How and why the financial and economic crises that hit the high-income countries after August 2007 have altered the world,
With rare exception, the best works of non-fiction are research-driven and that is certainly true of this book as indicated by 46 pages of detailed Notes, followed by 24 pages of References. These are Martin Wolf’s primary sources. I agree with him that there are valuable lessons (some of them invaluable lessons) to be learned from the economic crisis that began in 2007-2008. Wolf identifies the nature and extent of the origin of that crisis within a complex interaction between and among globalization initiatives, hugely destabilizing global imbalances, and our dangerously fragile financial system.
Why did Wolf write this book? One of the main reasons is to explain why and how “the ideal of a liberal democracy derives from the marriage of these two ideas — freedom and citizenship. It is based on the believe that we are not only individuals with rights to choose for ourselves, subject to the law; we are also, as Aristotle puts it, ‘political animals.’ As such, we have both a need and a right to participate in public life. Citizenship translates the idea of individual self-worth to the political level. As citizens, we can and should do things together. Many of these things are, in turn, the foundation stones of [Isaiah] Berlin’s ‘positive liberty,’ or individual agency, ” in his classic essay, Two Concepts of Liberty (1969).
Wolf is convinced — and I agree — that “a market economy is both a reflection of personal liberty and a precondition for its survival.” Consider this excerpt from Lord Turner’s classic, After the Crisis: Ends and Means (2012): “Economic freedom on both the consumption side and the production side — not only the right to choose what to consume but also the right to set up a new company, to work for oneself, and to compete with new ideas — should be recognized as a desirable objective in and of itself, not because of any prosperity dividend it delivers.” That is, only if people are free in their means can they be free in their ends.
These are among the dozens of passages of greatest interest and value to me, also listed to suggest the scope of Wolf’s coverage:
o Why the Shocks Matter (Pages 7-12)
o The Scale of the Crisis (18-26)
o Recovery in the Big High-Income Countries (32-36)
o The Rolling Crises (45-59)
o Understanding the Crisis, and, Misunderstanding the Crisis (59-85)
o Crisis and Recovery in Emerging Economies (90-95)
o The Monetary Normalization of High-Income Economies
o Why Financial Crises Are Endemic (118-123)
o The Shift into the Global Imbalances (158-170)
o Underling Drivers of the Global Shifts (182-188)
o The Failure of Official Economics (196-199)
o Alternatives to the New Orthodoxy (203-222)
o A Labour of Sisyphus, and, The Case for Radical Reform (232-237)
o A Capital Solution (237-252)
o How to Simulate Economies (263-272)
o Global Reform (282-285)
o Living in a Bad Marriage (294-304)
o What Happened? (320-324)
o The Challenge of Radical Reform (348-353)
I am deeply grateful to Martin Wolf for the abundance of information, insights, and counsel he provides in this thoughtful and thought-provoking examination of both the lessons learned and the lessons yet to be learned from the economic crisis that began in 2007-2008. Somehow he manages to balance his no-nonsense pragmatism with an abiding faith that eventually, somehow, it will be possible to restore economies to growth, on both the growth and supply sides.
“Every effort must be made, too, to ensure that a similar crisis will not recur without eliminating those aspects of an open world economy and integrated finance that are of benefit. This will require more radicalism than most recognize. We must not only learn lessons about how the world economy went awry. We must also act upon them. If we do not, next time a big crisis arrives even our open world eco0nimy could end in the fire.”
Many (if not most) of those who read this book will agree that he asks the right questions, even if they do not agree with his answers. That’s a start, a good start. Let the dialog continue.