THE SHIFTS AND THE SHOCKS

An editor for the Financial Times weighs in with a scholarly analysis of what caused the financial collapse of 2008 and provides suggestions to prevent a recurrence.

Wolf (Fixing Global Finance, 2008, etc.) offers a highly organized, detailed and, at times, somewhat dense text—at least for general readers. It’s also a text with attitude. Although his view is global, he focuses often on the United States and on the United Kingdom (the latter is his home) and discusses sharply how (in the U.S.) partisan politics often trumped common sense before, during and after the crisis. He argues throughout that austerity plans were exactly the wrong things to implement and that government stimulus plans were too small to be as effective as they could have been. In fact, he writes, they caused “a longer and deeper slump than necessary.” (In this regard, he’s an ally of New York Times columnist Paul Krugman, whom Wolf mentions a few times.) The author also argues that the Euro was a bad idea (he compares it to a failing marriage) and offers some ideas for relationship therapy that might ameliorate the situation. Wolf believes that there was an abundance of arrogance among policymakers (most of whom had not experienced the Great Depression); they could not believe the contemporary global economy was so fragile. The author also looks at the powerful roles of China and Germany (the latter “believes in tough love”), the failures in Greece, Iceland, Spain and Italy, the policies of bundling bad loans and “irresponsible lending,” and the need for stronger regulations. He writes with passion about sharply rising income inequality, but only readers adept in economic theory will be comfortable with the paragraphs thick with statistics and the myriads of charts and diagrams.

Closely reasoned, highly organized and logical—and stiffly challenging.