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Freefall: America, Free Markets, and the Sinking of the World Economy

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Nobel Prize winner Joseph E. Stiglitz explains the current financial crisis—and the coming global economic order. The current global financial crisis carries a “made-in-America” label. In this forthright and incisive book, Nobel Laureate Joseph E. Stiglitz explains how America exported bad economics, bad policies, and bad behavior to the rest of the world, only to cobble t Nobel Prize winner Joseph E. Stiglitz explains the current financial crisis—and the coming global economic order. The current global financial crisis carries a “made-in-America” label. In this forthright and incisive book, Nobel Laureate Joseph E. Stiglitz explains how America exported bad economics, bad policies, and bad behavior to the rest of the world, only to cobble together a haphazard and ineffective response when the markets finally seized up. Drawing on his academic expertise, his years spent shaping policy in the Clinton administration and at the World Bank, and his more recent role as head of a UN commission charged with reforming the global financial system, Stiglitz outlines a way forward building on ideas that he has championed his entire career: restoring the balance between markets and government, addressing the inequalities of the global financial system, and demanding more good ideas (and less ideology) from economists. Freefall is an instant classic, combining an enthralling whodunit account of the current crisis with a bracing discussion of the broader economic issues at stake.


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Nobel Prize winner Joseph E. Stiglitz explains the current financial crisis—and the coming global economic order. The current global financial crisis carries a “made-in-America” label. In this forthright and incisive book, Nobel Laureate Joseph E. Stiglitz explains how America exported bad economics, bad policies, and bad behavior to the rest of the world, only to cobble t Nobel Prize winner Joseph E. Stiglitz explains the current financial crisis—and the coming global economic order. The current global financial crisis carries a “made-in-America” label. In this forthright and incisive book, Nobel Laureate Joseph E. Stiglitz explains how America exported bad economics, bad policies, and bad behavior to the rest of the world, only to cobble together a haphazard and ineffective response when the markets finally seized up. Drawing on his academic expertise, his years spent shaping policy in the Clinton administration and at the World Bank, and his more recent role as head of a UN commission charged with reforming the global financial system, Stiglitz outlines a way forward building on ideas that he has championed his entire career: restoring the balance between markets and government, addressing the inequalities of the global financial system, and demanding more good ideas (and less ideology) from economists. Freefall is an instant classic, combining an enthralling whodunit account of the current crisis with a bracing discussion of the broader economic issues at stake.

30 review for Freefall: America, Free Markets, and the Sinking of the World Economy

  1. 4 out of 5

    Trevor

    This is an important book and perhaps the best I’ve read on the current crisis - its causes, the reasons for those causes, possible solutions and the moral implications of our obsession and blind faith in free market economics: a theology of greed whose time has surely past. In a decade in which per capital GDP in the US increased by ten percent while average wages decreased by 4 percent we have learnt that some rising tides only lift the biggest of boats. The increasing inequity of the US is but This is an important book and perhaps the best I’ve read on the current crisis - its causes, the reasons for those causes, possible solutions and the moral implications of our obsession and blind faith in free market economics: a theology of greed whose time has surely past. In a decade in which per capital GDP in the US increased by ten percent while average wages decreased by 4 percent we have learnt that some rising tides only lift the biggest of boats. The increasing inequity of the US is but reflective of the increasing inequity in the rest of the world. But inequity has social, moral and even economic costs. One thing that clearly got under Joseph’s skin was that after bringing the world economy to the brink of total collapse due to their failing in the basic requirements of their jobs, after only being saved by what may well prove to be a terribly flawed policy of pouring nearly a trillion dollars into the financial system to keep it afloat, the guys who got us into this mess gave themselves huge bonuses! The breathtaking audacity of such an action ought to have caused some kind of revolution – instead we effectively said, “Oh those guys, will they never learn…” Of course, even bankers couldn’t justify talking ‘performance bonuses’ at such at time – and so they called these dump-trucks full of money things like ‘retention fees’. What is also clear is that, despite his clear warnings that we need more regulation, more effective government intervention in the economy, a closer alignment of incentives toward social needs – nothing is likely to change. And why? My own theory is that the US public is so enamoured with the idea that they live in the best of all possible worlds that too much of their effort is spent trying to find ways to justify the unjustifiable (to which the most unjustifiable is the extreme and increasing inequity that is central to economic, foreign policy, environmental degradation and elsewhere) that there is no strength left to look at how we might actually make the world a better place. Anyway, if this is already the best of all possible worlds … Markets are efficient, self-interest brings social good, the blind-hand of the market fixes all, big government is bad government – all of these are myths carefully and clearly explained and deconstructed in this book. He also gives a fascinating explanation of the work he did in winning the Nobel Prize around how information asymmetries (even seemingly minor ones) destroy the possibility of market efficiency. And all this in clear and easily understood prose. He points to the normative role neoliberal economics plays – saying that the more time people spend in business school and economics classes the more selfish and (let's not be cute) repulsive they become. It really is time to worry about the consequences of breeding generations of greedy bastards whose sole reason for being is to pillage and to gorge. This is a lucid book, it is a book that challenges the existing assumptions (particularly neoliberal economic assumptions) and presents a way forward for a more stable, ecologically sustainable and more just society. It is written by a winner of the Nobel Prize for Economics (not that that is anything worth boasting about – they even gave one of those to Milton Friedman) and a chief economist with the World Bank. This is a guy from the centre of the establishment – when people like him start telling us things have got to change, well, who knows, perhaps it is time to start paying attention. But I’ve been reading too many articles lately in the business pages of the paper saying things like, ‘remember when people where talking about the end of free market economics in all of the excitement caused by the GFC – when in fact what we need is a bigger dose of less regulation’. Those are the bastards likely to win. As we have seen, No Drama Obama is no salvation – we are allowing the audacity of greed to trump the audacity of hope, it seems. But perhaps, if we can at least learn and remember what these bastards have done by reading books like this, to remember what they have gotten away with, perhaps then we can move from empty hope to positive action.

  2. 4 out of 5

    John

    I am 'mostly' conservative and very much into holding on tight to my faith. That puts me somewhere on the right—maybe far right, although I am no radical. But I absolutely looovvved reading this book. Economist Stiglitz worked for former President Clinton and he maintains that Sarbanes and Oxley didn't go far enough in regulating, especially, the big banks that without Chase-Steagall (since 1995) have been virtually guaranteed huge incentives for risky financial innovation (CDOs?) that have all I am 'mostly' conservative and very much into holding on tight to my faith. That puts me somewhere on the right—maybe far right, although I am no radical. But I absolutely looovvved reading this book. Economist Stiglitz worked for former President Clinton and he maintains that Sarbanes and Oxley didn't go far enough in regulating, especially, the big banks that without Chase-Steagall (since 1995) have been virtually guaranteed huge incentives for risky financial innovation (CDOs?) that have all but destroyed our economy. Maybe it is time for a global currency? Read this book. It's a best seller and if you are like me you won't want to put it down. Oh, How did such a liberal idea (government regulation) become so agreeable to me? How did I find myself in the liberal camp cheering Stiglitz on! The truth is simply the truth. Markets may not be self correcting; trust in the institution might be now all but gone; so, law must replace common sense and moral principle.

  3. 5 out of 5

    Lobstergirl

    It's probably unfair to call Stiglitz a subpar storyteller, since he's not really trying to tell a story here. I will anyway, though. Reading through a bunch of books on the financial crisis, you can't help make comparisons among them though they may be apples and oranges. Freefall lacks both the verve and masterfully absorbing narrative of All the Devils Are Here: The Hidden History of the Financial Crisis; the latter, written by two business journalists, wasn't trying to be an economic treatis It's probably unfair to call Stiglitz a subpar storyteller, since he's not really trying to tell a story here. I will anyway, though. Reading through a bunch of books on the financial crisis, you can't help make comparisons among them though they may be apples and oranges. Freefall lacks both the verve and masterfully absorbing narrative of All the Devils Are Here: The Hidden History of the Financial Crisis; the latter, written by two business journalists, wasn't trying to be an economic treatise. But Freefall also falls short in terms of concision and organization; Raghuram Rajan's Fault Lines: How Hidden Fractures Still Threaten the World Economy succeeds on those measures. Stiglitz, a 2001 Nobel prize winner, says many valuable and important things here. But it feels like he's stating and restating those things seven times. If this book were an animal, it would be an octopus, with numerous long, virtually identical parts. Its 300 pages of text seem more like 500 - and the endnotes are interminable, 62 pages worth. The hardcover edition lacks an index! His suggestions for reforming the financial sector, the economy, and actually all of society are vast, wide, deep, and most of them are so frankly aspirational as to be hopeless. None of this will ever come to pass, because the forces arrayed against change are too powerful. This went to press before the financial reform law, Dodd-Frank, was passed, but Dodd-Frank is pretty weak tea compared to what Stiglitz and other progressive economists would like to have happen. Too-big-to-fail is still with us; the financial sector is still awash, drowning, in moral hazard. There is still little penalty for risk-taking, because the government will still deem it necessary to bail out systemically important organizations. But there will be no bailouts for the little people. Cheers.

  4. 5 out of 5

    Daniel Clausen

    The book is about 10 years old. At points, the book feels dated; and then, at other points, you realize that the world and the US, in particular, are still struggling with the same basic questions: more regulation or less, a bigger role for government in the economy or not, a continuation of corporate welfare or not. The biggest question, the question with the biggest reckoning: Will America confront its debt addiction? That question -- the question of debt, what it is, how it works, and what is The book is about 10 years old. At points, the book feels dated; and then, at other points, you realize that the world and the US, in particular, are still struggling with the same basic questions: more regulation or less, a bigger role for government in the economy or not, a continuation of corporate welfare or not. The biggest question, the question with the biggest reckoning: Will America confront its debt addiction? That question -- the question of debt, what it is, how it works, and what is to be done about it -- seems larger than ever considering the world is about to embark on one of the greatest expansions in debt we have ever seen. In its attempts to explain things like Credit Default Swaps and the perils of financial deregulation, I feel like the book is probably less useful than a movie like "The Big Short" (I also quite like Margin Call). When I try to explain to people about the 2008 financial crisis and its aftermath, I prefer to recommend that movie because it is no less smart and quite a bit funnier. Still, despite how old the book is, I do feel like there are still some good things in it. Some of its lessons about economics and the global financial architecture might still be useful for the future...though, one wishes that it had been implemented a long time ago. I particularly enjoyed the parts of the book that dealt with the discipline of economics and larger issues with how the US values people's efforts and talents. Why do our best and brightest go into finance instead of into other pursuits? Why do so many people equate wealth with virtue? The last two chapters seem the most timeless because they focus less on the 2008 crisis and more with big questions of the role of money and economics in civic life. I look forward to reading more of Stiglitz's more current work.

  5. 5 out of 5

    Simon Wood

    THE GREAT FREE MARKET FAILURE Joseph Stiglitz has made the transition from being at the centre of one of the main institutions of the Washington Consensus, to a principled opponent of these very same institutions, and the current "free" market orthodoxy which still tenaciously holds it grip on economic thinking at the global and national level. In "Freefall" he looks at the current economic debacle, how it happened, its origins, the inadequate response, as well as speculating on what might get u THE GREAT FREE MARKET FAILURE Joseph Stiglitz has made the transition from being at the centre of one of the main institutions of the Washington Consensus, to a principled opponent of these very same institutions, and the current "free" market orthodoxy which still tenaciously holds it grip on economic thinking at the global and national level. In "Freefall" he looks at the current economic debacle, how it happened, its origins, the inadequate response, as well as speculating on what might get us out of this awful mess. His focus is almost wholly on the US experience with only occasional sideway glances at events in Europe and across the globe. The narrative of the events, and processes, that led to the credit crunch are put before the reader in a concise and comprehensive manner, including the variety of complex financial innovations that contributed to the crash. Stiglitz then looks at the Bush and the Obama administrations, he is fairly scathing about the latter, in particular regarding his economic team, almost all of them have played a part in getting the US economy into its current state. Unsurprisingly he finds their responses to be inadequate, and primarily focused at preserving financial institutions that have failed, and a policy environment that has failed, at the expense of the majority of the US population (he calls the bank rescue program "The Great American Robbery"). Stiglitz appears to favour some sort of bankruptcy proceeding for banks, as well as legislating for a return to the separation of commercial banks from investment banks, amongst other measures. Next Stiglitz looks at the mortgage industry, particularly the sub-prime segment of it. The details of the practice of this industry in the US (and even in the UK where 42% of mortgages applications are apparently still self-certified) is enough to make the jaw drop of even the most cynical of readers. This is followed with a more general appraisal of Americas position with rising public debt, it's relationship with China, and a still dysfunctional financial sector. One of the more interesting chapters is Stiglitz look at the rise and failure of the free-market economics: one still awaits its fall or it being reduced to its proper place. Issues highlighted include persistent failure to deal with reality as opposed to the asinine assumptions it makes regarding it, the poor record it has regarding growth, and its failure to improve the circumstances of the American population (US GDP grew by 10% between 2000 and 2008, median household income fell by 4%!). The final chapter "Towards a New Society" steps back from the crisis and looks at how we can begin to move towards a society that works for the majority of the population, rather than one run in the interests of the few. A stimulating read, that packs a surprising amount of narrative, analysis and thinking into 300 pages. One shortcoming is that despite being fully referenced the book omits an index. I assume this will be rectified when "Freefall" is published in paperback? A book that I would have no problems recommending to anyone interested in how the economic crisis came about, the resulting response, it's roots, as well as some more fundamental thinking on the whole debacle.

  6. 4 out of 5

    Clif Hostetler

    Now that I’ve read this book I have the dangerous idea that I understand economics. I learned about this book from this review by Travis. Therefore, blame him for my new know-it-all melancholy demeanor caused by exposure to the “dismal science.” The author makes many suggestions on how to change world economics to better serve human interests. The suggestions offered seem to be good ideas to me. But I’m convinced none of the author’s suggestions will be enacted because the moneyed interests of t Now that I’ve read this book I have the dangerous idea that I understand economics. I learned about this book from this review by Travis. Therefore, blame him for my new know-it-all melancholy demeanor caused by exposure to the “dismal science.” The author makes many suggestions on how to change world economics to better serve human interests. The suggestions offered seem to be good ideas to me. But I’m convinced none of the author’s suggestions will be enacted because the moneyed interests of the world, in addition to being “too big to fail,” are too politically influential to allow changes that may diminish their incomes. Welcome to the new corporate welfare state. Financially stressful times are opportunities to make improvements. Many improvements were made to the banking system during the 1930s depression, but the author indicates that's not what has happened during the current crisis: "With the banking system at the brink of collapse in the fall of 2008, lending dried up and the government stepped in to bail out the banks. This was the perfect time to start thinking about developing a truly efficient financial system that directs capital to where it is needed and where it is most productive in an efficient way, one that helps households and corporations alike to manage risk and that provides the basis of a fast and low-cost payment system. Instead, two separate presidential administrations undertook a series of measures to help the financial system, with little thought of the kind of financial system the country should have when if finally emerges from the crisis." An irony that arises from the aggressive steps taken to prevent total financial collapse into a severe depression is that, by avoiding it, the public perception is lulled into thinking that things weren't so bad after all. And so now the members of congress who voted for TARP are now under attack for wasting so much money. Another variation on this are those who say the whole mess could have been avoided if the collapse of Lehman Brothers would have been prevented. Maybe so, but there's a political side to the question to consider. The following quotation sums it up: "A third view holds that Lehman's collapse actually saved the entire financial system: without it, it would have been difficult to galvanize the political support required to bail out the banks. (It was hard enough to do so after its collapse.)" In other words, sometimes a bit of hardship is required to concentrate the mind. The author of this book offers a lot of criticism on how things were done and suggests better approaches to the problems. He suggests that it would have been better to target small banks instead of big banks and home owners over bankers. He also says it would have been better to have more oversight on how the banks used money given to them by the government. I'm sure the author is correct, but I'm not convinced that his suggestions would have been administratively practical. Varied targeting and increased oversight would have required more time and increased government bureaucracy. (And we all know how popular government bureaucracy is.) Furthermore, the bankers and big investors would have complained so much that it would have become politically untenable. I think if both sides of the actions taken could be fully discussed and explored, I suspect what the Bush and Obama administrations did is about all that was possible. The author refers to it as muddling through. (Democracy and making sausage have a lot in common.) It hurts me to say the things in the above paragraph. I would have loved forcing all investment bankers to have their salaries reduced to minimum wage until all government money was paid back. (The concept of paying big bonuses for losing money drives me crazy.) The author provided the following comparison of CEOs in various countries: "In Japanese society, a CEO who was responsible for destroying his firm, forcing thousands of workers to be laid off, might commit harikari. In the United Kingdom, CEOs resigned when their firms failed. In the United States, they are fighting over the size of their bonuses." The author doesn't seem to have much respect for the conservative politicians who believe that tax cuts can fix all problems: "Unfortunately, especially in the United States, many shibboleths have inhibited figuring out the right role of the state. One common aphorism, a crib from Thomas Paine, asserts, 'The government that governs best is the government that governs least.' Conventional wisdom on the Republican campaign trail is that tax cuts can cure any economic ill -- the lower the tax rate, the higher the growth rate. Yet Sweden has one of the highest per capita incomes, and in broader measures of well-being ... it outranks the United States by a considerable margin." We may be witnessing the end of American triumphalism: "The fall of the Berlin Wall in 1989 marked the end of communism as a viable idea. ... historians will mark the twenty years since 1989 as the short period of American triumphalism. September 15, 2008, the date that Lehman Brothers collapsed, may be to market fundamentalism (the notion that unfettered markets, all by themselves, can ensure economic prosperity and growth) what the fall of the Berlin Wall was to communism."

  7. 5 out of 5

    Michael Cabus

    We need books that make forceful motions for change; that push us past the malaise and stagnation that often envelopes our society. Stiglitz's searing critique of the financial sector, and its responsibility for the cycle of recessions that have become characteristic of the US economy, is much needed. Needed because 'recession' is a word that may spark fear (or morbid fascination, given the myriad economic articles with titles like "75% of economists predict this is when the next recession hits", We need books that make forceful motions for change; that push us past the malaise and stagnation that often envelopes our society. Stiglitz's searing critique of the financial sector, and its responsibility for the cycle of recessions that have become characteristic of the US economy, is much needed. Needed because 'recession' is a word that may spark fear (or morbid fascination, given the myriad economic articles with titles like "75% of economists predict this is when the next recession hits", making recession predicting akin to dentists recommending toothpaste) largely because it's causes are not so understood. I was in this camp who did not understand, too, and it's forgivable to be, given the huge effort by financial institutions (aided by the Republican and Democratic presidencies during the 2008 recession) to mask their responsibility. It even got a bit literary: don't call it "corporate welfare", for instance, when banks are bailed out...call it, "stimulus", something positive. To many liberals, the name Obama may come as a surprise in its inclusion, but, as Steglitz points out, Obama, for all the hope and change he talked about, largely left the recovery efforts in the hands of the same people who presided over it, merely "rearranging the deck chairs". The result was a near absolute catering to the financial institutions that caused the crisis, and a hypocritical austerity applied to home owners who were taken advantage of by these institutions predatory lending practices. This is refreshing, particularly as the narrative of individualism drove the narrative that foreclosures represented personal failings on the part of those who experienced them. It's not radical to think that that financial institutions have a moral obligation to society, but it does seem a foreign concept; faith in free markets was eroding, Stiglitz points out, and in our current time, we still see its effects. It doesn't take a huge leap to conclude that lack of faith in institutions during the recession, the witnessing of huge amounts of money going to financial firms and little to citizens, could be the seed for being disenchanted with political systems writ large, fueling a desire for something (or someone) who proclaimed to be outside the system. That is the wrong lesson, according the Stiglitz; instead of abandoning the idea of market capitalism, we should be looking for ways to intermix socialist ideas. He makes the wise case that if we can somehow manage corporate welfare, we can manage social welfare, and the latter will give us more innovation, allow people to take more risks, and improve the economy more. In many ways, this book is about than the 2008 recession; it is about a way to define a future society. Economics drives so much of what a society it, what it values; and to really prevent recessions is really about redefining what we value, to use moments of crisis to redefine society in an age of automation, climate change, and globalization. This book is required reading to be a fully informed citizen; it is a counter narrative than what many financial institutions want out there, which means it is doing the work a good book should, being a bit dangerous in an effort to change the world. A+

  8. 5 out of 5

    Patrick

    This review has been hidden because it contains spoilers. To view it, click here. What we got here is a nonfiction book by the winner of the Nobel Prize in Economics. This book explains step by step why our economy is in the shithouse and why I fucking lost half of my IRA fund. Next to pissing me off like the way Saving and Loan scandals pissed me off in high school, it is one of the reason I mostly vote Democrat even though I sometimes laughed at the funniest of the racist jokes that had been told to me. (Dear black, Asians, Jewish, gays, and hispanic people, I was wrong to What we got here is a nonfiction book by the winner of the Nobel Prize in Economics. This book explains step by step why our economy is in the shithouse and why I fucking lost half of my IRA fund. Next to pissing me off like the way Saving and Loan scandals pissed me off in high school, it is one of the reason I mostly vote Democrat even though I sometimes laughed at the funniest of the racist jokes that had been told to me. (Dear black, Asians, Jewish, gays, and hispanic people, I was wrong to laugh, no excuse, and am really sorry about that.) This is what happen when corporate goes on welfare AFTER ponificating on free markets, incentatives, free enterprises and other things that self proclaimed capitalist priests claim to believe in. They are DEFINETELY the capitalist priests, the bad kinds whom the cutest altar boys end up testifying against in courtrooms. The blame lies on the bank owners, loan agencies, investment firms, Wall Street firms who misdeeds overlaps each other, causing a bubble in which billions of dollars are bet on how long will that bubble last before it burst. And I think the current adminstration is too buried in health care to regulate the financial firms. You can call me a commie pinko but at least the communists like China are able to manage the damages, and the Japan had a great idea of having a CEO commit hari kari each time he or she fucked up in a job with a terrific salary and benefits. It would have been the last mistake he or she ever would make. Here, it seems accountability is unAmerican from the way the corporate pigs snuffle in the welfare trough meant for poor people in dire need of decent housings, food, and health benefits. Hey, how 'bout throwing some money our way instead of taking them all for yourselves? I wish Obama can slam regulations on top of all the free money that he took from the taxpayers and just HANDED over to the very same people who gambled away our future and took over homes and hopes from everyday American who just want to have a job, house, food, and medical services and some left over for retirement. Yeah, Mr. President, the next time I see a skinny twerp choke on his own tie in rage in public, I would be sure to back off, going, "Whoa, he's pissed. Let's get out of here." and not laugh at that guy. Although it would be a bitter kind of laughter. I would vote for the president who would have AT THE VERY LEAST do the the Karate Kid's crane jump knee up and then trick kick each wealthy banker right in the balls for even coming in the Oval Office and asking to be bailed out of their predatory loan practices and gambling mistakes. China is beating the shit out of us when it comes to helping poor Africans/Third World countries and winning them over in using economic rights over the so called free capitalism and democracy by building roads and supplies routes back and forth. And fixing the damages that us big bad Americans had caused. If the investment bankers actually believe in free capitalism then they should have not go on welfare and figure out a way to actually use their so called skills in wise investments like in biotech and artisan jobs like the Germans are doing.

  9. 5 out of 5

    Clif

    This is an excellent account in simple language about what caused the financial crises of 2007-8 and contains welcome suggestions about corrections to the financial system that need to be made in order to avoid a repeat in the future. Stiglitz is a Keynesian (CANE-zee-un), a person who believes that government regulation and intervention in the market is a necessity, who worked with the International Monetary Fund and has seen his share of financial panic in countries other than the United States This is an excellent account in simple language about what caused the financial crises of 2007-8 and contains welcome suggestions about corrections to the financial system that need to be made in order to avoid a repeat in the future. Stiglitz is a Keynesian (CANE-zee-un), a person who believes that government regulation and intervention in the market is a necessity, who worked with the International Monetary Fund and has seen his share of financial panic in countries other than the United States, so he brings expertise to this subject. He makes a strong point when he talks of how the IMF made demands on other countries in trouble that the U.S. government spectacularly ignored when it came to addressing the same irresponsibility in America. His writing could not be clearer and his suggestions are well argued. He argues that the "free market" model was irresponsible, not because bankers are particularly greedy, but because they were protected by the government standing by to bail them out even as they claimed to be regulating themselves conscientiously. This "moral hazard" allowed the banks to take foolish risks, investing in a huge overstock of housing that has crashed, while useful, needed investments were neglected. He is not impressed with the half measures that have been taken so far and feels that the financial industry is out to talk the crisis to death while strenuously resisting regulation until the demand for it wanes. The huge, unprecedented bailout strained even the world's strongest economy to the limit. Another such cannot be supported as the Fed and other central banks have played out all their cards and sit with a zero or even negative interest rate that all are terrified to raise. Not a long or difficult read, I would highly recommend Freefall to anyone who wants a clear account and insight on the series of events that have financially devastated many Americans.

  10. 4 out of 5

    Michael

    First, a confession. I find economics to be an incredibly boring subject and my eyes usually glaze over whenever I have to read about it. So that may be a factor in my rating. For the most part, the book is a fairly readable review of the 2008 economic meltdown and the factors that led to it. Much of the same ground was covered, in a much more entertaining way, in the movie, "The Big Short." Stiglitz has a definite point of view favoring greater governmental regulation and oversight of the financ First, a confession. I find economics to be an incredibly boring subject and my eyes usually glaze over whenever I have to read about it. So that may be a factor in my rating. For the most part, the book is a fairly readable review of the 2008 economic meltdown and the factors that led to it. Much of the same ground was covered, in a much more entertaining way, in the movie, "The Big Short." Stiglitz has a definite point of view favoring greater governmental regulation and oversight of the financial industry and he makes a good case for his viewpoint. He also recommends various reforms, including reforms of the field of economics itself. There are a lot of warnings in the book, such as the fact that the US and its citizens are living beyond their means and that such a situation can't last forever, and there is pain to be had down the road. He also ridicules (correctly, in my opinion) the notion that economic conclusions can be drawn while assigning no weight whatever to the environmental consequences of certain choices, such as the continued reliance upon fossil fuels. The book became less interesting as I progressed through it and there were a couple of chapters that I skimmed more than read. One of the problems was that I was reading a book in 2016 that was published in 2010 about a crisis that occurred in 2008. I think that the book would have been better if he'd waited longer to write it and saw how things played out rather than anticipating how things would play out. He was correct in some of his predictions, however, particularly that politicians would be too weak and beholden to corporate interests to enact real reforms or hold high-level executives accountable. The viewpoint was refreshingly progressive and he also talks about things like trust and ethics and the fact that the market isn't the answer to all problems. So that was all good. So, not bad, not great. Now I can move on to something more interesting.

  11. 4 out of 5

    Edwile Mbameg

    To say that Joseph E. Stiglitz is an "Insanely great Economist" is a truism. This book indicates -once more- that Stiglitz thinks beyond the realm of economic concerns. A must read for everyone and can be understood by anyone regardless of their level of education. It addresses economic matters and a lot more; the nature of inequities within American society and how these inequities have pervasive consequences beyond what we can see and by so doing compromising the long term prosperity of all. Al To say that Joseph E. Stiglitz is an "Insanely great Economist" is a truism. This book indicates -once more- that Stiglitz thinks beyond the realm of economic concerns. A must read for everyone and can be understood by anyone regardless of their level of education. It addresses economic matters and a lot more; the nature of inequities within American society and how these inequities have pervasive consequences beyond what we can see and by so doing compromising the long term prosperity of all. All over the course of history, Revolutions occurred because of imbalances in the wealth distribution within societies. It was the case in France in 1789; it was the case in Russia in 1917. The unequal distribution of wealth within America is staggering and if continued at the current pace will affect the country’s Social Mobility hence dealing a blow to its democracy. 25 years ago, the wealthiest 12 percent took 33 percent of the country’s wealth home. Since then, this trend has worsened. Today, 1 percent of the wealthiest Americans take home 40 percent of the country’s wealth. Growing inequality indicates shrinking opportunities for the vast majority. Inequality equally leads to monopoly, preferential tax treatment for the wealthy which in turns reinforces inequality and even distorts the very markets the disciples of laissez-faire have so long touted as perfect. A society's well being cannot be solely and accurately assessed through the level of its GDP, the profits garnered by financial firms or the bonuses CEOs bag home, let alone the number of fortune 500 companies we have. Economics and the well being of a society is a lot more than that. This is what Stiglitz makes clear in this book in a convincing way. Beyond the profits and beyond the bonuses, inequities sap the structure and cohesive nature of a society.

  12. 4 out of 5

    Terry Cornell

    This book is a must read for anyone wanting to understand the financial meltdown that started in 2008. Joseph Stiglitz was the Chairman of President Clinton's Council of Economic Advisers, was an executive at the World Bank and teaches at Coumbia University. His economic viewpoints are politically moderate, and while serving under Clinton the Economic Council had more right leaning and left leaning members. According to Stiglitz, most of the blame for the financial meltdown is on the greed drive This book is a must read for anyone wanting to understand the financial meltdown that started in 2008. Joseph Stiglitz was the Chairman of President Clinton's Council of Economic Advisers, was an executive at the World Bank and teaches at Coumbia University. His economic viewpoints are politically moderate, and while serving under Clinton the Economic Council had more right leaning and left leaning members. According to Stiglitz, most of the blame for the financial meltdown is on the greed driven Wall Street bankers who sacrificed sound long-term slower growing financial health over making risky fast-paced gains destined to fail. Also to blame are the policy makers in D.C. who allowed this to happen. Stiglitz has plenty of criticism for both the Bush and Obama administrations, and states his own remedies that should have been taken to correct our shattered economy. I've been a long time believer in a free market economy, but as Stiglitz points out, our economic system isn't a true free market. As long as government policies regulate the market, it truly isn't a free market. Every one of our representatives in D.C. should read this book. Some of Stiglitz's suggestions still need to be acted on to prevent another financial meltdown.

  13. 4 out of 5

    Conor Ahern

    Stiglitz is my guy, I think. He's not quite as peevish as Chomsky or restrained as Krugman. He is openly and notoriously left/liberal, and animated by a compelling conviction. This text was not only more informative but also more accessible than other books I have read on the 2008 Recession. Notably, it does an excellent job of warning that our recovery therefrom was less purgative than nepenthe. In the coming era of further deregulation, with our focus on all sorts of other shenanigans, I wonder Stiglitz is my guy, I think. He's not quite as peevish as Chomsky or restrained as Krugman. He is openly and notoriously left/liberal, and animated by a compelling conviction. This text was not only more informative but also more accessible than other books I have read on the 2008 Recession. Notably, it does an excellent job of warning that our recovery therefrom was less purgative than nepenthe. In the coming era of further deregulation, with our focus on all sorts of other shenanigans, I wonder if we will have the courage and foresight to reign in the excesses of a financial industry that already poses a threat to our democracy and our world's safety and prosperity. I wouldn't say I'm optimistic, and for that reason, as soon as this book ended I eagerly loaded up Stiglitz's The Price of Inequality: How Today's Divided Society Endangers Our Future to broaden my understanding of our country's ills according to his understanding of them.

  14. 4 out of 5

    Caren

    I am still trying to understand the causes of the Great Recession. Noting that the author is a Nobel Prize winner in economics, I picked this book up. It was not easy reading for me, as I have no background in economics. It is meant for the lay reader and doesn't have lots of jargon. It does, however, go into a lot of detail about economic theory and at times got a bit dry. I came away from the book with the appreciation that ideas do, indeed, have consequences. Since the late 1970s the free mar I am still trying to understand the causes of the Great Recession. Noting that the author is a Nobel Prize winner in economics, I picked this book up. It was not easy reading for me, as I have no background in economics. It is meant for the lay reader and doesn't have lots of jargon. It does, however, go into a lot of detail about economic theory and at times got a bit dry. I came away from the book with the appreciation that ideas do, indeed, have consequences. Since the late 1970s the free market ideas of Milton Friedman and the University of Chicago have been in ascendancy, gradually replacing the Keynesian ideas of FDR in the Great Depression. I also came to appreciate that there needs to be a balance between free markets and government regulation. (I believe the recession we have just experienced is the result of extreme deregulation. ) At any rate, I'd like to go through the book again using a personal copy, (rather than the library copy I just read) and take notes/highlight. There is a lot---a LOT--of value here and I think it would be time well spent.

  15. 4 out of 5

    Brenda

    Excellent discussion of several complicated subjects. Even if you're not interested in learning how and why the the Great Recession of 2008 occurred, I recommend reading the last four or five chapters on how we could improve today's American-style capitalism, which leaves so many people behind.

  16. 5 out of 5

    William Breakstone

    BOOK REVIEW FREEFALL: America, Free Markets, and the Sinking of the World Economy by Joseph E. Stiglitz, W. W. Norton & Company, 2010 Reviewed by Bill Breakstone, February 8, 2010 Here is yet another enlightening book about the current global financial crisis, written by the 2001 winner of the Nobel Prize in Economics, and a former member of President Clinton’s Council of Economic Advisors. There have been many worthy and highly interesting accounts of the current crisis, and they generally fall int BOOK REVIEW FREEFALL: America, Free Markets, and the Sinking of the World Economy by Joseph E. Stiglitz, W. W. Norton & Company, 2010 Reviewed by Bill Breakstone, February 8, 2010 Here is yet another enlightening book about the current global financial crisis, written by the 2001 winner of the Nobel Prize in Economics, and a former member of President Clinton’s Council of Economic Advisors. There have been many worthy and highly interesting accounts of the current crisis, and they generally fall into one of two categories—either detailed “inside” accounts of the failures or rescues of various financial firms, such as Andrew Ross Sorkin’s current “Too Big To Fail,” or books such as Stiglitz’s “Freefall” or John Cassidy’s “How Markets Fail,” that deal with the underlying economic theories, causes, and possible future remedies to prevent a repeat of the mistakes made leading up to our current situation. There will no doubt be many more, and those to come, as this one, have the benefit of a wider time line or perspective looking both back to past actions, and judging present policies that have been put forward. Though Stiglitz is a Keynesian economist, his participation in Clinton era policymaking took place at a time when financial deregulation reached its peak, in 1999, with the passage of the Financial Services Modernization Act, and the repeal of the Depression era Glass-Steagel Act, which separated the functions of commercial and investment banks. It would be very interesting indeed to read the minutes of the “Council”, and discover what position Steiglitz took against the likes of Robert Rubin and Larry Summers. “Freefall” is reviewed in Sunday’s New York Times Book Review Section by Kevin Phillips, a writer with a Republican background, but also, since 1993, an author of several economic texts highly critical of the effects of securitization on the American economy. His review is highly favorable, but not without several qualifications. “Freefall” traces the origins of the “Great Recession,” offers critiques on policies that were initiated to deal with it, and offers alternative remedies for future policies that might better address a still developing crisis. What the book has in common with so many others on this subject is that the system is broken, and we can only fix it by examining the underlying theories that have led us into what the author describes as “bubble capitalism.” There are certain underlying threads that Stiglitz shares with other authors on this subject. One is the effect that the 30-year reliance on free market economic theories (market fundamentalism) expressed by the “Chicago School” that became popular originally under the Reagan Administration had upon the American economy, in contradiction of the lessons learned and safeguards that were put in place following the “Great Depression.” Others are the re-ordering of incentives in the financial services sector of the economy to put emphasis on short-term performance over long-term societal goals. Yet another is the political power that the financial services industry wields over economic policymaking and the inherent conflicts of interest that such power has over issues that legislative and executive initiatives have historically been delegated to deal with such challenges. An examination of historical policies followed by our governmental leaders since the “Great Depression” provides lessons that, with the benefit of hindsight, make clear the nature and causes of what can only be referred to as an extreme market failure. Central to that are the past and future role that government plays in the oversight and control of our economy. Following is an extended quote from the close of Chapter Seven, in which Steiglitz examines this in great detail, and concludes that: “The United States will have regulation, just as government will spend money on research and technology and infrastructure and some forms of social protection. Governments will conduct monetary policy and will provide for national defense, police and fire protection, and other essential public services. When markets fail, government will come in to pick up the pieces. Knowing this, the government has what it can to prevent calamities. The questions then are, what should the government do? How much should it do? And how should it do it? Every game has rules and referees, and so does the economic game. One of the key roles of the government is to write the rules and provide the referees. The rules are the laws that govern the market economy. The referees include the regulators and the judges who help enforce and interpret the laws. The old rules, whether they worked well in the past, are not the right rules for the twenty-first century. Society has to have confidence that the rules are set fairly and that the referees are fair. In America, too many of the rules were set by and for those from finance, and the referees were one-sided. That the outcomes have been one-sided should not come as a surprise. There were alternative responses that held open at least an equal chance of success, but which put taxpayers less at risk: if only the government had just played by the rules, rather than switching midcourse to a strategy that involved unprecedented gifts to the financial sector. In the end, the only check on these abuses is through democratic processes. But the chances that democratic processes will prevail will depend upon reforms in campaign contributions and electoral processes. Some clichés are still true: he who pays the piper calls the tune. The financial sector has paid the pipers in both parties and has called the tune. Can we citizens expect to have regulations passed breaking up the too-big-to-fail, too-big to resolve, or too-big-to-manage banks if the banks continue to be the too-big-to-ignore campaign contributors? Can we expect even to restrict the banks from engaging in excessively risky behavior?” [Now weigh in the recent decision by the U. S. Supreme Court removing prohibitions on political contributions by corporations, and start shaking your heads.] “Dealing with this crisis—and preventing future crises—is as much a matter of politics as it is economics. If we as a country don’t make these reforms, we risk political paralysis, given the inconsistent demands of special interest and the country at large. And if we do avoid political paralysis, it may well be at the expense of our future: borrowing from the future to finance today’s bailouts, and/or creating minimal reforms today, passing on the larger problems to a later date.” As Steiglitz implies in the above paragraph, it will be up to the Administration to call for the needed reforms, but it will then fall to the Congress to pass enabling legislation. And a quick look to Capitol Hill will be enough to put the fear of God into anyone who considers reforms to be so necessary. As Paul Krugman writes on The Times Op-Ed page today, “The truth is that given the state of American politics, the way the Senate works is no longer consistent with a functioning government. Senators themselves should recognize this fact and push through those rules [procedural rules], including eliminating or at least limiting the filibuster. This is something they could and should do, by majority vote, on the first day of the next Senate session. Don’t hold your breath. As it is, Democrats don’t even seem able to score political points by highlighting their opponent’s obstructionism” “Today, the challenge is to create a New Capitalism. We have seen the failures of the old. But to create this New Capitalism will require trust—including trust between Wall Street and the rest of society. Our financial markets have failed us, but we can not function without them. Our government failed us, but we can not do without it. The Reagan-Bush agenda of deregulation was based on mistrust of government; the Bush-Obama attempt to rescue us from the failure of deregulation was based on fear. The inequities that have become manifest as wages fall, unemployment rises, but bank bonuses soar, or as corporate welfare is strengthened and the corporate safety net is expanded as that for ordinary citizens is cut back, generates bitterness and anger. An environment of bitterness and anger, of fear and mistrust, is hardly the best one in which to begin the long and hard task of reconstruction. But we have no choice: if we are to restore sustained prosperity, we need a new set of social contracts based on trust between all the elements of our society, between citizens and government, between this generation and the future.” The concluding chapters of “Freefall” offer some specific remedies and reforms that need to be discussed as the world moves from the current crisis into a future that will, hopefully, be brighter and more prosperous for all its citizens. As Phillips points out in his review, many of his suggestions are controversial and will be criticized by fellow economists. But they will be at least worthy of consideration and discussion. Steiglitz’s concluding words from “Freefall” are worth noting: “I write this book in midstream. The sense of freefall has ended. Perhaps by the time the book is out, the sense of crisis will be over. Perhaps the economy will have returned to full employment—though that is unlikely. I have argued that the problems our Nation and the world face entail more than a small adjustment to the financial system. Some have argued that we have had a minor problem in our plumbing. Our pipes got clogged. We called in the same plumbers who installed the plumbing—having created the mess, presumably only they knew how to straighten it out. Never mind if the overcharged us for the installation; never mind that they overcharged us for the repair. We should be grateful that the plumbing is working again, quietly pay the bills, and pray that they do a better this time than the last. But it is more than just a matter of “plumbing”: the failures in our financial system are emblematic of broader failures in our economic system, and the failures in our economic system reflect deeper problems in our society. We began the bailouts without a clear sense of what kind of financial system we wanted at the end, and the result has been shaped by the same political sources that got us into the mess. We have not changed our political system, so we should perhaps not be surprised by any of this. And yet, there was hope that change was possible. Not only possible, but necessary. That there will be changes as a result of the crisis is certain. There is no going back to the world before the crisis. But the questions are, How deep and fundamental will the changes be? Will they even be in the right direction? We have lost the sense of urgency, and what has happened so far does not portend well for the future. In some areas, regulations will be improved—almost surely, the excesses of leverage will be curbed. But in other areas, as this book goes to press, there is remarkably little progress—the too-big-to-fail banks will be allowed to continue much as before, the over-the-counter derivatives that cost taxpayers so much will continued almost abated, and finance executives will continue to receive outsized bonuses. In each of these areas, something cosmetic will be done, but it will fall far short of what is needed. In still other areas, deregulation will continue apace, shocking as it may seem: unless a popular outcry prevents it, it appears that basic protections of ordinary investors will be undermined with a critical weakening of the Sarbanes-Oxley Act, passed in the aftermath of the Enron and other dot-com scandals, by a Republican Congress and signed into law by a Republican president.” He continues: It has become a cliché to observe that the Chinese characters for crisis reflect “danger” and “opportunity.” We have seen the danger. The question is Will we seize the opportunity to restore our sense of balance between the market and the state, between individualism and the community, between man and nature, between means and ends? We now have the opportunity to create a new financial system that will do what human beings need a financial system to do: to create a new economic system that will create meaningful jobs, decent work for all those who want it, one in which the divide between haves and have-nots is narrowing, rather than widening; and, most importantly of all, to create a new society in which each individual is able to fulfill his aspirations and live up to his potential, in which we have created citizens who live up to shared ideals and values, in which we have created a community that treats our planet with the respect that in the long run it will surely demand. These are the opportunities. The real danger now is that we will not seize them.” Those thoughts were composed in November of 2009. Since that time, there has been little progress indeed in making the reforms that the author calls for. Instead, we have seen political gamesmanship and legislative paralysis. The economy has improved, but joblessness remains too high. The sense of urgency that Steiglitz notes has continued to diminish. What do we need to get things back on track? Another deep recession or worse?

  17. 4 out of 5

    Scott Goddard

    Reading books of this sort, that is, about economic crises and their causes, has a tendency to evoke a sense of frustrative disdain. Indeed, Freefall is no exception. It illuminates the more sordid happenings in society; how the government is a puppet to Big Business, the master; how Western governments are as parsimonious as their private sectors in the provision of international aid, and arguably more importantly, noting their obvious and recurrent display of outright hypocrisy against develop Reading books of this sort, that is, about economic crises and their causes, has a tendency to evoke a sense of frustrative disdain. Indeed, Freefall is no exception. It illuminates the more sordid happenings in society; how the government is a puppet to Big Business, the master; how Western governments are as parsimonious as their private sectors in the provision of international aid, and arguably more importantly, noting their obvious and recurrent display of outright hypocrisy against developing and emerging countries – for example, they advocate (insofar as being mistook for coercion) market fundamentalism and market liberlisation under the guise of the Washington Consensus or on behalf of the so caring, so paternalistic IMF and World Bank, but notwithstanding these proclamations, protectionism and subsidisation are still opted for. Stiglitz deconstructs the complexity surrounding the 2008 crisis into an easily absorbable and understandable form. In doing so, he makes patently clear who should be held to account; and yet those responsible for the crisis, the financiers, mortgage providers, credit agencies, and regulators to a lesser extent, were allowed to walk away scot-free, enjoying some inexplicable impunity. Some of these actors, as Stiglitz explains, engaged knowingly in nefarious activities, pursuant of personal financial gain, at the detriment of societal well-being. The allure of profit was too much; avarice, in part, was to blame, but financiers too were under some sorcery (or pretended to be) in that they believed, somewhat incredulously, the financial innovations such as CDO's and CDS's were actually conducive to societal well-being. Any argument against them was dismissed with the claim that risk was diversified; indeed, such a claim would ordinarily be true, if the underlying assets (or asset in this case; mortgages) were uncorrelated. So, naturally, when the bubble popped and the concomitant defaults began rolling in, in tsunami like effect, the whole edifice began to crumble at a worrying speed. Stiglitz quotes other causes, of equal salience, including: - Perverse incentives; - Ubiquity of moral hazard; - Agency problems (shareholders no longer had sufficient control and discretion over managers actions); - Regulatory capture; - Deregulation (pertaining especially to the lobbying and political donations); - Perverse financial innovation; - Flawed economic theory. How the government responded to the crisis, bailing out the banks, is thoroughly explained, analytically and evaluatively. Here Stiglitz is especially critical. In his view, the whole response was both ineffectual and wasteful; ineffectual in that it did not restart lending; wasteful in that the trillions of dollars (the book is contextualised primarily to the US) were effectively squandered to no effect. I lie in fact, the gargantuan bailouts did have one effect - they were absorbed into the coffers of those responsible for the crisis; record bonuses were openly awarded. The juxtaposition was sour; on one hand, millions of naive homeowners (or until after the crisis) were left saddled with insurmountable mortgage repayments; and on the other, the alchemists behind the crisis enjoyed huge bonuses, courtesy of government largesse. The renascence of neoclassical theory, or neoliberalism (almost interchangeable nowadays), is, as presciently argued, flawed and untenable. That it took a full-blown crisis to vividly argue this is testament to the theory's intransigence. Rationality, perfect information; the efficient market hypothesis, rational expectations - these theories to name a few are to blame, but all constitute, and embody the inanity, of neoclassical theory. For the economics as a social science (to ensure the diminished credibility and conviction is not diminished further) and for society at large (to ensure a repetition of the 2008 crisis, or something even more disastrous is obviated),neoclassical theory needs to be repudiated once and for all. Inflation was given some preeminent status, towering over all other economic considerations in terms of importance. Stiglitz delineates why the prioritisation of inflation as a concern is unjustified, and how moderate inflation is accommodative of a healthy economy. Inflation, he states, is often caused by exogenous factors, out of the control of governmental counteractive policies, and by extension, ignorance in the form of higher interest rates is folly. The Nordic countries are exemplified as a group of countries with a relatively high income tax brackets but, in direct contradiction of American mainstream economists, have a consistently high quality of life. Stiglitz examines the rising of China and the other emergent countries, how in the near future geopolitical power will shift from the West to East. How those who remained sceptical of financialisation and rampant deregulation experienced a number one or two on the Richter scale, relative to number 9’s and 10’s in the Western countries. In sum, Stiglitz puts forth a multidimensional account of the crisis, with respect to the causes, effects, aftermath; as well as examining contemporary issues.

  18. 4 out of 5

    Mat Davies

    Capitalism can't work if private rewards are unrelated to social returns. But that is what happened in late twentieth century and early twenty first century American Style Financial Capitalism P.110 This is a welcomed analysis by the Nobel Prize winning economist, former Chairman on the Council of Advisors during the Presidency of Clinton, and later chief economist at the World Bank. He shot to fame after his damning critique of the response by the IMF and World Bank to the East Asian Financial Cr Capitalism can't work if private rewards are unrelated to social returns. But that is what happened in late twentieth century and early twenty first century American Style Financial Capitalism P.110 This is a welcomed analysis by the Nobel Prize winning economist, former Chairman on the Council of Advisors during the Presidency of Clinton, and later chief economist at the World Bank. He shot to fame after his damning critique of the response by the IMF and World Bank to the East Asian Financial Crisis in his book Globalisation and its Discontents. This analysis of the global financial crisis was written just after the bail packages were injected and before the emergence of the crisis in the Eurozone. Unfortunately, it is still a highly relevant text. Stiglitz argues that deregulated markets and a toxic mix had led financial failure. In contrast to managing risk an allocating capital, the structure and policies of global capitalism had encouraged the creation of risk and misallocation of capital. The response to market failure is seen as too small and reliant on tax cuts based on the ideology which led to the crisis in the first place. The author then illustrates the damage wrought by predatory capitalism in what he calls the great mortgage scam. A scam which was birthed through financial ingenuity to securitize and circumvent the forms of regulation and followed by a regime of welfare for irresponsible banks, undermined, under-regulated, over leveraged and lacking accountability. One of the reasons why the fed was able to get away with what it did was that it was not directly accountable to congress or the administration … for putting at risk hundreds of billions of taxpayers dollars P 141 to 142 Indeed the governance of the too big to fail banks robbed the tax payer of their future, whilst propping up zombie banks by independent central banks, the vehicles of the so called rational market are examples of the failure of the deregulatory regime of the past thirty years. The mortgage scam and great American robbery is explored through the lens of the regulatory regime leading to mushrooming derivatives and the rolling back of speculative limiting laws such as the glass Steagall Act. Alas, accordingly a cocktail of flawed incentives systemic risk and unforeseen externalities bludgeoned the economic system, and the Washington consensus of deregulation it was built upon. The economic rationality of the epistemic community is criticized throughout the book. The author shows how predictably irrational man can be through examples such as Easter island, where a community annihilated themselves by destroying their habitat honoring their gods. He says that there is P.243 no scientific basis for the presumption that markets were efficient and goes on to point out that P.248 the belief in rationality is deeply ingrained in economics … irrationality committed to the assumption of rationality. The social dimension of economics stands out in tandem of the call for a new capitalist order, built on different values, and fundamentally an awareness of global aggregate demand. In general the work is incredibly rich in examples backing the authors assertions, and the prose is clear and crisp. The policy prescriptions, however, are vague and lack detail. For example, transparency as information, closing tax loopholes and government intervention are sound ideas. Yet, the challenge for the left today is how to translate ideas into action. To do so requires a link between ideas and formal mechanisms such as committees, levels of governance or influential channels. Nevertheless, the well articulated examples of deception and disingenuous forms of capital exchange and exploitation is worthy weaponry for those of a democratic socialist persuasion. And ultimately the explanation of the crisis and its relationship to ,macroeconomic ideas, finance and the economics of innovation are clearly layed out for all to see, and explains why an alternative discourse could not safeguard us from the crisis. No one challenging the prevailing view would be treated as credible. Showing similar views was part of being socially and intellectually acceptable. P.253 Gramscian hegemony as common sense indeed. Beyond the macroeconomic arguments , however, there are clear lessons for today. The deregulatory regime has not been rolled back accordingly, and the losses continue to be incurred by the public sector through the austerity agenda being inflicted across the USA and Europe. Today unemployment is masked in Britain by zero contracts and temporary and short term work. A fundamental principle emphasized by Stiglitz is worth reiterating here. The difficulty of achieving full employment should be clear. With the Labor force growing at its normal pace and productivity growing at its normal rate of 2 to 3%, in order for unemployment not to increase, the GDP has to grow by 3 to 4% P.63 Unfortunately, the spectre of market failure still haunts our economy 2 years after this book has been written, and five years since the financial crisis began to attract the medias attention.

  19. 5 out of 5

    Matthew Neal

    Thought provoking insight into the 2008 financial crisis.

  20. 4 out of 5

    Malachy

    A decent overview of the 2008 financial crash and the bail-out programs which resulted from them. At the same time, Stiglitz could really have said what he needed to say much more concisely.

  21. 5 out of 5

    Laura

    Quite comprehensive. Stiglitz must write like the freakin dickens, or he has a verbose editor, or something of that sort. I was amazed by how much Stiglitz had to say in this book, perhaps a testament to his passion of the subject and his desire to see the U.S. handle the recession better than it has so far. I think he gets a mite carried away with some accusations but think it defensible on the basis that his side of the debate is the one 1) not getting heard enough and 2) more worth hearing. Co Quite comprehensive. Stiglitz must write like the freakin dickens, or he has a verbose editor, or something of that sort. I was amazed by how much Stiglitz had to say in this book, perhaps a testament to his passion of the subject and his desire to see the U.S. handle the recession better than it has so far. I think he gets a mite carried away with some accusations but think it defensible on the basis that his side of the debate is the one 1) not getting heard enough and 2) more worth hearing. Considering how comprehensive the book is, Stiglitz did make the issues notably accessible, helpful to a novice in economics (oh, Econ 201, you seem so long ago... you were so long ago!). I found the latter chapters of the book to be somewhat more agreeable than the beginning; Stiglitz's accusatory tone grated at me more at the outset but faded somewhat as I realized that Stiglitz's actual economic/public policy desires are far more reasonable than some of his left-leaning rants led me to initially believe. His arguments and recommendations throughout the book are based on two primary arguments (imo): 1) that - consistent with his cornerstone research and contributions to information asymmetry - the models used by banks, bankers, rating agencies, brokers, insurers, lenders, securitizers (pretty sure that's not a word), and individuals were too simplistic and did not properly take into account the fact that "markets and information are imperfect," and 2) that laissez-faire markets act like selfish little brats when left to their own design. He's obviously very Rah Keynes! and Boo Friedman*! but, again, by the end of the book you realize that he understands the importance of both "free" markets and government. He doesn't think that excessive government regulation is ideal but sees it as a necessary evil (i.e., if you don't have game rules, you're going to have a pretty insane game). In fact, he spends a good deal of time lambasting the Fed and Treasury and the cronies in Washington. Stiglitz said in an interview, "The real debate today is about finding the right balance between the market and government. Both are needed. They can each complement each other. This balance will differ from time to time and place to place." Stiglitz also voices his concern that we (the people) may have lost faith in capitalism due to the recession, and that communist and dictatorial governments elsewhere in the world may use our failures against us. He argues that America has done a piss-poor job of being an emissary of good economic policy - we screwed over Southeast Asia during the Asian financial crisis in 1997, and developed countries continue to screw over developing countries, which will likely end up backfiring on us, especially from China and India. All in all, a good read, if you have time for it. If not, go watch "Inside Job." *It's interesting that, per Wikipedia's article on Friedman, in the section responding to Keynesian criticism, the Chicago school does not really defend Friedman's theories but just attempts to defend itself: “The Chicago School never said we wanted blind deregulation ... We should really ask who were the people in 2000 who decided markets don’t need regulating. Those were not Chicago economists. Some of them were Clinton officials, and some of them are now advising Obama.”

  22. 4 out of 5

    Bryan

    This refreshing book cuts through partisanship and attacks the problems of our economy with clear direction. He equally rails on the Bush and Obama administrations for the handling of the recession, and gives specifics for his railings. I didn’t get the impression that Stiglitz was trying to push any political party’s agenda, he simply sees the entire political process as a required mess which should give way to academic knowledge, (although the Right is exposed for its blatant stupidity on its This refreshing book cuts through partisanship and attacks the problems of our economy with clear direction. He equally rails on the Bush and Obama administrations for the handling of the recession, and gives specifics for his railings. I didn’t get the impression that Stiglitz was trying to push any political party’s agenda, he simply sees the entire political process as a required mess which should give way to academic knowledge, (although the Right is exposed for its blatant stupidity on its current economic stance). His suggestions for course corrections are clear enough for laymen like me to understand. His descriptions of the outrageous and despicable foundations for the recession were enough to get me a little bit angry at bankers and politicians. Not that he is trying to create outrage. He is simply stating the information as he sees it. Speaking of information—I understand (I might be wrong) his Nobel Prize was for his work on the subject of information problems, and his knowledge on the subject shows up now and again, enhancing the credibility of his commentary on the recession. From an economic standpoint, I think we should make this one of the required readings for our politicians who wish to vote on recession related policy. Regularly Stiglitz is an expert testifier in the halls of Congress, but this book provides more information than can be relayed in a few minute testimony. The best part about Stiglitz is that he isn’t afraid to write in an “I told you so” kind of way. Years ago I read another book of his called “Globalization and It’s Discontents” and my response was similar: this guy needs to have more people listen to him. This paperback edition is best because it includes a new Afterword section which has all sorts of summaries, updated information, and “I told you so” moments. Frankly, I like this kind of writing, because you feel smarter for having read it. The author has quite the brain. Stiglitz has a style of writing which brings out his personality, so that reading his books or watching him on some TV interview feels the same.

  23. 4 out of 5

    Stuart

    "Examines the aftermath of the financial crisis and bailout by the Bush and Obama administrations. In my opinion, thoroughly debunks the market fundamentalism and efficient markets theory promoted by Milton Friedman and the Chicago School. Unregulated capital markets do not automatically lead to the best allocation of resources in the economy, support full employment, or fair distribution of wages (does anyone still really think investment bank CEOs deserve those salaries and bonuses?). The answ "Examines the aftermath of the financial crisis and bailout by the Bush and Obama administrations. In my opinion, thoroughly debunks the market fundamentalism and efficient markets theory promoted by Milton Friedman and the Chicago School. Unregulated capital markets do not automatically lead to the best allocation of resources in the economy, support full employment, or fair distribution of wages (does anyone still really think investment bank CEOs deserve those salaries and bonuses?). The answer to a financial crisis is not fiscal austerity and higher taxes (that should have occurred before a country reached crisis-level), which is what the IMF and Germany are recommending for the European debt crisis, and has already wreaked havoc in Greece and Spain. Makes clear the moral hazards involved in bailing out "too big to fail" financial institutions, which were only created due to the ill-advised repeal of the Glass-Steagall Act in 1999. The big banks used their status as "too big to fail" to extract unconditional bailout packages which mainly went to sustain "retention" bonuses (hard to call them "performance-based") and a return to business as usual. Instead the money could have been channeled to smaller banks that could have increased lending to SMEs and helped engender a swifter recovery of jobs and business conditions."

  24. 4 out of 5

    Scott Lupo

    For an economist, Joseph Stiglitz writes very well in order for the average person to understand the complexity of the American economy. This book reflects and focuses on the Great Recession (as its been called) and the solutions that came about from it. Well, one thing is for sure, Stiglitz believes the system is broken and the U.S. needs to rethink completely what it is trying to accomplish economically. I agree with him that conservative, right-leaning principles have completely failed us. Th For an economist, Joseph Stiglitz writes very well in order for the average person to understand the complexity of the American economy. This book reflects and focuses on the Great Recession (as its been called) and the solutions that came about from it. Well, one thing is for sure, Stiglitz believes the system is broken and the U.S. needs to rethink completely what it is trying to accomplish economically. I agree with him that conservative, right-leaning principles have completely failed us. The economy has been built to extract as many resources as possible to enrich the few at the top at the behest of the rest of society and the world. American capitalism is unsustainable, needing growth in perpetuity to survive. And for infinite growth to occur only some will prosper while the rest will suffer at some point. Unfortunately, we've been sold this argument as the only way for our economy to work. It's nonsense. Stiglitz does a wonderful job of showing how the trickle down philosophy is based on huge assumptions about consumer habits, corporate incentives, and the role of government. Assumptions that leave their economic theories in tatters. Stiglitz goes on to provide solutions that are fact-based, rational, and use reason.

  25. 5 out of 5

    Doug

    I was talking to a banker friend and he was complaining that people who don't know what they're talking about are blaming the bankers for the whole mortgage crisis. Well, Joseph Stiglitz knows what he's talking about and he's blames the bankers. Most of the other books I read about the mortgage deal with anecdotes about some of the major players, but this books was the most comprehensive book I've read so far that deals with the underlying mechanics. I really hope this book (or something, ANYTHI I was talking to a banker friend and he was complaining that people who don't know what they're talking about are blaming the bankers for the whole mortgage crisis. Well, Joseph Stiglitz knows what he's talking about and he's blames the bankers. Most of the other books I read about the mortgage deal with anecdotes about some of the major players, but this books was the most comprehensive book I've read so far that deals with the underlying mechanics. I really hope this book (or something, ANYTHING else) can help debunk the myth that free markets aren't the answer; for a perfectly functioning free market to exist, so many assumptions must hold true, assumptions that simply do not exist in the real world. The bankers asked for deregulation the same way that the frogs asked for a king in the Aesop fable, only Jove decided to give out a multi-trillion dollar bailout to the frogs after the stork came down. But all in all, I really like reading Joseph Stiglitz, if I ever go to b-school or study economics, I'd love to go to Columbia to take one of his classes.

  26. 4 out of 5

    Bob Pearson

    This is an excellent read, though for non-economists, re-reading here and there is a good idea. I liked it because Stiglitz is not just an unalloyed liberal economist. He points out the risks of not providing liquidity in crises, but he equally underlines the danger of simply printing money. Underlying his presentation is the very good point that the developed world has excess capacity and the developing world has unmet demands. A perfect realignment of market forces at the end of the recession This is an excellent read, though for non-economists, re-reading here and there is a good idea. I liked it because Stiglitz is not just an unalloyed liberal economist. He points out the risks of not providing liquidity in crises, but he equally underlines the danger of simply printing money. Underlying his presentation is the very good point that the developed world has excess capacity and the developing world has unmet demands. A perfect realignment of market forces at the end of the recession and readjustment in the United States would be that the world's productive capacity would be used to more certainly meet the world's consumption needs. Stiglitz skewers Wall Street and financial circles for inventing and manipulating non-productive financial instruments over the last quarter century. Very interesting for me, he also points out how tax breaks and subsidies to the American corporate structure have helped make us less productive. He doesn't really say so, but the implication is that we Americans are in for a rather long recovery as we have to reinvent our economy.

  27. 4 out of 5

    Mike

    If you want to understand what went wrong with the financial system in 2007-08, and what needs to change to avoid it happening again, then read this book. A combination of incorrect economic theory, absence of regulation, and moral failure in the financial community (helped along by ignorant or venal politicians, and the buying of influence in governance)created the mess. Wall St led on all of this though many bankers and countries around the world willingly followed. What is most discouraging i If you want to understand what went wrong with the financial system in 2007-08, and what needs to change to avoid it happening again, then read this book. A combination of incorrect economic theory, absence of regulation, and moral failure in the financial community (helped along by ignorant or venal politicians, and the buying of influence in governance)created the mess. Wall St led on all of this though many bankers and countries around the world willingly followed. What is most discouraging is that there was no real accountability - those causing the problem actually got rewarded out of the public purse in the bailout. Furthermore, comparing what Stiglitz says needs to change (writing in 2010) versus what has actually changed (as of early 2015) is very discouraging for the 99% of us. While the economic arguments are interesting, I'm particularly taken by Stiglitz's arguments about moral failure in the American society

  28. 4 out of 5

    Kacey

    Stiglitz's book is a fantastic and page turning read about the financial crisis. His book accomplishes two purposes: to establish and explain the causes of the crisis in simple terms and to criticize the response. His explanation is extremely thorough, and I finished this book feeling that I finally had a grasp on what is happening in our country. In his criticism, he writes no holds barred, full of "I told you so"s and specific people's failures, which sometimes verges on arrogance. However, hi Stiglitz's book is a fantastic and page turning read about the financial crisis. His book accomplishes two purposes: to establish and explain the causes of the crisis in simple terms and to criticize the response. His explanation is extremely thorough, and I finished this book feeling that I finally had a grasp on what is happening in our country. In his criticism, he writes no holds barred, full of "I told you so"s and specific people's failures, which sometimes verges on arrogance. However, his accurate and well defended criticism cannot go unnoticed. As an Economics student, I found his teaching captivating, and his book read like I was sitting in a lecture. Beyond the expected subjects, I particularly found his criticism's and suggestion's towards the domain of economics enthralling. Stiglitz's certainly did a fantastic job with this book.

  29. 4 out of 5

    Pj

    Am on holiday and just finished this book...to busy to write an in depth review, but Stiglitz offers helpful insights into the causes behind the recent financial crisis, and his forecast is particularly sobering as one realizes the very real possibility that this could be reapeated again as there has been no meaningful reform (..for reasons provided). I read Sorkin´s "Too Big to Fail" first, and this was a nice follow-up. The prose is fairly dry at times, but overall quite accesible for those no Am on holiday and just finished this book...to busy to write an in depth review, but Stiglitz offers helpful insights into the causes behind the recent financial crisis, and his forecast is particularly sobering as one realizes the very real possibility that this could be reapeated again as there has been no meaningful reform (..for reasons provided). I read Sorkin´s "Too Big to Fail" first, and this was a nice follow-up. The prose is fairly dry at times, but overall quite accesible for those non-economists amongst us. Overall, an informative analysis.

  30. 5 out of 5

    Vera

    A Keynesian view of the economy and the 2007 Great Recession. Makes several good points: - The financial market has proven that it can't be trusted to regulate itself - The aggregate supply outweighs greatly the aggregate demand - GDP isn't a valid way to measure how well off regular people are - People should have better insurance (safety net) against losing their job and/or home - Regular people will feel the end of the recession when employment is restored, not when there's economic growth

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