Recommended Christmas reading 2016
Caspar Rose, Professor, Department of International Economics and Management
Caspar Rose’s research focuses on corporate governance and the financial markets. His research has been published in both Danish and international journals and is characterized by being highly interdisciplinary. He draws on both his background as lawyer (Master of Law) and economist (Master in Finance), and as PhD in finance.
Sapiens: A Brief History of Humankind
By Yuval Noah Harari, Harper, 2011
Writing a work on humankind is in and of itself a highly ambitious task but it is actually what Israeli Professor of History Yuval Noah Harari has attempted to do. Let it be said right away that he succeeds very well. Sapiens is divided into four parts: the Cognitive Revolution, the Agricultural Revolution, the unification of humanity and the Scientific Revolution.
The book surveys the development of Man since the nomadic time of hunting and gathering to the rise of the agricultural society about 10,000 years ago and ending with the modern time. Homo sapiens are compared to the other apes and the author identifies why exactly it was our species that became dominating. It is especially because of our ability to communicate through our unique language, which supported the belief in shared myths. One of the messages is that Man was probably happier as hunter-gatherers than in the agricultural era when life was simply more comfortable and less laborious. The author then proceeds to excellently describe the chronology of humankind, herein what forces that united humankind, and herein the role of religion and meaning of consciousness to homo sapiens.
The capitalist creed
Of special interest to CBS alumni is the chapter “The Capitalist Creed.” In this chapter, the author gives an account of the foundational forces behind the market economy, in which continually increasing economic growth is the aim. One of the reasons that the economy for millennia was in a standstill was that people were rarely willing to give more credit because they did not have faith that the future would be better than the present. In other words, they thought that economic wealth was limited or even decreasing. Thus, they saw it as a bad investment that there would be more wealth in the future. The point is then that if there is no trust, there is no credit, and without credit there will be no growth and thus less trust, which illustrates the negative spiral.
The importance of trust is illustrated by a long list of historic examples. One of the reasons the Dutch succeeded in colonizing large areas of land in e.g. Indonesia was that they were known to pay interests and repayment to their debtholders on time. It was the opposite in France where the French King Louis XVI had to witness that half of the national budget was spent to purely pay interests. The reason was that the investors feared not being repaid, which thus resulted in the demand for a higher interest rate.
Harari mentions that the premise for economic growth is good conditions for investors and as part of that respect for private property rights, independent courts, and protection of shareholder rights. Harari does not explicitly mention the term corporate governance. But the elements mentioned are also central within corporate governance, which is concerned with analyzing mechanisms and structures merge the interests of senior management and investors to ensure the value creation in the company. Efficient investor protection creates trust that reduces the companies’ cost of capital as the investors to a higher degree expect management to serve the company and the interest of the owners instead of their own interests.
Another point in Harari’s book is that the capitalistic expansion was not driven by kings or states but on the contrary by private enterprise in the form of joint-stock companies with limited liability for the owners. It was thus the private joint-stock companies that were behind the conquest of all of India, the Far East, and most of North America. It was not until later that the countries themselves took over the administration of the vast territories, but the ties between the companies and the governments remained very close throughout the colonial period.
Hereditary debt burden
The capital and the states gradually entered a sort of alliance of mutual protection of each other’s interests. The author provides a specific example. In connection to the Greek War of Independence with the Ottoman Empire innovative people at the London Stock Exchange developed so-called “Greek Rebellion Bonds.” The bonds sold like hot cakes and helped finance the Greek Rebellion. The market value increased dramatically in the beginning but when the fortunes of war turned on the Greeks, the market value dropped dramatically. The British government sent a large fleet that in 1827 destroyed most of the Ottoman fleet in the Battle of Navarino. The problem was that while Greece was gaining its national independence it was also amassing an enormous debt, which the new country was not able to repay. Greek economy was indebted to British debtholders for the following decades. One could say that Greece was actually born with a massive debt and it is the irony of fate that the country is still struggling with enormous debt problems. Put differently, the country is carrying a hereditary debt burden.
The book has many interesting points about the Industrial Revolution which touches upon many of the topics that are relevant to the human being, which I, in light of the available space, cannot write about here. The book, which has been published by Harper, is highly recommended to anyone who is interested in the history of humankind and societal conditions. Yuval Noah Harari’s work is simply a must read on the wish list. I award the book five stars out of five possible.
Brooke Harrington, Associate Professor, Department of Business and Politics. (Photo: Andrew Wheeler)
If you recognize Brooke Harrington from her photo it is because she has been the go-to source for journalists looking for someone to put the Panama Papers leak into perspective. She has recently published a book on the profession of wealth management and tax havens and is now working on a research project on the Scandinavian willingness to pay taxes. Her research area is Economic Sociology.
Capital without Borders: Wealth Management and the One Percent, by Brooke Harrington, Harvard University Press, 2016
Have you wondered why the Panama Papers made such a huge splash last spring, yet no criminal charges have been filed and no sanctions leveled? What is going on in these offshore tax havens to make billions of taxable wealth slip through the grasp of governments?
My new book tries to answers these questions, based on the eight years I spent studying the wealth management profession: the elite group of lawyers, accountants and other professionals who help the world’s elites hide assets from tax authorities, creditors, divorcing spouses, and so forth.
I trained for two years to become a wealth manager, then travelled to 18 countries to interview 65 practitioners—including at Mossack Fonseca, the firm whose client records are the basis of the Panama Papers. The book explains how offshore tax havens and the financial strategies of the super-rich really work, in language that a general-interest reader can understand. I also examine how the wealth managers, who make all this tax avoidance happen, see themselves and what impact they are having on the global political economy.
Treasure Islands: Tax Havens and the Men Who Stole the World, by Nicholas Shaxson, Vintage, 2012
This book will make you angry at the incredible injustice that tax havens make possible in the world. But it will also make you smarter, and might even make you laugh. Nicholas Shaxson is an outstanding investigative journalist who writes beautifully about a difficult and often technically-complex subject.
It is non-fiction that reads like a detective novel, as you get drawn into the stranger-than-fiction world of offshore and the elites who use it.
I learned a great deal from the book, and that was even after spending years researching and writing about the subject on my own, so I can’t recommend it highly enough.
“The Fall of Jersey: How a Tax Haven Goes Bust,” by Oliver Bullough, The Guardian, 8 December 2015
This newspaper article—part of The Guardian’s “The Long Read” series—is a tour de force of investigative reporting, and one of the most remarkable case studies I have ever read about the real costs of offshore tax avoidance.
While the two books I recommend above take a global view of the offshore industry, this is a portrait in miniature, focusing exclusively on the Channel Island of Jersey, which has long been a “poster child” for the prosperity that international finance can bring to small nations with precarious economic foundations.
This meticulously-reported story shows how the island has been rotted from the inside out by its “devil’s bargain” with the offshore finance industry: its economy is in worse shape than ever, and its traditional strengths in farming and tourism have withered away, leaving it no safety net; politically, the island’s democracy has been co-opted by global elites who don’t even live on the island, but who merely “park” their wealth there for tax purposes.
As a result, natives whose families have lived on Jersey for generations are leaving, priced out economically and shut out politically from the governance of their own homeland. It’s a story unfolding in many other tax havens at the same time (an issue I have written about for The Atlantic magazine), but perhaps nowhere so vividly and tragically as in Jersey.
Mads Mordhorst, Associate Professor and PhD, Department of Management, Politics and Philosophy and leader of Centre for Business History
Mads Mordhorst’s research revolves around national identity branding and history. In his research he has, among others, examined how companies utilise their own story and nation branding. Recently, he was one of the curators for the Denmark Canon (“Danmarkskanonen”), initiated by then Danish Minister for Culture Bertel Haarder.
‘Da Danske Møbler blev Moderne’ (”When Danish furniture became modern”, in Danish), by Per H. Hansen , Syddansk Universitetsforlag & Lindhardt og Ringhof, 2016
The book has been written by my colleague Professor Per H. Hansen, and has just recently been released in a new and revised edition. It does something as unique as combining the coffee table format with a solid research-based exposition of the rise and fall of Danish design – and possible return. It is therefore a good idea for a gift – both to give and to wish for. It is not a traditional history of design but has a broad analytical and contextual scope. It is a well-informed book that combines cultural history, organizational analysis and business economics, without it affecting the accessibility or the reading experience.
‘Brugsen – en anderledes forretning?’ ( ”Brugsen – a different business?”, in Danish) by Kristoffer Jensen (ed.), Samvirke, 2016
This is a book that I have contributed to, and it is the history of the Danish cooperative movement from the creation of the first Danish co-op in 1866 in Thisted and to the modern COOP – with an emphasis on the later years. Throughout all 150 years, Brugsen has been organised as a cooperative association and has had to balance being a business that should earn a profit and being a cooperative with a different and higher purpose. Even though the cooperative model seems antiquated, the discussions and problems, which are brought into light are very relevant and can therefore be great contributions to the present discussions about phenomena such as CSR, brand communities, and new company types likes crowd funding and sharing economy.
Paradoxes of the Competition State: The Dynamics of Political Globalization, by Philip G. Cerny, in: Government and opposition vol. 32, issue2, 2007
There are two good reasons for reading this short article from 2007. Firstly, from the Danish debate it may look like the competition state is a national Danish term coined by Ove K. Pedersen. However, the term is international and first and foremost associated with Philip G. Cerny and his perspective is more global than Pedersen’s. Secondly, in an almost prophetic way the article describes the contrasts that are embedded in the competition state and which are the prerequisites for the present clash with globalization, where we have seen Brexit and the election of Trump, and thereby also the present New Nationalism.
Academic Books offers a special discount for CBS alumni
Recommended summer reading