Another Reading List: A Neophyte’s Guide to the Current Economic Crisis
March 6, 2011
I admit to having a certain love of reading lists. Apart from its obvious referential function, a list allows its compiler the luxury of a degree of paresse: the well-intentioned reader will be enticed into operating within the parameters set by the list and the compiler will thus be spared the work of explicitly setting the boundaries of the topic the reader is asked to examine.
Not having any expertise in economics and wanting to come to a better understanding of what happened in the current crisis, I put together a set of readings. As the collection of books that follows shows, I understand economics in a broad and multidimensional sense, probably inseparable from what some intellectual traditions have termed political economy.
With respect to reading lists themselves, let’s allow ourselves a completely gratuitous clin d’oeil in the direction of Borges and recall that all of them should be considered open ended.
*Robert Kuttner, A Presidency in Peril (The Inside Story of Obama’s Promise, Wall Street’s Power and the Struggle to Control Our Economic Future), Chelsea Green, 2010.
Kuttner’s book belongs in first position on this list because it expresses the type of doubt which surfaced about the Obama administration once the euphoria of the departure of G. W. Bush dissipated. We quickly were reminded that, in the best of worlds, the political clout shouldn’t be held by the Rubin/Summers/Geithner clan.
*Kevin Phillips, Bad Money (Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism) Penguin Books, 2009.
Kevin Phillips is an astute analyst of American politics and his books are great reading. Some of my liberal friends refuse to believe that anyone formerly associated with Richard Nixon would have anything of value to contribute to the discussion of the current situation, but, as is often said in tv cop dramas, I trust this guy’s instincts.
*John Cassidy, How Markets Fail ( The Logic of Economic Calamities), Farrar, Straus, Giroux, 2009
Cassidy provides a careful introduction to the variants of economic theory in play as the recent catastrophe developed. His concise account of the current crisis is excellent.
*Simon Johnson & James Kwak, 13 Bankers ( The Wall Street Takeover and the Next Financial Meltdown) Pantheon, 2010.
Johnson and Kwak put the relationships involving power, banking and the U.S. government in a historical perspective and proceed to give a detailed account the rise of the present U.S. financial oligarchy. Their approach to describing the development of the recent financial crisis nicely complements Cassidy’s book.
*Joseph Stiglitz, Freefall (America, Free Markets, and the Sinking of the World Economy) , Norton, 2010.
Stiglitz is an economics heavyweight and his book reads like a primer on the current crisis. It blends policy considerations and theory into an accessible and comprehensive analysis that can easily serve as a guide for our attempt to understand what is at stake in the decisions government is now obligated to make.
Noriel Roubini and Stephen Mihm, Crisis Economics (A Crash Course in the Future of Finance), Penguin, 2010.
I was very impressed by the rigor of this clearly written book which appeals to knowledge of the nature and history of economic downturns to put the current crisis in perspective. The authors demonstrate that the attempt to understand what has happened in our economy cannot ignore the lessons learned from crisis economics. They also provide a very sobering look at what we can expect in the near future.
*Paul Krugman, The Age of Diminished Expectations ( U.S. Economic Policy in the 1990s, 3rd edition), MIT Press, 1997.
*Paul Krugman, The Return of Depression Economics and the Crisis of 2008, Norton, 2009.
Krugman is a very active commentator and we are all familiar with his work for the New York Times. Although the first book was written long before the recent crisis, I include it here because it does provide solid guidance to a better understanding of the fundamentals of the American economy. Krugman devotes brief but informative chapters to unemployment, productivity, trade and budget deficits, income distribution, etc. Also, understanding how the author perceived certain key U.S. economic issues of the 90′s helps us better evaluate what is happening presently.
I particularly appreciated Krugman’s book devoted to the current crisis for its chapters detailing bad judgment, economic hubris and misreadings of the warnings which previously surfaced in some of the economies of Asia and Latin America.
*James K. Galbraith, The Predator State (How Conservatives Abandoned the Free Market and Why Liberals Should Too) , The Free Press, 2008.
Galbraith’s description of the political economy of the United States is very clear in its explanation of how the changes in the institutions and programs associated with the heritage of the New Deal have structured contemporary American society. He very carefully deconstructs most of the myths (concerning free trade, balanced budgets, ”economic freedom”, etc.) which have been the basic tenets of U.S. conservatism. Free market ideology has in effect led to the establishment of a political and economic oligarchy, the ”predator state”. Galbraith shows us how the exercise of political power by this oligarchy (in its attempt to neutralize the New Deal heritage) combines with structural changes in the American economy to create a potentially disastrous situation.
*Judith Stein, Pivotal Decade (How the United States Traded Factories for Finance in the Seventies), Yale University Press, 2010.
Stein’s book is an ideal complement to Galbraith’s. The author shows some of the ways in which the 70′s can be considered a transitional decade. She attacks complex relations between capital, industry, international banking, foreign policy and domestic politics in a way that permits us to better understand the consequences of many ill advised choices. She succeeds in clearly demonstrating how economic policy from the Ford administration onward has produced increasing income inequality in the U.S.
*Roger Lowenstein, The End of Wall Street, The Penguin Press, 2010.
Lowenstein has us follow the development of the current crisis through the actions of a set of “characters” (listed at the beginning of the book) , major players in the main financial institutions (Citigroup, Goldman Sachs, JP Morgan Chase, etc.) implicated in the inflating of the credit bubble. His fluid narrative allows us to witness the interaction of key financial institutions, government and the Federal Reserve. This descriptive approach is very effective in helping us to better understand the machinations of the highest levels of American financial power.
*Michael Lewis, The Big Short (Inside the Doomsday Machine), Norton, 2010.
Michael Lewis is a best selling author these days and here he tells the story of a few exceptional and somewhat eccentric characters in the investment world, almost all of whom foresaw the coming of the economic crisis.
*Michael Edesess, The Big Investment Lie, (What Your Financial Advisor Doesn’t Want You to Know), Berrett Koehler, 2007.
My graduate school colleague and friend Mike Edesess has drawn on his knowledge and experience to produce an informative book which I enjoyed for two reasons: 1) the author is one of the most perspicacious and amusing people I’ve ever met 2) his intelligence has confirmed the prejudice which I’ve always had against the investment industry (and everyone loves to be right once and a while).
*Barry Eichengreen, Exorbitant Privilege, Oxford University Press, 2011.
Eichengreen presents a short history of the rise of the dollar as international standard currency. He describes the privileges that the United States obtains from the dollar’s role in international commerce and finance. Finally, he discusses possible scenarios connected to the decline of the power of American currency.
*Christian Marazzi, The Violence of Financial Capitalism, Semiotexte (MIT Press), 2011.
The most important element which I retain from Marazzi’s short book is its underlining of the role of financialization in the recovery of capital’s profitability. Combined with “biocapitalism” and cognitive capitalism, financialization is linked to productive strategies which reduce the labor force and define a new role for the consumer: producer of goods and services. Industrial capitalism with its Fordist model seems to be running out its course in developed nations. Profitability of enterprises is now based on a different model which in part replaces the traditional industrial work force by an offloading of new tasks onto the consumer.
* Carmen M. Reinhart and Kenneth S. Rogoff, This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press, 2009.
An empirical and quantitative study of major financial crises , this work includes a primer of basic concepts before embarking on a detailed presentation of crises defined by quantitative thresholds (inflation, currency crises, currency debasement) and crises defined by events (bank failures, external and domestic debt crises). Charts, graphs and tables provide information on crises affecting countries on all continents, particularly in the 19th and 20th centuries. Special treatment is given to the Great Depression and our Second Grand Contraction. The main thesis of the book is that this time is never different, “we have been here before”. And the one lesson to be retained is that extreme leverage and wholesale liberalization of rules on capital movement never result in something good. Reinhart and Rogoff’s book is a must read because of the mass of information it contains, its clear presentation of fundamental concepts and its pertinence in placing the current crisis in historical perspective.
