Toronto: Summit Books, 1991, 559 pp., $29.95
The thesis of this fascinating book is simple: The world economic order is in the process of being shaken to its foundations. Severe depression, perhaps even localized collapse, is on its way. To minimize the effect, the authors recommend we live frugally and spread our investment risks globally. Above all, we should get out of debt.
The authors, who publish an investment letter, Strategic Investment, are not simple doomsayers crying “the sky is falling, the sky is falling” and recommending we stock up on canned food somewhere in the hinterland.
Nevertheless, the very idea of a severe depression, a “great reckoning,” is disturbing and something we naturally do not want to contemplate. But after reading this book, you may find yourself ready to accept these authors’ prediction, even though you may have reservations about aspects of their argument.
The Great Reckoning is more than a book on economics; it is social history, analysis, and theory. For instance, the authors lay considerable stress on the importance of the rising flood of violence in our societies. We are witnessing the disintegration of authority and the fragmentation of society into violent tribes of political, ethnic, and religious focus. Many are arming themselves and pressing their ambitions through violence and intimidation. Central authorities are finding it increasingly difficult and costly to contain them, especially since the technology evolution (particularly miniaturization) can easily be exploited to abet these baleful developments.
Coupled with this social disintegration is the threat of economic collapse. Most developed nations of the world are living far beyond their means. Their debts are staggering beyond what would have been believed sustainable a couple of decades ago. The authors examine the experience of Britain, Germany, Japan, and the United States. They expect America soon to lose its preeminent economic, social, and spiritual position in the world. It is unlikely to be able to act as the world’s policeman (keeping the warring tribes at bay), and Japan will not be able to fill in the breach.
The central argument of the book is developed credibly, bolstered with interesting examples and references to current experience and historical developments. The authors’ analysis is quick, broad, and far-ranging, rather than narrowly specific and closely reasoned. This makes for can’t-put-it-down, tabloid-like reading. Among their economic recommendations are: get out of debt and real estate; try to save 25 per cent of your income; and spread your investment risks by investing in other countries who may not do as badly as ours in the “great reckoning.”
Religion is given a surprisingly central place in the scheme of future developments, much of it positive. Although the authors make no religious claims for themselves, they are supportive of a Christian-like religion, but it has a distinct functional, utilitarian feel to it. Their advice includes: “seek to strengthen your moral commitments and religious faith”; turn off the TV and force yourself to think; spend more time with family and neighbours, especially in a helping capacity; live modestly; and embrace Western values.
As I have said, you don’t have to agree with everything in this book to get enormous value from it. There is, for example, an interesting theory of history (a directional spiral); a riveting discussion of long economic waves and how we can benefit from being able to “read” them (a possibility now that we have available massive computing power); and a somewhat mechanistic, almost Marxist (in my view) description of how history, and everything else, depends on who controls the power in society. (“Understanding the dynamics of power and the incentives to use it are the keys to understanding how societies evolve.”) To read how the authors develop these ideas is alone worth the price of the book.
In the end, however, it all depends on whether you feel their recommendations are appropriate to what you understand our situation to be. But even if I were to dismiss their warning of a possible collapse, I for one believe that their recommendations are indeed appropriate to almost all economic conditions.
Davidson and Rees-Mogg say we must live carefully within our means, avoiding debt, especially long-term debt. We must find the meaning and satisfactions of life outside the consumerist, materialist mentality that permeates our social psyche. To that end we should live stewardly lives, aware of our surroundings, focussed on eternal truths. How can you go wrong taking to heart recommendations like that?