Timothy Noah. The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It. Bloomsbury Press, 2012, pp. 264, $25.00 In August 2012, a Pew Social & Demographic Trends report indicated that the American middle class has fallen on tough times. Among its interesting findings is that more self-described members of the middle [...]
Timothy Noah. The Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It. Bloomsbury Press, 2012, pp. 264, $25.00
In August 2012, a Pew Social & Demographic Trends report indicated that the American middle class has fallen on tough times. Among its interesting findings is that more self-described members of the middle class blame Congress than they do President Obama for their perceived difficulty in maintaining their standard of living. Most alarming, and one which likely will have an impact on this year’s elections, is the fact that median net worth took a nosedive during the Great Recession, plunging from $152,950 to $93,150. Furthermore, whether today’s college graduates, many of whom are underemployed and are living back at home with their parents, will achieve the trappings of middle class status anytime soon remains uncertain. One suspects we may be witnessing the emergence of the American equivalent of Japan’s Lost Generation.
Fortunately, however, we might comfort ourselves by knowing that the United States remains a land rich in opportunity much as it was in the past, unique among nations in its lack of a rigid class structure and its social mobility. But we’d be deceiving ourselves. In The Great Divergence, Timothy Noah of The New Republic posits that, since 1979, there has been a “particularly extreme” divergence in income inequality in the United States. Noah synthesizes the work of economists, political scientists, and sociologists to argue that income inequality has increased, and that this is not good for American society. In the book’s final chapter, he advocates specific actions and policies that he believes would help reverse this trend. His suggestions are largely politically progressive proposals, including increasing taxes on the super-rich, bolstering the federal workforce, and breaking up the too-large-to-fail banks. While there are likely some conservative-libertarian policy wonks that would be amenable to his proposal to break up the large banks, few would likely support Noah’s proposal to revive organized labor.
The author takes the title of the work comes from a phrase used by Paul Krugman, an outspoken advocate for Keynesian stimulus, in his 2007 book, The Conscience of a Liberal. Noah defines the Great Divergence as a socio-economic phenomenon as one not primarily involving the poor. Rather, it “is about the difference between how people lived during the half century preceding 1979 and how they lived during the three decades after 1979.” The story he tells, however, is not just about income inequality; it is about diminishing access to the top. According to Noah, over the past several decades, opportunities for upward social mobility have not increased.
Unlike some pundits who rehash talking points, Noah commendably cites ample scholarship to support his claim. In The Great Divergence, the reader learns that the United States now offers its citizens less intergenerational economic mobility than northern and western European nations. (I would venture, however, that the United States still allows for greater social mobility for children of first-generation immigrants than do Scandinavian and other western European countries.) Noah also highlights an intriguing sociological finding which indicates that Americans tend to overestimate the degree to which American society fosters upward socio-economic mobility.
Notable within the pages of The Great Divergence then is the fact that Noah challenges Paul Ryan for an October 2011 speech in which the Wisconsin Congressman contrasted what he perceived to be American social mobility with a rigid European welfare state class structure. Ryan, according to Noah, “had it exactly backward.” In truth, European countries now offer more social mobility than the United States. While Noah penned his study of income inequality prior to Mitt Romney’s choosing Ryan as his running mate, The Great Divergence takes on a more salient political implication in this new found context.
So what caused the Great Divergence? According to Noah, the Great Divergence did not result from prejudice against African-Americans or women. The failure of the American educational system to meet the demand for higher skilled workers is part of the story, as is trade with low-wage nations such as China and the increase of business lobbying in Washington. The decline of organized labor also played a role. Noah also refers to the rise of extremely wealthy (“stinking rich,” in his parlance) as a “separate and distinct phenomenon” that can be thought of as “the Great Divergence, Part 2.” The last several decades have been witness to the emergence of what are, in essence, new social classes within the top 1%, namely the top 0.1% and the top 0.01%. Wall Street, according to Noah, played a substantial role in the emergence of these extremely wealthy individuals. Top income shares are rising faster in the United States than in other developed countries.
Overall, Noah may succeed in persuading the reader in that income inequality not only is on the rise and that it is problematic for society. He is less convincing in his policy proposals to remedy the situation. To be fair, he does rightly acknowledge that many of his proposals, many of which are further to the left than President Obama, are not “politically salable today.” Noah could have bolstered his work, and perhaps the reception to it, had he offered a list of concrete and specific policies that would both reverse income inequality and be palatable to a large slice of the American electorate. The work also suffers from the fact that it is largely a summary of other scholars’ work, much of it very technical, making it less accessible to a general audience that it deserves to be.
In conclusion, one can think of The Great Divergence as a plea to the American public to recognize that income inequality is a problem. It is also to acknowledge that social mobility is no longer operating the way in which it used to. I would contend that the frustration that many Americans feel with Washington in many ways reflects the fact that the system is not producing the same results as it did for people’s parents and grandparents. Income inequality currently is a topic of concern among the country’s economists, political activists, and pundits. Whether it will be a broadly discussed national concern remains to be seen. It would be heartening to see at least one moderator in the upcoming presidential debates ask each of the candidates where they stood on the topic of income inequality.
Jonathan Eric Lewis (c) 2012
Noam Scheiber, The Escape Artists: How Obama’s Team Fumbled The Recovery. Simon & Schuster, 2012, pp. 351, $28.00 When he assumed the Office of the Presidency in January 2009, Barack Obama faced challenges on multiple fronts. Ground troops were still in Iraq, the deleterious effects of the housing bubble were rippling throughout the economy, and [...]
Noam Scheiber, The Escape Artists: How Obama’s Team Fumbled The Recovery. Simon & Schuster, 2012, pp. 351, $28.00
When he assumed the Office of the Presidency in January 2009, Barack Obama faced challenges on multiple fronts. Ground troops were still in Iraq, the deleterious effects of the housing bubble were rippling throughout the economy, and confidence about the nation’s long-term fiscal prospects hovered somewhere between hope and despair. To his significant advantage, President Obama did enter the White House with Democrat majorities in both the House and Senate. Although the former Illinois Senator’s supporters did not necessarily know it at the time of the new president’s inauguration, the first two years of the Obama Presidency would be crucial years for the country’s recovery from the worst economic downturn since the Great Depression. For decades to come, historians will debate whether President Obama helped or hindered what, in fact, would prove to be an anemic recovery from the near meltdown of the American financial sector.
In The Escape Artists: How Obama’s Team Fumbled the Recovery, Noam Scheiber provides a comprehensive narrative detailing the personalities and policies of the Obama economic team. He argues that President Obama and his team made a mistake in focusing on deficit reduction, rather than putting jobs foremost on the agenda. A senior editor at The New Republic and a Schwartz Fellow at the New America Foundation, Scheiber posits that while it is certainly the case that, “Team Obama helped avert catastrophe,” they nevertheless failed in their self-appointed task of restoring the economy to close to where it was prior to the financial crisis.
Readers most interested in the personalities behind the recovery will find much to appreciate in Scheiber’s extremely well researched book. Although he treats the complex economic issues with dexterity, Scheiber focuses his attention on the educational, personal, and professional backgrounds of the major players on Obama’s economic team than on complex and nuanced economic and legal issues. He devotes individual chapters to differing members of Team Obama, including Larry Summers of the National Economic Council, Treasury Secretary Tim Geithner, and Gary Gensler of the Commodities Futures Trading Commission (CFTC).
Overall, Scheiber is successful in documenting how the personal backgrounds of the key players on Obama’s economic team affected their policy decisions during their tenures in the administration. Occasionally, however, Scheiber’s narrative goes slightly off course. This is never more the case when, perhaps in an attempt to be comprehensive, he seemingly diverts his attention from the topic at hand. There are sections in the work where Scheiber spends perhaps too much time detailing some of the interesting, albeit not immediately relevant, details about the aforementioned personalities. One such case in point is a detailed discussion of Larry Summers’ childhood and high school years, which could easily have been condensed into two short paragraphs.
When he is at his best, however, Scheiber provides a fascinating look at the decision-making process of Obama’s economic team. This includes the numerous, and sometimes colorful, internal squabbles within the West Wing and other agencies and departments. Scheiber recounts how Christina Romer of the Council of Economic Advisers (CEA) had advocated for a larger stimulus package than the one that eventually was put into place is perhaps well known, details the tensions between Summers and Geithner, and recounts the different personalities and policy views of those tasked with deciding how to regulate derivatives, for instance, in the wake of the crisis.
Scheiber does, however, devote significant attention to Treasury Secretary Tim Geithner’s career and policy decisions. The reader learns how Geithner’s years overseas, first in his youth and then early in his career at Treasury, shaped his worldview. According to the author, Geithner’s approach, describing as a “willingness to set aside concern for appearances and keep kicking dirt on the fire until he smothered it,” is probably responsible for saving the financial system. On the other hand, recounts Scheiber, the bailouts really demonstrated how deeply embedded both personally and professionally Geithner was in the financial world.
As for President Obama himself, Scheiber portrays him as an idealistic politician who both sought bipartisanship on economic matters and was committed to his health care agenda, but was ultimately faced with an intransigent Republican opposition. For those readers who think that only Congressional Republicans cared about the deficit, The Escape Artists will provide a different perspective. In fact, Scheiber contends that Obama was too focused on deficit reduction. This, according to the author, played into the Republicans’ hands, as if to concede the point that the larger American public was most concerned with cutting spending. “By agreeing that deficits were the biggest threat to the economy,” he writes, “the president lent credence to the fallacious argument that cutting breeds prosperity, which Republicans wielded against his efforts to secure more stimulus.” Scheiber’s own view, then, is more in line with Keynesianism than with the cutting spending crowd.
In conclusion, The Escape Artists is an enjoyable read detailing how President Obama and his advisers ultimately failed to revive the American economy. The book, however, sometimes does not live up to the very provocative subtitle regarding fumbling the recovery. Indeed, if one were to judge this book by its cover, one would think it was just another right-wing critique of the president. While Scheiber occasionally gets bogged down in details that detract from the overall flow of the larger narrative, he does provide a lucid study of how individuals, personality quirks and all, do ultimately shape policy. Scheiber thinks that the president should have focused more on jobs. Whether he will get a chance to do so in a second term is ultimately up for the voters to decide.
Jonathan Eric Lewis (c) 2012
Eduardo Porter. The Price of Everything: Finding Method in The Madness of What Things Cost (paperback). Penguin Books, 2011, pp. 296, $16.00 Why do generic drugs cost less than name-brand drugs even though the chemical makeup is, for all intensive purposes, identical? Are wealthy people happier than poor people? Moral objections aside, can one put [...]
Eduardo Porter. The Price of Everything: Finding Method in The Madness of What Things Cost (paperback). Penguin Books, 2011, pp. 296, $16.00
Why do generic drugs cost less than name-brand drugs even though the chemical makeup is, for all intensive purposes, identical? Are wealthy people happier than poor people? Moral objections aside, can one put an accurate price on human life? More philosophically, what is the function of prices in a free market economy? If one were interested in attempting to figure out how best to answer any of these questions, Eduardo Porter’s recent book would be an excellent place to start.
In The Price of Everything, Porter (New York Times) argues that, “every choice we make is shaped by the prices of the options laid out before us—what we assess to be their relative costs—measured up against their benefits.” But there is more to prices than a cut-and-dry economic calculation about how to assess which course of action to take; prices tell us about humanity. “The prices we face as individuals and societies—how they move us, how they change as we follow one path or another—provide a powerful vantage point upon the unfolding of history.”
Historians may find this last statement hyperbolic. Most of Porter’s examples throughout the text are drawn from the twentieth-century. He does convincingly demonstrate that prices do play an important role in how societies are organized. Indeed, I would argue that for post-industrial consumer societies, prices of assets, goods, and services, can tell us a lot about the economic and political health, or lack thereof, of a given polity at any particular point in time. For instance, when only a select few members of a country’s ruling political elite can afford to purchase luxury goods, there is most likely something deeply wrong with that country’s political system.
The author of The Price of Everything makes the case that prices should be understood not just as “attached to things we buy in a store,” but pretty much everywhere. “At every crossroads, prices nudge us to take one course of action or another. In a way,” writes Porter, “this is obvious; every decision amounts to a choice among options to which we assign different values.” He argues that identifying prices allows us to better understand our decisions, be they measured in money, time, or opportunity costs.
The Price of Everything is divided into thematic chapters in which Porter explores the prices of goods, happiness, life, and other aspects of life in which prices matter. In Chapter One, “The Price of Things,” he rightly contends that, “consumers’ interactions with prices are fairly complex.” He identifies the extremely important assumption held by economists, which is that people are rational actors or, in Porter’s words, “people know what they are doing when they open their wallets.” In a balanced approach, he notes that while this is often the case. “But as a general principle, the assumption is misleading in a subtle yet important way.” The difference, according to the author, is this: “market transactions do not necessarily provide people with what they want; they provide people with what they think they want.” Skeptics, on the other hand, might contend that this is a distinction without a difference.
For anyone who has taken a college-level economics course, the rational actor will be a familiar character. But what if the hypothetical rational actor does not always act so rationally? What if this assumption is flawed? Drawing upon behavioral economics, Porter states his view that, “the model of rational humanity is a powerful tool that can help us understand the behavior of men and women in many walks of life. Yet, at the end of the day, belief in the inerrant ability of our choices to communicate our preferences is inconsistent with how we actually behave.” In other words, human nature is complex. In my view, economists, unlike professional historians, make a grand assumption about human rationality, one that any historian of the twentieth-century Europe in particular, could easily refute with ample historical evidence.
For readers interested in the financial crisis of 2008 and its aftermath, the book’s epilogue, entitled “When Prices Fail,” is worth ample consideration. After discussing the housing bubble, Porter discusses speculative bubbles, in general and contends that there are some economists who do not believe that bubbles exist. While Porter does discuss the efficient market hypothesis, he fails to provide as comprehensive an overview of the subject as it merits. The author’s view is that the discipline of economics both is, and should, change in respond to the financial crisis. He contends that the belief in “unbounded rationality” is flawed. Furthermore, he contends that economics needs to embrace a more complex and nuanced understanding of human nature, one in which people do not always pursue what they want, but rather what they think they want, a point he also raised in the book’s first chapter. In my opinion, if economists happened to think a bit more like historians, wherein the world they study is understood to be a messy, complex place that often defies simple explanations, our public policy discussions might not be so polarized between the progressive left and the populist right.
In conclusion, every once and a while, an economics book comes along that is not only intellectually engaging, but also refreshingly devoid of partisanship and quite accessible to a general audience without being overly simplistic. Porter’s well-written study is one of these books. He takes the reader on an intellectual journey into the realm of prices and explains how prices, or what things cost, help explain not only economics, but also aspects of human nature. While it is unlikely that economists, let alone extreme adherents of laissez-faire capitalism, will be willing to forgo with the rational actor assumption anytime soon, it is nevertheless the case that in two decades the economics profession will look very different from what it is today. If you want an engaging and enjoyable non-fiction read this summer, and one that will leave you wanting to learn more about how the discipline of economics might adapt to the post-financial crisis era, The Price of Everything is highly recommended.
Jonathan Eric Lewis (c) 2012
A Plan to Restore American Prosperity
First Principles: Five Keys to Restoring America’s Prosperity. John B. Taylor. W.W. Norton & Company 2012, pp. 235, $24.95 Unless something dramatic happens in the Persian Gulf, this year’s presidential election could very well hinge on the unemployment rate in November 2012. While January’s unemployment numbers had to have been somewhat encouraging for the White [...]
First Principles: Five Keys to Restoring America’s Prosperity. John B. Taylor. W.W. Norton & Company 2012, pp. 235, $24.95
Unless something dramatic happens in the Persian Gulf, this year’s presidential election could very well hinge on the unemployment rate in November 2012. While January’s unemployment numbers had to have been somewhat encouraging for the White House, a recent poll nevertheless revealed that only a mere thirty-six percent of Americans say President Obama is doing a good or an excellent job handling the economy. Many Americans, particularly those who understand the extent of our debt crisis, continue to be wary about this country’s economic outlook.
In First Principles: Five Keys to Restoring America’s Prosperity, John B. Taylor (Stanford University) presents his strategy to restore American economic greatness. According to the author, our current economic problems stem from its getting away from the basics of what made America great. “The premise of [First Principles],” writes Taylor, “is that the best way to understand the problems confronting the American economy is to go back to the first principles of economic freedom upon which the country was founded.” The author defines economic freedom as meaning the freedom to decide what to produce, consume, buy and sell, and how to help others. He enumerates what he considers to be the defining principles of economic freedom as: a predictable policy framework; the rule of law; strong incentives; a reliance on markets; and a clearly limited role for government.
Influenced by libertarian economists Milton Friedman and F.A. Hayek, Taylor emphasizes the importance of policy predictability and the rule of law. “Government’s adherence to known rules,” Taylor contends, “allows people to have a clearer sense of what is coming, and therefore to make more informed decisions about long-range plans.” Indeed, many of President Obama’s critics have complained that the current administration has created an uncertain business climate, making it very difficult for businesses and industry to plan for the future. When one hears echoes of capital sitting on the sidelines, this almost certainly is what is being referenced.
America’s adherence to the principles of economic freedom, suggests Taylor, has been stronger and weaker at different moments in our nation’s history. Policy shifts back and forth between interventionism and an appreciation for limited government. This occurs, “remarkably” according to Taylor, “nearly simultaneously for fiscal policy, regulatory policy, and tax policy.” Whereas the latter half of the 1960s into the 1970s was a time of increased interventionism, the Reagan-Bush-Clinton years were a more an era of economic freedom. This period is generally known as the Great Moderation. The George W. Bush-Obama era, on the other hand, has been a bipartisan era of increased interventionism. Following the financial crisis of 2008, the federal government has been increasingly interventionist with quantitative easing, health care regulations, and the Dodd-Frank financial reform legislation.
Taylor, who most recently served in the George W. Bush Administration, rightly acknowledges that members of both parties have veered away from an adherence to economic freedom. His assessment of how differing chairmen of the Federal Reserve performed deserves particular attention. Paul Volcker, best known for quelling rising inflation during the early years of the Reagan Administration, is presented as someone who intuitively understood the importance of economic freedom. Volcker’s near-singular focus on combatting inflation stands in stark contrast to Ben Bernanke’s monetary activism. With regard to the best-known Fed chairman, Taylor presents Alan Greenspan as someone who, in 2003-2005, purposefully moved away from the previous decades’ predictable rules-based monetary policy.
The author devotes individual chapters to the looming debt crisis, crony capitalism, and entitlement reform. Given his expertise in monetary policy, Taylor’s chapter on the Federal Reserve merits particular attention. In 1992, the author proposed the eponymous Taylor rule, a policy benchmark designed to aid the Federal Reserve in setting interest rates to achieve price stability. Unlike those who want to ‘end the Fed,’ Taylor wants to reform the nation’s central bank. He advocates that the Federal Reserve “focus on long-run price stability within a clear framework of economic stability,” and that it report its strategy and be accountable for deviating from it. Indeed, Taylor suggests that the Federal Reserve’s sole focus should be price stability, rather than its current dual mandate of price stability and maximum employment. He has at least one supporter in Congress. In late 2011, Representative Paul Ryan (R-WI) proposed a similar course of action in a Wall Street Journal op-ed.
In terms of policy, Taylor is largely correct. In my opinion, interventionism has largely not worked in the ways in which its advocates have intended. A commitment to predictability and the rule of law are extremely important for sustaining a democratic polity with a free market system. Where Taylor is less correct, however, is in his analysis of American economic history. Although the United States was partially founded on the principle of limited government, the nation at the time of the founding was largely agrarian and not as committed to economic freedom as we might initially imagine. Fearing the power of finance on our political system, many debated the wisdom of a central bank. Most significantly, slavery, an economic system in which people were considered property, would continue to grow and thrive until the Civil War and Reconstruction. It was not until after the largely industrial North defeated the Confederacy that free market capitalism and a commitment to the rule of law for all people became the country’s dominant economic and political ideologies.
In conclusion, First Principles is a thought-provoking work that deserves a wide audience. Even those readers who will disagree with the author’s analysis will find much to appreciate in this recent contribution to the ongoing debate about America’s economic woes.
Jon Lewis (c) 2012
The Legacy of the Crash: How the Financial Crisis Changed America and Britain. Edited by Terrence Casey. Palgrave Macmillan, 2011, pp. 291, $32.00 Historians, when studying economic or political events, often focus on whether a particular historical occurrence represents a break from, or continuity with, the past. There is, for instance, a general consensus that [...]
The Legacy of the Crash: How the Financial Crisis Changed America and Britain. Edited by Terrence Casey. Palgrave Macmillan, 2011, pp. 291, $32.00
Historians, when studying economic or political events, often focus on whether a particular historical occurrence represents a break from, or continuity with, the past. There is, for instance, a general consensus that the Great Depression, and both FDR’s and the Supreme Court’s response, represented a departure from American legal and political history, when the federal government intervened far less in economic affairs. But what of the responses to the financial crisis of 2008, when a Republican administration pursued a deeply interventionist strategy in the hopes of preventing a worldwide economic collapse, and the British government effectively nationalized a major bank? Did that represent the beginning of the end for Anglo-American capitalism or a temporary departure from business as usual?
The Legacy of the Crash, edited by Terrence Casey (Rose-Hulman Institute of Technology), attempts to shed light on how the crisis and its aftershocks may have transformed American and British political culture. Given that the chapters were originally academic papers presented at a September 2010 conference, it is unsurprising that the prose is largely scholarly, with numerous citations. The book is divided into three sections: the causes and consequences of the financial meltdown; political trends after the crash; and how public policy changed after it. While The Legacy of the Crash would be most valuable to scholars, readers interested in learning more about how the financial crisis affected the United States and the United Kingdom can nevertheless benefit somewhat from a perusal of the book.
Casey, in the book’s introduction, contends that the origins of the financial crisis had multiple causes. He argues against simplistic explanations of what went wrong. “It may provide moral or political comfort to identify a sole culprit, be it greedy bankers, economic theorists, short-sighted politicians, misguided regulators, or irresponsible homeowners. Reality though is closer to the plot of Agatha Christie’s Murder on the Orient Express, where everyone was guilty.” This passage, while pithy, might have been better written to acknowledge that, whereas everyone was guilty, not everyone was equally guilty. After all, it would be difficult to imagine that the crisis would have occurred but for the Federal Reserve’s easy money policies enacted after the dot-com bust in the early 2000s.
Are the American and British versions of capitalism similar? In “Was there Ever an Anglo-American Model of Capitalism?” (Chapter 2), Wyn Grant (University of Warwick/International Political Science Association) puts forth the argument “that the UK does conform to a liberal model of capitalism, not least in terms of the centrality and mode of organization of the financial services sector, but that the terrain is more contested than in the US.”
If there was indeed a crisis of capitalism, as Casey suggests in his essay, “Capitalism, Crisis, and a Zombie Named TINA” (Chapter 3), does that logically infer that capitalism is doomed to the dustbin of history? Quite the opposite, according to the author, who cites Margaret Thatcher’s acronym, TINA — There is no Alternative (to Anglo-American capitalism). “This crisis of capitalism, in short has yet to produce a counter-liberal coalition in either Britain or America, let alone that has maneuvered to a position of electoral success. Mrs. Thatcher’s axiom still rings true, at least for now.” When the two aforementioned authors write of liberalism, it should be emphasized, they are speaking of classical liberalism and free market capitalism, rather than of the American liberal-left political tradition. The Occupy Wall Street movement may, however, be the beginning of an anti-TINA coalition. Indeed, it would appear that at least one Republican pollster is concerned about the impact of OWS on Americans’ perceptions of capitalism.
While the Anglo-American model may arguably remain intact, the United States and the United Kingdom have their differences. In “Fiscal Policy Responses to the Economic Crisis in the UK and the US” (Chapter 5), Edward Ashbee (Copenhagen Business School) argues that despite the notion of an Anglo-American model of capitalism, “there were, as the financial crisis unfolded, important economic policy differences between the US and the UK. In particular, discretionary fiscal policies took very different forms.” Tom Bale (University of Sussex) and Robin Kolodny (Temple University) cite the work of other writers and remind us that that, while both are center-right parties, the Conservatives and the Republicans have both their similarities and their differences.
In the book’s conclusion, Casey posits that there was a crisis of capitalism. It was expected that the political economies of both countries would take a new path. “And yet, as chronicled by this volume,” he writes, “so much of what has occurred since then belies this prediction. In terms of public policy, economic governance, and political trends, there has been far more consistency than change.” Whether one accepts Casey’s argument, of course, is a matter of perspective. A Tea Party activist, for instance, might posit that the Obama Administration’s interventionist policies, if not combated, will fundamentally alter the relationship between the federal government and the private sector.
Casey, however, is spot on in arguing that, “one would hope that the primary legacy of the crash is to demolish the sense that ‘it cannot happen here’ and that politicians, financiers, and even individual consumers will adjust their behavior accordingly.” This assessment is even more pertinent in light of the failure of the congressional super-committee and the yet uncertain effects that the European debt crisis will have on the American and British economies.
In conclusion, The Legacy of the Crash will be more useful to the scholarly community, rather than to policymakers. While the chapters on the causes and consequences of the crash (Part I) have some useful insights, they do not substantially break new ground. The comparative approach between the United States and the United Kingdom, however, is a useful one. It would certainly be beneficial if more scholarly analyses of the financial crisis acknowledged how the Bush Administration’s policies in late 2008 were similar to, or different from, policies enacted by other western governments. Today, it is the Continent, rather than the United States or the United Kingdom, which faces an immediate financial crisis. One could imagine that in a couple of years hence, scholars will gather to assess how various European governments either succeeded or failed to respond to events that may or may not end the Euro.
Jon Lewis (c) 2011