One school, which questions the efficacy of fiscal or monetary intervention by government, has placed great emphasis on the role of rational expectations in both anticipating and to an extent negating the efforts of the government to fine tune the economy. Beenstock, using the British economy as a guinea pig, finds the neoclassical approach to macromodeling to be valid and comes to a largely negative finding as to the extent that the authorities can exert influence on economic activity.

Xue Muqiao

China’s Socialist Economy

Foreign Languages Press, Beijing, China (distributed in the United States by China Books and Periodicals, San Francisco, CA, U.S.A.), 1981, 316 pp.. $7.95.

Written by one of China’s most distinguished and influential economists, this book is a remarkably clear and thorough statement of the economic philosophy of the current Chinese leadership. Though it draws on a lifetime of practical experience and empirical observation, what distinguishes it from many other works of this kind is its analytical rigor and the high quality of its writing and translation. The intellectual framework is Marxist, and the book is probably intended primarily for a Chinese audience. But the author’s treatment of China’s economic problems and his proposals for reform of economic policies and the economic system will be readily comprehensible to Western economists. More important, the book will help foreigners understand how these issues are viewed by Chinese economists. Not least, its recurrent (but digestible) discussion of doctrinal points and social and political factors illuminates the ideological constraints within which China’s economic policymakers must operate.

Albert Keidel. Ill

Korean Regional Farm Product and Income: 1910-1975

Korea Development Institute. Seoul, Korea. 1981, xvi+251 pp., $15.

An unconventional approach to explaining the process of rural development in a country more known and studied for its industrial achievements. Keidel argues that explanation of the differences in the growth of agricultural output and rural income among the regions of Korea requires more than an analysis of variations in soil, climate, and inputs. His conclusion finds that cities have exerted a major, but often overlooked, influence on rural incomes in Korea.

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