THE EQUITY CULTURE

If you have a rage for chaos, you’ll love the stock market—beg pardon, the equity culture—of the future.

The financial world is much different today from what it was just a few years ago, writes former stock trader Smith (Toward Rational Exuberance, 2001); just a generation ago, stock markets were widely regarded as “economic backwaters to be ignored or treated with disdain,” whereas between the great speculative bubbles of 1987 and 2000, untold numbers of First Worlders acquired significant amounts of stock, fueling an economic subsystem that in turn became increasingly critical to national economies around the globe—and that could send financial jitters around the planet in seconds, for these days an increasingly integrated global market is behaving ever so oddly, defying the formulas of the free-market ideology that so influence modern governmental policy, especially in the US and Britain. Smith ably traces the evolution of this global market from the early modern era to the present, touching on fiscal-policy differences that contributed, for instance, to the rise of England as Europe’s foremost power (for, unlike France, “economic activity in Britain was unencumbered by capital controls, heavy taxes, or attempts to regulate exchange rates or the money supply”) and to the eventual rise of the US as an economic superpower (ever gaining and losing ground to Europe and Japan, thanks to fiscal policy again). In an account that turns on plenty of head-splitting economic theory but remains reader-friendly, Smith suggests that free-market policy will continue to erode traditional practices (such as lifetime employment in Japan and management by consensus in Germany) and further internationalize the market, while an increasing acceptance of risk and the perils of equity financing on the part of consumers hints that we’re in for a bumpy ride.

A treat for policy wonks and students of economics—and worth reading for anyone who plays the market.