The Shifts and the Shocks

September 1, 2014
Tectonic changes in the global economy yielded collapse and an ill-judged fiscal austerity, according to this far-reaching study of the Great Recession. Financial Times editor Wolf (Fixing Global Finance) recaps the ongoing slump from the panic of 2008 and the frantic efforts of central banks to shore up the financial system, to the turn towards tight fiscal and monetary policies in the West in 2010, which he blames for the sluggish recovery and the subsequent Eurozone debt crisis. He ties these recent "shocks" to decades-long sea changes in the world economy: globalization and intensified competition; a "savings-glut" with few profitable outlets for investment; economic inequality that shrinks wages and demand. Wolf's provocative indictment of economic orthodoxy suggests that more government debt and fiscal stimulus are needed, and that responsible creditors like Germany are as culpable as bankrupt countries like Greece. He floats a number of radical reform proposals, including measures that would essentially abolish the private banking system. Although readers with some understanding of macroeconomics will profit the most, Wolf's discussions of the complex dynamics of investment, banking, trade and monetary policy are lucid, and his incisive analysis makes a compelling case for bold, activist economic policy.

August 15, 2014
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.

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September 15, 2014
Economics commentator Wolf reports, The crisis that broke upon the world in August 2007, and then morphed into a widening economic malaise in the high-income countries and huge turmoil in the Eurozone, has put not just these countries but the world into a state previously unimagined even by intelligent and well-informed policymakers. Few mainstream economists foresaw the crisis or even the possibility of one, and we learn the economics establishment failed. Today the author finds the threats to liberal democracy (individual freedom and citizenship) are from financial and economic instability, high unemployment and soaring inequality. The author analyzes what the crisis tells us about the economy and economics in order to decide what needs to be done, such as reforms in financial regulation, the functioning of monetary systems, global governance, and global economic institutions. While reforms are under way, Wolf indicates there is a lack of action over global monetary and exchange-rate regimes. This challenging book provides an important perspective for the ongoing debates about the recent Great Recession.(Reprinted with permission of Booklist, copyright 2014, American Library Association.)