The End of Normal: The Great Crisis and the Future of Growth
James K. Galbraith
Simon & Schuster (2014)

The Great Confusion: Perhaps the problem lies with the economic principles or the way they have been understood

As we now realize and as James Galbraith duly notes, “a good command of economic principles was not sufficient to foresee the Soviet collapse. And two decades later, we discovered that a good command of economic principles did not help foresee the world financial crisis either. Perhaps the problem lies with the economic principles or the way they have been understood. And that’s the reason for this book. ”

The title of this thoughtful and thought-provoking book refers to the economic impact of four factors: the rising costs of diminished resources, the now-evident futility of tradition/conventional military power, the labor-saving consequences of the digital revolution, and the breakdown of law and ethics in the financial sector. My take on Galbraith’s overview on the last 50-60 years is that there has been a major paradigm shift in a sequence of stages, each of which redefined “normal”: first, the decline of easy growth in the 1970s; then uneven and unsteady (if any) growth in the 1980s and 1990s; and then in the 2000s until 2008, the global economy has been “the best of times” for some countries, the “worst of times for others.”

Since 2008 until now, so-called experts have tried — with limited success — to explain the causes that have driven each phase of the shift. Galbraith views much of the on-going discourse as being either wrongheaded or insufficient. In this book, he responds, demonstrating a good command of economic principles while sharing his thoughts about what has happened and is happening now. His hope is that in doing so, he will help those who read his book to change or at least cope with the current “Great Crisis.”

These are among the dozens of passages of greatest interest and value to me, listed also to suggest the scope of Galbraith’s coverage:

o A Contest of One Note Narratives (Pages 11-17)
o Economic Growth (21-37)
o Ben Bernanke (60-63 and 208-209)
o The Pragmatic Practice of Bubble Detection (80-83)
o Nonlinear financial dynamics (87-92)
0 U.S. Military Power (113-128)
o Creative Destruction (134-138)
o Information revolution (137-147)
o Financial fraud and great financial crises (149-168)
o Forecasting failures (172-178 and 180-181)
o ARRA (177-180 and 185-186)
o Crackpot counterrevolution (189-205)
o The U.S. economy in comparison/contrast with others (211-223)
o European economy: perils and potentialities (225-235)
o What a high-growth economic strategy favors (241-253)
o The economics of Axel Leijonhufvud and Earlene Craver (262)

I am grateful to James Galbraith for the information, insights, and counsel he provides. Frankly, I need to re-read the book because, with regard to much of the material, I may have understood its meaning but probably not appreciated its significance. The economic challenges we continue to face are immensely complicated and defy simplistic explanations. However, unless and until we understand their nature and extent, we cannot respond effectively. At least for me, doubt and uncertainty will continue to be “normal.”