Martin Wolf

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pages: 524 words: 143,993

The Shifts and the Shocks: What We've Learned--And Have Still to Learn--From the Financial Crisis by Martin Wolf

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air freight, anti-communist, Asian financial crisis, asset allocation, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Basel III, Ben Bernanke: helicopter money, Berlin Wall, Black Swan, bonus culture, break the buck, Bretton Woods, call centre, capital asset pricing model, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collateralized debt obligation, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, debt deflation, deglobalization, Deng Xiaoping, diversification, double entry bookkeeping, en.wikipedia.org, Erik Brynjolfsson, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial deregulation, financial innovation, financial repression, floating exchange rates, forward guidance, Fractional reserve banking, full employment, global rebalancing, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invisible hand, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, light touch regulation, liquidationism / Banker’s doctrine / the Treasury view, liquidity trap, Long Term Capital Management, mandatory minimum, margin call, market bubble, market clearing, market fragmentation, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, negative equity, new economy, North Sea oil, Northern Rock, open economy, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, purchasing power parity, pushing on a string, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, Richard Feynman, Richard Feynman, risk-adjusted returns, risk/return, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, shareholder value, short selling, sovereign wealth fund, special drawing rights, The Chicago School, The Great Moderation, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, The Wealth of Nations by Adam Smith, too big to fail, Tyler Cowen: Great Stagnation, very high income, winner-take-all economy, zero-sum game

O’Rourke, ‘Coping with Shocks and Shifts: The Multilateral Trading System in Historical Perspective’, National Bureau of Economic Research Working Paper No. 1759, November 2011, www.nber.org. PREFACE: WHY I WROTE THIS BOOK 1. Hyman P. Minsky, Inflation, Recession and Economic Policy (Brighton: Wheatsheaf, 1982), p. xi. 2. Martin Wolf, Fixing Global Finance (Baltimore and London: Johns Hopkins University Press and Yale University Press, 2008 and 2010). 3. Martin Wolf, Why Globalization Works (New Haven and London: Yale University Press, 2004), ch. 13. 4. The ‘great moderation’ was coined in 2002 by James H. Stock of Harvard and Mark Watson of Princeton as a way of describing the reduced volatility of US output. See ‘Has the Business Cycle Changed and Why?’, in Mark Gertler and Kenneth Rogoff (eds), NBER Macroeconomics Annual 2002, vol. 17 (Boston: MIT Press, 2003) http://www.nber.org/chapters/c11075.pdf, p. 162.

Letter to Her Majesty the Queen, 22 July 2009, http://media.ft.com/cms/3e3b6ca8-7a08-11de-b86f-00144feabdco.pdf. 6. The NEC, founded under President William Jefferson Clinton, is distinct from the Council of Economic Advisers, founded in 1946 under President Harry Truman. 7. Lawrence Summers and Martin Wolf, ‘A Conversation on New Economic Thinking’, Bretton Woods Conference, Institute for New Economic Thinking, 8 April 2011, http://ineteconomics.org/video/bretton-woods/larry-summers-and-martin-wolf-new-economic-thinking. 8. Ben Bernanke, Chairman of the Federal Reserve, also stressed the intellectual debt of central bankers to the journalist, Walter Bagehot, in a lecture on the Federal Reserve’s response to the crisis. See Bernanke, ‘The Federal Reserve’s Response to the Financial Crisis’, Lecture 3, George Washington University School of Business, 27 March 2012, http://www.federalreserve.gov/newsevents/lectures/federal-reserve-response-to-the-financial-crisis.htm. 9. http://rwer.wordpress.com/2013/02/19/robert-lucas-on-the-slump. 10.

International Monetary Fund, World Economic Outlook, April 2013, Fig. 1.1.2. 26. See Paul Krugman, ‘Conventional Wisdom’, 27 May 2010, New York Times, http://krugman.blogs.nytimes.com/2010/05/27/conventional-madness. See also Bank for International Settlements, 83rd BIS Annual Report 2012/2013, 23 June 2013, http://www.bis.org/publ/arpdf/ar2013e.htm. 27. See on this Martin Wolf, ‘The Role of Fiscal Deficits in De-leveraging’, 25 July 2012, http://blogs.ft.com/martin-wolf-exchange/2012/07/25/getting-out-of-debt-by-adding-debt. 28. Robert Kuttner, Debtors’ Prison: The Politics of Austerity Versus Possibility (New York: Alfred A. Knopf, 2013), p. 206. 29. McKinsey Global Institute, Debt and De-leveraging: Uneven Progress on the Road to Growth, January 2012, http://www.mckinsey.com/insights/global_capital_markets/uneven_progress_on_the_path_to_growth. 30.


pages: 318 words: 77,223

The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse by Mohamed A. El-Erian

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activist fund / activist shareholder / activist investor, Airbnb, balance sheet recession, bank run, barriers to entry, break the buck, Bretton Woods, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, collapse of Lehman Brothers, corporate governance, currency peg, Erik Brynjolfsson, eurozone crisis, financial innovation, Financial Instability Hypothesis, financial intermediation, financial repression, fixed income, Flash crash, forward guidance, friendly fire, full employment, future of work, Hyman Minsky, If something cannot go on forever, it will stop - Herbert Stein's Law, income inequality, inflation targeting, Jeff Bezos, Kenneth Rogoff, Khan Academy, liquidity trap, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, moral hazard, mortgage debt, Norman Mailer, oil shale / tar sands, price stability, principal–agent problem, quantitative easing, risk tolerance, risk-adjusted returns, risk/return, Second Machine Age, secular stagnation, sharing economy, sovereign wealth fund, The Great Moderation, The Wisdom of Crowds, too big to fail, University of East Anglia, yield curve, zero-sum game

Writing in the Financial Times back in October 2010, shortly after then-chairman Bernanke had signaled the new stage in Fed activism, Martin Wolf observed that “the U.S. is seeking to impose its will, via the printing press. The U.S. is going to win this war, one way or the other: it will either inflate the rest of the world or force their nominal exchange rates up against the dollar.”13 Either the Fed’s experimental stimulus policy would serve as an example for other countries to follow immediately, or it would be the exception, thereby forcing the dollar to weaken against other currencies and allowing the United States to steal growth from elsewhere. Martin Wolf was right, though both issues transpired, in a sequential fashion. Initially, only the Bank of England accompanied the Fed, while the Bank of Japan and the ECB held back.

Haldane, “Growing, Fast and Slow,” speech at the University of East Anglia, Norwich, England, February 17, 2015, http://www.bis.org/review/r150219b.pdf. 2. Mohamed A. El-Erian, When Markets Collide: Investment Strategies for the Age of Global Economic Change (New York: McGraw-Hill, 2008). PART II: CONTEXT: THE RISE, COLLAPSE, AND RESURRECTION OF CENTRAL BANKING 1. Martin Wolf, “We Are Trapped in a Cycle of Credit Booms,” Financial Times, October 8, 2014, http://www.ft.com/intl/cms/s/0/1a9f058e-4d43-11e4-bf60-00144feab7de.html#axzz3Lfv9pY4D. For a detailed analysis, see Martin Wolf, The Shifts and the Shocks: What We Have Learned—and Have Still to Learn—from the Financial Crisis (New York: Penguin Press, 2014). CHAPTER 5: THE GOLDEN AGE OF CENTRAL BANKS AND “BUBBLISH FINANCE” 1. Joan Robinson, “The Economics of Hyperinflation,” Economic Journal 48 (September 1938). 2.

Zucker, adapted for eBook Cover design and illustration: Pete Garceau v4.1 ep Contents Cover Title Page Copyright Preamble Part I: The Why, How, and What of This Book Chapter 1: Setting the Stage Chapter 2: The Only Game in Town Chapter 3: Central Banks’ Communication Challenge Chapter 4: How and Why This Book Is Organized Part II: Context: The Rise, Collapse, and Resurrection of Central Banking Chapter 5: The Golden Age of Central Banks and “Bubblish Finance” Chapter 6: Cascading Failures Chapter 7: Central Bank Resurrection Part III: From the What to the So What Chapter 8: Setting the Stage Chapter 9: The Quest of a Generation Chapter 10: Reducing the Risk of the Unemployed Becoming Unemployable Chapter 11: The Inequality Trifecta Chapter 12: The Persistent Trust Deficit Chapter 13: National Political Dysfunction Chapter 14: The “G-0” Slide into the “International Economic Non-System” Chapter 15: The Migration and Morphing of Financial Risks Chapter 16: The Liquidity Delusion Chapter 17: Bridging the Gap Between Markets and Fundamentals Chapter 18: It Is Hard to Be a Good House in a Challenged Neighborhood Part IV: The Desirable Way Forward Chapter 19: Addressing the Ten Big Challenges Chapter 20: The Reduced-Form Approach to a Grand Policy Design Part V: From What Should Happen to What Is Likely to Happen Chapter 21: When Desirable and Feasible Differ Chapter 22: Turning Paralyzing Complexity into Actionable Simplicity Chapter 23: The Belly of the Distribution of Potential Outcomes Chapter 24: A World of Greater Divergence (I) Chapter 25: A World of Greater Divergence (II) Chapter 26: A World of Greater Divergence (III) Chapter 27: A World of Greater Divergence (IV) Chapter 28: Putting It All Together Part VI: The Keys to Navigating a Bimodal Distribution Chapter 29: What History Tells Us Chapter 30: Recognizing Blind Spots and Overcoming Biases Chapter 31: Advancing and Enhancing Cognitive Diversity Chapter 32: Translating Awareness into Optionality, Resilience, and Agility Chapter 33: The Power of Scenario Analyses Chapter 34: Valuing Liquidity and Optionality Part VII: Bringing It All Together Chapter 35: In Sum Dedication Acknowledgments Notes By Mohamed A. El-Erian About the Author PREAMBLE “What is needed is not more finance, but better finance.” —MARTIN WOLF “The world has largely exhausted the scope for central bank improvisation as a growth strategy.” —LARRY SUMMERS In the last few years, the global economy has evolved in ways once deemed highly unlikely, if not unthinkable. It is a phenomenon that continues today and, as will be made clear in this book, will intensify in the period ahead. The global financial crisis that shook virtually every country, government, and household in the world in 2008–09 gave way to a frustrating “new normal” of low growth, rising inequality, political dysfunction, and, in some cases, social tensions—all despite massive policy interventions on the part of central banks and transformational technological innovations.


pages: 389 words: 98,487

The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor, and Why You Can Never Buy a Decent Used Car by Tim Harford

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Albert Einstein, barriers to entry, Berlin Wall, collective bargaining, congestion charging, Corn Laws, David Ricardo: comparative advantage, decarbonisation, Deng Xiaoping, Fall of the Berlin Wall, George Akerlof, information asymmetry, invention of movable type, John Nash: game theory, John von Neumann, Kenneth Arrow, market design, Martin Wolf, moral hazard, new economy, Pearl River Delta, price discrimination, Productivity paradox, race to the bottom, random walk, rent-seeking, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, sealed-bid auction, second-price auction, second-price sealed-bid, Shenzhen was a fishing village, special economic zone, spectrum auction, The Market for Lemons, Thomas Malthus, trade liberalization, Vickrey auction

Then there is Zhou Shien Pin, whose feet melted after he touched a high-voltage wire in a paint factory. Is this the price of economic growth? Is it worth paying? Economists like Paul Krugman, Martin Wolf, and Jagdish Bhagwati have repeatedly tried to argue that Chinese sweatshops beat the alternatives. This is not a popular view. After Martin Wolf ’s book, Why Globalization Works, was reviewed in the Guardian Weekly, the paper published an outraged letter from a reader who fantasized with glee about Wolf himself being forced to work in a sweatshop. This response is about as vicious as wishing that anyone who wears a “Mao” T-shirt be condemned to starvation—but less logical. Martin Wolf is correct to suggest that the sweatshops are better than the horrors that came before them, and a step on the road to something better. Mao’s “Great Leap Forward” was a leap into hell.

Other colleagues at Shell were inspira-tional, especially Betty-Sue Flowers, Anupam Khanna, Cho Khong, Michael Klein, Doug McKay, and John Robinson. At the Financial Times, Pilita Clark, Andy Davis, Chris Giles, Andrew Gowers, John Kay, John Willman, and Martin Wolf gave me opportunities and then made sure I didn’t waste them. At the World Bank, Michael Klein and Suzanne Smith are wonderful colleagues and every day with them is an education. David Bodanis, Felicity Bryan, Penny Dablin, Moore Flannery, Juri Gabriel, Mark Henstridge, Diana Jackson, Oliver Johnson, John Kay, Cho Khong, Paul Klemperer, Stephen McGroarty, Doug McKay, Fran Monks, Dave Morris, Rafael Ramirez, Jillian Reilly, John Robinson, Tim Savin, Martin Wolf, and Andrew Wright improved the book with their comments. Sally Holloway, my agent, has been superb. Tim Bartlett and Kate Hamill at Oxford University Press infuriated me with their precision and insight—I have been very lucky to work with them

Foreign investment is widely recognized to be good for economic growth in poor countries: it is an excellent way for them to create • 212 • B E E R , F R I E S , A N D G L O B A L I Z A T I O N jobs, learn cutting-edge techniques, and do so without having to invest their own scarce money. Unlike investments in shares, currency, or bonds, foreign direct investment cannot quickly be reversed in a panic. As economics journalist Martin Wolf puts it, “factories do not walk.” Although trade with and investment in poor countries has risen rapidly in recent years, we should be clear that both trade and foreign investment overwhelmingly takes place between the richest countries, not between rich and poor. People look at their Nike shoes and assume, perhaps, that everything is made in In-donesia and China. However, far more money is spent importing wine from Australia, pork from Denmark, beer from Belgium, insurance from Switzerland, computer games from Britain, cars from Japan, and computers from Taiwan, all carried on ships from South Korea.


pages: 772 words: 203,182

What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right by George R. Tyler

8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Basel III, Black Swan, blood diamonds, blue-collar work, Bolshevik threat, bonus culture, British Empire, business process, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Gordon Gekko, hiring and firing, income inequality, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, labour market flexibility, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, pension reform, performance metric, pirate software, Plutocrats, plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sand Hill Road, shareholder value, Silicon Valley, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

Fletcher, “Income Inequality on the Rise in Wealthy Nations, Report Finds,” Washington Post, Dec. 5, 2011. 8 “The Rich Are the Big Gainers in America’s New Prosperity,” Economist, June 17, 2006. 9 “Out of the Bottle,” Economist, Jan. 26, 2013, 42. 10 Saul Eslake, “Why Some Incomes Are Just Gross,” Sydney Morning Herald, Oct. 29, 2011. Martin Wolf, “America’s Inequality Need Not Determine the Future of Britain,” Financial Times, Dec. 22, 2011. 11 Saul Eslake, “Why Some Incomes Are Just Gross.” Martin Wolf, “America’s Inequality Need Not Determine the Future of Britain.” 12 James W. Loewen, Lies My Teacher Told Me (New York: Simon & Schuster, 2007), 206. 13 James MacGregor Burns, Packing the Court (New York: Penguin Press, 2009), 93, 96. 14 Ibid. 15 Joseph Stiglitz, The Price of Inequality (New York: Norton, 2012). 16 Carol Morello, “Middle Class Caught in the Squeeze,” Washington Post, Sept. 13, 2012. 17 Harold Meyerson, “Unhappy Labor Day,” Washington Post, Sept. 7, 2013. 18 Thomas Piketty and Emmanuel Saez, “The Evolution of Top Incomes: A Historical and International Perspective,” Cambridge, MA, NBER working paper no. 11955 (January 2006), http://www.nber.org/papers/w11955.

Senior government officials whose job it was to regulate industry became increasingly drawn from the ranks of industry itself, with plans to return when their stint in government was complete. These circumstances were rife with conflicts of interest as regulatory oversight weakened, especially in finance. Longtime civil servants were on the defensive, now considered to be part of the problem. And self-regulation prevailed whose inevitable outcome was described by Martin Wolf, chief economic columnist for the Financial Times, in December 2007: “What is happening in credit markets today is a huge blow to the credibility of the Anglo-Saxon model of transactions-oriented financial capitalism. A mixture of crony capitalism and gross incompetence has been on display in the core financial markets of New York and London. From … subprime lending to the placing (and favourable rating) of assets that turn out to be almost impossible to understand, value or sell, these activities have been riddled with conflicts of interest and incompetence.”62 The rather dire consequences for the real economy of regulatory capture were also noticed in Asia.

The Clinton administration’s Secretary of Labor, Robert Reich, unearthed the smoking gun evidence: “By 2006, CEOs were earning, on average, eight times as much per dollar of corporate profits as they did in the 1980s.”43 A vast disparity like this in trend lines is powerful evidence that executive pay suffers from market failure. There are many instances where genuine value for shareholders has been produced by well-run or visionary executive suites, justifying higher compensation. But examples abound, especially of late on Wall Street, where weak executives have also received lush compensation. Financial Times columnist Martin Wolf discussed this failure, focusing on the financial sectors in the United States and the United Kingdom, where investment management presents “… a huge ‘lemons’ problem: in this business it is really hard to distinguish talented managers from untalented ones. For this reason, the business is bound to attract the unscrupulous and unskilled, just as such people are attracted to dealing in used cars (which was the original example of a market in lemons)….


pages: 376 words: 109,092

Paper Promises by Philip Coggan

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accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, balance sheet recession, bank run, banking crisis, barriers to entry, Berlin Wall, Bernie Madoff, Black Swan, Bretton Woods, British Empire, call centre, capital controls, Carmen Reinhart, carried interest, Celtic Tiger, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, debt deflation, delayed gratification, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, falling living standards, fear of failure, financial innovation, financial repression, fixed income, floating exchange rates, full employment, German hyperinflation, global reserve currency, hiring and firing, Hyman Minsky, income inequality, inflation targeting, Isaac Newton, John Meriwether, joint-stock company, Kenneth Rogoff, labour market flexibility, light touch regulation, Long Term Capital Management, manufacturing employment, market bubble, market clearing, Martin Wolf, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, Myron Scholes, negative equity, Nick Leeson, Northern Rock, oil shale / tar sands, paradox of thrift, peak oil, pension reform, Plutocrats, plutocrats, Ponzi scheme, price stability, principal–agent problem, purchasing power parity, quantitative easing, QWERTY keyboard, railway mania, regulatory arbitrage, reserve currency, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, time value of money, too big to fail, trade route, tulip mania, value at risk, Washington Consensus, women in the workforce, zero-sum game

And debt is being refinanced all the time so the income on new debt falls. 3 Barry Eichengreen, Exorbitant Privilege: The Decline of the Dollar and the Future of the International Monetary System, Oxford, 2010. 4 Ibid. 5 ‘The Global Monetary System: Beyond Bretton Woods 2’, The Economist, 6 November 2010. 6 Robert Zoellick, ‘The G20 Must Look Beyond Bretton Woods’, Financial Times, 8 November 2010. 7 Martin Wolf, ‘Current Account Targets are a Way Back to the Future’, Financial Times, 3 November 2010. 8 ‘King Says G-20 Needs Grand Bargain to Avert Protectionism’, Bloomberg , 20 October 2010. 9 ‘Seoul Food: The Search for Global Balance’, Global Economics Weekly, 3 November 2010. 10 Martin Wolf, Fixing Global Finance: How to Curb Financial Crises in the Late 21st Century, rev. edn, New Haven, Conn., 2010. 11 A long-standing deal has seen Americans head the World Bank and Europeans the IMF. 12 Carmen Reinhart and Belen Sbrancia, ‘The Liquidation of Government Debt’, NBER Working Paper 16893, March 2011. 13 Russell Napier, ‘Bretton Woods on Speed’, CLSA research note, November 2010.

The Chinese Communist party had no intention of letting their interest or exchange rates be controlled by the markets; they opted for capital controls and a managed currency, pegged to the dollar. The corollary of this policy was that they accumulated a massive current-account surplus which (being China) the government controlled. These foreign-exchange reserves were then held in Treasury bonds and bills, making it easier for the US to finance its trade deficit. In his book Fixing Global Finance, Financial Times columnist Martin Wolf argues convincingly that the ‘savings glut’ of China and others was more responsible for the imbalance than American profligacy. 3 His argument is that a low level of real interest rates indicated an excess of desired saving over investment. The Chinese (ironically for a communist state) did not provide much in the way of pensions, so their citizens saved to cover their old age; the Japanese had little desire to spend or invest because of their sluggish economy.

It remains the world’s largest economy, with the most liquid markets, a history of reliable debt service, and the ability to borrow in its own currency. Moreover, it is a relatively closed economy, with only a small proportion of activity made up by foreign trade. As a result, while a fall in the pound might push up UK prices quite quickly, a fall in the dollar is less likely to lead to a rise in American inflation. However, as Martin Wolf has remarked, ‘The very factor that makes borrowing large sums relatively safe for Americans – that they are borrowing in a currency they can create at will – also makes borrowing riskier for their creditors.’8 As we shall discuss later, the US faced huge long-term fiscal challenges. THE EURO-ZONE CRISIS Europe, not the US, has been at the centre of the sovereign debt crisis. As outlined in Chapter 6, the euro had a number of design flaws, including a failure to impose fiscal or current-account discipline on member countries.


pages: 246 words: 74,341

Financial Fiasco: How America's Infatuation With Homeownership and Easy Money Created the Economic Crisis by Johan Norberg

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accounting loophole / creative accounting, bank run, banking crisis, Bernie Madoff, Black Swan, capital controls, central bank independence, collateralized debt obligation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Brooks, diversification, financial deregulation, financial innovation, helicopter parent, Home mortgage interest deduction, housing crisis, Howard Zinn, Hyman Minsky, Isaac Newton, Joseph Schumpeter, Long Term Capital Management, market bubble, Martin Wolf, Mexican peso crisis / tequila crisis, millennium bug, money market fund, moral hazard, mortgage tax deduction, Naomi Klein, new economy, Northern Rock, Own Your Own Home, price stability, Ronald Reagan, savings glut, short selling, Silicon Valley, South Sea Bubble, The Wealth of Nations by Adam Smith, too big to fail

As the income of the poor has risen, so have their savings, but investment opportunities are often limited in countries with many poor people, in part because the financial markets there are so underdeveloped that it would be impossible to gain a decent return. Since the United States is such a large and liquid market, most people feel it is one of the safest places to invest. You can always get your money back-which is not always the case in savers' home countries. Even so, it does seem odd that the poor countries of the world should have been paying for consumption in its richest ones to such a large extent. In his book Fixing Global Finance, Martin Wolf, a leading economics writer at the Financial Times, argues that this is not the result of spontaneous saving and the free play of the market forces. Instead, these savings have largely been ordered by the governments of developing countries. The background to this can be found in these countries' recent experience of financial crises. Since their financial markets had lagged behind for so long, capital was rarely channeled into productive investments, creating a dependence on short-term foreign capital.

In fact, the world's leading economies have tended to be net exporters of capital, as the United Kingdom was in the 19th century. But now more than 70 percent of the surpluses found their way to U.S. stocks, bonds, bank accounts, direct investments-and above all Treasuries. However, this did not lead to more investments. Instead, it made U.S. households save less and consume more. This is not to say that American wastefulness is what created these imbalances. Martin Wolf points out that, if that had been the case, Americans would have demanded more capital, crowding out other willing borrowers by accepting higher interest rates. The wastefulness was an effect, not a cause. Governments of low- and medium-income countries were stepping up their saving and pushing down interest rates so far that Americans were able to spend. Until those countries allow the market to set exchange rates and develop financial markets that make it safe for them to invest in their own economies, these imbalances will remain.

When the U.S. administration decided during the present crisis to increase the level of deposit insurance and start guaranteeing interbank loans, it was presented as a way to create security and stability. Later, however, Treasury Secretary Henry "Hank" Paulson admitted that this unfortunately encourages banks to take excess risks, but said that he was forced to do it because the Europeans had started it, and American banks would otherwise have found it hard to compete.' As Martin Wolf of the Financial Times puts it, "Financial markets are indeed risky ... but the interventions of government often make them less safe, not more so." Wolf believes that if there were no government safety nets, banks would set aside more capital, take longer-term deposits, and lend more in the money markets where they can cash out quickly. That may not be a solution that he himself advocates, but he still thinks it would be better than today's system: "Given the frequency of banking crises, this might be a big improvement."'


pages: 391 words: 102,301

Zero-Sum Future: American Power in an Age of Anxiety by Gideon Rachman

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Asian financial crisis, bank run, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Bretton Woods, BRICs, capital controls, centre right, clean water, collapse of Lehman Brothers, colonial rule, currency manipulation / currency intervention, deindustrialization, Deng Xiaoping, Doha Development Round, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, full employment, global reserve currency, greed is good, Hernando de Soto, illegal immigration, income inequality, invisible hand, Jeff Bezos, laissez-faire capitalism, Live Aid, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, moral hazard, mutually assured destruction, Naomi Klein, offshore financial centre, open borders, open economy, Peace of Westphalia, peak oil, pension reform, Plutocrats, plutocrats, popular capitalism, price stability, RAND corporation, reserve currency, rising living standards, road to serfdom, Ronald Reagan, shareholder value, Sinatra Doctrine, sovereign wealth fund, special economic zone, Steve Jobs, Stewart Brand, The Chicago School, The Great Moderation, The Myth of the Rational Market, Thomas Malthus, trickle-down economics, Washington Consensus, Winter of Discontent, zero-sum game

While Timothy McVeigh was angered by the notion that a world government might be imposed on the United States, al-Qaeda saw an all-powerful United States imposing its will on the rest of the world. The al-Qaeda movement was motivated by many strands of thought, emotion, and political analysis. Yet the symbolism of an attack on the economic capital of the United States and on the World Trade Center was hard to miss. As Martin Wolf of the Financial Times wrote, “We can view this event as an episode in the resistance of the Islamic World to westernization, as witness to the abiding force of human evil, as the end of liberal optimism and as an assault on liberal globalisation. All are valid, not excluding the last. The attack on the US was also an assault on globalisation.”10 In the heyday of liberal optimism during the Clinton years, it was easy to point to the most attractive forces driving globalization forward: new technologies, the spread of political freedom, the power of market economics, the creation of common interests between nations, even the wisdom of farsighted politicians.

The most gloomy environmentalists argue that over the long run, global warming will cause droughts, famines, and wars as mankind struggles over shrinking supplies of food and habitable land.4 An alternative to this Hobbesian vision of war of all against all is that mankind might actually succeed in reining in carbon emissions. But this could just be an alternative route to the same end: an international struggle for a fixed or diminishing “pie” of economic well-being. My colleague at the Financial Times, Martin Wolf, has written eloquently on this last point and the dangers of a “zero-sum world economy.” Wolf argues that “the biggest point about debates on climate change and energy supply is that they bring back the question of limits. … For if there are limits to emissions, there may also be limits to growth. But if there are limits to growth, the political underpinnings of our world fall apart. Intense distributional conflicts must then re-emerge—indeed, they are already emerging—within and among countries.”5 Since politicians everywhere tend to prioritize short-term political survival over long-term planetary survival, it seems unlikely that the world’s major powers will sacrifice the elixir of growth on the altar of environmentalism.

Quoted in Legrain, Open World, 25. 6. Cited in William Greider, Come Home America: The Rise and Fall (and Redeeming Promise) of Our Country (New York: Rodale, 2009), 70. 7. Joseph Stiglitz, Globalization and Its Discontents (London: Penguin, 2002), 4. 8. Ibid., 21. 9. Lou Michel and Dan Herbeck, American Terrorist: Timothy McVeigh and the Oklahoma City Bombing (New York: ReganBooks, 2001), 59. 10. Martin Wolf, Why Globalization Works (New Haven, Conn.: Yale University Press, 2005), 9. 17. POWER: CHARLES KRAUTHAMMER AND THE NEOCONSERVATIVES 1. Charles Krauthammer, “The Unipolar Moment,” Foreign Affairs 70:1 (Winter 1990/91). 2. Charles Krauthammer, “The Bush Doctrine,” Time, March 5, 2001. Some neoconservatives argue that Krauthammer was a latecomer to the party because of his reservations about liberal interventionism in the 1990s. 3.


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The Production of Money: How to Break the Power of Banks by Ann Pettifor

Ben Bernanke: helicopter money, Bernie Madoff, Bernie Sanders, bitcoin, blockchain, borderless world, Bretton Woods, capital controls, Carmen Reinhart, central bank independence, clean water, credit crunch, Credit Default Swap, cryptocurrency, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, distributed ledger, Donald Trump, eurozone crisis, fiat currency, financial deregulation, financial innovation, financial intermediation, financial repression, fixed income, Fractional reserve banking, full employment, Hyman Minsky, inflation targeting, interest rate derivative, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, light touch regulation, London Interbank Offered Rate, market fundamentalism, Martin Wolf, mobile money, Naomi Klein, neoliberal agenda, offshore financial centre, Paul Samuelson, Ponzi scheme, pushing on a string, quantitative easing, rent-seeking, Satyajit Das, savings glut, secular stagnation, The Chicago School, the market place, Thomas Malthus, Tobin tax, too big to fail

The movement shows little concern for high interest rates; indeed they are seen as beneficial because they act as constraints on lending. They have also little interest in cross-border financial flows or the impact of these flows on domestic economic policies. Sovereign Money reformers are backed by establishment figures such as Lord Adair Turner of the Institute of New Economic Thinking (INET) and Martin Wolf of the Financial Times. The latter argued that, ‘proposals for replacing private debt-created money with government-created money are perfectly feasible and would bring substantial benefits.’2 Although I am about to take issue with their specific proposals, I am also clear that today’s monetary reformers must be congratulated. They are taking aim at reckless and greedy bankers. They are generating public debate about a vital area of public policy.

Creationism in Schools, 2005, gallup.com, accessed 8 June 2016. 9John Maynard Keynes, Economic Possibilities for our Grandchildren, 1930, econ.yale.edu. 1. Credit Power 1Michael Hudsen, Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy, New York: Nation Books, 2016. 2Geoffrey Ingham, The Nature of Money, Cambridge: Polity Press, 2004. 3Sir Mervyn King in an interview with Martin Wolf, ‘Lunch with the FT’, Financial Times, 14 June 2013, ft.com, accessed 6 June 2016. And the thing that’s so extraordinary is that, for the past few years, the banking system, which is normally responsible for creating 95 percent of broad money has been contracting its part of the money supply. And since we at the bank only supply about 5 percent of it, the proportional increase in our bit has to be massive to offset the contraction of the rest. 4See Cullen Roche, ‘Understanding Why Austrian Economics Is Flawed’, Pragmatic Capitalism, 10 September 2013, pragcap. com, accessed 3 October 2013. 5For more on this, see William Keegan, Mrs Thatcher’s Economic Experiment, London: Penguin Books, 1984. 6Ibid., p. 208. 7Jon Ward, ‘He Found the Flaw?’

London: New Economics Foundation, 2011. 12Keynes cited in Geoff Tily Keynes’s General Theory, the Rate of Interest and ‘Keynesian’ Economics, London: Palgrave Macmillan, 2007, p. 71. 13David Smith, From Boom to Bust, London: Penguin Group, 1992, p. 5. 14Ibid., p. 6. 15For more on 1960s policies for ‘growth’ see Geoff Tily, ‘The National Accounts, GDP and the “Growthmen”’, 2015, primeeconomics.org, accessed 9 June 2016. 6. Should Society Strip Banks of the Power to Create Money? 1Mary Mellor, Debt or Democracy: Public Money for Sustainability and Social Justice, London: Pluto Press, 2016. 2Martin Wolf, The Shifts and the Shocks: What We’ve Learned – and Have Still to Learn – from the Financial Crisis, London: Penguin, 2015. 3See Robert N. Proctor and Londa Schievinger, Agnotology: The Making and Unmaking of Ignorance, California: Stanford University Press, 2008. 4Antoine E. Murphy, John Law, Economic Theorist and Policy-Maker, Oxford: Clarendon Press, 1997, p. 51. 5Mellor, Debt, p. 13. 6‘Creating a Sovereign Monetary System’, Positive Money, 2014, positivemoney.org, accessed 2 June 2016, p. 8. 7Mellor, Debt, p. 69. 8Ibid. 9Joseph Huber, ‘Sovereign Money in Critical Context: Explaining Monetary Reform by Using Typical Misunderstandings’, Positive Money, 2014, positivemoney.org, accessed 2 June 2016. 10John Maynard Keynes, ‘An Open Letter to President Roosevelt’, 1933, newdeal.feri.org, accessed 2 June 2016. 11As explained in Jaromir Benes and Michael Kumhof, ‘The Chicago Plan Revisited’, IMF Working Paper, August 2012, imf.org, accessed 6 June 2016. 12Ibid. 13Ibid., p. 6. 14Ibid. 15Ibid., p. 5. 16Ibid., p. 13. 17David Smith, The Rise and Fall of Monetarism, London: Penguin Books, 1987, p. 13. 18Ibid., p. 19. 19Ibid., p. 37. 20Professor Wynne Godley, in Chapter 19 of Ann Pettifor ed., Real World Economic Outlook, London: New Economics Foundation and Palgrave MacMillan, 2003, p. 178.


pages: 190 words: 61,970

Life You Can Save: Acting Now to End World Poverty by Peter Singer

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accounting loophole / creative accounting, Branko Milanovic, Cass Sunstein, clean water, end world poverty, experimental economics, illegal immigration, Martin Wolf, microcredit, Peter Singer: altruism, pre–internet, purchasing power parity, randomized controlled trial, Richard Thaler, Silicon Valley, Thomas Malthus, ultimatum game, union organizing

But it scarcely seems possible that, if we truly set out to reduce poverty, and put resources into doing so that match the size of the problem—including resources to evaluate past failures and learn from our mistakes— we will be unable to find ways of making a positive impact. “Trade, Not Aid”? One of our great anxieties about giving aid is that it isn’t really going to help the poor or, worse still, that it may even hurt them. That view is supported by some aid critics, who claim that aid does not spur economic growth.7 Martin Wolf, for example, in Why Globalization Works, argues that reducing the barriers that poor nations face when they seek to sell their products on the global market would do more to reduce poverty than any amount of aid.8 Wolf and other aid critics point out that the nations that have pulled themselves out of poverty during the past fifty years have generally received little aid, whereas the nations that have received the most aid are generally still poor.

Michael Liffman, of the Asia-Pacific Centre for Philanthropy and Social Investment at Swinburne University, encouraged me to think about ethical issues specific to philanthropy, and cosponsored a conference at Princeton University on that topic. At Columbia University, Akeel Bilgrami brought me together with Joe Stiglitz and Bill Easterly in a stimulating discussion of the efficacy of aid. Moises Naim, of Foreign Policy arranged another lively debate for me, this time with Martin Wolf, in Monterrey, Mexico. At Oxfam America, Philip Weiser and Paul O’Brien kindly responded to my queries; and Aida Pesquera, from the Oxfam office in Bogotá, accompanied me on a visit to an Oxfam project in Colombia. Oxfam Australia arranged my visit to the ragpickers they were aiding in Pune, India, and Margie Bryant of Serendipity Productions, funded the trip as part of her documentary on my work.

Celia Dugger, “CARE Turns Down Federal Funds for Food Aid,” The New York Times, August 16, 2007; Daniel Maxwell and Christopher Barrett, Food Aid After Fifty Years: Recasting Its Role (London: Routledge, 2005), p. 35. 7. William Easterly, The White Man’s Burden (London: Penguin, 2007), is among them. See also Raghuram Rajan and Arvind Subramanian, “Aid and Growth: What Does the Cross-Country Evidence Really Show?” IMF Working Paper 05/127 (Washington, D.C.: International Monetary Fund, 2005). 8. Martin Wolf, Why Globalization Works (New Haven, CT.: Yale University Press, 2004). 9. See Organisation for Economic Co-operation and Development, “Recipient Aid Charts,” www.oecd.org/countrylist/0,3349,en_2649_34469_25602317_l_l_l_l,00.html; for discussion see Tim Harford and Michael Klein, “Aid and the Resource Curse,” Public Policy for the Private Sector, Note 291, April 2005, http://rru.worldbank.org/Documents/PublicPolicyJournal/ 291Harford_Klein.pdf 10.


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Austerity: The History of a Dangerous Idea by Mark Blyth

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accounting loophole / creative accounting, balance sheet recession, bank run, banking crisis, Black Swan, Bretton Woods, capital controls, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, debt deflation, deindustrialization, disintermediation, diversification, en.wikipedia.org, ending welfare as we know it, Eugene Fama: efficient market hypothesis, eurozone crisis, financial repression, fixed income, floating exchange rates, Fractional reserve banking, full employment, German hyperinflation, Gini coefficient, global reserve currency, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, interest rate swap, invisible hand, Irish property bubble, Joseph Schumpeter, Kenneth Rogoff, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, Long Term Capital Management, market bubble, market clearing, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, Occupy movement, offshore financial centre, paradox of thrift, Philip Mirowski, price stability, quantitative easing, rent-seeking, reserve currency, road to serfdom, savings glut, short selling, structural adjustment programs, The Great Moderation, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, unorthodox policies, value at risk, Washington Consensus, zero-sum game

But then, like the United States and the United Kingdom, Germany forgot her uniqueness, in terms of both timing and context and in terms of how building the export-led ordo that made Germany rich was only possible precisely because other countries were not doing the same at the same time.38 Now Germany and the EC want everyone else in Europe to be more German: another fallacy of composition that cannot work. As Martin Wolf put it beautifully, “Is everybody supposed to run current account surpluses? If so, with whom—Martians? And if everybody does indeed try to run a savings surplus, what else can be the outcome but a permanent global depression?”39 Germany was able to take the lead in Europe because German ideas have been at the heart of the EU and the euro since its inception. This is also why the Germans were able so successfully to turn the debate about the crisis their way—they were the only people who really believed what they were saying.

Gary Gorton, Slapped by the Invisible Hand: The Panic of 2007 (New York: Oxford University Press, 2010). 6. Greta R. Krippner, Capitalizing on Crisis: The Political Origins of the Rise of Finance (Cambridge, MA: Harvard University Press, 2011). 7. T-bills were in short supply because Asian governments were vacuuming up as many as they could to add to reserves and manage their exchange rates. See Martin Wolf, Fixing Global Finance (Baltimore, MD: Johns Hopkins University Press, 2008); and Eric Helleiner and Jonathan Kirshner, The Future of the Dollar (Ithaca, NY: Cornell University Press, 2009), chap. 3. 8. As we shall see later, this fear of contagion is what in part drives austerity in the Eurozone. 9. “Mark to market” accounting rules also contributed. 10. If anything, it’s the absence of the state in the repo markets that’s worth commenting upon, since the absence of the state’s guarantee of insurance explains the system’s vulnerability to a bank run. 11.

Even the Germans will find rapidly diminishing returns to the euro beginning to set in fast in 2013, as the Eurozone continues to slash itself to prosperity. 45. There was also a third, more “public” argument that a common currency would lead to a greater popular identification with Europe on the level of citizen’s identities. Quite the opposite seems to be happening in Spain at the moment. 46. I owe this insight to a presentation entitled “Will the Euro Survive the Crisis?” given by Martin Wolf at Brown University, April 17, 2012. 47. I thank Simon Tilford for this insight. 48. Barry Eichengreen, Golden Fetters: The Gold Standard and the Great Depression 1919–1939 (New York: Oxford University Press, 1996). 49. This was sometimes referred to as “the d’Artagnan Principle” after Alexandre Dumas’s Musketeers’ cry “all for one and one for all.” 50. See Martin Feldstein, “EMU and International Conflict,” Foreign Affairs (November/December 1997); and “The Euro and Economic Conditions” NBER working paper 17617, Cambridge, MA, November 2011. 51.


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The Age of Stagnation by Satyajit Das

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9 dash line, accounting loophole / creative accounting, additive manufacturing, Airbnb, Albert Einstein, Alfred Russel Wallace, Anton Chekhov, Asian financial crisis, banking crisis, Berlin Wall, bitcoin, Bretton Woods, BRICs, British Empire, business process, business process outsourcing, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Clayton Christensen, cloud computing, collaborative economy, colonial exploitation, computer age, creative destruction, cryptocurrency, currency manipulation / currency intervention, David Ricardo: comparative advantage, declining real wages, Deng Xiaoping, deskilling, disintermediation, Downton Abbey, Emanuel Derman, energy security, energy transition, eurozone crisis, financial innovation, financial repression, forward guidance, Francis Fukuyama: the end of history, full employment, gig economy, Gini coefficient, global reserve currency, global supply chain, Goldman Sachs: Vampire Squid, happiness index / gross national happiness, Honoré de Balzac, hydraulic fracturing, Hyman Minsky, illegal immigration, income inequality, income per capita, indoor plumbing, informal economy, Innovator's Dilemma, intangible asset, Intergovernmental Panel on Climate Change (IPCC), Jane Jacobs, John Maynard Keynes: technological unemployment, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, labour mobility, light touch regulation, liquidity trap, Long Term Capital Management, low skilled workers, Lyft, Mahatma Gandhi, margin call, market design, Marshall McLuhan, Martin Wolf, Mikhail Gorbachev, mortgage debt, mortgage tax deduction, new economy, New Urbanism, offshore financial centre, oil shale / tar sands, oil shock, old age dependency ratio, open economy, passive income, peak oil, peer-to-peer lending, pension reform, Plutocrats, plutocrats, Ponzi scheme, Potemkin village, precariat, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, Ralph Nader, Rana Plaza, rent control, rent-seeking, reserve currency, ride hailing / ride sharing, rising living standards, risk/return, Robert Gordon, Ronald Reagan, Satyajit Das, savings glut, secular stagnation, seigniorage, sharing economy, Silicon Valley, Simon Kuznets, Slavoj Žižek, South China Sea, sovereign wealth fund, TaskRabbit, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, the market place, the payments system, The Spirit Level, Thorstein Veblen, Tim Cook: Apple, too big to fail, total factor productivity, trade route, transaction costs, unpaid internship, Unsafe at Any Speed, Upton Sinclair, Washington Consensus, We are the 99%, WikiLeaks, Y2K, Yom Kippur War, zero-coupon bond, zero-sum game

In 2014, the bank commenced an investigation into whether its officials were aware or facilitated the manipulation of auctions designed to inject money into the credit markets during the GFC. Little appears to have changed since Ferdinand Pecora conducted the 1932 commission examining Wall Street practices prior to the 1929 crash. His observation remains true today: “Legal chicanery and pitch darkness were the banker's stoutest allies.” 12 Governments seem unable or unwilling to rein in banks, which are described by the Financial Times’ Martin Wolf as a “risk-loving industry guaranteed as a public utility.”13 Increasingly reviled and mistrusted, financial institutions throughout the world are losing legitimacy. To deal with domestic problems, developed nations are using a combination of low interest rates and increased money supply to devalue their currencies. The currency wars are part of a wider conflict between nations, under way since 2009.

25 September 2009. www.bankofengland.co.uk/archive/Documents/historicpubs/speeches/2009/speech409.pdf. 6 Peter Drucker, “The Mirage of Pensions,” Harper's Monthly, February 1950. 7 Jagadeesh Gokhale, Measuring the Unfunded Obligations of European Countries, National Centre for Policy Studies, Policy Report Number 319, January 2009. 8 See Quentin Peel, “Merkel Warns on Cost of Welfare,” Financial Times, 16 December 2012. 9 See AFP, “Impact of US Financial Crisis Will Be Felt around World: Chinese PM,” 28 September 2008. 10 See Martin Wolf, “Reform of British Banking Needs to Go Further,” Financial Times, 20 June 2013. 11 A phrase coined by Andrew Haldane of the Bank of England. 12 See Simon Schama, The American Future: A History from the Founding Fathers to Barack Obama, 2010, p. 311. 13 See “Jean-Claude Juncker Interview: The Demons Haven't Been Banished,” Der Spiegel, 11 March 2013. www.spiegel.de/international/europe/spiegel-interview-with-luxembourg-prime-minister-juncker-a-888021.html. 3.

Ralph Mannheim, Der Fuehrer: Hitler's Rise to Power, Houghton Mifflin, 1944, excerpted in Fritz Ringer, The German Inflation of 1923, Oxford University Press, 1969, p. 170. 2 See Michael Mackenzie, Dan McCrum, and Stephen Foley, “Bond Markets: A False Sense of Security,” Financial Times, 18 November 2012. 3 See Ralph Atkins and Martin Sandbu, “FT Interview Transcript: Jens Weidmann,” Financial Times, 13 November 2011. 4 See Ben McLannahan, “Japan Bonds Swing Wildly after BoJ Move,” Financial Times, 5 April 2013. 5 John Maynard Keynes, quoted in Robert Sidelsky, John Maynard Keynes: The Economist as Saviour 1920-1937, Macmillan, 1992, p. 62. 6 Greg Smith, “Why I Am Leaving Goldman Sachs,” New York Times, 14 March 2012. 7 Upton Sinclair, I, Candidate for Governor: And How I Got Licked, University of California Press (1935) 1994, p. 109. 8 “Wall Street and the Financial Crisis: The Role of Investment Banks,” Senate Hearing 111-674, vol. 4, 27 April 2010. www.gpo.gov/fdsys/pkg/CHRG-111shrg57322/html/CHRG-111shrg57322.htm. 9 Matt Taibbi, “The Great American Bubble Machine,” Rolling Stone, 5 April 2010. 10 Liam Vaughan and Jesse Westbrook, “Barclays Big-Boy Breaches Mean Libor Fixes Not Enough,” Bloomberg, 29 June 2012. www.bloomberg.com/news/articles/2012-06-29/barclays-big-boy-breaches-mean-libor-fixes-not-enough. 11 Martin Arnold, “HSBC Shares Drop after Full-Year Profits Fall,” Financial Times, 23 February 2015. 12 Ferdinand Pecora, Wall Street under Oath, Simon & Schuster, 1939, p. 130. http://books.google.com.au/books?id=i2AUAQAAMAAJ&dq=Wall%20Street%20Under%20Oath. 13 Martin Wolf, “Why Banking Is an Accident Waiting to Happen,” Financial Times, 27 November 2007. www.ft.com/intl/cms/s/0/3da550e8-9d0e-11dc-af03-0000779fd2ac.html#axzz3ZxuzhRuO. 14 John Maynard Keynes, General Theory of Employment, Interest and Money, Macmillan, 1936, Chapter 12, Part VI. 15 “Statement by Mr. Guideo Mantega, Minister of Finance of Brazil,” International Monetary and Financial Committee, Twenty-Fifth Meeting, 21 April 2012. www.imf.org/External/spring/2012/imfc/statement/eng/bra.pdf. 16 Jin Liqun and Keyu Jin, “Europe Should Stop Arguing and Look to Asia,” Financial Times, 7 June 2012. 17 AAP, “‘Ashamed’ IMF Economist Peter Doyle Quits Organisation,” News.com.au, 21 July 2012. www.news.com.au/world/ashamed-imf-economist-quits-organisation/story-fndir2ev-1226431366257. 18 Victor Mallet, “Indian Growth: Rose Tinted,” Financial Times, 17 December 2012. 19 Willem Buiter, “The Unfortunate Uselessness of Most ‘State of the Art’ Academic Monetary Economics,” Vox, 6 March 2009. www.voxeu.org/article/macroeconomics-crisis-irrelevance. 20 Mark Melin, “Paul Singer Blasts ‘Krugmanization’ of Economics,” ValueWalk, 3 November 2014. www.valuewalk.com/2014/11/paul-singer-paul-krugman/. 21 Jonathan Lynn and Anthony Jay, Yes, Prime Minister: The Diaries of the Rt Hon.


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Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism by Kevin Phillips

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algorithmic trading, asset-backed security, bank run, banking crisis, Bernie Madoff, Black Swan, Bretton Woods, BRICs, British Empire, collateralized debt obligation, computer age, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency peg, diversification, Doha Development Round, energy security, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, George Gilder, housing crisis, Hyman Minsky, imperial preference, income inequality, index arbitrage, index fund, interest rate derivative, interest rate swap, Joseph Schumpeter, Kenneth Rogoff, large denomination, Long Term Capital Management, market bubble, Martin Wolf, Menlo Park, mobile money, money market fund, Monroe Doctrine, moral hazard, mortgage debt, Myron Scholes, new economy, oil shale / tar sands, oil shock, old-boy network, peak oil, Plutocrats, plutocrats, Ponzi scheme, profit maximization, Renaissance Technologies, reserve currency, risk tolerance, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, shareholder value, short selling, sovereign wealth fund, The Chicago School, Thomas Malthus, too big to fail, trade route

ONE Introduction The Panic of August We are living through the first crisis of our brave new world of securitised financial markets. It is too early to tell how economically important this upheaval will prove. But nobody can doubt its significance for the financial system. Its origins lie with credit expansion and financial innovation in the U.S. itself. It cannot be blamed on “crony capitalism” in peripheral economies, but rather on irresponsibility in the core of the world economy. —Martin Wolf, Financial Times, September 2007 The “crack cocaine” of our generation appears to be debt. We just can’t seem to get enough of it. And, every time it looks like the U.S. consumer may be approaching his maximum tolerance level, somebody figures out how to lever on even more debt using some new and more complex financing. For years, I have watched this levering up process, often noting that it was taking an ever increasing amount of debt to produce a dollar’s worth of GDP growth.

The question of just how much more of a countertrend is still to come can be expected to spur hundreds of Ph.D. theses from Buenos Aires and Caracas to Moscow and Kuala Lumpur. Even within the United States, market preferences are unlikely to block the emergence of some government-sanctioned energy strategy or hybrid of an energy and global-warming strategy, nor are they likely to block a considerable amount of financial reregulation, not least in the area of securities transparency and valuation. Other reregulation, as suggested by commentators like Martin Wolf and Henry Kaufman, could also include a rethinking of the legal status of megabanks. To Wolf, “What we have [in banking] is a risk-loving industry guaranteed as a public utility.” If banks are to be rescued because they are too big to fail, they must also become, in the manner of a regulated public utility, too suitably behaved and too responsible to fail.43 This chapter cannot turn away from the role of unstable and speculative finance in jeopardizing America’s position in the world of the early twenty-first century without considering two particular failures.

Obviously, this represents a much larger scale of backfiring or negligent innovation than the impact of so-called portfolio insurance in 1987 or the shortcomings in hedge-fund quantitative mathematics in 1998. And if these multiple abuses overlap with the great unwinding of the 1982-2007 debt bubble, then they—and the financial sector that created, promoted, and so greatly profited from them—will have much to answer for. The nature of English-speaking capitalism as practiced especially by Wall Street but also by the City of London is drawing fire. Martin Wolf, the chief economic commentator at the Financial Times, noted at year’s end that “what is happening in credit markets today is a huge blow to the credibility of the Anglo-Saxon model of transactions-orientated financial capitalism. A mixture of crony capitalism and gross incompetence has been on display in the core financial markets of New York and London.”44 On the other side of the Atlantic, the iconic American investor Warren Buffett summarized his criticism: “You can’t turn a financial toad into a prince by securitizing it. . . .


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The End of Alchemy: Money, Banking and the Future of the Global Economy by Mervyn King

Andrei Shleifer, Asian financial crisis, asset-backed security, balance sheet recession, bank run, banking crisis, banks create money, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, bitcoin, Black Swan, Bretton Woods, British Empire, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crowdsourcing, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Doha Development Round, Edmond Halley, Fall of the Berlin Wall, falling living standards, fiat currency, financial innovation, financial intermediation, floating exchange rates, forward guidance, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, German hyperinflation, Hyman Minsky, inflation targeting, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labour market flexibility, large denomination, liquidity trap, Long Term Capital Management, manufacturing employment, market clearing, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Nick Leeson, North Sea oil, Northern Rock, oil shale / tar sands, oil shock, open economy, paradox of thrift, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, quantitative easing, rent-seeking, reserve currency, Richard Thaler, rising living standards, Robert Shiller, Robert Shiller, Satoshi Nakamoto, savings glut, secular stagnation, seigniorage, stem cell, Steve Jobs, The Great Moderation, the payments system, Thomas Malthus, too big to fail, transaction costs, Tyler Cowen: Great Stagnation, yield curve, Yom Kippur War, zero-sum game

In turn, the implicit subsidy incentivises banks to take on yet more risk. In good times, banks took the benefits for their employees and shareholders, while in bad times the taxpayer bore the costs. For the banks, it was a case of heads I win, tails you – the taxpayer – lose. Greater risk begets greater size, greater importance to the functioning of the economy, higher implicit public subsidies, and yet larger incentives to take risk – described by Martin Wolf of the Financial Times as the ‘financial doomsday machine’.14 All banks, and large ones in particular, benefited from an implicit taxpayer guarantee, enabling them to borrow cheaply to finance their lending. Although the implicit subsidy was not new, banks were able to exploit its existence to borrow more, and resorted to the use of ever more short-term finance from institutions (known as wholesale funding) in addition to deposits from individual or business customers.

They recommended ending the system of ‘fractional reserve banking’, under which banks create deposits to finance risky lending and so have insufficient safe cash reserves to back their deposits.12 The elimination of fractional reserve banking was a proposal put forward in 1933 as the ‘Chicago Plan’.13 The proponents of the plan included the brilliant American monetary theorist Irving Fisher and a distinguished group of economists at Chicago such as Frank Knight, Henry Simons and Paul Douglas; later support came from right across the spectrum of post-war economists, ranging from Milton Friedman to James Tobin and Hyman Minsky.14 Interestingly, John Maynard Keynes was not part of this group, largely because Britain did not experience a banking crisis in the 1930s and his focus was on restoring output and employment.15 More recently, a number of economists have proposed variations on the same theme: John Cochrane from Chicago, Jaromir Benes and Michael Kumhof from the IMF, the British economists Andrew Jackson, Ben Dyson and John Kay, Laurence Kotlikoff from Boston and the distinguished FT commentator Martin Wolf.16 There are two ways of looking at these radical approaches to banking reform, one by focusing on the banks’ assets and the other on their liabilities. The essence of the Chicago Plan was to force banks to hold 100 per cent liquid reserves against deposits. Reserves would include only safe assets, such as government securities or reserves held with the central bank. In this way there would be no reason for anyone to run on a bank, and even if some people did withdraw their deposits there would be no incentive for others to join them, because there would always be sufficient funds to support the remaining deposits.

It was the sharp fall in credit and money after 2008 that led to the massive expansion of money via quantitative easing. As Irving Fisher put it, ‘We could leave the banks free … to lend money as they please, provided we no longer allowed them to manufacture the money which they lend … In short: nationalize money but do not nationalize banking.’20 And the clarity and passion of Fisher in the 1930s are echoed in the arguments of John Cochrane and Martin Wolf today. Such reforms would indeed eliminate the alchemy in our banking system, which the official reform agenda fails to tackle. So why hasn’t the idea been implemented? One explanation is that it would eliminate the implicit subsidy to banking that results from the ‘too important to fail’ nature of most banks. Banks will lobby hard against such a reform. To protect the system of making payments, as crucial to the daily functioning of the economy as electricity is to our daily lives, governments will always guarantee the value of bank accounts used to make payments, and it is therefore in the interest of banks to find ways of putting risky assets on to the same balance sheet as deposits.


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Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream by Arianna Huffington

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American Society of Civil Engineers: Report Card, Bernie Madoff, Bernie Sanders, call centre, carried interest, citizen journalism, clean water, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, extreme commuting, Exxon Valdez, full employment, greed is good, housing crisis, immigration reform, invisible hand, knowledge economy, laissez-faire capitalism, late fees, market bubble, market fundamentalism, Martin Wolf, medical bankruptcy, microcredit, new economy, New Journalism, offshore financial centre, Ponzi scheme, Report Card for America’s Infrastructure, Richard Florida, Ronald Reagan, Rosa Parks, single-payer health, smart grid, The Wealth of Nations by Adam Smith, too big to fail, transcontinental railway, trickle-down economics, winner-take-all economy, working poor, Works Progress Administration

Workers,” 2 May 2005, www.fpc.state.gov. 61 And in a 2006 study: Booz Allen Hamilton, “The Globalization of White-Collar Work: The Facts and Fallout of Next-Generation Offshoring,” 2006, www.booz.com. 62 Accenture now employs: Julia Hanna, “How Many U.S. Jobs are ‘Offshorable’?” Harvard Business School, 1 Dec. 2008, www.hbswk.hbs.edu. 63 A June 2008 Harvard Business School study: Ibid. 64 Even more troubling: Booz Allen Hamilton, “The Globalization of White-Collar Work: The Facts and Fallout of Next-Generation Offshoring,” 2006, www.booz.com. 65 “The financial sector,” wrote Martin Wolf: Martin Wolf, “The Challenge of Halting the Financial Doomsday Machine,” 20 Apr. 2010, www.ft.com. 66 By 2020, interest alone: David Brooks, “The Ecstasy of Fiscal Policy,” 1 Apr. 2010, www.nytimes.com. 67 That same year, five segments: Douglas W. Elmendorf, “The Economic and Budget Outlook,” Congressional Budget Office, 13 May 2010, www.cbo.gov. 68 A recent report: John Mauldin, “The Future of the Global Public Debt Explosion,” 2 May 2010, www.businessinsider.com. 69 For instance, in Greece: Bank for International Settlements, “The Future of Public Debt Prospects and Implications,” Mar. 2010, www.bis.org. 70 “While fiscal problems need …”: Ibid. 71 As Mauldin says: John Mauldin, “The Future of the Global Public Debt Explosion,” 2 May 2010, www.businessinsider.com. 72 Mauldin goes on to: Ibid. 73 Princeton economist Alan Blinder: Alan Blinder, “Opening Remarks and Consequences of Current Fiscal Trajectory,” 8 Oct. 2009, www.americanprogress.org. 74 Historian Arnold Toynbee believed that: Arnold Toynbee, A Study of History (New York: Oxford University Press, 1946), 273. 75 Partisanship pop quiz time: Dwight D.

And it’s what happens when a country turns its economy over to the casino of Wall Street. It’s not too late to change course. The financialization of our economy didn’t just happen. Decisions were made that made it possible—and decisions can be unmade. But first we need to decide, as a country, what kind of economy we want to have: one that’s good for middle-class families or one that’s built to enrich Wall Street. “The financial sector,” wrote Martin Wolf of the Financial Times, “seems to be a machine to transfer income and wealth from outsiders to insiders, while increasing the fragility of the economy as a whole.”65 When the chief economics commentator at the Financial Times is sounding like the second coming of Karl Marx, you know things have gotten way out of hand. THE ECONOMIC CORONARY AROUND THE CORNER Another potentially catastrophic problem headed our way is our mounting debt.

The Economic Singularity: Artificial intelligence and the death of capitalism by Calum Chace

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3D printing, additive manufacturing, agricultural Revolution, AI winter, Airbnb, artificial general intelligence, augmented reality, autonomous vehicles, banking crisis, basic income, Baxter: Rethink Robotics, Berlin Wall, Bernie Sanders, bitcoin, blockchain, call centre, Chris Urmson, congestion charging, credit crunch, David Ricardo: comparative advantage, Douglas Engelbart, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Flynn Effect, full employment, future of work, gender pay gap, gig economy, Google Glasses, Google X / Alphabet X, ImageNet competition, income inequality, industrial robot, Internet of things, invention of the telephone, invisible hand, James Watt: steam engine, Jaron Lanier, Jeff Bezos, job automation, John Markoff, John Maynard Keynes: technological unemployment, John von Neumann, Kevin Kelly, knowledge worker, lifelogging, lump of labour, Lyft, Marc Andreessen, Mark Zuckerberg, Martin Wolf, McJob, means of production, Milgram experiment, Narrative Science, natural language processing, new economy, Occupy movement, Oculus Rift, PageRank, pattern recognition, post scarcity, post-industrial society, precariat, prediction markets, QWERTY keyboard, railway mania, RAND corporation, Ray Kurzweil, RFID, Rodney Brooks, Satoshi Nakamoto, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, software is eating the world, speech recognition, Stephen Hawking, Steve Jobs, TaskRabbit, technological singularity, The Future of Employment, Thomas Malthus, transaction costs, Tyler Cowen: Great Stagnation, Uber for X, universal basic income, Vernor Vinge, working-age population, Y Combinator, young professional

The Bank estimated the UK's situation as slightly less alarming than that of the US, but not much. It found that roughly a third of jobs have a low probability of being automated out of existence, another third have a medium probability, and the final third have a high probability. Haldane avoided putting a specific timescale on this, and also avoided saying what would happen after that undisclosed period. Martin Wolf As the main financial columnist and associate editor at the Financial Times, Martin Wolf is the very epitome of a City establishment figure. He was described by US Treasury Secretary Larry Summers as “probably the most deeply thoughtful and professionally informed economic journalist in the world.”[xlvii] Although the credit crunch and subsequent recession have re-kindled his youthful enthusiasm for Keynesian economics, it is still a surprise to read him advocating income redistribution and universal basic income, as he did in this article from February 2014: “If Mr Frey and Prof Osborne [see below] are right [about automation]… we will need to redistribute income and wealth.

The Culture has no unemployment problem, no one has to work, so all work is a form of play.”[cclxxxviii] Abundance The Star Trek economy is the post-scarcity economy, the economy of radical abundance. In their 2012 book “Abundance: the future is better than you think”, Peter Diamandis and Stephen Kotler argue that this world is within reach in the not-too-distant future, thanks largely to the exponential improvement in technology. Financial Times columnist Martin Wolf urged that we should “enslave the robots and free the poor”,[cclxxxix] and who would not welcome such an outcome? Perhaps if we play our cards right, automation by machine intelligence will simply mean that we humans get to spend our long and healthy lives playing, learning, enjoying each other's company, having adventures and fun. Of course, life is rarely so simple or so easy. In chapter 5 we will explore some of the challenges and hurdles to be overcome.


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When China Rules the World: The End of the Western World and the Rise of the Middle Kingdom by Martin Jacques

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Admiral Zheng, Asian financial crisis, Berlin Wall, Bob Geldof, Bretton Woods, BRICs, British Empire, credit crunch, Dava Sobel, deindustrialization, Deng Xiaoping, deskilling, discovery of the americas, Doha Development Round, energy security, European colonialism, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, global reserve currency, global supply chain, illegal immigration, income per capita, invention of gunpowder, James Watt: steam engine, joint-stock company, Kenneth Rogoff, land reform, land tenure, Malacca Straits, Martin Wolf, Naomi Klein, new economy, New Urbanism, one-China policy, open economy, Pearl River Delta, pension reform, price stability, purchasing power parity, reserve currency, rising living standards, Ronald Reagan, Scramble for Africa, Silicon Valley, South China Sea, sovereign wealth fund, special drawing rights, special economic zone, spinning jenny, Spread Networks laid a new fibre optics cable between New York and Chicago, the scientific method, Thomas L Friedman, trade liberalization, urban planning, Washington Consensus, Westphalian system, Xiaogang Anhui farmers, zero-sum game

Mearsheimer, The Tragedy of Great Power Politics (New York: Norton, 2001), p. 74. 2 . Alastair Bonnett, The Idea of the West: Culture, Politics and History (London: Palgrave Macmillan, 2004), Chapters 1-2, 6. 3 . We are already living in what is, in economic terms, a multipolar world; Pam Woodall, ‘The New Titans’, survey, The Economist, 16 September 2006. Also, Brian Beedham, ‘Who Are We, Who Are They?’, survey, pp. 14-16, The Economist, 29 July 1999. 4 . Martin Wolf, ‘Life in a Tough World of High Commodity Prices’, Financial Times, 4 March 2008; Jing Ulrich, ‘China Holds the Key to Food Prices’, Financial Times, 7 November 2007. 5 . ‘Sharpened Focus on Sovereign Wealth Funds,’ International Herald Tribune, 21 January 2008; ‘China’s Stake in BP’, Financial Times, 15 April, 2008. 6 . Dominic Wilson and Anna Stupnytska, ‘The N-11: More Than an Acronym’, Goldman Sachs Global Economics Papers, 153, 28 March 2007, pp. 8-9. 7 .

Also, Lex, ‘China and Fannie Mae’, Financial Times, 17 July 2008. 153 . ‘China Acts to Become Huge Global Investor’, International Herald Tribune, 10-11 March 2007. 154 . ‘Beijing to Take $3bn Gamble on Blackstone’, Financial Times, 18 May 2007. 155 . ‘China’s Two Trillion Dollar Question’, editorial, Financial Times, 11 September 2008. 156 . For a broader view of the rise of such funds, see Martin Wolf, ‘The Brave New World of State Capitalism’, Financial Times, 16 October 2007. 157 . ‘China Aids Barclays on ABN Amro’, Financial Times, 23 July 2007; ‘The Chinese Bank Plan is One to Watch’, Financial Times, 23 July 2007. 158 . ‘Bear Stearns in Landmark China Deal’, Financial Times, 22 October 2007. 159 . ‘Chinese Banks Seek Stake in StanChart’, Financial Times, 18 November 2007. Earlier in 2007, the Bank of China was reported as being interested in acquiring a US bank; ‘Bank of China Seeking US Acquisition Targets’, South China Morning Post, 22 January 2007. 160 .

Michael Yahuda, ‘The Evolving Asian Order: The Accommodation of Rising Chinese Power’, in Shambaugh, Power Shift, p. 349. 37 . Jim O’Neill et al., ‘China and Asia’s Future Monetary System’, Goldman Sachs Global Economics Paper, 129 (12 September 2005), p. 11; for details of the Chiang Mai Initiative, see www.unescap.org/pdd/publications/bulletin2002/ch8.pdf. 38 . Zhang Yunling, East Asian Regionalism and China, p. 54. 39 . Ibid., p. 29; also Martin Wolf, ‘Asia Needs the Freedom of Its Own Monetary Fund’, Financial Times, 19 May 2004. 40 . Interview with Zhu Feng, Beijing, 16 November 2005. 41 . Zhu Feng, ‘Regionalism, Nationalism and China’s Regional Activism in East Asia’, unpublished paper, 2006, p. 4; and Takashi Inoguchi, ‘Nationalism, Globalisation and Regional Order in North-East Asia: The Case of Japan at the Dawn of the Century’, paper presented at conference on ‘Nationalism and Globalisation in North-East Asia’, Asia Research Centre, London School of Economics, 12 May 2007, 42 .


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European Spring: Why Our Economies and Politics Are in a Mess - and How to Put Them Right by Philippe Legrain

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3D printing, Airbnb, Asian financial crisis, bank run, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, BRICs, British Empire, business process, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Celtic Tiger, central bank independence, centre right, cleantech, collaborative consumption, collapse of Lehman Brothers, collective bargaining, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, debt deflation, Diane Coyle, Downton Abbey, Edward Glaeser, Elon Musk, en.wikipedia.org, energy transition, eurozone crisis, fear of failure, financial deregulation, first-past-the-post, forward guidance, full employment, Gini coefficient, global supply chain, Growth in a Time of Debt, hiring and firing, hydraulic fracturing, Hyman Minsky, Hyperloop, immigration reform, income inequality, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), Irish property bubble, James Dyson, Jane Jacobs, job satisfaction, Joseph Schumpeter, Kenneth Rogoff, labour market flexibility, labour mobility, liquidity trap, margin call, Martin Wolf, mittelstand, moral hazard, mortgage debt, mortgage tax deduction, North Sea oil, Northern Rock, offshore financial centre, oil shale / tar sands, oil shock, open economy, peer-to-peer rental, price stability, private sector deleveraging, pushing on a string, quantitative easing, Richard Florida, rising living standards, risk-adjusted returns, Robert Gordon, savings glut, school vouchers, self-driving car, sharing economy, Silicon Valley, Silicon Valley startup, Skype, smart grid, smart meter, software patent, sovereign wealth fund, Steve Jobs, The Death and Life of Great American Cities, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, Tyler Cowen: Great Stagnation, working-age population, Zipcar

The Breakingviews team founded by Hugo Dixon are also excellent. At The Economist, thank you to John Micklethwait for his support for my previous books. I look forward to reading Unhappy Union, John Peet and Anton La Guardia’s book about the crisis; Zanny Minton Beddoes and I have often had converging opinions about it. Saugato Datta, who has since moved on, is a great guy. At the Financial Times, I have enjoyed many stimulating conversations with Martin Wolf, my former colleague Gideon Rachman, Gillian Tett, Peter Spiegel, Alex Barker and many others. I recently had the pleasure of meeting Martin Sandbu who is writing a book about the euro which will doubtless be excellent. Wolfgang Münchau’s Eurointelligence is required reading for anyone interested in the crisis. At the Wall Street Journal, Stephen Fidler, who covered the Latin American debt crisis in the 1980s, is particularly perceptive; Simon Nixon understands the role of finance better than most economic commentators; and Matina Stevis can see things from both a Greek perspective and an external one.

A FIASCO MADE IN FRANKFURT, BRUSSELS AND BERLIN A tragedy in five acts By deciding that the crisis was largely fiscal, policy makers could ignore the truth that the underlying cause of the disarray was irresponsible cross-border lending, for which suppliers of credit are surely as responsible as users. If the culpability of both sides – lenders and borrowers – had been understood, the moral case for debt write-offs would have been clearer. Martin Wolf, chief economics commentator, Financial Times103 Lazy. Feckless. Profligate. Thieving. Those are just some of the terms of abuse hurled at Gipsies, who have long been scapegoats in Europe for all manner of ills. Similar venom has recently been directed at a different set of GIPSIs – Greece, Ireland, Portugal, Spain and Italy – the countries that have suffered the brunt of the crisis in the eurozone, and on which it has been blamed.

One calculation by Brad DeLong and Larry Summers finds that on plausible assumptions, government borrowing pays for itself in a slump when resources lie idle – especially when interest rates are very low but even when they are pretty high – notably by averting the scars on future growth of having workers unemployed for years, with their skills going rusty and their future employability ebbing away.209 Yet astonishingly, Trichet argued on the contrary that in the worst crisis since the 1930s governments needed to embrace austerity to have the space to respond to potential future emergencies.210 As Martin Wolf, the chief economics commentator for the Financial Times, has insightfully remarked: “Too often, fiscal conservatives sound just like the revolutionaries who were prepared to sacrifice present generations for what turned out to be imaginary future benefits.”211 Everyone can’t save at once When the economy is at full tilt, government borrowing has an additional cost: since the domestic supply of loanable funds is limited, it crowds out borrowing by the private sector and risks inflation.


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Why We Can't Afford the Rich by Andrew Sayer

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accounting loophole / creative accounting, Albert Einstein, asset-backed security, banking crisis, banks create money, basic income, Bretton Woods, British Empire, call centre, capital controls, carbon footprint, collective bargaining, corporate raider, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, declining real wages, deglobalization, deindustrialization, delayed gratification, demand response, don't be evil, Double Irish / Dutch Sandwich, en.wikipedia.org, Etonian, financial innovation, financial intermediation, Fractional reserve banking, full employment, G4S, Goldman Sachs: Vampire Squid, high net worth, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, Isaac Newton, James Dyson, job automation, Julian Assange, labour market flexibility, laissez-faire capitalism, land value tax, low skilled workers, Mark Zuckerberg, market fundamentalism, Martin Wolf, mass immigration, means of production, moral hazard, mortgage debt, negative equity, neoliberal agenda, new economy, New Urbanism, Northern Rock, Occupy movement, offshore financial centre, oil shale / tar sands, patent troll, payday loans, Philip Mirowski, Plutocrats, plutocrats, popular capitalism, predatory finance, price stability, pushing on a string, quantitative easing, race to the bottom, rent-seeking, Ronald Reagan, shareholder value, short selling, sovereign wealth fund, Steve Jobs, The Nature of the Firm, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transfer pricing, trickle-down economics, universal basic income, unpaid internship, upwardly mobile, Washington Consensus, wealth creators, Winter of Discontent, working poor, Yom Kippur War, zero-sum game

Of course, there are defences of interest on credit, but before we consider them, there’s a common misunderstanding of bank lending and where credit comes from that we need to rectify. It’s a misunderstanding that has long allowed the financial sector to escape serious scrutiny, and there’s a risk the delusion may persist. How banks create money for nothing and charge us interest for it The essence of the contemporary monetary system is creation of money, out of nothing, by private banks’ often foolish lending. (Martin Wolf)61 I believe it is absolutely fundamental to understand that banks do not intermediate already existing money. They create money and credit ex nihilo, de novo. (Adair Turner, former Chair of the UK Financial Services Authority)62 Capitalism is issuing money to itself and claiming it as profit. (Mary Mellor)63 For most people, it’s natural to think of interest in terms of their own savings and debts, and to assume that loans are always loans of someone else’s savings.

Some firms were bought and sold several times by different private equity firms, and in some cases were made to take on still more loans to fund dividends.85 Financialised capitalism appears to have enacted the illusions of mainstream economics, in which buying and selling, rather than production, are seen as primary: as if wealth could be endlessly created just by lending and buying and selling existing and future assets: as if continually shifting to more profitable sources of revenue could be a substitute for real investment in goods and services; as if shareholder pressure for unearned income and an overactive market for corporate control would ensure economic development. It’s extraordinarily naïve to imagine that a hyperactive market for the control of companies will ensure that those companies will produce better products with greater efficiency. Even from the standpoint of the mainstream, the financial sector can no longer take refuge in a markets-are-always-right line. Financial Times economics editor Martin Wolf puts it clearly enough: A market works well if, and only if, decision-makers confront the consequences of their decisions. This is not – and probably cannot be – the case in finance: certainly, people now sit on fortunes earned in activities that have led to unprecedented rescues and the worst recession since the 1930s.86 Arm’s-length lending, with the risks on one side borne by the borrower and on the other passed on through securitisation, allows the lender to escape the consequences of their decisions on lending.

At some point, the financial system seemed to be no longer there primarily to hedge existing risks, but more and more to create its own.112 Haldane: The banking industry [like the car industry] is also a pollutant. Systemic risk is a noxious by-product. Banking benefits those producing and consuming financial services – the private benefits for bank employees, depositors, borrowers and investors. But it also risks endangering innocent bystanders within the wider economy – the social costs to the general public from banking crises.113 Martin Wolf, again at the Financial Times, summarised the situation thus: Financial systems are important servants of the economy, but poor masters. A large part of the activity of the financial sector seems to be a machine to transfer income and wealth from outsiders to insiders, while increasing the fragility of the economy as a whole.… Banks are rent-extractors – and uncompetitive ones at that.114 Wolf also asked: ‘Can we afford our financial system?’


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The Euro: How a Common Currency Threatens the Future of Europe by Joseph E. Stiglitz, Alex Hyde-White

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bank run, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bretton Woods, capital controls, Carmen Reinhart, cashless society, central bank independence, centre right, cognitive dissonance, collapse of Lehman Brothers, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, currency peg, dark matter, David Ricardo: comparative advantage, disintermediation, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial innovation, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, housing crisis, income inequality, incomplete markets, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour market flexibility, labour mobility, light touch regulation, manufacturing employment, market bubble, market friction, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, neoliberal agenda, new economy, open economy, paradox of thrift, pension reform, pensions crisis, price stability, profit maximization, purchasing power parity, quantitative easing, race to the bottom, risk-adjusted returns, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, sovereign wealth fund, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population

Stiglitz and Daniel Heymann (Houndmills, UK, and New York: Palgrave Macmillan, 2014), pp. 1–39; and the other papers in that volume. 47 As we noted in chapter 2, the Erasmus program, where European students study in each other’s countries, is an example. 48 As we noted in the case of the provision of deposit insurance within a banking union. Chapter 10. Can There Be an Amicable Divorce? 1 Martin Wolf, in his very thoughtful writing about the euro and the euro crisis, has come to much the same conclusions, and has often used the marriage metaphor, suggesting that the breakup of the eurozone, including the exit of Greece, would be a messy divorce. This chapter shows how it might be somewhat less messy—though it may be stretching it to suggest it could ever be truly amicable. See Martin Wolf, The Shifts and Shocks: What We’ve Learned—and Have Still to Learn—from the Financial Crisis (New York: Penguin Press, 2014). 2 I won’t discuss here the optimal groupings but instead will focus on how such a divorce can be managed. 3 Those in finance describe the divorce as providing an in-the-money option. 4 Of course, this logic implies that for countries that have managed to grow reasonably well within the confines of the eurozone, the benefit to leaving would be less than the cost. 5 See, for instance, Matthew Yglesias, “How Greece Leaving the Euro Would Actually Work,” Vox, July 16, 2015, available at http://www.vox.com/2015/7/6/8901303/greek-crisis-grexit-how-it-works; and Jack Ewing, “Weighing the Fallout of a Greek Exit from the Euro,” New York Times, July 9, 2015. 6 Regulators, legislatures, and courts in antitrust actions have finally begun intervening to curtail the high fees and abusive practices, but the fees remain far higher than what they should be. 7 As we noted in chapter 7, among the foolish mistakes of the Troika were its policies that effectively discouraged the use of the banking system and thus almost encouraged tax avoidance.

The idea behind such a system has been promoted by the international Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System, which released its report in September 2009, which in turn was published as The Stiglitz Report (New York: The New Press, 2010). See also John Maynard Keynes, “The Keynes Plan,” 1942–43, reproduced in J. Keith Horsefield, ed., The International Monetary Fund 1945–1965: Twenty Years of International Monetary Cooperation, vol. 3, Documents (Washington, DC: International Monetary Fund, 1969), pp. 3–36; and Martin Wolf, Fixing Global Finance (Baltimore: Johns Hopkins University Press, 2010). Chapter 5. The Euro: A Divergent System 1 A quite different antigravity force has been at play elsewhere in the world, as money has moved from developing and emerging markets to the developed countries. In Making Globalization Work (New York: W. W. Norton, 2006), I explain how this is a result, in part, of the global reserve system. 2 For instance, in 2000 the GDP per capita in southern Italy was 55 percent of the wealthy northwestern region, a figure that remained unchanged in 2014.

.† I am greatly indebted to the members and staff of the commission for their insights into crises, their causes and consequences. Though we focused much of our attention on the impacts of the crisis on emerging markets and developing countries, much of what we said has proven equally applicable to Europe. The subject of the euro has, of course, been a fascinating one for economists. Among the numerous individuals from whom I have learned enormously, three require special note: Martin Wolf, both from conversations and from his book The Shifts and Shocks (New York: Penguin Press, 2014); George Soros, whose deep concern for the consequences of the euro crisis and his substantial understanding of financial markets inevitably led to his immersion into the euro crisis—and again I have learned from both his writings on the subject and our innumerable discussions; and Rob Johnson, president of INET and my former student at Princeton, to whom I am grateful not only for frequent discussions on the subject but for his convening of economists from Europe and America who have attempted to come to a common understanding of the causes and responses to the crisis.

Hopes and Prospects by Noam Chomsky

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Albert Einstein, banking crisis, Berlin Wall, Bretton Woods, British Empire, capital controls, colonial rule, corporate personhood, Credit Default Swap, cuban missile crisis, David Ricardo: comparative advantage, deskilling, en.wikipedia.org, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Firefox, Howard Zinn, Hyman Minsky, invisible hand, liberation theology, market fundamentalism, Martin Wolf, Mikhail Gorbachev, Monroe Doctrine, moral hazard, new economy, nuremberg principles, one-state solution, open borders, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ralph Waldo Emerson, RAND corporation, Ronald Reagan, structural adjustment programs, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, trade liberalization, uranium enrichment, Washington Consensus

“The crisis may be turning out very well for many of the behemoths that dominate U.S. finance,” the press reports: “A series of federally arranged mergers safely landed troubled banks on the decks of more stable firms. And it allowed the survivors to emerge from the turmoil with strengthened market positions, giving them even greater control over consumer lending and more potential to profit,” and with even better opportunities to take risks and gain profits without concern for the consequences of failure, thanks to the government insurance policy. Martin Wolf of the Financial Times, the media’s most respected financial commentator, writes that the financial system was saved from “an abyss” only by massive robbery of taxpayers to pay off the financial sector’s creditors—a decision that was “quite unbearable,” but “also correct,” given the alternative. The lesson learned “is that every systemically significant institution must be rescued in a crisis,” though “we cannot let stand the doctrine that systemically significant institutions are too big or interconnected to be allowed to fail in the crisis.”

Germany and Spain are well in the lead in development and use of solar energy, and China, though it remains a very poor country with enormous internal problems, is dedicating substantial resources to a “green revolution” and may soon surpass them. It already makes one-third of the world’s solar cells, is in the lead in mass production of electric cars and the latest generation of “clean coal” power stations, and is predicted to surpass the United States as the largest market for wind turbines. China is also providing the most successful model for financial institutions, Martin Wolf concludes: “China has emerged as the most significant winner from the financial and economic crisis” because of its successful management—and not coincidentally, it rejected the financial liberalization of the neoliberal era.15 The primary victims of military terror and economic strangulation are the poor and weak, within the rich countries themselves and far more brutally in the South. But there are significant signs of change.

Michael Kranish, Boston Globe, December 21, 2009. Virtually the only report. See below, pp. 226f. 8. Eric Dash, New York Times, June 10, 2009. 9. Theo Francis and Peter Coy, “No Big Fix for Global Finance,” Business Week, September 9, 2009. David Cho, “Banks ‘Too Big to Fail’ Have Grown Even Bigger; Behemoths Born of the Bailout Reduce Consumer Choice, Tempt Corporate Moral Hazard,” Washington Post, August 28, 2009. Martin Wolf, Financial Times, September 15, 2009. 10. “Fewer American See Solid Evidence of Global Warming,” Pew survey reports, October 22, 2009, http://people-press.org/report/556/. 11. Clifford Krauss and Jad Mouawad, New York Times, August 19, 2009; John Carey, Business Week, September 8, 2009. 12. Alison Vekshin and Dawn Kopecki, Bloomberg Business Week, January 11, 2010. 13. Gretchen Morgenson, New York Times, September 14, 2009. 14.


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13 Bankers: The Wall Street Takeover and the Next Financial Meltdown by Simon Johnson, James Kwak

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Andrei Shleifer, Asian financial crisis, asset-backed security, bank run, banking crisis, Bernie Madoff, Bonfire of the Vanities, bonus culture, break the buck, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, commoditize, corporate governance, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, Edward Glaeser, Eugene Fama: efficient market hypothesis, financial deregulation, financial innovation, financial intermediation, financial repression, fixed income, George Akerlof, Gordon Gekko, greed is good, Home mortgage interest deduction, Hyman Minsky, income per capita, information asymmetry, interest rate derivative, interest rate swap, Kenneth Rogoff, laissez-faire capitalism, late fees, light touch regulation, Long Term Capital Management, market bubble, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage tax deduction, Myron Scholes, Paul Samuelson, Ponzi scheme, price stability, profit maximization, race to the bottom, regulatory arbitrage, rent-seeking, Robert Bork, Robert Shiller, Robert Shiller, Ronald Reagan, Saturday Night Live, Satyajit Das, sovereign wealth fund, The Myth of the Rational Market, too big to fail, transaction costs, value at risk, yield curve

Subprime lending, mortgage-backed securities, collateralized debt obligations (CDOs), and credit default swaps all flowed naturally from this business model, and absent fundamental reform, there is no reason to believe bankers will refrain from inventing new toxic products and precipitating another crisis in the future. What’s more, given the growth in the size of the leading banks, the next crisis is likely to be even bigger. As The Financial Times’ Martin Wolf wrote in September 2009, “What is emerging is a slightly better capitalised financial sector, but one even more concentrated and benefiting from explicit state guarantees. This is not progress: it has to mean still more and bigger crises in the years ahead.”17 When the next crisis comes, either the government will ride to the rescue once again, costing taxpayers hundreds of billions of dollars, or popular revulsion at bailing out megabanks yet again will prevent Congress and the administration from saving the financial system—with potentially disastrous economic consequences.

Quoted in Hirsh, “Barney Frank,” supra note 13. 15. Stephen Labaton, “Bill Shields Most Banks from Review,” The New York Times, October 15, 2009, available at http://www.nytimes.com/2009/10/16/business/16regulate.html; Hirsh, “Barney Frank,” supra note 13. 16. William Greider, “The Money Man’s Best Friend,” The Nation, November 11, 2009, available at http://www.thenation.com/doc/20091130/greider. 17. Martin Wolf, “Why Narrow Banking Alone Is Not the Finance Solution,” Financial Times, September 29, 2009, available at http://www.ft.com/cms/s/0/34cbca0c-ad28–11de-9caf-00144feabdc0.html. 18. Time Magazine/ABT SRBI Survey, conducted October 26–27, 2009; results available at http://www.srbi.com/Wall%20Street%20Questionnaire%20and%20Poll%20Results.pdf. 19. Keith Ernst, Debbie Bocian, and Wei Li, “Steered Wrong: Brokers, Borrowers, and Subprime Loans,” Center for Responsible Lending, April 8, 2008, available at http://www.responsiblelending.org/mortgage-lending/research-analysis/steered-wrong-brokers-borrowers-and-subprime-loans.pdf. 20.

The Balance Sheet (James Surowiecki): http://www.newyorker.com/online/blogs/jamessurowiecki/ Beat the Press (Dean Baker): http://www.prospect.org/csnc/blogs/beat_the_press Calculated Risk: http://calculatedriskblog.com The Conscience of a Liberal (Paul Krugman): http://krugman.blogs.nytimes.com/ J. Bradford DeLong’s Grasping Reality with Opposable Thumbs: http://delong.typepad.com/ Econbrowser (Menzie Chinn and James Hamilton): http://www.econbrowser.com/ Econlog (Arnold Kling, Bryan Caplan, and David Henderson): http://econlog.econlib.org/ Economists’ Forum (Martin Wolf and guests): http://blogs.ft.com/economistsforum/ Economist’s View (Mark Thoma): http://economistsview.typepad.com/ Economix (New York Times reporters and guest economists): http://economix.blogs.nytimes.com/ Executive Suite (Joe Nocera): http://executivesuite.blogs.nytimes.com/ Free Exchange (The Economist): http://www.economist.com/blogs/freeexchange/ Interfluidity (Steve Randy Waldman): http://www.interfluidity.com/ Ezra Klein: http://voices.washingtonpost.com/ezra-klein/ Making Sense (Paul Solman): http://www.pbs.org/newshour/economy/makingsense/ Greg Mankiw: http://gregmankiw.blogspot.com/ Marginal Revolution (Tyler Cowen and Alex Tabarrok): http://www.marginalrevolution.com/ Naked Capitalism (Yves Smith and others): http://www.nakedcapitalism.com/ Planet Money: http://www.npr.org/blogs/money/ Real Time Economics (Wall Street Journal): http://blogs.wsj.com/economics/ Rortybomb (Mike Konczal): http://rortybomb.wordpress.com/ Felix Salmon: http://blogs.reuters.com/felix-salmon/ Acknowledgments This book is the product of a friendship that began twenty years ago and a collaboration that began at the peak of the financial crisis in 2008.


pages: 353 words: 98,267

The Price of Everything: And the Hidden Logic of Value by Eduardo Porter

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Alvin Roth, Asian financial crisis, Ayatollah Khomeini, banking crisis, barriers to entry, Berlin Wall, British Empire, capital controls, Carmen Reinhart, Cass Sunstein, clean water, Credit Default Swap, Deng Xiaoping, Edward Glaeser, European colonialism, Fall of the Berlin Wall, financial deregulation, Ford paid five dollars a day, full employment, George Akerlof, Gordon Gekko, guest worker program, happiness index / gross national happiness, housing crisis, illegal immigration, immigration reform, income inequality, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: technological unemployment, Joshua Gans and Andrew Leigh, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, loss aversion, low skilled workers, Martin Wolf, means of production, Menlo Park, Mexican peso crisis / tequila crisis, new economy, New Urbanism, peer-to-peer, pension reform, Peter Singer: altruism, pets.com, placebo effect, price discrimination, price stability, rent-seeking, Richard Thaler, rising living standards, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, Silicon Valley, stem cell, Steve Jobs, Stewart Brand, superstar cities, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, trade route, transatlantic slave trade, transatlantic slave trade, ultimatum game, unpaid internship, urban planning, Veblen good, women in the workforce, World Values Survey, Yom Kippur War, young professional, zero-sum game

,” New Scientist, No. 2697, July 2009, pp. 8-10. The tale about the wager between Julian Simon and Paul Ehrlich is in John Tierney, “Betting on the Planet,” New York Times Magazine, December 2, 1990. The price of Brent crude is drawn from the Energy Information Agency database (at tonto.eia.doe.gov/dnav/pet/hist/LeafHandler.ashx?n=Plastic&s=RBRTE&f=D, accessed 07/19/2010). Martin Wolf’s despair is in evidence in Martin Wolf, “The Dangers of Living in a Zero-Sum World Economy,” Financial Times, December 18, 2007. The price of the contents of Ehrlich’s basket can be found in U.S. Geological Survey, “Historical Statistics for Mineral and Material Commodities in the United States” (minerals.usgs.gov/ds/2005/140/index.html, accessed 07/19/2010). 226-229 When Prices Fail: The estimate of the impact of the financial crisis on the world’s economic output in 2009 is drawn from the International Monetary Fund, World Economic Outlook, April 2010 (http://www.imf.org/external/pubs/ft/weo/2010/01/weodata/weorept.aspx?

We were momentarily saved from this catastrophe by a global recession of which we had not seen the like since the 1930s. But as soon as the world started growing again, we started hitting some of the same constraints. Oil prices, which dropped to a trough of $33.73 a barrel after Christmas in 2008, were back above $80 in April of 2010. In August, on fears of a global shortage, the Food and Agriculture Organization’s food price index surged to its highest level since September 2008. Martin Wolf, the usually serene economic columnist for the Financial Times, wrote that limits to economic growth could topple civilization. A world that over the past two hundred years had grown itself out of many of its problems could easily slip back to a zero-sum reality in which one group’s gain would result in another’s loss, in which the only chance to get ahead would be to steal, repress, and plunder.


pages: 385 words: 101,761

Creative Intelligence: Harnessing the Power to Create, Connect, and Inspire by Bruce Nussbaum

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3D printing, Airbnb, Albert Einstein, Berlin Wall, Black Swan, Chuck Templeton: OpenTable, clean water, collapse of Lehman Brothers, creative destruction, Credit Default Swap, crony capitalism, crowdsourcing, Danny Hillis, declining real wages, demographic dividend, Elon Musk, en.wikipedia.org, Eugene Fama: efficient market hypothesis, Fall of the Berlin Wall, follow your passion, game design, housing crisis, Hyman Minsky, industrial robot, invisible hand, James Dyson, Jane Jacobs, Jeff Bezos, jimmy wales, John Gruber, John Markoff, Joseph Schumpeter, Kickstarter, lone genius, manufacturing employment, Marc Andreessen, Mark Zuckerberg, Martin Wolf, new economy, Paul Graham, Peter Thiel, QR code, race to the bottom, reshoring, Richard Florida, Ronald Reagan, shareholder value, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, six sigma, Skype, Steve Ballmer, Steve Jobs, Steve Wozniak, supply-chain management, Tesla Model S, The Chicago School, The Design of Experiments, the High Line, The Myth of the Rational Market, thinkpad, Tim Cook: Apple, too big to fail, tulip mania, We are the 99%, Y Combinator, young professional, Zipcar

Goizueta, Coca-Cola Chairman Noted for Company Turnaround, Dies at 65,” New York Times, October 19, 1997, accessed September 13, 2012, http://www.nytimes.com/1997/10/19/us/ roberto-c-goizueta-coca-cola-chairman-noted-for-company-turnaround-dies-at-65.html. 231 After talking to Wall Street: interview with Professor Ho at a copresentation she gave with Gillian Tett of the Financial Times, March 10, 2010, at Columbia University; Karen Ho, Liquidated: An Ethnography of Wall Street (Durham, NC: Duke University Press, 2009). 231 The value of millions of houses remains: Binyamin Appelbaum, “Cautious Moves on Foreclosures Haunting Obama,” New York Times, August 19, 2012, accessed September 14, 2012, http://www.nytimes.com/2012/08/20/business/economy/ slow-response-to-housing-crisis-now-weighs-on-obama.html; Les Christie, “Troubled Homeowners Get a Lifeline,” CNN Money, October 24, 2011, accessed September 14, 2012, http://money.cnn.com/2011/10/24/real_estate/ housing_refinance/index.htm. 231 Interest rates, zero for many: David Shulman, “The Downside of the Fed’s Zero Rate Policy,” US News and World Report, April 30, 2012, accessed September 14, 2012, http://www.usnews.com/opinion/blogs/ economic-intelligence/2012/04/30/the-downside-of-the-feds-zero-interest-rate-policy. 231 the volatility of the markets: Tami Luhby, “Credit Freeze and Your Paycheck,” CNN Money, September 28, 2008, accessed September 14, 2012, http://money.cnn.com/2008/09/28/news/economy/ main_street_impact/index.htm?postversion=2008092811; Colin Barr, “How It Got This Bad,” CNN Money, September 26, 2008, accessed September 14, 2012, http://money.cnn.com/2008/09/26/news/ leverage.fortune; Martin Wolf and Chris Giles, “Transcript: Larry Summers Interview,” Financial Times, April 2, 2010, accessed September 14, 2012, http://www.ft.com/intl/cms/s/0/ 3c023d9c-3dba-11df-bdbb-00144feabdc0.html#axzz24r1TJX1h. 232 It took years for economists: Marcus Baram, “Who’s Whining Now? Gramm Slammed by Economists,” September 19, 2008, accessed September 14, 2012, http://abcnews.go.com/print?id=5835269. 232 In a 2010 interview with Martin Wolf: Wolf and Giles, “Transcript: Larry Summers Interview.” 232 Summers was, after all: Stephen Labaton, “Congress Passes Wide-Ranging Bill Easing Bank Laws,” New York Times, November 5, 1999, accessed September 14, 2012, http://www.nytimes.com/1999/11/05/business/ congress-passes-wide-ranging-bill-easing-bank-laws.html; Charles Ferguson, “Larry Summers and the Subversion of Economics,” Chronicle of Higher Economics, October 3, 2010, accessed September 14, 2012, http://chronicle.com/article/Larry-Summersthe/124790/; Rana Foroohar, “Larry Summers: No Regrets on Deregulation,” Time Business, April 12, 2011, accessed September 14, 2012, http://business.time.com/2011/04/12/ larry-summers-no-regrets-on-deregulation/. 232 In 1999, Summers, along with: Cyrus Sanati, “10 Years Later, Looking at Repeal of Glass-Steagall,” DealBook, November 12, 2009, accessed September 14, 2012, http://dealbook.nytimes.com/2009/11/12/10 -years-later-looking-at-repeal-of-glass-steagall/. 232 the Depression-era regulation: Labaton, “Congress Passes Wide-Ranging Bill Easing Bank Laws.” 232 calling the repeal “historic”: Sanati, “10 Years Later.” 232 Perhaps no one believed: Justin Fox, “The Myth of the Rational Market,” Time, June 22, 2009, accessed September 14, 2012, http://www.time.com/time/magazine/ article/0,9171,1904153,00.html. 232 But in October 2008, Greenspan: Edmund L.

Interest rates, zero for many financial instruments, are below inflation. Finally, and perhaps most important, the volatility of the markets during the crash did not reflect the underlying economic fundamentals but rather reflected the heightened emotions of political and social actors. It took years for economists, policy makers, and bankers to admit that the fundamental assumptions underlying the efficient market theory were wrong. In a 2010 interview with Martin Wolf, the economics correspondent for the Financial Times, Lawrence Summers, former Treasury Secretary under President Clinton and ex-assistant for economic policy for Barack Obama, grudgingly admitted he was surprised at the failure of efficient markets in the crisis. Summers was, after all, a chief architect of the deregulation that helped provoke the financial crash in 2007. In 1999, Summers, along with Treasury Secretary and ex-Goldman Sachs co-CEO Robert Rubin, did away with Glass-Steagall, the Depression-era regulation of the financial markets, calling the repeal “historic legislation” that will “better enable American companies to compete in the new economy.”


pages: 403 words: 111,119

Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist by Kate Raworth

3D printing, Asian financial crisis, bank run, basic income, battle of ideas, Berlin Wall, bitcoin, blockchain, Branko Milanovic, Bretton Woods, Buckminster Fuller, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, choice architecture, clean water, cognitive bias, collapse of Lehman Brothers, complexity theory, creative destruction, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, dematerialisation, Douglas Engelbart, Douglas Engelbart, en.wikipedia.org, energy transition, Erik Brynjolfsson, ethereum blockchain, Eugene Fama: efficient market hypothesis, experimental economics, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, Financial Instability Hypothesis, full employment, global supply chain, global village, Henri Poincaré, hiring and firing, Howard Zinn, Hyman Minsky, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of writing, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, land reform, land value tax, Landlord’s Game, loss aversion, low skilled workers, M-Pesa, Mahatma Gandhi, market fundamentalism, Martin Wolf, means of production, megacity, mobile money, Mont Pelerin Society, Myron Scholes, neoliberal agenda, Network effects, Occupy movement, off grid, offshore financial centre, oil shale / tar sands, out of africa, Paul Samuelson, peer-to-peer, planetary scale, price mechanism, quantitative easing, randomized controlled trial, Richard Thaler, Ronald Reagan, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Simon Kuznets, smart cities, smart meter, South Sea Bubble, statistical model, Steve Ballmer, The Chicago School, The Great Moderation, the map is not the territory, the market place, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, Torches of Freedom, trickle-down economics, ultimatum game, universal basic income, Upton Sinclair, Vilfredo Pareto, wikimedia commons

It would certainly separate the role of providing money from the role of providing credit, so helping to prevent the build-up of debt-fuelled credit bubbles that burst with such deep social costs. That idea may sound outlandish, but it is neither a new nor a fringe suggestion. First proposed during the 1930s Great Depression by influential economists of the day such as Irving Fisher and Milton Friedman, it obtained renewed support after the 2008 crash, gaining the backing of mainstream financial experts at the International Monetary Fund and Martin Wolf of the UK’s Financial Times.49 State-owned banks could, furthermore, use money from the central bank to channel substantial low- or zero-interest loans into investments for long-term transformation, such as affordable and carbon-neutral housing and public transport. It would give a crucial boost to building the transformative assets that every economy now needs, and would shift power away from what Keynes called ‘the rentier … the functionless investor’.

The US economist Richard Easterlin found that between 1946 and 1974, GDP per capita grew significantly in the US but the population’s self-reported levels of happiness – on a scale of 0 to 10 – remained flat, and even fell in the 1960s.43 Those findings have since been called into question by studies that find self-reported happiness continuing to rise as income rises, albeit ever more slowly the richer a country becomes.44 But even if we were to accept Easterlin’s data at face value, the fact that people’s self-assessed happiness stayed flat while their income rose is no proof that happiness would still stay level if incomes flatlined. What’s more, when wages for the worse-off stagnate, immigrants are all too quickly blamed, as has happened in many high-income countries in recent years, fuelling xenophobia and social strife. Our societies, like our economies, have evolved to expect growth and have come to depend upon it: it seems we do not yet know how to live without it. No wonder Martin Wolf, one of the UK’s most respected financial journalists, wrote with palpable unease in 2007 when he took the rare step of leaning across the debating aisle to agree with the prepare-for-landing crowd about the economic implications of cutting global carbon emissions. ‘If there are limits to emissions, there may also be limits to growth,’ he acknowledged in his Financial Times column. ‘But if there are indeed limits to growth, the political underpinnings of our world fall apart.

Ricardo, D. (1817) On the Principles of Political Economy and Taxation, Ch. 2, http://www.econlib.org/library/Ricardo/ricP.html 18. Schabas, M. (1995) ‘John Stuart Mill and concepts of nature’, Dialogue, 34: 3, p. 452. 19. Gaffney, M. and Harrison, F. (1994) The Corruption of Economics. London: Shepheard-Walwyn. 20. Wolf, M. (2010) ‘Why were resources expunged from neo-classical economics?’ Financial Times, 12 July 2010. http://blogs.ft.com/martin-wolf-exchange/tag/resources/ 21. Green, T. (2012) ‘Introductory economics textbooks: what do they teach about sustainability?’, International Journal of Pluralism and Economics Education, 3: 2, pp. 189–223. 22. Daly, H. and Farley, J. (2011) Ecological Economics. Washington: Island Press, p. 16. 23. Daly, H. (1990) ‘Toward some operational principles of sustainable development’, Ecological Economics, 2, pp. 1–6. 24.

Power Systems: Conversations on Global Democratic Uprisings and the New Challenges to U.S. Empire by Noam Chomsky, David Barsamian

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affirmative action, Affordable Care Act / Obamacare, Albert Einstein, Chelsea Manning, collective bargaining, colonial rule, corporate personhood, David Brooks, discovery of DNA, double helix, drone strike, failed state, Howard Zinn, hydraulic fracturing, income inequality, inflation targeting, Intergovernmental Panel on Climate Change (IPCC), Julian Assange, land reform, Martin Wolf, Mohammed Bouazizi, Naomi Klein, new economy, obamacare, Occupy movement, oil shale / tar sands, pattern recognition, Powell Memorandum, quantitative easing, Ralph Nader, Ralph Waldo Emerson, single-payer health, sovereign wealth fund, The Wealth of Nations by Adam Smith, theory of mind, Tobin tax, union organizing, Upton Sinclair, uranium enrichment, WikiLeaks

And if you look at what are supposed to be the growing alternatives, China is another form of state capitalism. So I don’t know what’s supposed to be ending. The question is whether these systems, whatever they are, can be adapted to current problems and circumstances. For example, there’s no justification, economic or other, for the enormous and growing role of financial institutions since the 1970s. Even some of the most respected economists point out that they’re just a drag on the economy. Martin Wolf of the Financial Times says straight out that the financial institutions shouldn’t be allowed to have anything like the power they do.19 There’s plenty of leeway for modification and change. Worker-owned industries can take over. There’s interesting work on this topic by Gar Alperovitz, who has been right at the center of a lot of the organizing around worker control.20 It’s not a revolution, but it’s the germ of another type of capitalism, capitalism in the sense that markets and profit are involved.

Lawyers Rights Watch Canada, “Canada in Breach of Human Rights Obligations in Omar Khadr Case,” Vancouver, British Columbia, 16 May 2012. 15. GOP Debate, Myrtle Beach Convention Center, Myrtle Beach, South Carolina, 16 January 2012. 16. Ibid. 17. Jeffrey M. Jones, “Unemployment Re-Emerges as Most Important Problem in the U.S.,” Gallup, 15 September 2011. 18. Immanuel Wallerstein, interview with Sophie Shevardnadze, Russia Today, 4 October 2011. 19. Martin Wolf, “The Big Question Raised by Anti-Capitalist Protests,” Financial Times (London), 28 October 2011. 20. See also Richard Wolff, Democracy at Work (Chicago: Haymarket Books, 2012). 21. Howard Zinn, “A Chorus Against War,” The Progressive 67, no. 3 (March 2003), pp. 19–21. 22. Howard Zinn, “Operation Enduring War,” The Progressive 66, no. 3 (March 2002), pp. 12–13. 23. David Hume, “Of the First Principles of Government,” in Selected Essays, ed.

Masters of Mankind by Noam Chomsky

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affirmative action, American Legislative Exchange Council, Berlin Wall, failed state, God and Mammon, income inequality, Intergovernmental Panel on Climate Change (IPCC), land reform, Martin Wolf, means of production, nuremberg principles, offshore financial centre, oil shale / tar sands, Paul Samuelson, Plutocrats, plutocrats, profit maximization, Ralph Waldo Emerson, Silicon Valley, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, union organizing, urban renewal, War on Poverty, Washington Consensus, Westphalian system

However, a recent study by the International Monetary Fund indicates—to quote the business press—that perhaps “the largest US banks aren’t really profitable at all,” adding that “the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from US taxpayers.”2 This is more evidence to support the judgment of the most respected financial correspondent in the English-speaking world, Martin Wolf of the London Financial Times, that “an out-of-control financial sector is eating out the modern market economy from inside, just as the larva of the spider wasp eats out the host in which it has been laid.”3 The term “capitalism” is also commonly used for systems in which there are no capitalists: for example, the extensive worker-owned Mondragón conglomerate in the Basque Country of Spain or the worker-owned enterprises expanding in northern Ohio—often with conservative support—a matter discussed in important work by Gar Alperovitz.4 Some might even use the term “capitalism” to include the industrial democracy advocated by John Dewey, America’s leading social philosopher.

McChesney, The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the U.S.A. to China (New York: Monthly Review Press, 2012). 2. Editors, “Why Should Taxpayers Give Big Banks $83 Billion a Year?” Bloomberg View, February 20, 2013. Citing Kenichi Ueda and Beatrice Weder di Mauro, “Quantifying Structural Subsidy Values for Systemically Important Financial Institutions,” IMF Working Paper, WP/12/128 (2012). 3. Martin Wolf, “Comment on Andrew G. Haldane, ‘Control Rights (And Wrongs),’” Wincott Annual Memorial Lecture, October 24, 2011. 4. See, among other works, Gar Alperovitz, America beyond Capitalism: Reclaiming Our Wealth, Our Liberty, and Our Democracy (Hoboken, NJ: Wiley, 2004). 5. John Dewey, “Education vs. Trade-Training—Dr. Dewey’s Reply,” New Republic 3, no. 28 (1915), p. 42. 6. Quoted in Westbrook, John Dewey and American Democracy, p. 440. 7.


pages: 726 words: 172,988

The Bankers' New Clothes: What's Wrong With Banking and What to Do About It by Anat Admati, Martin Hellwig

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Andrei Shleifer, asset-backed security, bank run, banking crisis, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, bonus culture, break the buck, Carmen Reinhart, central bank independence, centralized clearinghouse, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, diversified portfolio, en.wikipedia.org, Exxon Valdez, financial deregulation, financial innovation, financial intermediation, fixed income, George Akerlof, Growth in a Time of Debt, income inequality, invisible hand, Jean Tirole, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, Larry Wall, light touch regulation, London Interbank Offered Rate, Long Term Capital Management, margin call, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Nick Leeson, Northern Rock, open economy, peer-to-peer lending, regulatory arbitrage, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, Satyajit Das, shareholder value, sovereign wealth fund, technology bubble, The Market for Lemons, the payments system, too big to fail, Upton Sinclair, Yogi Berra

We thank Viral Acharya, Philippe Aghion, Sheila Bair, Mary Barth, Nadine Baudot-Trajtenberg, Jane Baxter, Lawrence Baxter, Urs Birchler, Niklaus Blattner, Jürg Blum, Arnoud Boot, Claudio Borio, Michael Boskin, John Boyd, Dick Brealey, Claudia Buch, Charles Calomiris, John Cochrane, Peter DeMarzo, Thomas Gehrig, Hans Gersbach, Hendrik Hakenes, Andy Haldane, Ian Harrison, Richard Herring, Tom Hoenig, Rob Johnson, Ed Kane, Dennis Kelleher, Mervyn King, David Kreps, Sebastian Mallaby, Maureen McNichols, Hamid Mehran, Allan Meltzer, David Miles, Chuck Morris, Manfred J. M. Neumann, George Parker, Francisco Perez-Gonzalez, Thierry Philipponnat, John Plender, Barbara Rehm, Isabel Schnabel, David Skeel, Chester Spatt, Ilya Strebulaev, Martin Summer, Elu von Thadden, Adair Turner, Jim Van Horne, Larry Wall, Beatrice Weder di Mauro, Juli Weiss, Mark Whitehouse, Martin Wolf, Daniel Zimmer, and Jeff Zwiebel. Some of them may disagree with our views, but all of them have contributed to the book with their insights. In the book we are critical of politicians and regulators, but many do not fit our characterizations. Our thinking has been influenced, in particular, by serving on policy committees. We are grateful for the opportunity provided by these committees to apply academic thinking to practical questions and to discuss the issues with politicians and administrators, central bankers and regulators, corporate executives, and other academics.

This lack of implementation helped FDIC-insured banks to be stronger than European banks or U.S. investment banks regulated by the Securities and Exchange Commission, which allowed the use of risk weights.41 In a major innovation, Basel III proposes to introduce regulation based on a so-called leverage ratio. This regulation will set a minimum level for equity relative to total assets. Basel III fixed this minimum level at 3 percent.42 If this number looks outrageously low, it is because the number is outrageously low. When the agreement was announced in September 2010, Martin Wolf’s column in the Financial Times was appropriately titled “Basel: The Mouse That Did Not Roar.”43 He sarcastically noted that the claim that the requirement triples the previous requirements “sounds tough, but only if one fails to realize that tripling almost nothing does not give one very much.” Banks’ having 3 percent equity is akin to Kate’s having $9,000 in equity and a mortgage of $291,000 funding a $300,000 house.

Noyer had warned against “excessive capital cushions” and insisted that the French banks’ holdings of Greek debt were not a reason for particular concern.5 In international negotiations about the reform of banking regulation over the past few years, France has consistently opposed any tightening of regulation. In Chapter 11 we referred to the characterization of Basel III as “The Mouse That Did Not Roar” in the title of Martin Wolf’s column in the Financial Times. The watering down of regulatory reform was largely due to the efforts of France, Germany, and Japan.6 Many politicians exhibit a remarkable discrepancy between speech and action. In public speech they are often critical of banks, but they do little to curb the risks that banks impose on taxpayers. Yet the French and German politicians who resist tighter regulation should know from their own experiences that bank bailouts are very expensive.7 Politicians, regulators, supervisors, and others often align themselves with bankers because they want to promote their countries’ banks’ interests in international competition.


pages: 322 words: 77,341

I.O.U.: Why Everyone Owes Everyone and No One Can Pay by John Lanchester

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asset-backed security, bank run, banking crisis, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black-Scholes formula, Celtic Tiger, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, diversified portfolio, double entry bookkeeping, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, George Akerlof, greed is good, hindsight bias, housing crisis, Hyman Minsky, intangible asset, interest rate swap, invisible hand, Jane Jacobs, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, laissez-faire capitalism, light touch regulation, liquidity trap, Long Term Capital Management, loss aversion, Martin Wolf, money market fund, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, negative equity, new economy, Nick Leeson, Norman Mailer, Northern Rock, Own Your Own Home, Ponzi scheme, quantitative easing, reserve currency, Right to Buy, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, South Sea Bubble, statistical model, The Great Moderation, the payments system, too big to fail, tulip mania, value at risk

When we look at who could have done something about this, there are two sets of people who might have raised the alarm: economists and journalists. It’s more or less against the law ever to praise the media for anything, but the fact is that print journalists did speak up in public about the risks building up and the vulnerability of the global financial system. Larry Elliott in The Guardian, Martin Wolf and Gillian Tett in the Financial Times, and even the often overly gung ho Economist all warned about the dangers—and had the satisfaction denied to Cassandra of everyone realizing that they’d been right all along. (Remember, Cassandra’s curse was that no one would believe her.) It may be, as Judge Richard Posner has observed, that journalists have a built-in affinity for narratives of disaster and collapse: the press, as he puts it, “thrives on drama and therefore conflict and alarms, discord and discontinuities.”14 (It’s also true, of course, that there were industrial quantities of property market puffery and hype, a considerable amount of which took place on television.)

I have also been helped by the work of a number of journalists and commentators. I’d say, as an outsider to economics, that the standard of reporting and writing and commentary in this milieu is bracingly high. I have learnt an enormous amount from the work of Evan Davis, Stephanie Flanders, and Robert Peston at the BBC—Flanders and Peston have high-quality blogs, in addition to their old-media work; Philip Coggan, John Kay, Gillian Tett, and Martin Wolf at the Financial Times; Larry Elliott at The Guardian; and although as a Nobel Prize winner he is too grand to count, Paul Krugman at The New York Times is also a superb journalist and commentator. There is a great deal of lively economic commentary on the Internet, and the best clearinghouse for the debates is the superb blog run by Tyler Cowen and Alex Tabarrok, Marginal Revolution, at www.marginalrevolution.com.


pages: 296 words: 82,501

Stuffocation by James Wallman

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3D printing, Airbnb, back-to-the-land, Berlin Wall, big-box store, Black Swan, BRICs, carbon footprint, Cass Sunstein, clean water, collaborative consumption, commoditize, creative destruction, crowdsourcing, David Brooks, Fall of the Berlin Wall, happiness index / gross national happiness, high net worth, income inequality, Intergovernmental Panel on Climate Change (IPCC), James Hargreaves, Joseph Schumpeter, Kitchen Debate, Martin Wolf, mass immigration, McMansion, means of production, Nate Silver, Occupy movement, Paul Samuelson, post-industrial society, Post-materialism, post-materialism, Richard Florida, Richard Thaler, sharing economy, Silicon Valley, Simon Kuznets, Skype, spinning jenny, The Signal and the Noise by Nate Silver, Thorstein Veblen, Tyler Cowen: Great Stagnation, World Values Survey, Zipcar

Richard Nixon in the Kitchen and The Best Idea of the 20th Century Sources for the story of Nixon, Khrushchev and the kitchen include William Safire, “The Cold War’s Hot Kitchen”, New York Times, 23 July 2009; also, various articles in BBC.co.uk, New York Times archives, History.com, and old newscasts on YouTube.com. Read the transcript – to which I’ve made minor alterations for the sake of grammar and ease of reading – at the Freedom of Information Act Reading Room (www.foia.cia.gov). The best idea of the 20th century? For an excellent reading of the benefits of capitalism, read Michael Schuman, “How To Save Capitalism”, Time Magazine, 30 January 2012; Martin Wolf, “Is the Age of Unlimited Growth Over?”, Financial Times, 3 October 2012; and Stephen Moore and Julian L. Simon, “The Greatest Century That Ever Was: 25 Miraculous Trends of the Past 100 Years”, Policy Analysis, No. 364, December 15, 1999. “By 2030, so many believe, we may even have eradicated poverty.” Read more about ending poverty in “Poverty: Not Always with Us”, The Economist, 1 June 2013, and Mark Tran, “New UN goals call for end to extreme poverty by 2030”, The Guardian, 30 May 2013.

The Pilot and the Pig’s Ear For more on Bompas and Parr, visit www.jellymongers.co.uk “Everyone is an autobiographer nowadays” “We live in a cluttered time of too much information” We consume the equivalent of 174 newspapers’ worth of information every day, according to a researcher at the University of Southern California called Dr Martin Hilbert, as reported in Richard Alleyn, “Welcome to the information age – 174 newspapers a day”, Daily Telegraph, 11 February 2011. CHAPTER THIRTEEN The Experientialists Who Love Stuff “Consumer spending makes up around 65% of the British, and just above 70% of the US economy” Various sources, including: Martin Wolf, “Britain must fix its banks – not its monetary policy”, Financial Times, 6 June 2013; Hale Stewart, “Consumer Spending and the Economy”, FiveThirtyEight, New York Times, 19 September 2010. The Secret Loot in the Experience Economy For more on Secret Cinema, visit www.secretcinema.org. Fabien Riggall once boasted about getting people to pay £50 each to see a film Read Nick Curtis, “Secret Cinema: how to get 25,000 people to pay £50 for a film ticket, without knowing what the film is”, Evening Standard, 7 December 2012.


pages: 232 words: 77,956

Private Island: Why Britain Now Belongs to Someone Else by James Meek

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Affordable Care Act / Obamacare, Berlin Wall, business continuity plan, call centre, clean water, Deng Xiaoping, Etonian, HESCO bastion, housing crisis, illegal immigration, Martin Wolf, medical bankruptcy, Mikhail Gorbachev, post-industrial society, pre–internet, price mechanism, Right to Buy, risk tolerance, road to serfdom, Ronald Reagan, Rubik’s Cube, Skype, sovereign wealth fund, Washington Consensus, working poor

Then the customers will still pay for water according to Ofwat’s assumptions, but shareholders will pocket the difference between the two. And that, Helm says, is exactly what happened. ‘Investors,’ he wrote, ‘now contemplate an extraordinary open goal … The scale of this transfer [from customers to shareholders] is enormous.’ In an article in the Financial Times inspired by Helm’s analysis, Martin Wolf wrote: ‘Investors have been able to buy the companies (BAA and the water companies, for example), replace the equity with debt and enjoy a licence to print money. Professor Helm estimates that this financial arbitrage has been worth up to £1 billion a year, at the expense of the customers, predominantly in water. This is, quite simply, a scandal.’ As if this wasn’t bad enough, Helm pointed out that the huge recent increase in utilities’ debt threatened the stability of the riskier side of their business, the day-to-day operations.

An incredible 76 per cent of all bank loans in Britain go to property, and 64 per cent of that to residential mortgages. That is money that could be spent on lending to other, more productive businesses. Yet it is so large a share of banks’ assets that the kind of radical reform of the planning and land ownership system Griffith wants to see might, by lowering house and land prices, bring the banks to their knees again. As Martin Wolf wrote in a despairing attack on Help to Buy in the Financial Times, ‘a deregulated and dynamic housing supply could spell financial and political Armageddon.’ Against this is David Orr’s prescription: to increase housing supply at the other end of the market with a relatively small increase in government funding to housing associations, and to hand council housing over to a new set of European-style municipal housing agencies that could borrow money without adding to the national debt.


pages: 249 words: 66,383

House of Debt: How They (And You) Caused the Great Recession, and How We Can Prevent It From Happening Again by Atif Mian, Amir Sufi

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Andrei Shleifer, asset-backed security, balance sheet recession, bank run, banking crisis, Ben Bernanke: helicopter money, break the buck, Carmen Reinhart, collapse of Lehman Brothers, creative destruction, debt deflation, Edward Glaeser, en.wikipedia.org, financial innovation, full employment, high net worth, Home mortgage interest deduction, housing crisis, Joseph Schumpeter, Kenneth Rogoff, liquidity trap, Long Term Capital Management, market bubble, Martin Wolf, money market fund, moral hazard, mortgage debt, negative equity, paradox of thrift, quantitative easing, Robert Shiller, Robert Shiller, school choice, shareholder value, the payments system, the scientific method, tulip mania, young professional, zero-sum game

The most extreme image that comes to mind is the chairman of the Federal Reserve authorizing helicopter drops of cash. The idea of directly injecting cash into the economy may at first seem crazy, but reputable economists and commentators have suggested exactly such a policy during severe economic downturns.8 Ben Bernanke, only a few years before he was chairman of the Fed, suggested helicopter drops for Japanese central bankers in the 1990s, earning the nickname “Helicopter Ben.”9 Financial Times columnist Martin Wolf wrote in February 2013 that “the view that it is never right to respond to a financial crisis with monetary financing of a consciously expanded fiscal deficit—helicopter money, in brief—is wrong. It simply has to be in the toolkit.”10 Willem Buiter used rigorous modeling to show that such helicopter drops would in fact help an economy trapped at the zero lower bound on nominal interest rates.11 It would be best if the helicopters targeted indebted areas of the country to drop cash.

Richard Koo, “The World in Balance Sheet Recession: What Post-2008 West Can Learn from Japan 1990–2005” (presentation, “Paradigm Lost: Rethinking Economics and Politics” conference, Berlin, April 15, 2012), http://ineteconomics.org/conference/berlin/world-balance-sheet-recession-what-post-2008-west-can-learn-japan-1990-2005. 8. The most cited reference to such helicopter drops of money is Milton Friedman, “The Optimum Quantity of Money,” in The Optimum Quantity of Money and Other Essays (Chicago: Aldine, 1969), 1–50. 9. Ben Bernanke, “Japanese Monetary Policy: A Case of Self-Induced Paralysis” (paper, Princeton University, 1999). 10. Martin Wolf, “The Case for Helicopter Money,” Financial Times, February 12, 2013. 11. Willem H. Buiter, “Helicopter Money: Irredeemable Fiat Money and the Liquidity Trap; Or, Is Money Net Wealth after All?” (working paper, January 31, 2004), http://www.willembuiter.com/helinber.pdf. 12. Alan Boyce, Glenn Hubbard, Christopher Mayer, and James Witkin, “Streamlined Refinancings for Up to 13 Million Borrowers” (draft policy proposal, Columbia Business School, Columbia University, June 13, 2012), http://www8.gsb.columbia.edu/sites/realestate/files/BHMW-V15-post.pdf. 13.


pages: 270 words: 79,180

The Middleman Economy: How Brokers, Agents, Dealers, and Everyday Matchmakers Create Value and Profit by Marina Krakovsky

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Affordable Care Act / Obamacare, Airbnb, Al Roth, Black Swan, buy low sell high, Chuck Templeton: OpenTable, Credit Default Swap, cross-subsidies, crowdsourcing, disintermediation, diversified portfolio, experimental economics, George Akerlof, Goldman Sachs: Vampire Squid, income inequality, index fund, information asymmetry, Jean Tirole, Kenneth Arrow, Lean Startup, Lyft, Marc Andreessen, Mark Zuckerberg, market microstructure, Martin Wolf, McMansion, Menlo Park, Metcalfe’s law, moral hazard, multi-sided market, Network effects, patent troll, Paul Graham, Peter Thiel, pez dispenser, ride hailing / ride sharing, Robert Metcalfe, Sand Hill Road, sharing economy, Silicon Valley, social graph, supply-chain management, TaskRabbit, The Market for Lemons, too big to fail, trade route, transaction costs, two-sided market, Uber for X, ultimatum game, Y Combinator

Carol Shamon, the San Diego-based modeling agent introduced in the Certifier chapter, says that though she’s a nice person, she sometimes becomes a fierce “mama bear” to protect the talent she represents. Even a lawyer who’s a good Insulator doesn’t see himself as merely an expert in the law. That’s a point made by Hubert Willman, a seasoned attorney who negotiates deals at the mergers and acquisitions firm Martin Wolf based in Danville, California.21 When one company buys another or goes up for sale, many millions of dollars and entire careers are at stake; therefore, it makes sense that companies typically turn to professionals to negotiate the deal. Even serial entrepreneurs have limited experience selling a company, but professional mergers and acquisitions firms do it every day. It’s more than expertise that these firms offer; they create a protective layer between buyers and sellers.

Power, 165 Jerry Maguire, 174, 189 Jin, Ginger, 85, 102 Johnson & Johnson, 54 Lay, Ken, 41 Leone, Doug, 21 Lerner, Josh, 133 leveraging relationships, 93–4 Lewis, Michael, 112 Li & Fung, 140 likability, 177–8 limited partners (LPs), 9, 19 LinkedIn, 4, 22–3, 27, 36, 54–5, 61 Long Tail, The (Anderson), 134–5 Lyft, 6, 38, 124, 126, 136–7 Maples, Mike, 5–6, 124–7, 129–33, 136 “Market for Lemons, The” (Akerlof), 65 Marks, Howard, 127 Martin Wolf, 190 Match.com, 38, 42 McAdams, David, 88, 90, 93 McKenney, Julie, 94–7, 100, 107 McMaster-Carr, 141 Medallion Rug Gallery, 19, 28 Medical Group Management Association (MGMA), 187–8 middlemen Parasites, 8–11, 89, 118 Partners, 8–9, 13 Pets, 9, 12–13 Predators, 9, 11–13, 112 stereotypes about, 10 see also Bridges; Certifiers; Concierges; Enforcers; Insulators; Risk Bearers Miura-Ko, Ann, 124, 131–2 MRO (Maintenance, Repair, Operations) industry, 141 MySpace, 80 National Automobile Dealers Association, 11 Neale, Margaret, 192 negative externalities, 12 negotiation, 176–7, 179, 183–9, 191–2 Nesbit, Lynn, 185 Netflix, 135 NFL, 173–4, 179–80, 183 Nozad, Pejman, 18–20, 22–3, 26–8, 40–2 OpenTable, 78–84, 108–9 opportunism, 74, 92, 104–5, 108 Parasites, 8–11, 89, 118 Parker, Eugene, 180 Partners, 8–9, 13 Pejman Mar, 19 Pets, 9, 12–13 Petzinger, Thomas, 8 Pfeffer, Jeffrey, 177 Poe, Ellison, 8, 146–8, 153, 158–9, 169 pooling, 137–42 PowerSellers, 60, 67, 85–6, 134, 164 Predators, 9, 11–13, 112 Priceline, 78 Prisco, Pete, 180 Proposers, 183–4 Rachleff, Andy, 127 Radford, R.


pages: 261 words: 81,802

The Trouble With Billionaires by Linda McQuaig

battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, British Empire, Build a better mousetrap, carried interest, collateralized debt obligation, computer age, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Douglas Engelbart, Douglas Engelbart, employer provided health coverage, financial deregulation, fixed income, full employment, George Akerlof, Gini coefficient, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of the telephone, invention of the wheel, invisible hand, Isaac Newton, Jacquard loom, Jacquard loom, Joseph-Marie Jacquard, laissez-faire capitalism, land tenure, Mark Zuckerberg, market bubble, Martin Wolf, mega-rich, minimum wage unemployment, Mont Pelerin Society, Naomi Klein, neoliberal agenda, Northern Rock, offshore financial centre, Paul Samuelson, Plutocrats, plutocrats, Ponzi scheme, pre–internet, price mechanism, purchasing power parity, RAND corporation, rent-seeking, rising living standards, road to serfdom, Ronald Reagan, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Tobin tax, too big to fail, trickle-down economics, Vanguard fund, very high income, wealth creators, women in the workforce

Paulson’s hit helped trigger the collapse of global financial markets, leaving tens of millions suffering around the world. The activities of Paulson, and others like him on Wall Street, could surely in no way be construed as socially beneficial. Their actions do nothing to improve the efficient allocation of capital – the function that financial markets are supposed to perform. Instead, they amount to little more than gambling, which has no social utility. Martin Wolf, a columnist for the Financial Times, noted that Paulson’s moves ‌served ‘absolutely no useful purpose’.4 By buying insurance on CDO investments in which he had no ownership stake, Paulson wasn’t protecting himself from losses, but rather was placing a bet that the CDO investments would fail – like buying insurance on someone else’s car, hoping it would crash. But it was worse than that. Paulson managed to get Goldman Sachs to create faulty CDOs, so that he would have excellent odds in betting against them.

.), (Cambridge: Cambridge University Press, 1994), pp. 91–2. ‌17 Frank E. Manuel & Fritzie P. Manuel, Utopian Thought in the Western World (Cambridge, MA: Belknap Press, 1979), p. 466. ‌18 Bardini, Bootstrapping, pp. 6–14. ‌19 Alperovitz & Daly, Unjust Deserts, p. 144. 6 Why Other Billionaires Are Even Less Deserving ‌1 Quoted in Gregory Zuckerman, The Greatest Trade Ever (New York: Random House, 2009), p. 192. ‌2 Ibid., p. 95. ‌3 Ibid., pp. 3, 8. ‌4 Martin Wolf and Simon Johnson, online interview, Yahoo Originals, 21 April 2010. ‌5 This analogy is an adaptation of one made by Phil Angelides, head of the federally appointed Financial Crisis Inquiry Commission, and cited in Dean Baker, ‘Goldman’s Scam #5476, Yes, It Can Get Even Worse’, The Guardian, 19 April 2010. ‌6 Wolf and Johnson interview. ‌7 Henry Paulson is not related to John Paulson. ‌8 In fact, Goldman bought more of this insurance from AIG than any other bank.


pages: 75 words: 22,220

Occupy by Noam Chomsky

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corporate governance, corporate personhood, deindustrialization, Howard Zinn, income inequality, invisible hand, Martin Wolf, Nate Silver, Occupy movement, Plutonomy: Buying Luxury, Explaining Global Imbalances, precariat, Ralph Nader, Ronald Reagan, too big to fail, union organizing

At that time, there was also egalitarianism: the lowest quintile did as well as the highest quintile and it absorbed into the mainstream society. Groups that had been excluded from society, African Americans for example, could finally be integrated into society. That came to an end in the 1970s when, for one thing, there was a shift towards increasing the role of finance in the society. One of the great financial correspondents, Martin Wolf, wrote recently that the financial systems are wiping out functioning markets the way larva destroys a host. He’s one of the most respected financial economists in the world and not a radical. That’s what the effect of the financial system has been. Combined with this were corporate decisions to ship production abroad. It’s not a law of nature, again. You can have decent working conditions and production at home and abroad, but they made more profit that way.


pages: 484 words: 136,735

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

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bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, bonus culture, Bretton Woods, BRICs, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Edward Glaeser, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, global rebalancing, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage debt, new economy, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

This financial revolution was responsible for the boom-bust cycle that exploded in the 2007-09 crisis, but the changes in traditional attitudes to debt, in property values, and in views about reasonable levels of borrowing are unlikely to be fully reversed even after the crisis. The first two of these four megatrends—the emergence of three billion new capitalists, both producers and consumers, in Asia and the unification of the world economy into a single market—have been discussed at length in many excellent studies, most notably Martin Wolf’s magisterial book, Why Globalization Works.4 The transformative power of the other two megatrends, by contrast, has not been as widely recognized. The next two chapters will therefore look in detail at these less familiar transformations. The theme in the background of this discussion will be the way in which all the global megatrends reinforced one another, first in creating the period of remarkable economic stability that came to be known as the Great Moderation and then snapping back with a vengeance in the crisis of 2007-09.

Although this term was invented by the sociologist Daniel Bell in The Coming of the Post-Industrial Society, its relationship to information technology was developed most convincingly by Toffler in his book The Third Wave. Ignored by “serious” academics, Toffler was the only modern Western economist or social scientist to appear in a list of “Fifty foreigners shaping China’s modern development” published by People’s Daily in 2006. http://english.people.com.cn/200608/03/eng20060803_289510.html. 4 Martin Wolf, Why Globalization Works. Chapter Six 1 Known to philosophers as Petronius’s Paradox, this statement is usually attributed to Gaius Petronius Arbiter, a Roman patrician believed to be the author of the Satyricon. Petronius’s Paradox is considered a classic example of a self-referential statement that contradicts its own premise and is therefore logically meaningless. 2 Ben Bernanke, “The Great Moderation,” remarks at the meetings of the Eastern Economic Association, Federal Reserve Board, Washington, DC, February 20, 2004. 3 Olivier Blanchard and John Simon, “The Long and Large Decline in U.S.

Senate he cosponsored tough legislation to overhaul the U.S. process for determining currency manipulation and authorizing new enforcement measures so countries like China cannot continue to get a free pass for undermining fair trade principles.” Timothy Geithner, Treasury Secretary Confirmation Hearing before the U.S. Senate Committee on Finance, January 21, 2010. Available from http://www.finance.senate.gov/sitepages/leg/LEG%202009/012209%20TFG%20Questions.pdf. See also Robert Aliber, “Tariffs Can Persuade Beijing to Free the Renminbi,” Financial Times, December 8, 2009, and Martin Wolf, “Why China’s Exchange Rate Policy Is a Common Concern,” Financial Times, December 9, 2009. 23 The most important and successful of these interventions was the Plaza Agreement of September 22, 1985, which resulted in a 40 percent devaluation of the dollar over the following eighteen months. This was followed by the Louvre Accord of February 22, 1987, which helped to stabilize the dollar-yen exchange rate for the next five years in the range of 125-150, but was subsequently blamed for contributing to the 1987 crash on Wall Street and the Japanese bubble economy of 1988-89. 24 A good summary of recent thinking is John Williamson, “The Choice of Exchange Rate Regime: The Relevance of International Experience to China’s Decision,” Lecture at the Central University of Finance and Economics in Beijing on September 7, 2004.


pages: 460 words: 122,556

The End of Wall Street by Roger Lowenstein

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Asian financial crisis, asset-backed security, bank run, banking crisis, Berlin Wall, Bernie Madoff, Black Swan, break the buck, Brownian motion, Carmen Reinhart, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fear of failure, financial deregulation, fixed income, high net worth, Hyman Minsky, interest rate derivative, invisible hand, Kenneth Rogoff, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, Martin Wolf, money market fund, moral hazard, mortgage debt, negative equity, Northern Rock, Ponzi scheme, profit motive, race to the bottom, risk tolerance, Ronald Reagan, Rubik’s Cube, savings glut, short selling, sovereign wealth fund, statistical model, the payments system, too big to fail, tulip mania, Y2K

CHAPTER 2 1 Matt Apuzzo, “Report: Banks Torpedoed Rules That Could Have Saved Them,” Associated Press, December 1, 2008. 2 PRNewswire-FirstCall, February 4, 2003 (Source: Countrywide), http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/02-04-2003/0001885208&EDATE=. 3 David Andrukonis, e-mail, September 7, 2004. 4 Mortgage Bankers Association. 5 Meredith Whitney, Oppenheimer equity research report, December 11, 2008. Household growth was 2.5 percent. 6 Martin Wolf, “Asia’s Revenge,” Financial Times, October 9, 2008, and also Martin Wolf, “Seeds of Its Own Destruction,” Financial Times, March 9, 2009. 7 Ben S. Bernanke, Sandridge Lecture, Virginia Association of Economics, Richmond, March 10, 2005. 8 Carmen M. Reinhart and Kenneth S. Rogoff, draft of “Is the 2007 U.S. Sub-Prime Financial Crisis So Different? An International Historical Comparison,” February 5, 2008; subsequently published in American Economic Review, May 2009. 9 Fannie Mae found 932 articles in a Google search of “housing bubble” in the first four months of 2005, and 1,248 such articles in just the next two months—a sharp acceleration.

My wife, Judy, with bottomless reserves of dedication and commitment, with her superior feeling for reading and for writing, teased out the hidden connections, assaulted the unclear linkages, insisted on clarity in the midst of authorial clouds, refused to be satisfied with the nearly good, the half-explained, or the almost right, and, generally, with the patience born, I trust and reciprocate, of love, helped to steer—verily to nurture—volumes of prose into something more nearly resembling a book. Words do not express. NOTES PROLOGUE 1 “Only a fifth”: Mark Zandi, Economy.com, and Robert J. Samuelson, The Great Inflation and Its Aftermath: The Past and Future of American Affluence (2008), p. 218; “debt of financial firms”: Martin Wolf, “Asia’s Revenge,” Financial Times, October 9, 2008. 2 Ben Bernanke and Mark Gertler, “Monetary Policy and Asset Price Volatility,” Economic Review, Federal Reserve Bank of Kansas City, issue Q IV (1999), pp. 17-51; and Roger Lowenstein, “The Education of Ben Bernanke,” New York Times Magazine, January 20, 2008. 3 Peter S. Goodman, “The Reckoning: Taking a Hard New Look at a Greenspan Legacy,” New York Times, October 8, 2008. 4 Robert L.


pages: 543 words: 147,357

Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society by Will Hutton

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Andrei Shleifer, asset-backed security, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Bretton Woods, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, debt deflation, decarbonisation, Deng Xiaoping, discovery of DNA, discovery of the americas, discrete time, diversification, double helix, Edward Glaeser, financial deregulation, financial innovation, financial intermediation, first-past-the-post, floating exchange rates, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, Hyman Minsky, I think there is a world market for maybe five computers, income inequality, inflation targeting, interest rate swap, invisible hand, Isaac Newton, James Dyson, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, liberal capitalism, light touch regulation, Long Term Capital Management, Louis Pasteur, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, mass immigration, means of production, Mikhail Gorbachev, millennium bug, money market fund, moral hazard, moral panic, mortgage debt, Myron Scholes, Neil Kinnock, new economy, Northern Rock, offshore financial centre, open economy, Plutocrats, plutocrats, price discrimination, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, railway mania, random walk, rent-seeking, reserve currency, Richard Thaler, Right to Buy, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, Rory Sutherland, Satyajit Das, shareholder value, short selling, Silicon Valley, Skype, South Sea Bubble, Steve Jobs, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, unpaid internship, value at risk, Vilfredo Pareto, Washington Consensus, wealth creators, working poor, zero-sum game, éminence grise

Cooley, Matthew Richardson and Ingo Walter, ‘Rethinking Compensation in Financial Firms’, both in Viral Acharya and Matthew Richardson (eds) (2009) Restoring Financial Stability: How to Repair a Failed System, John Wiley and Sons. 3 Kate Kelly, ‘Bear CEO’s Handling of Crisis Raises Issues’, Wall Street Journal, 1 November 2007, at http://online.wsj.com/article/SB119387369474078336.html. 4 Evan Thomas, ‘Rubin’s Detail Deficit’ Newsweek, 29 November 2008. 5 Andrew Haldane (2009) ‘Rethinking the Financial Network’, presentation to the Financial Students Association, Amsterdam. 6 John Kay, ‘Banks Got Burned by Their Own “Innocent Fraud”’, Financial Times, 15 October 2008, at http://www.johnkay.com/finance/573. 7 See testimony of Richard Michalek in front of the Permanent Subcommittee on Investigations on Wall Street and the Financial Crisis: The Role of Credit Rating Agencies Friday, 23 April 2010. 8 James Crotty (2009) ‘Structural Causes of the Global Financial Crisis: A Critical Assessment of the “New Financial Architecture”’, Cambridge Journal of Economics 33: 563–80. 9 Simon Johnson and James Kwak, ‘The Quiet Coup’, Atlantic Monthly,May 2009, at http://www.theatlantic.com/doc/200905/imf-advice. 10 Deniz Igan, Prachi Mishra and Thierry Tressel (2009) ‘A Fistful of Dollars: Lobbying and the Financial Crisis’, IMF Working Paper No. 09/287. 11 CRESC (2009) ‘An Alternative Report on UK Banking Reform’, ESRC Centre for Research on Socio-Cultural Change, University of Manchester. 12 Patrick Wintour, ‘Conservative Party in Hock to City, Says Nick Clegg’, Guardian, 3 May 2010, at http://www.guardian.co.uk/politics/2010/may/03/bankers-nick-clegg-david-cameron. 13 David Miller and William Dinan (2009) ‘Revolving Doors, Accountability and Transparency – Emerging Regulatory Concerns and Policy Solutions in the Financial Crisis’, report, OECD. 14 Tamsin Cave (2010) ‘An Inside Job – A Snapshot of Political Schmoozing by the City’, Spinwatch, at http://www.spinwatch.org/blogs-mainmenu29/tamasin-cave-mainmenu-107/5347-an-inside-job. 15 Joseph Zeira (1999) ‘Informational Overshooting, Booms and Crashes – The Stock Market Boom and Crash of 1929’, Journal of Monetary Economics 43 (1): 237–57. 16 World Bank (2001) Finance for Growth: Policy Choices in a Volatile World and the supporting database: Gerard Caprio and Daniel Klingbiel (2003) ‘Episodes of Systemic and Borderline Financial Crisis’, World Bank. The evidence and literature are reviewed in Martin Wolf (2008) Fixing Global Finance, Johns Hopkins University Press. 17 Claudio Borio and William White (2003) ‘Whither Monetary and Financial Stability? The Implications of Evolving Policy Regimes’, paper presented at a symposium sponsored by the Federal Reserve Bank of Kansas City. 18 Manuel Roig-Franzia, ‘Credit Crisis Cassandra’, Washington Post, 26 May 2009, at http://www.washingtonpost.com/wp-dyn/content/article/2009/05/25/AR2009052502108.html. 19 Hyman Minsky (2008) Stabilizing an Unstable Economy, McGraw-Hill Professional.

See also Julia Jones, Piyamas Nanork and Benjamin Oldroyd (2007) ‘The Role of Genetic Diversity in Nest Cooling in a Wild Honey Bee, Apis florea’, Journal of Comparative Physiology a-Neuroethology Sensory Neural and Behavioral Physiology 193 (2): 159–65. 55 Dean Amel, Colleen Barnes, Fabio Panetta and Carmelo Salleo (2004) ‘Consolidation and Efficiency in the Financial Sector: A Review of the International Evidence’, Journal of Banking and Finance 28: 2493–519. 56 ACT Response to the Turner Review of Banking Regulation, at http://www.treasurers.org/reviewbankingregulation/actresponse/0609. 57 Peter Boone and Simon Johnson, ‘Bernanke on Banking’, Economix, 19 October 2009, at http://economix.blogs.nytimes.com/2009/10/29/bernankeon-banking/. 58 Manmohan Singh (2010) ‘Collateral, Netting and Systemic Risk in the OTC Derivatives Market’, IMF Working Paper No. 10/99. 59 Michael Lewis (2010) The Big Short: Inside the Doomsday Machine, Allen Lane. Chapter Eight: The £5 Trillion Mistake 1 Carmen Reinhart and Kenneth Rogoff (2010) This Time is Different, Princeton University Press. 2 HM Treasury (2009) Pre-Budget Report 2009: Securing the Recovery: Growth and Opportunity, HMSO. See also Martin Wolf, ‘Britain’s Dismal Choice: Sharing the Losses’, Financial Times, 15 December 2009, at http://www.ft.com/cms/s/0/f693b6a4-e9af-11de-9f1f-00144feab49a,s01=1.html. 3 OECD (2009) OECD Factbook, OECD, with Treasury figures and estimates for 2008 and 2009. 4 Robert Chote, Carl Emmerson and Jonathan Shaw (eds) (2010) The Institute for Fiscal Studies Green Budget, IFS. 5 Francesco Guerrera, ‘Welch Denounces Corporate Obsessions’, Financial Times, 13 March 2009, at http://www.ft.com/cms/s/0/3ca8ec2e-0f70-11de-ba10-0000779fd2ac.html. 6 Max Hastings, ‘The End of Britain’s Long Weekend’, Financial Times, 20 December 2009, at http://www.ft.com/cms/s/0/1e9f7cdc-ed8e-11de-ba12-00144feab49a.html. 7 Internal Cabinet Office analysis. 8 Chris Giles, ‘Manufacturing Fades under Labour’, Financial Times, 2 December 2009, at http://www.ft.com/cms/s/0/f32a3392-df7a-11de-98ca-00144feab49a.html. 9 Leonard Trelawny Hobhouse (1911) Liberalism, at socserv.mcmaster.ca/econ/ugcm/3ll3/hobhouse/liberalism.pdf. 10 Buffett, Gates and Simon are all cited in Gar Alperovitz and Lew Daly (2008) Unjust Deserts: How the Rich Are Taking Our Common Inheritance and Why We Should Take It Back, The New Press. 11 Antonio Afonso, Ludger Schuknecht and Vito Tanzi (2005) ‘Public Sector Efficiency: An International Comparison’, Public Choice 123 (3–4): 321–47.

, IMF Working Paper No. 09/160. 15 Joseph Stiglitz, ‘The Dangers of Deficit Reduction’, Project Syndicate, at http://www.project-syndicate.org/commentary/stiglitz123/English. 16 International Monetary Fund (2009) ‘The State of Public Finances Cross-Country Fiscal Monitor: November 2009’, report, Tables 1 and 2 on pp. 35 and 36. 17 Robert Chote, Carl Emmerson and Jonathan Shaw (eds) (2010) The Green Budget 2010, Institute for Fiscal Studies. 18 Ibid. 19 David Willetts (2010) The Pinch: How the Baby Boomers Stole Their Children’s Future, Atlantic Books. 20 Martin Wolf, ‘China and Germany Unite to Impose Global Deflation’, Financial Times, 16 March 2010, at http://www.ft.com/cms/s/0/cd01f69e-3134-11df-8e6f-00144feabdc0.html. 21 Michael Pettis (2009) ‘Sharing the Pain: The Global Struggle over Savings’, Carnegie Endowment for International Peace Policy Brief No. 84. 22 Eswar Prasad (2009) ‘Rebalancing Growth in Asia’, NBER Working Paper No. 15169. 23 See John Garnaut, ‘China’s Runaway Growth Train on a Dangerous Course’, Sydney Morning Herald, 25 January 2010, at http://www.smh.com.au/business/chinas-runaway-growth-train-on-a-dangerous-course-20100124-msll.html.

Poisoned Wells: The Dirty Politics of African Oil by Nicholas Shaxson

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Asian financial crisis, Berlin Wall, blood diamonds, business climate, central bank independence, clean water, colonial rule, energy security, Exxon Valdez, failed state, Fall of the Berlin Wall, Hernando de Soto, income per capita, inflation targeting, Martin Wolf, mobile money, offshore financial centre, old-boy network, Ronald Reagan, Scramble for Africa, Yom Kippur War, zero-sum game

I’m not saying that authoritarianism is good; just that in fragile countries strong central governments backed by a political consensus, usually coming from a strong middle class, tend to perform better than weak, fractured ones. (Oil, by magnifying inequality and attacking the industrialized parts of the economy, often destroys the middle class.) Academic research has found that divided societies tend to be more violent, and grow more slowly, than others.45 “In a society when everyone cheats and takes or pays bribes, there is little incentive not to join in,” wrote the Financial Times commentator Martin Wolf. “Government is a monopoly for good reason. Competing bandits are bad news.” Today Nigeria has a civilian government under President Obasanjo, who was elected in 1999 as a paragon of transparency and good governance. He cleverly appointed Nigerians recruited from the overseas diaspora—less suffused with the Nigerian scramble mentality—and placed them in a self-reinforcing ring, where they would hopefully be able to trust each other even if they couldn’t trust anyone else.

Tax evasion, remember, uses exactly the same system that helps African rulers steal their citizens’ money and helps drug cartels launder their profits. The fourth argument—that tax competition between countries is good—is entirely bogus, and rests on an economic fallacy. “The notion of the competitiveness of countries, on the model of the competitiveness of companies, is nonsense,” wrote the Financial Times commentator Martin Wolf.19 Think about it this way. If a company cannot compete, it goes bankrupt and a better one takes its place; this weeds out bad firms and is a 228 Conclusion source of capitalism’s dynamism. But if a country cannot “compete,” you get a failed state. “I have never heard a coherent argument for tax competition,” said Christensen of the Tax Justice Network. “You might as well talk about environmental competition.”

Baker, Capitalism’s Achilles Heel, page 48. Senator Carl Levin, among others, suggested this one in the Omar Bongo Citibank Senate investigation, “U.S. Senate Permanent Subcommittee on Investigations Hearings on Private Banking and Money Laundering,” November 9, 1999, page 104. http://www.cato.org/pubs/pas/pa431.pdf. I am paraphrasing Raymond Baker. Baker, Capitalism’s Achilles Heel, page 180. See Martin Wolf, Why Globalization Works (New Haven, Conn.: Yale University Press, 2004), page 268; see his broad discussion of competitiveness on pages 249–277. For example, News Corp (which owns Fox News) paid an effective 6 percent tax rate—including a zero tax rate in Britain—in some years, while corporate tax rates in its main markets have been above 30 percent. See “Rupert Laid Bare,” Economist, March 18, 1999, available at http://www.economist.com/ displaystory.cfm?


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The Making of Global Capitalism by Leo Panitch, Sam Gindin

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accounting loophole / creative accounting, active measures, airline deregulation, anti-communist, Asian financial crisis, asset-backed security, bank run, banking crisis, barriers to entry, Basel III, Big bang: deregulation of the City of London, bilateral investment treaty, Branko Milanovic, Bretton Woods, BRICs, British Empire, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, central bank independence, collective bargaining, continuous integration, corporate governance, creative destruction, Credit Default Swap, crony capitalism, currency manipulation / currency intervention, currency peg, dark matter, Deng Xiaoping, disintermediation, ending welfare as we know it, eurozone crisis, facts on the ground, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, full employment, Gini coefficient, global value chain, guest worker program, Hyman Minsky, imperial preference, income inequality, inflation targeting, interchangeable parts, interest rate swap, Kenneth Rogoff, land reform, late capitalism, liberal capitalism, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, manufacturing employment, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, money: store of value / unit of account / medium of exchange, Monroe Doctrine, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, new economy, non-tariff barriers, Northern Rock, oil shock, precariat, price stability, quantitative easing, Ralph Nader, RAND corporation, regulatory arbitrage, reserve currency, risk tolerance, Ronald Reagan, seigniorage, shareholder value, short selling, Silicon Valley, sovereign wealth fund, special drawing rights, special economic zone, structural adjustment programs, The Chicago School, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, very high income, Washington Consensus, Works Progress Administration, zero-coupon bond, zero-sum game

Now if somebody has had many years of experience like me, the people you’re talking to at least think, well, this guy knows what he is talking about; he’s been through some of these firefights himself, and so we’re not dealing with somebody who doesn’t understand how we think or what we can do.79 With the political implications of bailing out a private hedge fund ruling out public funds being brought into play in this instance (as they very much had been in the Korean bailout less than nine months earlier), and with the pressure on them from the Fed by most accounts rather heavier than McDonough suggests, fourteen of Wall Street’s leading financial institutions agreed to organize a creditors’ consortium to take over LCTM and the responsibility to meet its obligations. “Suddenly,” as Martin Wolf put in the Financial Times, “investors discovered Russia was not too nuclear to fail, yet a mere hedge fund could be too big to do so.”80 But however significant, this would not have happened, nor would it have been enough, had the Fed not already started pouring funds into the banking system. Once it was decided to deny the Russians further bailout funds, US interest rates had to come down, and investors’ flight to the safety of US Treasury bonds would accommodate this—the only questions were when and by how much.

Geithner’s “Financial Stability Plan,” introduced in March 2009, followed what had gone before. The Treasury would purchase more bank stock, while emphasizing that the long-term objective was to keep the banks in private hands. The new asset-management funds the Treasury would set up to unblock financial markets (along the lines of the Resolution Trust Corporation during the Savings and Loan crisis) were accurately described by the Financial Times’s Martin Wolf: “Under the scheme, the government provides virtually all the finance and bears almost all the risk, but it uses the private sector to price the assets. In return, private investors obtain rewards—perhaps generous rewards—based on their performance via equity participation, alongside the Treasury. I think of this as the ‘vulture fund relief scheme.’”71 Amid public outrage over the millions the banks were still paying to the executives who had created the mess, President Obama justified his Treasury secretary’s plan with words very similar to Paulson’s six months earlier: “You’ve got a pretty egregious situation here that people are understandably upset about . . .

Available at imf.org. 77 See Roger Lowenstein, When Genius Failed: The Rise and Fall of Long-Term Capital Management, New York: Random House, 2000. 78 The Financial Crisis Inquiry Report, National Commission on the Causes of the Financial and Economic Crisis in the United States, New York: Public Affairs, 2011, p. 57. 79 McDonough interview, PBS, The Commanding Heights. See also his statement before the House Committee on Banking and Financial Services, 105th Congress, 2nd Session, October 1, 1998. 80 Martin Wolf, “Back to the Future,” Financial Times, October 14, 1998. 81 Paul Krugman, “Let’s Not Panic—Yet,” New York Times, August 30, 1998. Another article two days later by the chief economist of Morgan Stanley, Stephen Roach, supported this, saying that “central banks and the IMF need to focus squarely on crisis containment and put tangential considerations aside . . . I had long felt that the Federal Reserve’s next move should be to ease interest rates; now I believe it should reduce rates to stem the crisis.”


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Fault Lines: How Hidden Fractures Still Threaten the World Economy by Raghuram Rajan

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accounting loophole / creative accounting, Andrei Shleifer, Asian financial crisis, asset-backed security, assortative mating, bank run, barriers to entry, Bernie Madoff, Bretton Woods, business climate, Clayton Christensen, clean water, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, diversification, Edward Glaeser, financial innovation, fixed income, floating exchange rates, full employment, global supply chain, Goldman Sachs: Vampire Squid, illegal immigration, implied volatility, income inequality, index fund, interest rate swap, Joseph Schumpeter, Kenneth Rogoff, knowledge worker, labor-force participation, Long Term Capital Management, market bubble, Martin Wolf, medical malpractice, microcredit, money market fund, moral hazard, new economy, Northern Rock, offshore financial centre, open economy, price stability, profit motive, Real Time Gross Settlement, Richard Florida, Richard Thaler, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, school vouchers, short selling, sovereign wealth fund, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, Vanguard fund, women in the workforce, World Values Survey

Comments from Anil Kashyap, Richard Posner, Amit Seru, and Amir Sufi were very useful. I owe special thanks to Viral Acharya at New York University’s Stern School of Business, who gave me very detailed comments on the chapters on finance. I have also benefited greatly from conversations with Marshall Bouton, John Cochrane, Arminio Fraga, Shrinivas Govindarajan, David Johnson, Randall Kroszner, Charles Prince, Edward Snyder, Joyce van Grondelle, Robert Vishny, Martin Wolf, and Naomi Woods. I thank Rishabh Sinha and Swapnil Sinha for their research assistance. The time I spent at the International Monetary Fund between August 2003 and December 2006 taught me a lot about the politics of international finance. I learned a great deal from Anne Krueger and Rodrigo de Rato, as well as from my colleagues in the research department there, especially Timothy Callen, Charles Collyns, Kalpana Kochhar, Paolo Mauro, Gian Maria Milesi-Ferretti, Jonathan Ostry, Eswar Prasad, David Robinson, and Arvind Subramanian.

.: Manchester University Press, 2003), 42. 10 The photograph is widely accessible, for example on the website of the International Political Economy Zone, ipezone.blogspot.com/2007/09/flashback-camdessus-suharto-pic.html, accessed March 10, 2010. Chapter Four. A Weak Safety Net 1 I have concealed real names here. 2 The ideas in this chapter evolved out of an initial office conversation with Martin Wolf of the Financial Times, to whom I owe thanks. 3 Stacey Schreft, Aarti Singh, and Ashley Hodgson, “Jobless Recoveries and the Wait-and-See Hypothesis,” Economic Review, Federal Reserve Bank of Kansas City (4th quarter, 2005): 81–99. 4 R. Haskin and I. Sawhill, Creating an Opportunity Society (Washington, DC: Brookings Institution Press, 2009), 111. 5 Erica Groshen and Simon Potter, “Has Structural Change Contributed to a Jobless Recovery?”


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Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism by Ha-Joon Chang

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affirmative action, Albert Einstein, Big bang: deregulation of the City of London, bilateral investment treaty, borderless world, Bretton Woods, British Empire, Brownian motion, call centre, capital controls, central bank independence, colonial rule, Corn Laws, corporate governance, David Ricardo: comparative advantage, Deng Xiaoping, Doha Development Round, en.wikipedia.org, falling living standards, Fellow of the Royal Society, financial deregulation, fixed income, Francis Fukuyama: the end of history, income inequality, income per capita, industrial robot, Isaac Newton, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labour mobility, land reform, liberal world order, liberation theology, low skilled workers, market bubble, market fundamentalism, Martin Wolf, means of production, mega-rich, moral hazard, offshore financial centre, oil shock, price stability, principal–agent problem, Ronald Reagan, South Sea Bubble, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transfer pricing, urban sprawl, World Values Survey

In contrast, most developing countries do not have the capabilities to conduct research. The incentive to conduct research may have been increased, but there is no one to take advantage of it. It is like the story of my son, Jin-Gyu, which I discussed in chapter 3. If the capability is not there, it does not matter what the incentives are. This is why even the renowned British financial journalist Martin Wolf, a self-proclaimed defender of globalization (despite his full awareness of its problems and limitations), describes IPR as ‘a rent-extraction device’ for most developing countries, ‘with potentially devastating consequences for their ability to educate their people (because of copyright), adapting designs for their own use (ditto) and deal with severe challenges of public health’.48 As I keep emphasizing, the foundation of economic development is the acquisition of more productive knowledge.

Of course, neo-liberals are not unique in holding such a view. But what distinguishes them is their belief that this relationship is mainly, if not exclusively, mediated by the (free) market. They argue that democracy promotes free markets, which, in turn, promote economic development, which then promotes democracy: ‘The market underpins democracy, just as democracy should normally strengthen the market’, writes Martin Wolf, the British financial journalist, in his renowned book, Why Globalisation Works.20 According to the neo-liberal view, democracy promotes free markets because a government that can be unseated without resorting to violent measures has to be restrained in its predatory behaviour. If they don’t have to worry about losing power, rulers can impose excessive taxes with impunity and even confiscate private property, as numerous autocrats have done throughout history.When this happens, incentives to invest and generate wealth are destroyed and market forces distorted, impeding economic development.


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Servant Economy: Where America's Elite Is Sending the Middle Class by Jeff Faux

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back-to-the-land, Bernie Sanders, Black Swan, Bretton Woods, BRICs, British Empire, call centre, centre right, cognitive dissonance, collateralized debt obligation, collective bargaining, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, currency manipulation / currency intervention, David Brooks, David Ricardo: comparative advantage, falling living standards, financial deregulation, financial innovation, full employment, hiring and firing, Howard Zinn, Hyman Minsky, illegal immigration, indoor plumbing, informal economy, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, lake wobegon effect, Long Term Capital Management, market fundamentalism, Martin Wolf, McMansion, medical malpractice, mortgage debt, Myron Scholes, Naomi Klein, new economy, oil shock, old-boy network, Paul Samuelson, Plutocrats, plutocrats, price mechanism, price stability, private military company, Ralph Nader, reserve currency, rising living standards, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, school vouchers, Silicon Valley, single-payer health, South China Sea, statistical model, Steve Jobs, Thomas L Friedman, Thorstein Veblen, too big to fail, trade route, Triangle Shirtwaist Factory, union organizing, upwardly mobile, urban renewal, War on Poverty, We are the 99%, working poor, Yogi Berra, Yom Kippur War

Prominent economists, including Nobel Prize winners Paul Krugman and Joseph Stiglitz, said that the stimulus was too small. Krugman later noted that it was a matter of historical record that countries hit by a severe financial crisis normally experience long periods of economic pain, so “the inadequacy of the stimulus was obvious from the beginning.”7 When the plan was made public in January 2009, columnist Martin Wolf of the Financial Times complained that the deficit should be allowed to become larger—and continue for a long time. “The US,” he wrote, “must run big fiscal deficits if it is to sustain full employment.”8 Summers himself told ABC News in February 2009 that the economic crisis was “worse than any time since the Second World War. It’s worse than, I think, than most economists like me ever thought we would see.”9 Some White House insiders later said that the stimulus had to be modest because it would have been hard to spend the money fast enough (and that it would take time for federal spending to work its way into the economy was an argument for moving fast).

“Obama on ‘Renewing the Economy,’” transcript of speech, New York Times, March 27, 2008. 5. Barack Obama, “House upon a Rock,” speech at Georgetown University, April 14, 2009, http://www.whitehouse.gov/blog/09/04/14/The-House-Upon-a-Rock. 6. Gerald F. Seib, “In Crisis, Opportunity for Obama,”Wall Street Journal, November 21, 2008. 7. Paul Krugman, “Falling into the Chasm,” New York Times, October 24, 2010. 8. Martin Wolf, “Why Obama’s Plan Is Still Inadequate and Incomplete,”Financial Times, January 13, 2009. 9. “Larry Summers and Michael Steele,” This Week with Christiane Amanpour, ABC News, February 8, 2009. 10. CNN Politics, Election Center, November 24, 2010, http://www.cnn.com/ELECTION/2010/results/polls.main. 11. Andrew Gelman, “Unsurprisingly, More People Are Worried about the Economy and Jobs Than about Deficit,” Statistical Modeling, Causal Interference, and Social Science, June 19, 2010, http://www.stat.columbia.edu/~cook/movabletype/archives/2010/06/unsurprisingly.html;Ryan Grim, “Mayberry Machiavellis: Obama Political Team Handcuffing Recovery,” Huffington Post, July 6, 2010, http://www.huffingtonpost.com/2010/07/06/mayberry-machiavellis-oba_n_636770.html. 12.


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The Internet Is Not the Answer by Andrew Keen

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3D printing, A Declaration of the Independence of Cyberspace, Airbnb, AltaVista, Andrew Keen, augmented reality, Bay Area Rapid Transit, Berlin Wall, bitcoin, Black Swan, Bob Geldof, Burning Man, Cass Sunstein, citizen journalism, Clayton Christensen, clean water, cloud computing, collective bargaining, Colonization of Mars, computer age, connected car, creative destruction, cuban missile crisis, David Brooks, disintermediation, Donald Davies, Downton Abbey, Edward Snowden, Elon Musk, Erik Brynjolfsson, Fall of the Berlin Wall, Filter Bubble, Francis Fukuyama: the end of history, Frank Gehry, Frederick Winslow Taylor, frictionless, full employment, future of work, gig economy, global village, Google bus, Google Glasses, Hacker Ethic, happiness index / gross national happiness, income inequality, index card, informal economy, information trail, Innovator's Dilemma, Internet of things, Isaac Newton, Jaron Lanier, Jeff Bezos, job automation, Joseph Schumpeter, Julian Assange, Kevin Kelly, Kickstarter, Kodak vs Instagram, Lean Startup, libertarian paternalism, lifelogging, Lyft, Marc Andreessen, Mark Zuckerberg, Marshall McLuhan, Martin Wolf, Metcalfe’s law, move fast and break things, move fast and break things, Nate Silver, Network effects, new economy, Nicholas Carr, nonsequential writing, Norbert Wiener, Norman Mailer, Occupy movement, packet switching, PageRank, Paul Graham, peer-to-peer, peer-to-peer rental, Peter Thiel, Plutocrats, plutocrats, Potemkin village, precariat, pre–internet, RAND corporation, Ray Kurzweil, ride hailing / ride sharing, Robert Metcalfe, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Silicon Valley ideology, Skype, smart cities, Snapchat, social web, South of Market, San Francisco, Steve Jobs, Steve Wozniak, Steven Levy, Stewart Brand, TaskRabbit, Ted Nelson, telemarketer, The Future of Employment, the medium is the message, the new new thing, Thomas L Friedman, Tyler Cowen: Great Stagnation, Uber for X, urban planning, Vannevar Bush, Whole Earth Catalog, WikiLeaks, winner-take-all economy, working poor, Y Combinator

And, everyone’s favorite, ROBOTS,” wrote the Atlantic’s Derek Thompson in 2014 about our increasing concern with the elimination of jobs from the economy.17 As if to mark (or perhaps mourn) the twenty-fifth anniversary of the Web, it seems as if 2014 is the year that we’ve finally fully woken up to what the Wall Street Journal columnist Daniel Akst dubs “automation anxiety.”18 The cover of the one business magazine that I’d read on the flight from Chicago to Rochester, for example, featured the image of a deadly tornado roaring through a workspace. “Coming to an office near you . . .,” it warned about what technology will do to “tomorrow’s jobs.”19 Many others share this automation anxiety. The distinguished Financial Times economics columnist Martin Wolf warns that intelligent machines could hollow out middle-class jobs, compound income inequality, make the wealthy “indifferent” to the fate of everyone else, and make a “mockery” of democratic citizenship.20 “The robots are coming and will terminate your jobs,”21 worries the generally cheerful economist Tim Harford in response to Google’s acquisition in December 2013 of Boston Dynamics, a producer of military robots such as Big Dog, a three-foot-long, 240-pound, four-footed beast that can carry a 340-pound load and climb snowy hiking trails.

,” Guardian, January 21, 2012. 14 Jason Farago, “Our Kodak Moments—and Creativity—Are Gone,” Guardian, August 23, 2013, theguardian.com/commentisfree/2013/aug/23/photography-photography. 15 Nick Brown, “US Judge Approves Kodak Plan to Exit Bankruptcy,” Reuters, August 20, 2013, reuters.com/article/2013/08/20/us-kodak-idUSBRE97J0W820130820. 16 Julie Creswell, “Kodak’s Fuzzy Future,” New York Times, May 3, 2013, dealbook.nytimes.com/2013/05/03/after-bankruptcy-a-leaner-kodak-faces-an-uphill-battle. 17 Derek Thompson, “What Jobs Will the Robots Take?,” Atlantic, January 23, 2014. 18 Daniel Akst, “Automation Anxiety,” Wilson Quarterly, Summer 2013. 19 “Coming to an Office Near You . . .” Economist, January 18 , 2014. 20 Martin Wolf, “If Robots Divide Us, They Will Conquer,” Financial Times, February 4, 2014. 21 Tim Harford, “The Robots Are Coming and Will Terminate Your Jobs,” Financial Times, December 28–29, 2013. 22 Ibid. 23 Nicholas Carr, The Big Switch: Rewiring the World, from Edison to Google (New York: Norton, 2008), p. 113. 24 Nicholas Carr, The Glass Cage: Automation and Us (New York: Norton, 2014), p. 198. 25 Carole Cadwallader, “Are the Robots About to Rise?


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The Cost of Inequality: Why Economic Equality Is Essential for Recovery by Stewart Lansley

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banking crisis, Basel III, Big bang: deregulation of the City of London, Bonfire of the Vanities, borderless world, Branko Milanovic, Bretton Woods, British Empire, business process, call centre, capital controls, collective bargaining, corporate governance, corporate raider, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, Edward Glaeser, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, Goldman Sachs: Vampire Squid, high net worth, hiring and firing, Hyman Minsky, income inequality, James Dyson, Jeff Bezos, job automation, John Meriwether, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, laissez-faire capitalism, light touch regulation, Long Term Capital Management, low skilled workers, manufacturing employment, market bubble, Martin Wolf, mittelstand, mobile money, Mont Pelerin Society, Myron Scholes, new economy, Nick Leeson, North Sea oil, Northern Rock, offshore financial centre, oil shock, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, Right to Buy, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, The Great Moderation, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, Tyler Cowen: Great Stagnation, Washington Consensus, Winter of Discontent, working-age population

Leveraging meant the banks could, apparently miraculously, turn money into more money, inflating returns along with fees and bonuses. Banks would turn deposits of a few billion pounds into lending parcels worth twenty or thirty times this amount, or in some cases even more. ‘The essence of the contemporary monetary system is the creation of money, out of nothing, by private banks’ often foolish lending’, wrote Financial Times columnist, Martin Wolf in 2010.194 In 1974, new rules had been drawn up by global finance regulators meeting in the historic Swiss city of Basel about the level of capital banks were required to hold. Under Basel 1, as it was called, banks were required to keep liquid capital reserves of at least eight per cent of their lending and investment. Yet banks soon found a set of obscure devises for by-passing these rules, mostly through the creation of more and more exotic, and highly risky, financial instruments called derivatives.

They have much more to do with rising asset prices driven by excess profits and unsustainable credit, fuelled by financial deregulation. This has also been the main cause of the upsurge in financial crises, most of them associated with a torrent of currency, stock or property speculation. In the two decades from 1950 there were no banking crises and relatively few financial crises. Since the end of the 1970s, the number of such crises has mushroomed. As the Financial Times columnist, Martin Wolf, has put it, ‘financial liberalisation and financial crises go together like a horse and carriage’.230 In October 1987, the world’s leading stock markets crashed, their largest fall in a day since the crash of 1929. A serious fall-out for the world economy was only averted by a huge injection of liquidity by the Federal Reserve and the Bank of England. From the beginning of the 1980s, the number of banking failures in the US started rising sharply, a problem exacerbated by the impact of bank deregulation. 231 In 1989, the bursting of a serious property bubble in Japan, triggered by a series of bank liquidity crises, led to a decade-long period of deflation and a sustained collapse in Japanese shares prices.


pages: 459 words: 103,153

Adapt: Why Success Always Starts With Failure by Tim Harford

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Andrew Wiles, banking crisis, Basel III, Berlin Wall, Bernie Madoff, Black Swan, car-free, carbon footprint, Cass Sunstein, charter city, Clayton Christensen, clean water, cloud computing, cognitive dissonance, complexity theory, corporate governance, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, crowdsourcing, cuban missile crisis, Daniel Kahneman / Amos Tversky, Dava Sobel, Deep Water Horizon, Deng Xiaoping, double entry bookkeeping, Edmond Halley, en.wikipedia.org, Erik Brynjolfsson, experimental subject, Fall of the Berlin Wall, Fermat's Last Theorem, Firefox, food miles, Gerolamo Cardano, global supply chain, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, Jane Jacobs, Jarndyce and Jarndyce, Jarndyce and Jarndyce, John Harrison: Longitude, knowledge worker, loose coupling, Martin Wolf, mass immigration, Menlo Park, Mikhail Gorbachev, mutually assured destruction, Netflix Prize, New Urbanism, Nick Leeson, PageRank, Piper Alpha, profit motive, Richard Florida, Richard Thaler, rolodex, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, South China Sea, special economic zone, spectrum auction, Steve Jobs, supply-chain management, the market place, The Wisdom of Crowds, too big to fail, trade route, Tyler Cowen: Great Stagnation, web application, X Prize, zero-sum game

I am also hugely grateful to my colleagues at the Financial Times and the BBC More or Less team, in particular: Lionel Barber, Dan Bogler and Lisa MacLeod for their patience while I worked on the book; my colleagues on the leader-writing team; Sue Norris, Sue Matthias, Andy Davis and Caroline Daniel at FT Magazine; Peter Cheek and Bhavna Patel of the FT library; the ‘economics faculty’ of the FT, Chris Cook, Chris Giles, Robin Harding, Martin Sandbu and Martin Wolf; and at the BBC Richard Knight and Richard Vadon. A large number of people were kind enough to agree to be interviewed or simply to provide suggestions or brief comments. I have also relied on the reporting of other writers, whom I hope I have properly acknowledged in the notes, but whom I wish to thank here where the debt is particularly great. Without in any way implicating them in the book that resulted, I am grateful to: Chapter One: Thomas Thwaites, Eric Beinhocker, Philip Tetlock, John Kay, Paul Ormerod, Donald Green, Michele Belot, Richard Thaler, David Halpern, Matthew Taylor and Jonah Lehrer.

Chapter Four: William Easterly, Owen Barder, Jeffrey Sachs, Michael Clemens, Edward Miguel, Sandra Sequeira, Esther Duflo, John McArthur, Ben Goldacre, Sir Iain Chalmers, Gabriel Demombynes, Michael Klein, Macartan Humphreys, Daron Acemoglu, Dean Karlan, Chris Blattman, Joshua Angrist, Jonathan Zinman, Clare Lockhart, Mark Henstridge, César Hidalgo, Bailey Klinger, Ricardo Hausmann and Paul Romer. Chapter Five: Gabrielle Walker, David King, James Cameron, Cameron Hepburn, Mark Williamson, Euan Murray, Justin Rowlatt, David MacKay, Tim Crozier-Cole, Geoffrey Palmer and Prashant Vaze. Chapter Six: Sophy Harford, James Reason, Charles Perrow, Gillian Tett, Philippe Jamet, Ed Crooks, Steve Mitchelhill, Peter Higginson, Andrew Haldane, Martin Wolf, Raghuram Rajan, Jeremy Bulow and Paul Klemperer. Chapter Seven: Sandie Kanthal and Peter Higginson. Chapter Eight: Richard Wiseman. Although I did not interview them for this book, at certain points I drew heavily on the writing or broadcasting of the following people: Loren Graham, Thomas Ricks, David Cloud, Greg Jaffe, George Packer, Leo McKinstry, Dava Sobel, Ian Parker, Sebastian Mallaby, Andrew Ross Sorkin, Jennifer Hughes, Gary Hamel, Peter Day, Michael Buerk, Twyla Tharp and Kathryn Schulz.


pages: 356 words: 103,944

The Globalization Paradox: Democracy and the Future of the World Economy by Dani Rodrik

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affirmative action, Asian financial crisis, bank run, banking crisis, bilateral investment treaty, borderless world, Bretton Woods, British Empire, capital controls, Carmen Reinhart, central bank independence, collective bargaining, colonial rule, Corn Laws, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, Doha Development Round, en.wikipedia.org, endogenous growth, eurozone crisis, financial deregulation, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, George Akerlof, guest worker program, Hernando de Soto, immigration reform, income inequality, income per capita, industrial cluster, information asymmetry, joint-stock company, Kenneth Rogoff, labour market flexibility, labour mobility, land reform, liberal capitalism, light touch regulation, Long Term Capital Management, low skilled workers, margin call, market bubble, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, microcredit, Monroe Doctrine, moral hazard, night-watchman state, non-tariff barriers, offshore financial centre, oil shock, open borders, open economy, Paul Samuelson, price stability, profit maximization, race to the bottom, regulatory arbitrage, savings glut, Silicon Valley, special drawing rights, special economic zone, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tobin tax, too big to fail, trade liberalization, trade route, transaction costs, tulip mania, Washington Consensus, World Values Survey

So we have the late Paul Samuelson, the author of the postwar era’s landmark economics textbook, reminding his fellow economists that China’s gains in globalization may well come at the expense of the United States; Paul Krugman, the 2008 Nobelist in Economics, arguing that trade with low-income countries is no longer too small to have an effect on inequality in rich nations; Alan Blinder, a former U.S. Federal Reserve vice chairman, worrying that international outsourcing will cause unprecedented dislocations for the U.S. labor force; Martin Wolf, the Financial Times columnist and one of the most articulate advocates of globalization, expressing his disappointment with the way financial globalization has turned out; and Larry Summers, the Clinton administration’s “Mr. Globalization” and economic adviser to President Barack Obama, musing about the dangers of a race to the bottom in national regulations and the need for international labor standards.

The hedgehog applies first-best principles while the fox applies second-best tools. 3 Stanley Fischer, “Capital Account Liberalization and the Role of the IMF,” September 19, 1997, http://www.imf.org/external/np/ speeches/1997/091997.htm. 4 Frederic S. Mishkin, The Next Great Globalization: How Disadvantaged Nations Can Harness Their Financial Systems to Get Rich (Princeton: Princeton University Press, 2006). 5 Two prominent economists who are strong supporters of globalization but have expressed doubts on the wisdom of freeing up capital flows are Jagdish Bhagwati and Martin Wolf. 6 Frederic S. Mishkin, “Why We Shouldn’t Turn Our Backs on Financial Globalization,” IMF Staff Papers, vol. 56, no. 1 (2009), pp. 150ff. 7 Quoted at http://www.imf.org/external/np /sec/mds/1996/MDS9611.htm. 8 Mishkin, “Why We Shouldn’t Turn Our Backs,” p. 106. 9 Michael Lewis, “The End,” Portfolio.com, Nov. 11, 2008 (http://www.portfolio.com/news-markets/ national-news/portfolio/2008/ 11/11/The-End-of-Wall-Streets- Boom?


pages: 561 words: 87,892

Losing Control: The Emerging Threats to Western Prosperity by Stephen D. King

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Admiral Zheng, asset-backed security, barriers to entry, Berlin Wall, Bernie Madoff, Bretton Woods, BRICs, British Empire, capital controls, Celtic Tiger, central bank independence, collateralized debt obligation, corporate governance, credit crunch, crony capitalism, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, demographic dividend, demographic transition, Deng Xiaoping, Diane Coyle, Fall of the Berlin Wall, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, German hyperinflation, Gini coefficient, hiring and firing, income inequality, income per capita, inflation targeting, invisible hand, Isaac Newton, knowledge economy, labour market flexibility, labour mobility, liberal capitalism, low skilled workers, market clearing, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, old age dependency ratio, Paul Samuelson, Ponzi scheme, price mechanism, price stability, purchasing power parity, rent-seeking, reserve currency, rising living standards, Ronald Reagan, savings glut, Silicon Valley, Simon Kuznets, sovereign wealth fund, spice trade, statistical model, technology bubble, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Market for Lemons, The Wealth of Nations by Adam Smith, Thomas Malthus, trade route, transaction costs, Washington Consensus, women in the workforce, working-age population, Y2K, Yom Kippur War

Of particular value have been regular meetings at the Bank for International Settlements in Basel, the Oesterreichische Kontrollbank AG (OeKB) in Vienna and the Accumulation Society in London. I have also benefited from my occasional involvement with the Business Council for Britain. Those who offered encouragement when the book was merely a vague concept include Diane Coyle, Hamish McRae and Martin Wolf. All three know a lot more than I do about writing books and all were kind enough to steer me in the right direction. I am enormously grateful to the people at Yale University Press. Special thanks go to Phoebe Clapham, my editor, who was dogged in her determination to turn my scribblings into a coherent final manuscript. I also offer my gratitude to Sarah Harrison and Liz Pelton, who have provided so much support on publicity.

In relation to the size of the indigenous population, the proportion of foreign-born citizens is now a lot lower: in the second half of the nineteenth century the proportion stood at between 13 and 14 per cent whereas, over the last fifty years, it has oscillated between 4 and 8 per cent. The proportionate economic impact of immigration has, thus, faded over the last half-century. 2. Source: US Census Bureau. 3. The range of arguments is vast. Supporters of globalization include Martin Wolf with his Why Globalization Works (Yale University Press, New Haven, 2004) and Thomas Friedman’s The World is Flat: A Brief History of the 21st Century (Farrar, Strauss, Giroux, New York, 2005). Its detractors – using varying arguments – include Joseph Stiglitz (Globalization and its Discontents [Penguin, London, 2003]), Naomi Klein (No Logo [Fourth Estate, New York, 1999]) and Noreena Hertz (The Silent Takeover [The Free Press, New York, 2002]).


pages: 357 words: 95,986

Inventing the Future: Postcapitalism and a World Without Work by Nick Srnicek, Alex Williams

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3D printing, additive manufacturing, air freight, algorithmic trading, anti-work, back-to-the-land, banking crisis, basic income, battle of ideas, blockchain, Bretton Woods, call centre, capital controls, carbon footprint, Cass Sunstein, centre right, collective bargaining, crowdsourcing, cryptocurrency, David Graeber, decarbonisation, deindustrialization, deskilling, Doha Development Round, Elon Musk, Erik Brynjolfsson, Ferguson, Missouri, financial independence, food miles, Francis Fukuyama: the end of history, full employment, future of work, gender pay gap, housing crisis, income inequality, industrial robot, informal economy, intermodal, Internet Archive, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, late capitalism, liberation theology, Live Aid, low skilled workers, manufacturing employment, market design, Martin Wolf, mass immigration, mass incarceration, means of production, minimum wage unemployment, Mont Pelerin Society, neoliberal agenda, New Urbanism, Occupy movement, oil shale / tar sands, oil shock, patent troll, pattern recognition, Paul Samuelson, Philip Mirowski, post scarcity, postnationalism / post nation state, precariat, price stability, profit motive, quantitative easing, reshoring, Richard Florida, rising living standards, road to serfdom, Robert Gordon, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Slavoj Žižek, social web, stakhanovite, Steve Jobs, surplus humans, the built environment, The Chicago School, The Future of Employment, Tyler Cowen: Great Stagnation, universal basic income, wages for housework, We are the 99%, women in the workforce, working poor, working-age population

Economists, NGOs and policymakers explored the idea in detail,94 and a number of small-scale experiments were set up in Canada and the United States.95 Such was the influence of UBI that over 1,300 economists signed a petition pushing the US Congress to enact a ‘national system of income guarantees’.96 Three separate administrations gave serious consideration to the proposal, and two presidents – Nixon and Carter – attempted to pass legislation to achieve it.97 In other words, UBI very nearly became a reality in the 1970s.98 While Alaska eventually implemented a basic income funded by its oil wealth, the idea largely disappeared from debate in the wake of neoliberal hegemony.99 But recent years have seen the idea undergo a resurgence in popularity. In both mainstream and critical media, it has gained traction, being taken up by Paul Krugman, Martin Wolf, the New York Times, the Financial Times and the Economist.100 The Swiss are holding a referendum on UBI in 2016, the proposal has been recommended by parliamentary committees in other countries, various political parties have adopted it in their manifestos, and there have been new experiments with it in Namibia and India.101 The idea has global scope, having been promoted forcefully by groups in Brazil, South Africa, Italy and Germany, and by an international network involving over twenty countries.102 The movement for a UBI is thus once again resurgent in the wake of the 2008 crisis and the austerity regimes put in place after it.

Technology and The Future of Work (London: Oxford University Press, 1982), pp. 204–5. 98.An indispensable resource for the story behind this rise and fall in a basic income policy, along with an essential guide to how cultural framing affects the viability of the policy, is Brian Steensland, The Failed Welfare Revolution: America’s Struggle over Guaranteed Income Policy (Princeton, NJ: Princeton University Press, 2007). 99.Daniel Raventós, Basic Income: The Material Conditions of Freedom, transl. Julie Wark (London: Pluto Press, 2007), p. 12. 100.Paul Krugman, ‘Sympathy for the Luddites’, New York Times, 13 June 2013; Martin Wolf, ‘Enslave the Robots and Free the Poor’, Financial Times, 11 February 2014. 101.More specifically, the Green Party of England and Wales has included it in its manifesto; the Liberal Party of Canada has put the idea on their agenda, and its leader pushed for it in 2001; in Canada, the Standing Senate Committee on Social Affairs recommended it as a way to deal with poverty; and the Swiss will be voting in a referendum on the idea.


pages: 347 words: 99,317

Bad Samaritans: The Guilty Secrets of Rich Nations and the Threat to Global Prosperity by Ha-Joon Chang

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affirmative action, Albert Einstein, banking crisis, Big bang: deregulation of the City of London, bilateral investment treaty, borderless world, Bretton Woods, British Empire, Brownian motion, call centre, capital controls, central bank independence, colonial rule, Corn Laws, corporate governance, David Ricardo: comparative advantage, Deng Xiaoping, Doha Development Round, en.wikipedia.org, falling living standards, Fellow of the Royal Society, financial deregulation, fixed income, Francis Fukuyama: the end of history, income inequality, income per capita, industrial robot, Isaac Newton, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labour mobility, land reform, liberal world order, liberation theology, low skilled workers, market bubble, market fundamentalism, Martin Wolf, means of production, mega-rich, moral hazard, offshore financial centre, oil shock, price stability, principal–agent problem, Ronald Reagan, South Sea Bubble, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transfer pricing, urban sprawl, World Values Survey

In contrast, most developing countries do not have the capabilities to conduct research. The incentive to conduct research may have been increased, but there is no one to take advantage of it. It is like the story of my son, Jin-Gyu, that I discussed in chapter 3. If the capability is not there, it does not matter what the incentives are. This is why even the renowned British financial journalist Martin Wolf, a self-proclaimed defender of globalization (despite his full awareness of its problems and limitations), describes IPR as ‘a rent-extraction device’ for most developing countries, ‘with potentially devastating consequences for their ability to educate their people (because of copyright), adapting designs for their own use (ditto) and deal with severe challenges of public health’.48 As I keep emphasizing, the foundation of economic development is the acquisition of more productive knowledge.

Of course, neo-liberals are not unique in holding such a view. But what distinguishes them is their belief that this relationship is mainly, if not exclusively, mediated by the (free) market. They argue that democracy promotes free markets, which, in turn, promote economic development, which then promotes democracy: ‘The market underpins democracy, just as democracy should normally strengthen the market’, writes Martin Wolf, the British financial journalist, in his renowned book, Why Globalisation Works.20 According to the neo-liberal view, democracy promotes free markets because a government that can be unseated without resorting to violent measures has to be restrained in its predatory behaviour. If they don’t have to worry about losing power, rulers can impose excessive taxes with impunity and even confiscate private property, as numerous autocrats have done throughout history.


pages: 370 words: 102,823

Rethinking Capitalism: Economics and Policy for Sustainable and Inclusive Growth by Michael Jacobs, Mariana Mazzucato

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3D printing, balance sheet recession, banking crisis, basic income, Bernie Sanders, Bretton Woods, business climate, Carmen Reinhart, central bank independence, collaborative economy, complexity theory, conceptual framework, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, decarbonisation, deindustrialization, dematerialisation, Detroit bankruptcy, double entry bookkeeping, Elon Musk, endogenous growth, energy security, eurozone crisis, factory automation, facts on the ground, fiat currency, Financial Instability Hypothesis, financial intermediation, forward guidance, full employment, G4S, Gini coefficient, Growth in a Time of Debt, Hyman Minsky, income inequality, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), Internet of things, investor state dispute settlement, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, low skilled workers, Martin Wolf, mass incarceration, Mont Pelerin Society, neoliberal agenda, Network effects, new economy, non-tariff barriers, paradox of thrift, Paul Samuelson, price stability, private sector deleveraging, quantitative easing, QWERTY keyboard, railway mania, rent-seeking, road to serfdom, savings glut, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Steve Jobs, the built environment, The Great Moderation, The Spirit Level, Thorstein Veblen, too big to fail, total factor productivity, transaction costs, trickle-down economics, universal basic income, very high income

The automatic stabilisers were built to operate with or without Congressional blessings. In practice, this meant that as hundreds of thousands of people lost their jobs, tax receipts (T) fell sharply and government spending (G) to support the jobless (e.g. unemployment compensation, food stamps, etc.) rose rapidly. The result was a non-discretionary (i.e. endogenous) spike in the deficit (G-T) that reflected the severity of the crisis, something Martin Wolf noted18 in his regular column at the Financial Times. ‘I look at this through the lens of sectoral financial balances’, Wolf said, continuing: The idea that the huge fiscal deficits of recent years have been the result of decisions taken by the current administration is nonsense. No fiscal policy changes explain the collapse into massive deficit between 2007 and 2009, because there was none of any importance.

Historical data on the federal budget is available at http://www.whitehouse.gov/omb/budget/historicals (accessed 4 May 2016). 17 Jan Hatzius of Goldman Sachs and Paul McCulley of PIMCO, the world’s largest bond fund, both relied on Wynne Godley’s sector financial balances framework to help them see the positive role of government deficits in facilitating the deleveraging process. See for example Hatzius’ 2012 interview with the Business Insider: http://www.businessinsider.com/goldmans-jan-hatzius-on-sectoral-balances-2012-12?IR=T (accessed 4 May 2016). 18 M. Wolf, ‘The balance sheet recession in the US’, Financial Times, 19 July 2012, http://blogs.ft.com/martin-wolf-exchange/2012/07/19/the-balance-sheet-recession-in-the-us/ (accessed 4 May 2016). 19 P. McCulley, Global Central Bank Focus: Facts on the Ground, Policy Note 2010/2, Levy Economics Institute of Bard College, 2010, p. 3, http://www.levyinstitute.org/pubs/pn_10_02.pdf (accessed 4 May 2016). 20 L. R. Wray, Understanding Modern Money: The Key to Full Employment and Price Stability, London, Edward Elgar Publishing, 1998. 21 S.

Propaganda and the Public Mind by Noam Chomsky, David Barsamian

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Albert Einstein, Asian financial crisis, Bretton Woods, capital controls, deindustrialization, European colonialism, experimental subject, Howard Zinn, Hyman Minsky, interchangeable parts, labour market flexibility, labour mobility, liberation theology, Martin Wolf, one-state solution, Ralph Nader, RAND corporation, school vouchers, Silicon Valley, structural adjustment programs, Thomas L Friedman, Tobin tax, Washington Consensus

Ted Bardacke and James Kynge, “China Lashes Out at US ‘Gunboat Diplomacy,’” Financial Times, September 4, 1999, p. 4. Chapter 5 1. Andrew Simms, “Unctad Offers Way Forward for Talks on World Trade,” Guardian Weekly (Manchester), February 23, 2000, p. 12. 2. Susan Strange, Mad Money: When Markets Outgrow Governments (Ann Arbor: University of Michigan Press, 1998), p. 127. 3. See the articles on-line at http:/ /www.twnside.org.sg/unctad.htm and http://www.twnside.org.sg/title/ focusIS.htm. 4. Martin Wolf, “The Curse of Global Inequality,” Financial Times, January 26, 2000, p. 23. 5. Thomas L. Friedman, “Senseless in Seattle,” New York Times, December 1, 1999, p. A23. 6. Doug Henwood, “Miscellany,” Left Business Observer 91 (August 31, 1999), p. 8. See also http:/ /www.panix.com /-dhenwood /Gini_supplement.html and http://www.panix.com/-dhenwood/Wealth_distrib.html. 7. Patricia Adams, Odious Debts: Loose Lending.

See The Bulletin of the Atomic Scientists 56: 2 (March-April 2000), pp. 22-41. 30. Tariq Ali, “The Panic Button,” Guardian, October 14, 1999, p. 21. 31. Marc L. Miringoff and Marque-Luisa Miringoff, The Social Health of the Nation: How America Is Really Doing (New York: Oxford UP, 1999). 32. Bretton Woods Commission, Bretton Woods: Looking into the Future (Washington, DC: Bretton Woods Commission, 1994). See Martin Wolf, “Bretton Woods at an Awkward Age,” Financial Times, October 7, 1994, p. 19, and Michael Prowse, “IMF and World Bank ‘Must Adapt to New Global Financial Landscape,’” Financial Times, July 7, 1994, p. 5. 33. UNCTAD, Trade and Development Report, 1999 (Geneva: UNCTAD, 1999). For a review, see Chakravarthi Raghavan, Third World Economics, November 1-15,1999. See also John Eatwell and Lance Taylor, Global Finance at Risk: The Case for International Regulation (New York: New Press, 2000), p. 295, estimating a decline of growth rates to two-thirds below the pre-reform period. 34.

Who Rules the World? by Noam Chomsky

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Albert Einstein, anti-communist, Ayatollah Khomeini, Berlin Wall, Bretton Woods, British Empire, capital controls, corporate governance, corporate personhood, cuban missile crisis, deindustrialization, Donald Trump, Doomsday Clock, Edward Snowden, en.wikipedia.org, facts on the ground, failed state, Fall of the Berlin Wall, Howard Zinn, illegal immigration, Intergovernmental Panel on Climate Change (IPCC), invisible hand, liberation theology, Malacca Straits, Martin Wolf, Mikhail Gorbachev, Monroe Doctrine, nuclear winter, Occupy movement, oil shale / tar sands, one-state solution, Plutonomy: Buying Luxury, Explaining Global Imbalances, precariat, Ralph Waldo Emerson, Ronald Reagan, South China Sea, Stanislav Petrov, structural adjustment programs, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trade route, union organizing, uranium enrichment, wage slave, WikiLeaks, working-age population

Reporting the results of a study of how the public would eliminate the deficit, Steven Kull, director of the Program for Public Consultation, which conducted the study, writes that “clearly both the administration and the Republican-led House are out of step with the public’s values and priorities in regard to the budget … The biggest difference in spending is that the public favored deep cuts in defense spending, while the administration and the House propose modest increases … The public also favored more spending on job training, education, and pollution control than did either the administration or the House.”19 The costs of the Bush-Obama wars in Iraq and Afghanistan are now estimated to run as high as $4.4 trillion—a major victory for Osama bin Laden, whose announced goal was to bankrupt America by drawing it into a trap.20 The 2011 U.S. military budget—almost matching that of the rest of the world combined—was higher in real (inflation-adjusted) terms than at any time since World War II, and slated go even higher. There is much loose talk about projected cuts, but such reporting fails to mention that if they take place at all, they will be from projected future Pentagon growth rates. The deficit crisis has largely been manufactured as a weapon to destroy hated social programs on which a large part of the population relies. The highly respected economics correspondent Martin Wolf, of the Financial Times, writes, “It is not that tackling the US fiscal position is urgent.… The US is able to borrow on easy terms, with yields on 10-year bonds close to 3 per cent, as the few non-hysterics predicted. The fiscal challenge is long term, not immediate.” Significantly, he adds: “The astonishing feature of the federal fiscal position is that revenues are forecast to be a mere 14.4 per cent of GDP in 2011, far below their postwar average of close to 18 per cent.

University of Maryland–College Park, “Public’s Budget Priorities Differ Dramatically from House and Obama,” press release, Newswise.com, 2 March 2011, http://www.newswise.com/articles/publics-budget-priorities-differ-dramatically-from-house-and-obama. 20. Catherine Lutz, Neta Crawford, and Andrea Mazzarino, “Costs of War,” Brown University Watson Institute for International and Public Affairs, http://watson.brown.edu/costsofwar/. 21. Martin Wolf, “From Italy to the US, Utopia vs. Reality,” Financial Times (London), 12 July 2011. 22. Lawrence Summers, “Relief at an Agreement Will Give Way to Alarm,” Financial Times (London), 2 August 2011. 23. “Health Care Budget Deficit Calculator,” Center for Economic and Policy Research, http://www.cepr.net/calculators/hc/hc-calculator.html. 24. Matthew L. Wald and John M. Broder, “Utility Shelves Ambitious Plan to Limit Carbon,” New York Times, 13 July 2011. 25.


pages: 344 words: 93,858

The Post-American World: Release 2.0 by Fareed Zakaria

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affirmative action, agricultural Revolution, airport security, anti-communist, Asian financial crisis, battle of ideas, Berlin Wall, Bretton Woods, BRICs, British Empire, call centre, capital controls, central bank independence, centre right, collapse of Lehman Brothers, conceptual framework, Credit Default Swap, currency manipulation / currency intervention, delayed gratification, Deng Xiaoping, double entry bookkeeping, failed state, Fall of the Berlin Wall, financial innovation, global reserve currency, global supply chain, illegal immigration, interest rate derivative, Intergovernmental Panel on Climate Change (IPCC), knowledge economy, Mahatma Gandhi, Martin Wolf, mutually assured destruction, new economy, oil shock, open economy, out of africa, Parag Khanna, postindustrial economy, purchasing power parity, race to the bottom, reserve currency, Ronald Reagan, Silicon Valley, Silicon Valley startup, South China Sea, Steven Pinker, The Great Moderation, Thomas L Friedman, Thomas Malthus, trade route, Washington Consensus, working-age population, young professional, zero-sum game

The Harvard economist Dani Rodrik has estimated that sending so much money abroad instead of investing it productively costs the Chinese roughly one percentage point of GDP a year, or more than $40 billion annually. China’s lending was also essentially a massive stimulus program for the United States. During the go-go years of the mid-aughts, it kept interest rates low and encouraged homeowners to refinance, hedge fund managers to ramp up leverage, and investment banks to goose their balance sheets. China’s lending created cheap money, says the Financial Times columnist Martin Wolf, and “cheap money encouraged an orgy of financial innovation, borrowing and spending.” It was one of the major contributors to the global financial crisis, and the cycle continues even in its aftermath. Everyone agrees the status quo is unsustainable. “There can be no return to business as usual,” Wolf wrote after the financial collapse. But in the short term, we seem destined for more of the same.

Autor is cautious and tentative, but it would seem that technology, followed by global competition, has played the largest role in making less valuable the routine tasks that once epitomized middle-class work. As this hollowing out of the middle suggests, there really isn’t a Third World anymore. China, India, and the United States all compete on a level playing field. What, then, is America’s competitive advantage? The answer lies in something the economist Martin Wolf noted. Describing the changing world, he wrote that economists used to discuss two basic concepts, capital and labor. But these are now commodities, widely available to everyone. What distinguishes economies today are ideas and energy. A country must be a source of either ideas or energy (meaning oil, natural gas, coal, etc.). The United States has been and can be the world’s most important, continuing source of new ideas, big and small, technical and creative, economic and political.


pages: 443 words: 98,113

The Corruption of Capitalism: Why Rentiers Thrive and Work Does Not Pay by Guy Standing

3D printing, Airbnb, Albert Einstein, Amazon Mechanical Turk, Asian financial crisis, asset-backed security, bank run, banking crisis, basic income, Ben Bernanke: helicopter money, Bernie Sanders, Big bang: deregulation of the City of London, bilateral investment treaty, Bonfire of the Vanities, Bretton Woods, Capital in the Twenty-First Century by Thomas Piketty, carried interest, cashless society, central bank independence, centre right, Clayton Christensen, collapse of Lehman Brothers, collective bargaining, credit crunch, crony capitalism, crowdsourcing, debt deflation, declining real wages, deindustrialization, Doha Development Round, Donald Trump, Double Irish / Dutch Sandwich, ending welfare as we know it, eurozone crisis, falling living standards, financial deregulation, financial innovation, Firefox, first-past-the-post, future of work, gig economy, Goldman Sachs: Vampire Squid, Growth in a Time of Debt, housing crisis, income inequality, information retrieval, intangible asset, invention of the steam engine, investor state dispute settlement, James Watt: steam engine, job automation, John Maynard Keynes: technological unemployment, labour market flexibility, light touch regulation, Long Term Capital Management, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market clearing, Martin Wolf, means of production, mini-job, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, Neil Kinnock, non-tariff barriers, North Sea oil, Northern Rock, nudge unit, Occupy movement, offshore financial centre, oil shale / tar sands, open economy, openstreetmap, patent troll, payday loans, peer-to-peer lending, Plutocrats, plutocrats, Ponzi scheme, precariat, quantitative easing, remote working, rent control, rent-seeking, ride hailing / ride sharing, Right to Buy, Robert Gordon, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, sharing economy, Silicon Valley, Silicon Valley startup, Simon Kuznets, sovereign wealth fund, Stephen Hawking, Steve Ballmer, structural adjustment programs, TaskRabbit, The Chicago School, The Future of Employment, the payments system, Thomas Malthus, Thorstein Veblen, too big to fail, Uber and Lyft, Uber for X, Y Combinator, zero-sum game, Zipcar

This labour pool has been made more accessible by the unbundling of firms and the technological revolution that has been shaping the rentier economy. As we will see, the new digital platforms have also expanded the effective labour supply by mobilising extra people to carry out tasks on a piecework basis that previously were done by (fewer) full-time employees. The basis of the Phillips curve has been demolished by the globalised flexible labour process. LIES, DAMNED LIES AND ‘AUSTERITY’ ‘The austerity obsession … is lunatic.’ Martin Wolf, Financial Times50 In the early years of the Global Transformation, governments made a Faustian bargain with their citizens.51 Liberalisation of markets in a globalising economy tripled the labour supply to the world labour market, adding two billion people. This was bound to put downward pressure on the living standards of those relying on labour in industrialised countries. Governments compensated by allowing an orgy of consumption based on rising household debt as well as subsidies such as tax credits that propped up workers’ earnings; this increased public debt.

Before considering them, it is worth commenting on one misguided approach and one great missed opportunity. The misguided proposal is that stagnation justifies ‘helicopter money’, an image first suggested by Milton Friedman in which central banks would print money and throw it out of a helicopter for people to spend. In early 2016, this idea was garnering increasing interest, including from Mario Draghi, head of the European Central Bank. Martin Wolf of the Financial Times concluded that central banks should ‘be given the power to send money, ideally to every citizen’.18 But the main objection to ‘helicopter money’ is that it would leave economic policy in the hands of bankers rather than democratically accountable bodies. The missed opportunity was a big one. Recall that in 2015 the European Central Bank (ECB) began a ‘quantitative easing’ programme that pumped into financial markets the equivalent of 10 per cent of Eurozone GDP.


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Extreme Money: Masters of the Universe and the Cult of Risk by Satyajit Das

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affirmative action, Albert Einstein, algorithmic trading, Andy Kessler, Asian financial crisis, asset allocation, asset-backed security, bank run, banking crisis, banks create money, Basel III, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, capital asset pricing model, Carmen Reinhart, carried interest, Celtic Tiger, clean water, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, Daniel Kahneman / Amos Tversky, debt deflation, Deng Xiaoping, deskilling, discrete time, diversification, diversified portfolio, Doomsday Clock, Edward Thorp, Emanuel Derman, en.wikipedia.org, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, financial independence, financial innovation, financial thriller, fixed income, full employment, global reserve currency, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, happiness index / gross national happiness, haute cuisine, high net worth, Hyman Minsky, index fund, information asymmetry, interest rate swap, invention of the wheel, invisible hand, Isaac Newton, job automation, Johann Wolfgang von Goethe, John Meriwether, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kevin Kelly, labour market flexibility, laissez-faire capitalism, load shedding, locking in a profit, Long Term Capital Management, Louis Bachelier, margin call, market bubble, market fundamentalism, Marshall McLuhan, Martin Wolf, mega-rich, merger arbitrage, Mikhail Gorbachev, Milgram experiment, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, mortgage tax deduction, mutually assured destruction, Myron Scholes, Naomi Klein, negative equity, Network effects, new economy, Nick Leeson, Nixon shock, Northern Rock, nuclear winter, oil shock, Own Your Own Home, Paul Samuelson, pets.com, Philip Mirowski, Plutocrats, plutocrats, Ponzi scheme, price anchoring, price stability, profit maximization, quantitative easing, quantitative trading / quantitative finance, Ralph Nader, RAND corporation, random walk, Ray Kurzweil, regulatory arbitrage, rent control, rent-seeking, reserve currency, Richard Feynman, Richard Feynman, Richard Thaler, Right to Buy, risk-adjusted returns, risk/return, road to serfdom, Robert Shiller, Robert Shiller, Rod Stewart played at Stephen Schwarzman birthday party, rolodex, Ronald Reagan, Ronald Reagan: Tear down this wall, Satyajit Das, savings glut, shareholder value, Sharpe ratio, short selling, Silicon Valley, six sigma, Slavoj Žižek, South Sea Bubble, special economic zone, statistical model, Stephen Hawking, Steve Jobs, survivorship bias, The Chicago School, The Great Moderation, the market place, the medium is the message, The Myth of the Rational Market, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, trickle-down economics, Turing test, Upton Sinclair, value at risk, Yogi Berra, zero-coupon bond, zero-sum game

Economist Robert Wade disagreed: [Greenspan] and other U.S. officials see it as imperative to make sure that the troubles in Asia are blamed on the Asians and that free capital markets are seen as key to world economic recovery and advance; the idea that international capital markets are themselves the source of speculative disequilibria and retrogression must not be allowed to take root.10 The Greenspan put ensured that at the first sign of trouble central bankers—“pawnbrokers of last resort”11—flooded the system with money, lowering interest rates to protect risk takers. The strategy ensured successive, larger blow-ups in financial markets in 1987, 1991, 1994, 1998, 2001, and 2007. Martin Wolf, the chief economics writer for the Financial Times, argued: “What we have [in banking] is a risk-loving industry guaranteed as a public utility.”12 Greenspan did not see any contradictions in the bailout of LTCM: “some moral hazard, however slight, may have been created by the Federal Reserve’s involvement. Such negatives were outweighed by the risk of serious distortions to market prices had [LTCM] been pushed suddenly into bankruptcy.”13 As English philosopher Herbert Spencer knew: “the ultimate result of shielding men from the effects of folly is to fill the world with fools.”

(19 October 1999), Financial Markets Conference of the Federal Reserve Bank of Atlanta. 10. Robert Wade “The Asian financial crisis and the global economy” (November 1998) (www.wright.edu); Peter Temple (2001) Hedge Funds: The Courtesans of Capitalism, John Wiley & Sons, Chichester: 141. 11. Yves Smith “Covert nationalization of the banking system” (3 August 2008) (www.nakedcapitalism.com). 12. Martin Wolf “Why banking is an accident waiting to happen” (27 November 2007) Financial Times. 13. Roger Lowenstein (2000) When Genius Failed: The Rise and Fall of Long Term Capital Management, Fourth Estate, London: 230. 14. Quoted in Temple, Hedge Funds: 110. 15. NewsHour with Jim Lehrer (13 February 1996), PBS. 16. “Measuring the measurers” (31 May 2007) The Economist. 17. Roger Lowenstein “Triple-A failure” (27 April 2008) New York Times Magazine. 18.

David Wessel (2010) In Fed We Trust: Ben Bernanke’s War on the Great Panic, Scribe Publications, Melbourne. Jack Wetherford (1997) The History of Money, Three Rivers Press, New York. R. Christopher Whalen (2011) Inflated: How Money and Debt Built the American Dream, John Wiley, New Jersey. Mark T. Williams (2010) Uncontrolled Risk: The Lessons of Lehman Brothers and How Systemic Risk Can Still Bring Down the World Financial System, McGraw-Hill, New York. Martin Wolf (2010) Fixing Global Finance, Yale University Press, London. Christopher Wood (2006) The Bubble Economy: Japan’s Extraordinary Speculative Boom of the 80s and the Dramatic Bust of the 90s, Solstice Publishing, Jakarta. Bob Woodward (2000) Maestro: Greenspan’s Fed and the American Boom, Simon & Schuster, New York. Daniel Yergin and Joseph Stanislaw (2002) The Commanding Heights: The Battle for the World Economy, Touchstone Books, New York.


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Stress Test: Reflections on Financial Crises by Timothy F. Geithner

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Affordable Care Act / Obamacare, asset-backed security, Atul Gawande, bank run, banking crisis, Basel III, Bernie Madoff, Bernie Sanders, break the buck, Buckminster Fuller, Carmen Reinhart, central bank independence, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Doomsday Book, eurozone crisis, financial innovation, Flash crash, Goldman Sachs: Vampire Squid, housing crisis, Hyman Minsky, illegal immigration, implied volatility, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, Nate Silver, negative equity, Northern Rock, obamacare, paradox of thrift, pets.com, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, RAND corporation, regulatory arbitrage, reserve currency, Saturday Night Live, savings glut, selection bias, short selling, sovereign wealth fund, The Great Moderation, The Signal and the Noise by Nate Silver, Tobin tax, too big to fail, working poor

An actor playing me opened Saturday Night Live by announcing that my solution to the crisis was to give $420 billion to the first caller with a solution to the crisis. The substantive critiques were just as withering. “Someone should have told Treasury Secretary Timothy Geithner that the one thing to avoid at a time of uncertainty is raising more questions,” the New York Times editorial board declared. The widely respected Financial Times columnist Martin Wolf actually began his analysis: “Has Barack Obama’s presidency already failed?” It was a bad speech, badly delivered, rattling confidence at a bad time. I somehow managed to convince the public we’d be overly generous to Wall Street while convincing the markets we wouldn’t be generous enough. Our populist critics concluded we were more eager than ever to shovel cash to arsonists; former World Bank chief economist Joseph Stiglitz described our plan as “banks win, investors win—and taxpayers lose.”

I was probably in some denial about my transition from anonymous mandarin to public figure. The weekend before my speech, I mentioned to Mark Patterson that I was pleased I could still walk around in public without being recognized. “That’s not going to last much longer,” Patterson said. MY SPEECH, as I mentioned in the introduction to this book, sucked. Barclays Capital’s chief U.S. economist called my speech “shock and ugh.” Martin Wolf’s Financial Times column about the already-doomed Obama presidency called our plan “yet another child of the failed interventions of the past one and a half years: optimistic and indecisive.” The consensus view was that my inept delivery and lack of detail had dramatically increased uncertainty in the financial system. The conservative columnist Jim Pethokoukis summarized my message as: “We have a plan to have a plan.”

“But I’m confident that our plan is better than the alternatives, Mr. President,” I said. He presumably would have liked a more definitive show of confidence. On March 23, we finally got some positive feedback from the markets, after we unveiled some details of our Public-Private Investment Program for buying toxic assets. Prominent economists and journalists portrayed it as yet another giveaway to Wall Street, “a vulture fund relief scheme,” as Martin Wolf of the Financial Times put it. Paul Krugman dubbed it “financial hocus-pocus” and “cash for trash,” while the economist Jeffrey Sachs, who had already accused us of ripping off taxpayers to enrich bankers, called it “even more potentially disastrous.” But the markets loved it. Stocks rose 7 percent, the first day of mostly good news in my two months at Treasury. Investors, who had been disappointed after Hank twice abandoned plans to buy toxic assets, and then again when my initial speech hadn’t lived up to the leaked expectations about asset purchases, were excited again.


pages: 662 words: 180,546

Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

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Alvin Roth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, Kenneth Arrow, Kenneth Rogoff, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

A man who reportedly earned millions for having advised hedge funds one day a week for a year shortly before serving in the Obama Administration (and who is quite likely, now that he’s out, to do so again), he ought to have been patriotic and intellectually honest enough to provide a real answer.6 The most interesting moment at a recent conference held in Bretton Woods, New Hampshire—site of the 1945 conference that created today’s global economic architecture—came when Financial Times columnist Martin Wolf quizzed former United States Treasury Secretary Larry Summers, President Barack Obama’s ex-assistant for economic policy. “[Doesn’t] what has happened in the past few years,” Wolf asked, “simply suggest that [academic] economists did not understand what was going on?” . . . For Summers, the problem is that there is so much that is “distracting, confusing, and problem-denying in . . . the first year course in most PhD programs.”

The website also has a set of pages devoted to economics; under the rubric “Meet the Mavericks” it profiled Paul Samuelson, George Akerlof, Joseph Stiglitz, and Herman Daly. Kalle Lasn Associates has also published an anti-textbook entitled Meme Wars: The Creative Destruction of Neoclassical Economics which contains contributions by George Akerlof and Joseph Stiglitz. At least the graphics were radical. Similar ideas were promoted in the curiously titled Occupy Handbook, which included chapters by Raghuram Rajan, Tyler Cowen, Martin Wolf, David Graeber, Jeffrey Sachs, and Robert Shiller.6 Besotted by the millenarian idea of starting anew, and lacking any sense of the history of protest and political organization, both neoliberals and neoclassical economists rapidly addled whatever political curiosity and radical inclinations that the well-intentioned protestors might have had. Rebels railed against corporate power, but apparently had no idea how it actually worked.

At the conference there was, however, a substantial contingent from the Austrian School heterodoxy at INET. The Tea Party demonstrators outside the New Hampshire conference thus demonstrated once again that their grasp of the practical politics of Soros and his organization was less than sound. 10 Speakers included Deepak Lal, Amity Shales, John B. Taylor, Peter Boettke, Steve Forbes, Niall Ferguson, Hannes Gissurarson, Timothy Congdon, Martin Wolf, and Gary Becker. The papers, once available on the Mont Pèlerin website, have since been removed. For some further description, see Plehwe, “Neoliberal Think Tanks and the Crisis.” The dominant neoliberal narrative of the crisis, which had stabilized by 2010, blaming it entirely on government policies, is described below in chapter 5. 11 Lehmann, “Let Them Eat Dogma.” 12 This statement takes into account the numerous assertions of “reform,” from the Dodd-Frank bill in the U.S. to the Basel III international bank regulations.


pages: 602 words: 120,848

Winner-Take-All Politics: How Washington Made the Rich Richer-And Turned Its Back on the Middle Class by Paul Pierson, Jacob S. Hacker

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accounting loophole / creative accounting, active measures, affirmative action, asset allocation, barriers to entry, Bonfire of the Vanities, business climate, carried interest, Cass Sunstein, clean water, collective bargaining, corporate governance, Credit Default Swap, David Brooks, desegregation, employer provided health coverage, financial deregulation, financial innovation, financial intermediation, fixed income, full employment, Home mortgage interest deduction, Howard Zinn, income inequality, invisible hand, knowledge economy, laissez-faire capitalism, Martin Wolf, medical bankruptcy, moral hazard, Nate Silver, new economy, night-watchman state, offshore financial centre, oil shock, Powell Memorandum, Ralph Nader, Ronald Reagan, shareholder value, Silicon Valley, The Wealth of Nations by Adam Smith, too big to fail, trickle-down economics, union organizing, very high income, War on Poverty, winner-take-all economy, women in the workforce

For the financial sector, however, the new instruments and expanding freedom to use them created astonishing opportunities: to increase the number of transactions (with intermediaries taking a cut on each one), to ratchet up leverage (and thus potential profits), and to increase the complexity and opacity in ways that advantaged insiders. Not coincidentally, all of these developments increased the risk to the system as a whole. However, that would be someone else’s problem—or, as economists gently put it, an “externality.” As Martin Wolf of the Financial Times observed acerbically in 2008, “No industry has a comparable talent for privatizing gains and socializing losses.”58 At the very top, those privatized gains were mind-boggling. Wages in the financial sector took off in the 1980s. The pace of the rise accelerated in the 1990s, and again after the millennium. In 2002, one had to earn $30 million to make it to the top twenty-five hedge fund incomes; in 2004, $100 million; in 2005, $130 million (when the twenty-fifth spot was occupied by William Browder, grandson of Earl Browder, onetime head of the Communist Party of the United States).

., The State After Statism: New State Activities in the Age of Liberalization (Oxford: Oxford University Press, 2006). 55 Levitt, Take On the Street, 250; Brian J. Hall and Kevin Murphy, “The Trouble with Stock Options,” Journal of Economic Perspectives, 17, no. 3 (2003): 51. 56 Thomas Philippon and Ariell Reshef, “Wages and Human Capital in the U.S. Financial Industry: 1909–2006,” NBER Working Paper No. 14644 (January 2008). 57 Justin Lahart, “Has the Financial Industry’s Heyday Come and Gone?” Wall Street Journal, April 28, 2008. 58 Martin Wolf, “Regulators Should Intervene in Bankers’ Pay,” Financial Times, January 16, 2008. 59 Jenny Anderson, “Atop Hedge Funds, Richest of the Rich Get Even More So,” New York Times, May 26, 2006; Jenny Anderson and Julie Creswell, “Top Hedge Fund Managers Earn Over $240 Million,” New York Times, April 24, 2007; Jenny Anderson, “Wall Street Winners Get Billion-Dollar Paydays,” New York Times, April 16, 2008. 60 Christine Harper, “Wall Street Bonuses Hit Record $39 Billion for 2007,” Bloomberg, January 17, 2008, http://www.bloomberg.com/apps/news?


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Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else by Chrystia Freeland

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activist fund / activist shareholder / activist investor, Albert Einstein, algorithmic trading, assortative mating, banking crisis, barriers to entry, Basel III, battle of ideas, Bernie Madoff, Big bang: deregulation of the City of London, Black Swan, Branko Milanovic, Bretton Woods, BRICs, business climate, call centre, carried interest, Cass Sunstein, Clayton Christensen, collapse of Lehman Brothers, commoditize, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, crony capitalism, Deng Xiaoping, don't be evil, double helix, energy security, estate planning, experimental subject, financial deregulation, financial innovation, Flash crash, Frank Gehry, Gini coefficient, global village, Goldman Sachs: Vampire Squid, Gordon Gekko, Guggenheim Bilbao, haute couture, high net worth, income inequality, invention of the steam engine, job automation, John Markoff, joint-stock company, Joseph Schumpeter, knowledge economy, knowledge worker, liberation theology, light touch regulation, linear programming, London Whale, low skilled workers, manufacturing employment, Mark Zuckerberg, Martin Wolf, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, NetJets, new economy, Occupy movement, open economy, Peter Thiel, place-making, Plutocrats, plutocrats, Plutonomy: Buying Luxury, Explaining Global Imbalances, postindustrial economy, Potemkin village, profit motive, purchasing power parity, race to the bottom, rent-seeking, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, self-driving car, short selling, Silicon Valley, Silicon Valley startup, Simon Kuznets, Solar eclipse in 1919, sovereign wealth fund, stem cell, Steve Jobs, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tony Hsieh, too big to fail, trade route, trickle-down economics, Tyler Cowen: Great Stagnation, wage slave, Washington Consensus, winner-take-all economy, zero-sum game

Take the elegant Manhattan dinner parties hosted by Marie-Josée Kravis, the economist wife of private equity billionaire Henry Kravis in their elegant Upper East Side apartment. Though the china is Sèvres and the paintings are Old Masters, the dinner table conversation would not be out of place in a graduate seminar. Mrs. Kravis takes pride in bringing together not only plutocrats such as her husband and Michael Bloomberg, but also thinkers and policy makers such as Richard Holbrooke, Robert Zoellick, and Financial Times columnist Martin Wolf, and leading them in discussion of issues ranging from global financial imbalances to the war in Afghanistan. In fact, the idea conference is so trendy that a couple of New Yorkers recently hosted an ideas wedding. When David Friedlander and Jacqueline Schmidt married in Brooklyn in December 2011, their guests were issued name tags that asked them to declare a commitment. Another card urged, “Name one action you can take in the next twenty-four hours that is aligned with your commitment.”

My Atlantic cover story on the global super-elite was my first public articulation of the ideas in this book; research I did for my Atlantic essay on Skolkovo, the Russian Silicon Valley, also proved useful. My weekly column for Reuters and the International Herald Tribune was a valuable space for working out my thinking, as were Reuters video interviews and the Reuters magazine. I am grateful to many colleagues, editors, and sparring partners. Chief among them: Martin Wolf, Alison Wolf, John Lloyd, David Hoffman, John Gapper, Felix Salmon, Jim Impoco, Jim Ledbetter, Mike Williams, Stuart Karle, Alison Smale, Anatole Kaletsky, David Rohde, David Wighton, Gary Silverman, Francesco Guerrera, John Thornhill, Alan Beattie, Krishna Guha, Robert Thomson, Annalena McAfee, Andrew Gowers, Richard Lambert, Daniel Franklin, Sebastian Mallaby, Fareed Zakaria, David Frum, Arianna Huffington, Eliot Spitzer, Steve Brill, Anya Schiffrin, Steve Clemons, Susan Glasser, and Ali Velshi.

Making Globalization Work by Joseph E. Stiglitz

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affirmative action, Andrei Shleifer, Asian financial crisis, banking crisis, barriers to entry, Berlin Wall, business process, capital controls, central bank independence, corporate governance, corporate social responsibility, currency manipulation / currency intervention, Doha Development Round, Exxon Valdez, Fall of the Berlin Wall, Firefox, full employment, Gini coefficient, global reserve currency, Gunnar Myrdal, happiness index / gross national happiness, illegal immigration, income inequality, income per capita, incomplete markets, Indoor air pollution, informal economy, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), inventory management, invisible hand, John Markoff, Kenneth Arrow, Kenneth Rogoff, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, microcredit, moral hazard, North Sea oil, offshore financial centre, oil rush, open borders, open economy, price stability, profit maximization, purchasing power parity, quantitative trading / quantitative finance, race to the bottom, reserve currency, rising living standards, risk tolerance, Silicon Valley, special drawing rights, statistical model, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, trickle-down economics, union organizing, Washington Consensus, zero-sum game

Too often, I fear, the combatants in these debates slide past each other, each simply asserting their positions. They are more engaged in rallying their troops than in winning converts. I suspect that I may not win many converts, but I have, I think, made an effort to engage on the issues, to uncover the differences in underlying assumptions and values. The public debate about globalization has been especially lively within the last half decade, with important contributions by Martin Wolf (Why Globalization Works), Jagdish Bhagwati (In Defense of Globalization), Bill Easterly (The Elusive Quest for Growth), Jeff Sachs (The End of Poverty), and Thomas Friedman (The World Is Flat). Onstage and offstage, we have continued these debates with each other, and I believe we have all benefited—even if we have not been able to convince each other of the merits of our positions. Our democracies have given us the opportunity-1 would say the responsibility—to engage Acknowledgments XXIII in these debates, which hopefully will play a role in shaping public policy in this vital area.

Steel Import Tariffs: A Quantification of the Impact During 2002," CITAC Foundation, 2003; available at wvvw.citac.info/steeltaskforce/studies/attach/2002 Job_Study.pdf. 21. See Bruce Greenwald and Joseph E. Stiglitz, "Helping Infant Economies Grow: Foundations of Trade Policies for Developing Countries," American Economic Review, vol. 96, no. 2 (May, 2006), pp. 141-46. 22. See UNDP, Making Global Trade Work for People (London and Sterling, VA: Earthscan Publications, 2003). For arguments that globalization and/or trade would lead to more growth, see Martin Wolf, Why Globalization Works (New Haven: Yale University Press, 2004); Jagdish N. Bhagwati, In Defense of Globalization (New York: Oxford University Press, 2004); World Bank, Globalization, Growth, and Poverty: Building an Inclusive World Economy (Washington, DC: World Bank, 2002); Jeffrey D. Sachs and Andrew M. Warner, "Economic Reform and the Process of Global Integration," in Brookings Papers on Economic Activity 1995, vol. 1, Macroeconomics, ed.

The End of Power: From Boardrooms to Battlefields and Churches to States, Why Being in Charge Isn’t What It Used to Be by Moises Naim

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additive manufacturing, barriers to entry, Berlin Wall, bilateral investment treaty, business process, business process outsourcing, call centre, citizen journalism, Clayton Christensen, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, conceptual framework, corporate governance, creative destruction, crony capitalism, deskilling, disintermediation, don't be evil, failed state, Fall of the Berlin Wall, financial deregulation, Francis Fukuyama: the end of history, illegal immigration, immigration reform, income inequality, income per capita, intangible asset, intermodal, invisible hand, job-hopping, Joseph Schumpeter, Julian Assange, Kickstarter, liberation theology, Martin Wolf, mega-rich, megacity, Naomi Klein, Nate Silver, new economy, Northern Rock, Occupy movement, open borders, open economy, Peace of Westphalia, Plutocrats, plutocrats, price mechanism, price stability, private military company, profit maximization, Ronald Coase, Ronald Reagan, Silicon Valley, Skype, Steve Jobs, The Nature of the Firm, Thomas Malthus, too big to fail, trade route, transaction costs, Washington Consensus, WikiLeaks, World Values Survey, zero-sum game

Thanks are due to those who over the long period of this book’s gestation gave me their time, shared their insights, critiqued my ideas, and in some cases, read and commented on early drafts of individual chapters: Mort Abramowitz, Jacques Attali, Ricardo Avila, Carlo de Benedetti, Paul Balaran, Andrew Burt, Fernando Henrique Cardoso, Tom Carver, Elkyn Chaparro, Lourdes Cue, Wesley Clark, Tom Friedman, Lou Goodman, Victor Halberstadt, Ivan Krastev, Steven Kull, Ricardo Lagos, Sebastian Mallaby, Luis Alberto Moreno, Evgeny Morozov, Dick O’Neill, Minxin Pei, Maite Rico, Gianni Riotta, Klaus Schwab, Javier Solana, George Soros, Larry Summers, Gerver Torres, Martin Wolf, Robert Wright, Ernesto Zedillo, and Bob Zoellick. A special note of thanks goes to Professor Mario Chacón of New York University, who prepared the appendix, a detailed analysis of empirical data showing the manifestations of the decay of power in national politics worldwide. I had superb research assistants throughout the period I worked on this book. I’d like to thank Josh Keating, Bennett Stancil, and Shimelse Ali for their help in making the book as strong as possible.

Max, “The Prince’s Gambit.” 9. Ivan Arreguín-Toft, “How the Weak Win Wars: A Theory of Asymmetric Conflict,” International Security 26, no. 1 (2001): 93–128; Ivan Arreguín-Toft, “How a Superpower Can End Up Losing to the Little Guys,” Nieman Watchdog , March 23, 2007, www.niemanwatchdog.org. On the impact of IEDs, see Tom Vanden Brook, “IED Attacks in Afghanistan Set Record,” USA Today, January 25, 2012. 10. Martin Wolf, “Egypt Has History on Its Side,” Financial Times, February 15, 2011. The updated figure for 2011 is from the Polity IV Project’s Global Report 2011, which was compiled at George Mason University (Wolf’s original source). 11. Emmanuel Saez, “Striking It Richer: The Evolution of Top Incomes in the United States (Updated with 2009 and 2010 Estimates),” March 2, 2012, http://elsa.berkeley.edu/~saez/saez-UStopincomes-2010.pdf. 12.

Because We Say So by Noam Chomsky

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Affordable Care Act / Obamacare, American Legislative Exchange Council, Chelsea Manning, cuban missile crisis, David Brooks, drone strike, Edward Snowden, Intergovernmental Panel on Climate Change (IPCC), Julian Assange, Malacca Straits, Martin Wolf, means of production, Monroe Doctrine, Occupy movement, oil shale / tar sands, Powell Memorandum, Ralph Waldo Emerson, RAND corporation, Slavoj Žižek, Stanislav Petrov, Thorstein Veblen, too big to fail, uranium enrichment, WikiLeaks

One primary justification for the design is what Nobel laureate Joseph Stiglitz called the “religion” that “markets lead to efficient outcomes,” which was recently dealt yet another crushing blow by the collapse of the housing bubble that was ignored on doctrinal grounds, triggering the current financial crisis. Claims are also made about the alleged benefits of the radical expansion of financial institutions since the 1970s. A more convincing description was provided by Martin Wolf, senior economic correspondent for the FINANCIAL TIMES: “An out-of-control financial sector is eating out the modern market economy from inside, just as the larva of the spider wasp eats out the host in which it has been laid.” The EPI study observes that the FAILURE BY DESIGN is class-based. For the designers, it has been a stunning success, as revealed by the astonishing concentration of wealth in the top 1 percent, in fact the top 0.1 percent, while the majority has been reduced to virtual stagnation or decline.

Rethinking Islamism: The Ideology of the New Terror by Meghnad Desai

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Ayatollah Khomeini, battle of ideas, Berlin Wall, full employment, global village, illegal immigration, income per capita, invisible hand, liberal capitalism, liberation theology, Mahatma Gandhi, Martin Wolf, means of production, oil shock, purchasing power parity, Ronald Reagan, structural adjustment programs, The Wealth of Nations by Adam Smith, Yom Kippur War

฀I฀argued฀there฀ that฀what฀caused฀the฀terrorism฀was฀not฀Islam฀as฀a฀religion฀or฀even฀ the฀ lifestyle฀ or฀ culture฀ of฀ Muslims฀ in฀ Britain฀ but฀ an฀ ideology,฀ Global฀ Islamism,฀ whose฀ nature฀ had฀ to฀ be฀ grasped฀ if฀ we฀ were฀ to฀ fight฀ terrorism.฀ I฀ drew฀ an฀ analogy฀ between฀ Soviet฀ Communism฀ and฀ Global฀ Islamism฀ as฀ ideologies฀ which฀ had฀ an฀ anti-Western฀ agenda฀ and฀ asked฀ whether฀ we฀ could฀ combat฀ one฀ ideology฀ as฀ we฀ did฀ the฀ other.฀ The฀ letter฀ elicited฀ a฀ response฀ by฀ Martin฀ Wolf฀ in฀ the฀FT฀as฀well฀as฀some฀correspondence.฀I฀was฀then฀approached฀by฀ Alex฀Wright฀of฀I.B.฀Tauris฀and฀invited฀to฀submit฀a฀book฀proposal฀ developing฀my฀argument. viii ฀  This฀ short฀ book฀ –฀ really฀ an฀ extended฀ essay฀ –฀ is฀ the฀ result.฀ I฀ examine฀the฀history฀of฀the฀Middle฀East฀over฀the฀last฀hundred฀years.฀ I฀ look฀ at฀ the฀ nature฀ of฀ ideology฀ in฀ general,฀ examining฀ Marxism– Leninism,฀anarchism,฀Nazism฀and฀nationalism฀as฀likely฀analogues฀to฀ Global฀Islamism.


pages: 223 words: 58,732

The Retreat of Western Liberalism by Edward Luce

3D printing, affirmative action, Airbnb, basic income, Berlin Wall, Bernie Sanders, Branko Milanovic, Bretton Woods, call centre, carried interest, centre right, cognitive dissonance, colonial exploitation, colonial rule, computer age, corporate raider, cuban missile crisis, currency manipulation / currency intervention, Dissolution of the Soviet Union, Doha Development Round, Donald Trump, double entry bookkeeping, Erik Brynjolfsson, European colonialism, everywhere but in the productivity statistics, Fall of the Berlin Wall, Francis Fukuyama: the end of history, future of work, George Santayana, gig economy, Gini coefficient, global supply chain, illegal immigration, imperial preference, income inequality, informal economy, Internet of things, Jaron Lanier, knowledge economy, liberal capitalism, Marc Andreessen, Mark Zuckerberg, Martin Wolf, mass immigration, means of production, Monroe Doctrine, moral panic, more computing power than Apollo, mutually assured destruction, new economy, New Urbanism, Norman Mailer, offshore financial centre, one-China policy, Peace of Westphalia, Peter Thiel, Plutocrats, plutocrats, precariat, purchasing power parity, reserve currency, Richard Florida, Robert Gordon, Ronald Reagan, Second Machine Age, self-driving car, sharing economy, Silicon Valley, Skype, Snapchat, software is eating the world, South China Sea, Steve Jobs, superstar cities, TaskRabbit, telepresence, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tyler Cowen: Great Stagnation, universal basic income, unpaid internship, Washington Consensus, We are the 99%, We wanted flying cars, instead we got 140 characters, white flight, World Values Survey, Yogi Berra

I have also benefited greatly from the insights of Michael Lind of the New America Foundation, whose work on the trajectory of US democracy and whose conversations with me on and around many of the topics addressed in this book have proved invaluable. Michael deserves far greater recognition for anticipating the crisis we find ourselves confronting. Others who have kindly lent me their brains on a frequent basis, and to whom I am deeply grateful, include Tyler Cowen, Jonathan Rauch, Larry Summers, David Rothkopf, Martin Wolf, Jonathan Kirshner, Bill Galston, E. J. Dionne, Thomas Wright, Richard Porter, Eric Li, Lloyd Green, Alexander Dynkin, Steve Clemons, David Frum, Jim Pethkoukis, Jane Mayer, Tom Friedman, Matthias Matthjis, William Wallis, Sidney Blumenthal, Karim Sajadpour, Yascha Mounk, Francis Fukuyama, Niall Ferguson, Lou Susman, Richard Longworth, Kori Schake, Denis Staunton, Andrew Edgecliffe-Johnson, Gillian Tett, Gideon Rachman, Demetri Sevastopulo, and Liaquat Ahamed.


Britannia Unchained: Global Lessons for Growth and Prosperity by Kwasi Kwarteng, Priti Patel, Dominic Raab, Chris Skidmore, Elizabeth Truss

Airbnb, banking crisis, Carmen Reinhart, central bank independence, clockwatching, creative destruction, Credit Default Swap, demographic dividend, Edward Glaeser, eurozone crisis, fear of failure, glass ceiling, informal economy, James Dyson, Kenneth Rogoff, knowledge economy, long peace, margin call, Mark Zuckerberg, Martin Wolf, megacity, Mexican peso crisis / tequila crisis, Neil Kinnock, new economy, North Sea oil, oil shock, open economy, pension reform, price stability, profit motive, Ronald Reagan, Sand Hill Road, Silicon Valley, Steve Jobs, Walter Mischel, wealth creators, Winter of Discontent, working-age population, Yom Kippur War

Other influences at Harvard included Lawrence Katz, who became chief economist at the Labour Department, and Robert Reich who served as Secretary of Labour.52 Much of their thought could still be seen in New Labour’s later minimum wage and New Deal initiatives. 26 Britannia Unchained Returning back to the UK, Balls took the job as a journalist at the Financial Times where he later caught the attention of Gordon Brown. At first, he was unsure whether to take the position (and the lower salary) of working for Brown, and asked his journalist friends for advice: Martin Wolf of the Financial Times thought he should turn it down, William Keegan of the Observer told him to go for it, while Will Hutton of the Guardian could not decide.53 It was only when his newspaper refused his request to spend a couple of years in Africa that he finally made his mind up. Brown, too, had worked hard as a pupil, and soon found himself drawn to academia and journalism. Part of an experimental fast-track scheme at his Kirkcaldy High School, Brown had completed his A Levels and gone on to the University of Edinburgh by 16.


pages: 183 words: 17,571

Broken Markets: A User's Guide to the Post-Finance Economy by Kevin Mellyn

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banking crisis, banks create money, Basel III, Bernie Madoff, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, Bretton Woods, BRICs, British Empire, call centre, Carmen Reinhart, central bank independence, centre right, cloud computing, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate raider, creative destruction, credit crunch, crony capitalism, currency manipulation / currency intervention, disintermediation, eurozone crisis, fiat currency, financial innovation, financial repression, floating exchange rates, Fractional reserve banking, global reserve currency, global supply chain, Home mortgage interest deduction, index fund, information asymmetry, joint-stock company, Joseph Schumpeter, labor-force participation, labour market flexibility, light touch regulation, liquidity trap, London Interbank Offered Rate, lump of labour, market bubble, market clearing, Martin Wolf, means of production, mobile money, money market fund, moral hazard, mortgage debt, mortgage tax deduction, negative equity, Ponzi scheme, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, reserve currency, rising living standards, Ronald Coase, seigniorage, shareholder value, Silicon Valley, statistical model, Steve Jobs, The Great Moderation, the payments system, Tobin tax, too big to fail, transaction costs, underbanked, Works Progress Administration, yield curve, Yogi Berra, zero-sum game

(It is possible to be frugal without being an exporter, of course, but such countries are almost always poor.) They are the thrifty, hardworking ants and paragons of virtue. However, the decadent and lazy grasshoppers resent them, as they find virtue creepy and dislike those to whom they owe money. The ants and grasshoppers are, in fact, dependent on each other. The formal term global imbalance—a topic that sage economic commentator Martin Wolf often returns to in the pages of the Financial Times as a core threat to global prosperity—is largely one of too much saving in Asia, and too much spending in Europe and especially the United States. The ideal solution— one China has specifically targeted in its 12th five-year plan (yes, China is still formally a communist country with five-year plans)—is for much higher domestic consumption in the countries that save too much, and higher savings in countries that scarcely save at all, such as the United States and United Kingdom.


pages: 234 words: 63,149

Every Nation for Itself: Winners and Losers in a G-Zero World by Ian Bremmer

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airport security, banking crisis, barriers to entry, Berlin Wall, blood diamonds, Bretton Woods, BRICs, capital controls, clean water, creative destruction, Deng Xiaoping, Doha Development Round, energy security, European colonialism, failed state, global rebalancing, global supply chain, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), Julian Assange, labour mobility, Martin Wolf, mass immigration, Mikhail Gorbachev, mutually assured destruction, Nixon shock, nuclear winter, Parag Khanna, purchasing power parity, reserve currency, Ronald Reagan, smart grid, South China Sea, sovereign wealth fund, special economic zone, Stuxnet, trade route, uranium enrichment, Washington Consensus, WikiLeaks, Yom Kippur War

“The Maldives: A Sinking Paradise,” Green Hotelier, May 20, 2011, http://www.greenhotelier.org/index.php?option=com_content&view=article&id=263&Itemid=2. 2. “Maldives Cabinet Makes a Splash,” BBC News, October 17, 2009, http://news.bbc.co.uk/2/hi/8311838.stm. 3. See Jagdish Bhagwati, In Defense of Globalization (New York: Oxford University Press, 2004); Thomas Friedman, The World Is Flat: A Brief History of the Twenty-First Century (New York: Farrar, Straus and Giroux, 2005); and Martin Wolf, Why Globalization Works (New Haven, CT: Yale University Press, 2004). 4. See Dani Rodrik, The Globalization Paradox: Democracy and the Future of the World Economy (New York: Norton, 2011); Michel Chossudovsky, The Globalization of Poverty and the New World Order, 2nd ed. (Pincourt, Quebec: Global Research, 2003); and Harold James, The Creation and Destruction of Value: The Globalization Cycle (Cambridge, MA: Harvard University Press, 2009). 5.


pages: 1,242 words: 317,903

The Man Who Knew: The Life and Times of Alan Greenspan by Sebastian Mallaby

airline deregulation, airport security, Andrei Shleifer, anti-communist, Asian financial crisis, balance sheet recession, bank run, barriers to entry, Benoit Mandelbrot, Bretton Woods, central bank independence, centralized clearinghouse, collateralized debt obligation, conceptual framework, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency peg, energy security, equity premium, fiat currency, financial deregulation, financial innovation, fixed income, Flash crash, forward guidance, full employment, Hyman Minsky, inflation targeting, information asymmetry, interest rate swap, inventory management, invisible hand, Kenneth Rogoff, Kitchen Debate, laissez-faire capitalism, Long Term Capital Management, low skilled workers, market bubble, market clearing, Martin Wolf, money market fund, moral hazard, mortgage debt, Myron Scholes, new economy, Nixon shock, Northern Rock, paper trading, paradox of thrift, Paul Samuelson, Plutocrats, plutocrats, popular capitalism, price stability, RAND corporation, rent-seeking, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, Saturday Night Live, savings glut, secular stagnation, short selling, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, unorthodox policies, upwardly mobile, WikiLeaks, women in the workforce, Y2K, yield curve, zero-sum game

Instead, Bear came under the Securities and Exchange Commission, which allowed it to operate with almost no equity buffers; whereas a bank like Citigroup had more than sixty government supervisors stationed permanently on its premises, Bear got away with annual supervisory visits.28 The fragmentation of the regulatory system had encouraged risk taking to migrate to banks where oversight was weakest. The “financial self-regulation” that Greenspan touted had not been enough to compensate. Greenspan’s unlucky timing left him looking isolated. Deutsche Bank had recently signed on as a Greenspan consulting client, but the day after the FT op-ed appeared, Deutsche’s boss staked out the opposite position: “I no longer believe in the market’s self-healing power,” he declared flatly.29 Martin Wolf, the FT’s chief economics commentator, had recently published an upbeat book titled Why Globalization Works. But now he sounded dark. “The dream of global free-market capitalism died,” Wolf declared after the failure of Bear Stearns. “Deregulation has reached its limits.”30 Amid mounting doubts about markets, Greenspan tried again to defend his perspective. “Would a material tightening of regulation improve financial performance?”

The fuzzy nature of the inflation target, even after 1996, is also evident from Greenspan’s willingness to call it into question during later meetings. In February 1997, for example, he suggested that asset prices should be part of the target. “Product prices alone should not be the sole criterion if we are going to maintain a stable, viable financial system whose fundamental goal, let us remember, is the attainment of maximum sustainable economic growth.” 23. Greenspan had met Martin Wolf and Michael Prowse of the Financial Times on June 25, 1996. 24. At the FOMC meeting beginning February 4, 1997, Greenspan reiterated his view that a public commitment to an inflation target would be unhelpful. “There is no evidence in my experience that words have had the slightest effect. It has not helped the Bundesbank, and if it has not helped the Bundesbank, how is it going to help anybody?

Financial Crisis Inquiry Commission, “The Financial Crisis Inquiry Report: The Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States” (Financial Crisis Inquiry Commission, January 2011), 150–53, http://fcic-static.law.stanford.edu/cdn_media/fcic-reports/fcic_final_report_full.pdf. 29. “Global Credit Crunch: Deutsche Bank Head Calls for Government Help,” Der Spiegel, March 18, 2008, http://www.spiegel.de/international/business/global-credit-crunch-deutsche-bank-head-calls-for-government-help-a-542140.html. 30. Martin Wolf, “The Rescue of Bear Stearns Marks Liberalization’s Limit,” Financial Times, March 26, 2008, http://www.ft.com/intl/cms/s/0/8ced5202-fa94-11dc-aa46-000077b07658.html#axzz3ZBRa IhqN. 31. Alan Greenspan, “The Fed Is Blameless on the Property Bubble,” Financial Times, April 7, 2008, http://www.ft.com/intl/cms/s/0/81c05200-03f2-11dd-b28b-000077b07658.html#axzz 3ZBRaIhqN. 32. John Crudele, “Paulson’s Plan Is More an April Fool’s Joke,” New York Post, April 1, 2008, http://nypost.com/2008/04/01/paulsons-plan-is-more-an-april-fools-joke/. 33.


pages: 614 words: 176,458

Meat: A Benign Extravagance by Simon Fairlie

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agricultural Revolution, Albert Einstein, back-to-the-land, call centre, carbon footprint, Community Supported Agriculture, deindustrialization, en.wikipedia.org, food miles, Food sovereignty, Haber-Bosch Process, Hugh Fearnley-Whittingstall, informal economy, Intergovernmental Panel on Climate Change (IPCC), Just-in-time delivery, land reform, Mahatma Gandhi, Martin Wolf, megacity, Northern Rock, Panamax, peak oil, refrigerator car, scientific mainstream, sexual politics, stem cell, The Wealth of Nations by Adam Smith, trade liberalization, University of East Anglia, upwardly mobile, women in the workforce, zero-sum game

The watermill wasn’t developed until 1,000 years after it was invented, because slaves could do the job cheaper.39 How many potential agricultural improvements are there which have remained ignored because they can’t compete with fossil fuels? A notable example is the huge discrepancy between conventional UK wheat yields of around eight tonnes per hectare, which are dependent upon high applications of synthetic nitrogen, and average yields of organic wheat which are little more than half as much. Martin Wolfe, of Elm Farm Research Station, has drawn attention to the curious fact that the same does not hold for other grains: In 2000, six modern wheat varieties yielded, on average, 10 tonnes per hectare across national trials under standard non-organic conditions. When these varieties were grown organically the yield fell to less than 4 tonnes per hectare. Oat and triticale varieties under the non-organic conditions yielded, respectively, 8.2 and 6.5 tonnes per hectare.

Quote slightly shortened. 38 Shurtleff, W and Akiko Aoyagi (n.d.), History of Soybeans and Soyfoods in China, unpublished, http://www.soyinfocenter.com/HSS/history.php; World Resource Institute, Country Profiles, http://earthtrends.wri.org/pdf_library/country_profiles/ene_cou_156.pdf 39 Marc Bloch (1967), ‘The Advent and Triumph of the Watermill’ in Land and Work in Medieval Europe, Routledge and Kegan Paul. 40 Martin Wolfe (2001), Recognizing and Realizing the Potential of Organic Agriculture, presentation at Global Ag 2020 conference, John Innes Centre, 19 April 2001, www.biotech-info.net/organic_potential.html 41 Rabenandrasana, Justin (n.d.), Revolution in Rice Intensification in Madagascar, ILEIA Newsletter, www.farmingsolutions.org/successtories/stories.asp?id=9; Mae-Wan Ho (2004) Rice Wars, Institute of Science in Society, 2004 http://www.i-sis.org.uk/RiceWars.php; Organic System Doubles Yield, Foodmarket Exchange news release, 20 Dec 2002, www.foodmarketexchange.com; Gallarde, Juancho (2006) ‘Rice-Duck farming in Negor’, Daily Star, Saturday 28 October 2006, http://www.visayandailystar.com/2006/October/28/negor2.htm; Australian Government Overseas Aid, Rice Revolution, 2004, http://www.ausaid.gov.au/closeup/rice_revolution.cfm. 42 Mae-Wan Ho (2004), ibid. 43 Surridge, C (2004), ‘Feast of Famine’, Nature 428, pp 360-36, 25 March 2004. 44 Smil (2004), op cit. 19, p 30 45 Armstrong, W P (1998), Marriage Between A Fern & Cyanobacterium, November 1998, http://waynesword.palomar.edu/plnov98.htm 46 NESAC (2006), Package of Practice for Azolla: A Potential Bio-fertilizer, http://megapib.nic.in/azolla.htm, 12 November 2006 47 Smil (2004), op cit.19, p 174.


pages: 250 words: 88,762

The Logic of Life: The Rational Economics of an Irrational World by Tim Harford

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activist fund / activist shareholder / activist investor, affirmative action, Albert Einstein, Andrei Shleifer, barriers to entry, Berlin Wall, colonial rule, Daniel Kahneman / Amos Tversky, double entry bookkeeping, Edward Glaeser, en.wikipedia.org, endowment effect, European colonialism, experimental economics, experimental subject, George Akerlof, income per capita, invention of the telephone, Jane Jacobs, John von Neumann, law of one price, Martin Wolf, mutually assured destruction, New Economic Geography, new economy, Plutocrats, plutocrats, Richard Florida, Richard Thaler, Ronald Reagan, Silicon Valley, spinning jenny, Steve Jobs, The Death and Life of Great American Cities, the market place, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Malthus, women in the workforce, zero-sum game

Equally talented and equally generous with their expertise or comments were Lee Aitken, Sam Bodanis, Dominic Camus, Anne Currell, Stephen Dubner, Chris “Jesus” Ferguson, Patri Friedman, Mark Henstridge, Diana Jackson, Howard Lederer, Philippe Legrain, Seamus McCauley, Giuliana Molinari, Dave Morris, Frazer Payne, William Poundstone, Greg Raymer, Romesh Vaitilingam, and David Warsh. Every day at the Financial Times brings me new ideas, but I particularly wish to thank my colleagues on the leader-writing team, David Gardner, Robin Harding, and Alison Smith; my FT Magazine editors, Isabel Berwick, Rosie Blau, Pilita Clark, Michael Skapinker, and Graham Watts; Chris Giles and Martin Wolf; and Lionel Barber and Dan Bogler for so quickly agreeing to give me some time to write this book. I am also grateful to the Financial Times for allowing me to use my articles as the basis for some sections of this book. Beyond the FT, David Plotz of Slate and Elisabeth Eaves, Dave Ewalt, and Michael Noer of Forbes improved articles that served as preparation for writing this book. The amazing production crew members of Trust Me, I’m an Economist all deserve a medal, but Simon Chu, Gabi Kent, and Lindsay Shapero particularly helped me develop ideas that have ended up here.


pages: 310 words: 90,817

Paper Money Collapse: The Folly of Elastic Money and the Coming Monetary Breakdown by Detlev S. Schlichter

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bank run, banks create money, British Empire, capital controls, Carmen Reinhart, central bank independence, currency peg, fixed income, Fractional reserve banking, German hyperinflation, global reserve currency, inflation targeting, Kenneth Rogoff, Long Term Capital Management, market clearing, Martin Wolf, means of production, money market fund, moral hazard, mortgage debt, open economy, Ponzi scheme, price discovery process, price mechanism, price stability, pushing on a string, quantitative easing, reserve currency, rising living standards, risk tolerance, savings glut, the market place, The Wealth of Nations by Adam Smith, Thorstein Veblen, transaction costs, Y2K

Friedrich August von Hayek, “The Paradox of Saving,” Economica, vol. 11, May 1931, reprinted in The Collected Works of F. A. Hayek, Volume 9 (London: Routledge: 1995), pp. 74–120. 17. Ludwig von Mises, Geldwertstabilisierung und Konjunkturpolitik, p. 1. 18. Ben S. Bernanke, The Global Savings Glut and the US Current Account Deficit (Federal Reserve Board, Washington DC, March 2005), http://www.federalreserve.gov/boarddocs/speeches/2005/200503102/ 19. For example: Martin Wolf, Fixing Global Finance: How to Curb Financial Crises in the 21st Century (New Haven and London: Yale University Press, 2009). 20. Ludwig von Mises, Human Action, p. 435 (n.), p. 450. Chapter 10 Beyond the Cycle Paper Money’s Endgame There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.


pages: 325 words: 99,983

Globish: How the English Language Became the World's Language by Robert McCrum

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Alistair Cooke, anti-communist, Berlin Wall, British Empire, call centre, colonial rule, credit crunch, cuban missile crisis, Deng Xiaoping, Etonian, failed state, Fall of the Berlin Wall, Francis Fukuyama: the end of history, invention of movable type, invention of writing, invisible hand, Isaac Newton, jimmy wales, knowledge economy, Livingstone, I presume, Martin Wolf, Naomi Klein, Norman Mailer, Parag Khanna, Ralph Waldo Emerson, Republic of Letters, Ronald Reagan, sceptred isle, Scramble for Africa, Silicon Valley, Steven Pinker, the new new thing, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade route, transatlantic slave trade, transcontinental railway, upwardly mobile

NOTES Prologue: ‘Crazy English’ 5 Mandarin … outnumbers: Martin Jacques, When China Rules the World (London, 2009), pp. 115–18. I am indebted to Dr Jacques for his help with my research in China. 5 the cultural revolution of my generation: from the vast literature of ‘globalisation’, I recommend A Brief History of Globalization by Alex MacGillivray (London, 2006), Globalisation and its Discontents by Joseph Stiglitz (London, 2004), and Why Globalisation Works by Martin Wolf (New Haven, 2004). 6 expressed by America’s Founding Fathers: these words are found in the preamble to the Declaration of Independence, and they reflect values expressed by Labour Prime Minister Gordon Brown. ‘When, at my meeting with President Bush,’ said Brown, ‘I talk of a joint inheritance – not just of shared history but shared values founded on a shared destiny – I mean the idea that everyone is created equal, that there should be freedom of expression for all faiths, that arts and culture should celebrate diversity, that government should be open and accountable, that there should be opportunity for all – for all men and women–and a belief in free trade.’


pages: 397 words: 112,034

What's Next?: Unconventional Wisdom on the Future of the World Economy by David Hale, Lyric Hughes Hale

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affirmative action, Asian financial crisis, asset-backed security, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Bretton Woods, capital controls, Cass Sunstein, central bank independence, cognitive bias, collapse of Lehman Brothers, collateralized debt obligation, corporate governance, corporate social responsibility, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, debt deflation, declining real wages, deindustrialization, diversification, energy security, Erik Brynjolfsson, Fall of the Berlin Wall, financial innovation, floating exchange rates, full employment, Gini coefficient, global reserve currency, global village, high net worth, Home mortgage interest deduction, housing crisis, index fund, inflation targeting, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Just-in-time delivery, Kenneth Rogoff, labour market flexibility, labour mobility, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, Mexican peso crisis / tequila crisis, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, mortgage tax deduction, Network effects, new economy, Nicholas Carr, oil shale / tar sands, oil shock, open economy, passive investing, payday loans, peak oil, Ponzi scheme, post-oil, price stability, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, reserve currency, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, Ronald Reagan, sovereign wealth fund, special drawing rights, technology bubble, The Great Moderation, Thomas Kuhn: the structure of scientific revolutions, Tobin tax, too big to fail, total factor productivity, trade liberalization, Washington Consensus, Westphalian system, women in the workforce, yield curve

This is the Federal Reserve’s “Assets and Liabilities of Commercial Banks in the United States” published on its website. In November 2009 the figure was $1,327.6 billion, compared with $1,173.1 billion a year earlier; in November 2010—after hundreds of billions of write-offs—it was $1,362.6 billion. The media alleged at various points in the crisis that the US banking system was “bust” or “insolvent.” Even columnists such as Martin Wolf of the Financial Times—taking his cue from Nouriel Roubini of Roubini Global Economics—have indulged in this sort of scare-mongering. Of course, no banking system can withstand slides in asset values of, say, 40 to 70 percent. But, despite severe asset price oscillations from 2007 to 2010, the US commercial banking system plainly was not bust at any stage in the Great Recession. In fact, the preliminary data suggested that American banks have over 15 percent more capital in January 2011 than they did two years earlier, while their risk assets have fallen.


pages: 364 words: 104,697

Were You Born on the Wrong Continent? by Thomas Geoghegan

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Albert Einstein, American Society of Civil Engineers: Report Card, banking crisis, Berlin Wall, Bob Geldof, collective bargaining, corporate governance, cross-subsidies, dark matter, David Brooks, declining real wages, deindustrialization, ending welfare as we know it, facts on the ground, Gini coefficient, haute cuisine, income inequality, John Maynard Keynes: Economic Possibilities for our Grandchildren, knowledge economy, knowledge worker, labour market flexibility, laissez-faire capitalism, low skilled workers, Martin Wolf, McJob, minimum wage unemployment, mittelstand, offshore financial centre, Paul Samuelson, payday loans, pensions crisis, Plutocrats, plutocrats, purchasing power parity, Ralph Waldo Emerson, Robert Gordon, Ronald Reagan: Tear down this wall, Saturday Night Live, Silicon Valley, The Wealth of Nations by Adam Smith, Thorstein Veblen, union organizing, Wolfgang Streeck, women in the workforce

Some people, like Paul Krugman in the New York Times, seem to believe European social democracy will not survive—and it’s all due to the euro. Now, this book is not a defense of the euro, a project unrelated to social democracy. Paul Krugman himself would agree they’re unrelated. But let me suggest that, while the existence of the euro creates some big problems, it may still turn out to be a good thing. I admit to being influenced here by the views of Martin Wolf in the Financial Times. Free of the euro, imprudent debtor countries like Spain and Ireland might make an easier comeback. If they had their own individual currencies, like the peso or the pound, the currencies would be cheap, because no one would trust the credibility of Spain or Ireland. As a result, in these countries imports would be shockingly expensive. Food prices would soar. Life would be nasty.


pages: 385 words: 111,807

A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

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Affordable Care Act / Obamacare, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, corporate raider, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Gunnar Myrdal, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, information asymmetry, intangible asset, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land reform, liberation theology, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, Pareto efficiency, Paul Samuelson, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Vilfredo Pareto, Washington Consensus, working-age population, World Values Survey

While it pushed the Asian economies themselves on in a more market-oriented direction, the Asian crisis – and the Brazilian and the Russian crises that immediately followed it – actually planted the first seed of scepticism about post-Cold War free-market triumphalism. There were serious discussions about the need to reform the global financial system, much of them along the same lines as the ones that we have seen following the 2008 global financial crisis. Even many leading advocates of globalization – like the Financial Times columnist Martin Wolf and the free-trade economist Jagdish Bhagwati – started questioning the wisdom of allowing free international capital flows. All was not well with the new global economy. The false dawn: from the dot.com boom to the Great Moderation When these crises were brought under control, talk of global financial reform receded. In the US, a major push in the other direction came in the form of the 1999 repeal of the iconic New Deal legislation, the 1933 Glass-Steagall Act, which structurally separated commercial banking from investment banking.


pages: 363 words: 107,817

Modernising Money: Why Our Monetary System Is Broken and How It Can Be Fixed by Andrew Jackson (economist), Ben Dyson (economist)

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bank run, banking crisis, banks create money, Basel III, Bretton Woods, call centre, capital controls, cashless society, central bank independence, credit crunch, David Graeber, debt deflation, double entry bookkeeping, eurozone crisis, financial exclusion, financial innovation, Financial Instability Hypothesis, financial intermediation, floating exchange rates, Fractional reserve banking, full employment, Hyman Minsky, inflation targeting, informal economy, information asymmetry, intangible asset, land reform, London Interbank Offered Rate, market bubble, market clearing, Martin Wolf, means of production, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, negative equity, Northern Rock, price stability, profit motive, quantitative easing, Real Time Gross Settlement, regulatory arbitrage, risk-adjusted returns, seigniorage, shareholder value, short selling, South Sea Bubble, The Great Moderation, the payments system, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, unorthodox policies

The current system cannot be fixed by subjecting it to ever more rules and regulations; houses built on sand will eventually collapse no matter how careful the occupants are asked to be. The issue that must be addressed is the ability of the banking sector to create money. For decades, such concerns have been sidelined. Yet these concerns are becoming more widespread that ever before, with even the chief economics commentator for the Financial Times, Martin Wolf, expressing the view that: “It is the normal monetary system, in which the ‘printing’ of money is delegated to commercial banks, that needs defending. This delegates a core public function - the creation of money - to a private and often irresponsible commercial oligopoly.” (Wolf, 2012) This core public function is one upon which the stability of the entire economy depends. As a result instability and fragility are built into the current monetary system.


pages: 391 words: 97,018

Better, Stronger, Faster: The Myth of American Decline . . . And the Rise of a New Economy by Daniel Gross

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2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, Affordable Care Act / Obamacare, Airbnb, American Society of Civil Engineers: Report Card, asset-backed security, Bakken shale, banking crisis, BRICs, British Empire, business process, business process outsourcing, call centre, Carmen Reinhart, clean water, collapse of Lehman Brothers, collateralized debt obligation, commoditize, creative destruction, credit crunch, currency manipulation / currency intervention, demand response, Donald Trump, Frederick Winslow Taylor, high net worth, housing crisis, hydraulic fracturing, If something cannot go on forever, it will stop - Herbert Stein's Law, illegal immigration, index fund, intangible asset, intermodal, inventory management, Kenneth Rogoff, labor-force participation, LNG terminal, low skilled workers, Mark Zuckerberg, Martin Wolf, Maui Hawaii, McMansion, money market fund, mortgage debt, Network effects, new economy, obamacare, oil shale / tar sands, oil shock, peak oil, Plutocrats, plutocrats, price stability, quantitative easing, race to the bottom, reserve currency, reshoring, Richard Florida, rising living standards, risk tolerance, risk/return, Silicon Valley, Silicon Valley startup, six sigma, Skype, sovereign wealth fund, Steve Jobs, superstar cities, the High Line, transit-oriented development, Wall-E, Yogi Berra, zero-sum game, Zipcar

In the first quarter of 2009 the U.S. economy, we now know, was shrinking at a 6.7 percent annual rate. By the fall of 2009 it was expanding at a 3.8 percent annual rate. That’s a change in the rate of annual growth of 10.5 percent in a six-month period—unprecedented in modern history. Objectively speaking, in the aggregate, the United States has come back better, stronger, and faster than its peers. In June 2011 Martin Wolf, the sage Financial Times columnist, wrote, “Of the six biggest advanced economies—the U.S., Japan, Germany, France, the U.K. and Italy—only the U.S. and Germany had higher gross domestic product in the first quarter of 2011 than three years before.” Three years after the September 2008 meltdown, the United States was leaving its credit mess behind. By contrast, Europe was headed into a fall of discontent, fueled by raging debt and political crises.


pages: 327 words: 88,121

The Vanishing Neighbor: The Transformation of American Community by Marc J. Dunkelman

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Affordable Care Act / Obamacare, Albert Einstein, assortative mating, Berlin Wall, big-box store, blue-collar work, Bretton Woods, Broken windows theory, call centre, clean water, cuban missile crisis, dark matter, David Brooks, delayed gratification, double helix, Downton Abbey, Edward Glaeser, Fall of the Berlin Wall, Filter Bubble, Francis Fukuyama: the end of history, George Santayana, Gini coefficient, glass ceiling, global supply chain, global village, helicopter parent, if you build it, they will come, impulse control, income inequality, invention of movable type, Jane Jacobs, John Markoff, Khyber Pass, Louis Pasteur, Marshall McLuhan, Martin Wolf, McMansion, Nate Silver, Nicholas Carr, obamacare, Occupy movement, Peter Thiel, post-industrial society, Richard Florida, rolodex, Saturday Night Live, Silicon Valley, Skype, Steve Jobs, telemarketer, The Chicago School, The Death and Life of Great American Cities, the medium is the message, Thomas L Friedman, Tyler Cowen: Great Stagnation, urban decay, urban planning, Walter Mischel, War on Poverty, women in the workforce, World Values Survey, zero-sum game

Friedman and Michael Mandelbaum, That Used To Be Us (New York: Farrar, Straus and Giroux, 2011), 5; Nick Anderson, “College net price is rising,” Washington Post, October 24, 2012 9“The Lost Decade of the Middle Class,” 30. 10“The Lost Decade of the Middle Class,” 48. 11“Trends in American Values: 1987–2012: Partisan Polarization Surges in Bush, Obama Years,” Pew Research Center for the People and the Press, June 4, 2012, 47. 12Alexis de Tocqueville, Democracy in America (1835, 1840, reprint, Chicago: University of Chicago Press, 2000). 13Tocqueville, Democracy in America, 576. 14David Brooks, “Ryan’s Biggest Mistake,” New York Times, August 23, 2012. 15Fareed Zakaria, The Post-American World (New York: W. W. Norton, 2009), 211–12. 16Niall Ferguson, Civilization: The West and the Rest (New York: Penguin Press, 2011), 12. 17Binyamin Appelbaum and Robert Gebeloff, “Even Critics of Safety Net Increasingly Depend on It,” New York Times, February 12, 2012. 18Martin Wolf, ”How Austerity Has Failed,” New York Review of Books, July 11, 2013. 19Friedman and Mandelbaum, That Used to Be Us. 20Paul Weinstein Jr., “Cut to Invest: Establish a ‘Cut-to-Invest Commission’ to Reduce Low-Priority Spending, Consolidate Duplicative Programs, and Increase High-Priority Investments,” Brookings Institute, November 2012. 21http://www.nytimes.com/2013/03/11/opinion/krugman-dwindling-deficit-disorder.html. 22Francis Fukuyama, The End of History and the Last Man (New York: Free Press, 2006). 23Seymour Martin Lipset, American Exceptionalism (New York: W.


pages: 346 words: 90,371

Rethinking the Economics of Land and Housing by Josh Ryan-Collins, Toby Lloyd, Laurie Macfarlane, John Muellbauer

agricultural Revolution, asset-backed security, balance sheet recession, bank run, banking crisis, barriers to entry, basic income, Bretton Woods, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, debt deflation, deindustrialization, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, garden city movement, George Akerlof, ghettoisation, Gini coefficient, Hernando de Soto, housing crisis, Hyman Minsky, income inequality, information asymmetry, knowledge worker, labour market flexibility, labour mobility, land reform, land tenure, land value tax, Landlord’s Game, low skilled workers, market bubble, market clearing, Martin Wolf, means of production, money market fund, mortgage debt, negative equity, Network effects, new economy, New Urbanism, Northern Rock, offshore financial centre, Pareto efficiency, place-making, price stability, profit maximization, quantitative easing, rent control, rent-seeking, Richard Florida, Right to Buy, rising living standards, risk tolerance, Second Machine Age, secular stagnation, shareholder value, the built environment, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, universal basic income, urban planning, urban sprawl, working poor, working-age population

With very few exceptions, the banks’ primary business consisted of non-mortgage lending to companies both in 1928 and 1970. In 2007, banks in most countries had turned primarily in to real estate lenders. OSCAR JORDA ET AL. (2016, P. 16) [T]he US and UK economies … turned their populations in to highly leveraged speculators in a fixed asset that dominates most portfolios and impairs personal mobility. MARTIN WOLF (2008) 5.1 Introduction In Bishops’ Avenue, a grand street in a desirable part of North London, a third of the mansions on the road are empty (Booth, 2014). Many have fallen into a state of disrepair and been unoccupied for many years. This is striking. How could once beautiful buildings on a plot of land so well located in one of the world’s fastest growing cities be left to rot? Clearly, these places are no longer ‘homes’ in any meaningful sense of the word.


pages: 354 words: 92,470

Grave New World: The End of Globalization, the Return of History by Stephen D. King

9 dash line, Admiral Zheng, air freight, Albert Einstein, Asian financial crisis, bank run, banking crisis, barriers to entry, Berlin Wall, Bernie Sanders, bilateral investment treaty, bitcoin, blockchain, Bonfire of the Vanities, borderless world, Bretton Woods, British Empire, capital controls, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collateralized debt obligation, colonial rule, corporate governance, credit crunch, currency manipulation / currency intervention, currency peg, David Ricardo: comparative advantage, debt deflation, deindustrialization, Deng Xiaoping, Doha Development Round, Donald Trump, Edward Snowden, eurozone crisis, facts on the ground, failed state, Fall of the Berlin Wall, falling living standards, floating exchange rates, Francis Fukuyama: the end of history, full employment, George Akerlof, global supply chain, global value chain, hydraulic fracturing, Hyman Minsky, imperial preference, income inequality, income per capita, incomplete markets, inflation targeting, information asymmetry, Internet of things, invisible hand, joint-stock company, Long Term Capital Management, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, moral hazard, Nixon shock, offshore financial centre, oil shock, old age dependency ratio, paradox of thrift, Peace of Westphalia, Plutocrats, plutocrats, price stability, profit maximization, quantitative easing, race to the bottom, rent-seeking, reserve currency, reshoring, rising living standards, Ronald Reagan, Scramble for Africa, Second Machine Age, Skype, South China Sea, special drawing rights, technology bubble, The Great Moderation, The Market for Lemons, the market place, trade liberalization, trade route, Washington Consensus, WikiLeaks, Yom Kippur War, zero-sum game

He admitted that, yes, it could well have been the case. I couldn’t resist the opportunity to prove him right. Given the amount of history contained within Grave New World, I inevitably had to stand on the shoulders of historians or, at the very least, their books: many such volumes are listed in the bibliography. Those who have offered me advice and inspiration in equal measure on the economic aspects of globalization include Martin Wolf, Gideon Rachman, George Magnus, Shamik Dhar, David Bloom, Simon Williams, Murat Ulgen, Robin Down and Simon Wells. I also owe a debt of gratitude to the various anonymous referees who provided comments at various stages during the book’s progress. Policymakers on both sides of the Atlantic (and the Pacific) have been enormously helpful (although I suspect they would rather be thanked in spirit rather than in name).


pages: 323 words: 95,492

The Rise of the Outsiders: How Mainstream Politics Lost Its Way by Steve Richards

Affordable Care Act / Obamacare, Airbnb, banking crisis, battle of ideas, Bernie Sanders, call centre, centre right, collapse of Lehman Brothers, David Brooks, Donald Trump, Etonian, eurozone crisis, falling living standards, full employment, housing crisis, low skilled workers, manufacturing employment, Martin Wolf, mass immigration, Neil Kinnock, obamacare, Occupy movement, Ronald Reagan, Silicon Valley

Fractured work patterns mean it is much harder for younger people to secure mortgages, when they need to prove to a lender that they are in secure employment. How best can governments intervene to address the generational divide? Democratic politics would benefit from a more robust debate between centre left and centre right, in the aftermath of the financial crash. The centre-left case for a Keynesian response to the 2008 financial crash was put much more confidently by a few newspaper columnists – Paul Krugman in The New York Times, Martin Wolf in the Financial Times, William Keegan in The Observer – than it was by politicians. The centre-left politicians, with their nervy eyes on the voters, could not find a way of explaining why a deficit could be addressed by more government borrowing. With the centre left in retreat, the centre right had much of the stage to itself and, in imposing an excess of spending cuts, made itself so unpopular that it gave space to those even further to the right, who put the case for government hyperactivity.


pages: 275 words: 84,980

Before Babylon, Beyond Bitcoin: From Money That We Understand to Money That Understands Us (Perspectives) by David Birch

agricultural Revolution, Airbnb, bank run, banks create money, bitcoin, blockchain, Bretton Woods, British Empire, Broken windows theory, Burning Man, capital controls, cashless society, Clayton Christensen, clockwork universe, creative destruction, credit crunch, cross-subsidies, crowdsourcing, cryptocurrency, David Graeber, dematerialisation, Diane Coyle, distributed ledger, double entry bookkeeping, ethereum blockchain, facts on the ground, fault tolerance, fiat currency, financial exclusion, financial innovation, financial intermediation, floating exchange rates, Fractional reserve banking, index card, informal economy, Internet of things, invention of the printing press, invention of the telegraph, invention of the telephone, invisible hand, Irish bank strikes, Isaac Newton, Jane Jacobs, Kenneth Rogoff, knowledge economy, Kuwabatake Sanjuro: assassination market, large denomination, M-Pesa, market clearing, market fundamentalism, Marshall McLuhan, Martin Wolf, mobile money, money: store of value / unit of account / medium of exchange, new economy, Northern Rock, Pingit, prediction markets, price stability, QR code, quantitative easing, railway mania, Ralph Waldo Emerson, Real Time Gross Settlement, reserve currency, Satoshi Nakamoto, seigniorage, Silicon Valley, smart contracts, social graph, special drawing rights, technoutopianism, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, wage slave, Washington Consensus, wikimedia commons

In the podcast, Felix sensibly attempts to refute some of my crackpot theories about London having its own money and Scotland launching the first wholly virtual fiat currency, but I feel that the tectonic plates underlying currency have shifted in my direction. Once again, let’s pop over to the Financial Times to see what the great and good have said about this, as distinct from wide-eyed techno-determinists like me. What about Martin Wolf? He said that London is far richer than Scotland, and could easily be fiscally self-sufficient (Wolf 2013). If we are recognizing the age of cities, recognizing that there are no national economies, then ‘it is high time that London became a true city state’. How true this is. And the right place to start would be to stop London from distorting the UK economy further by making it have its own money.


pages: 790 words: 150,875

Civilization: The West and the Rest by Niall Ferguson

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Admiral Zheng, agricultural Revolution, Albert Einstein, Andrei Shleifer, Atahualpa, Ayatollah Khomeini, Berlin Wall, BRICs, British Empire, clean water, collective bargaining, colonial rule, conceptual framework, Copley Medal, corporate governance, creative destruction, credit crunch, David Ricardo: comparative advantage, Dean Kamen, delayed gratification, Deng Xiaoping, discovery of the americas, Dissolution of the Soviet Union, European colonialism, Fall of the Berlin Wall, Francisco Pizarro, full employment, Hans Lippershey, haute couture, Hernando de Soto, income inequality, invention of movable type, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, John Harrison: Longitude, joint-stock company, Joseph Schumpeter, Kitchen Debate, land reform, land tenure, liberal capitalism, Louis Pasteur, Mahatma Gandhi, market bubble, Martin Wolf, mass immigration, means of production, megacity, Mikhail Gorbachev, new economy, Pearl River Delta, Pierre-Simon Laplace, probability theory / Blaise Pascal / Pierre de Fermat, profit maximization, purchasing power parity, quantitative easing, rent-seeking, reserve currency, road to serfdom, Ronald Reagan, savings glut, Scramble for Africa, Silicon Valley, South China Sea, sovereign wealth fund, special economic zone, spice trade, spinning jenny, Steve Jobs, Steven Pinker, The Great Moderation, the market place, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Thorstein Veblen, total factor productivity, trade route, transaction costs, transatlantic slave trade, transatlantic slave trade, upwardly mobile, uranium enrichment, wage slave, Washington Consensus, women in the workforce, World Values Survey

For a modern review, see Hayes, ‘Statistics of Deadly Quarrels’ and the discussion in Pinker, Better Angels. 16. Kotkin, Armageddon Averted. 17. Guan and Li, ‘GDP and Economic Structure’. 18. Maddison, World Economy. 19. http://gcr.weforum.org/gcr2010/. 20. http://www.conference-board.org/data/economydatabase/. 21. I am grateful to Jim O’Neill at Goldman Sachs for providing me with the relevant dataset. 22. Martin Wolf, ‘Will China’s Rise Be Peaceful?’, Financial Times, 16 November 2010. 23. Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, World Population Prospects: The 2008 Revision, http://esa.un.org/unpp, 27 November 2010. 24. Huntington, Clash of Civilizations, tables 3.1, 3.2, 3.3, 4.3, 4.5, 4.6. 25. Cecchetti et al., ‘Future of Public Debt’. 26.


pages: 421 words: 120,332

The World in 2050: Four Forces Shaping Civilization's Northern Future by Laurence C. Smith

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Bretton Woods, BRICs, clean water, Climategate, colonial rule, deglobalization, demographic transition, Deng Xiaoping, energy security, flex fuel, global supply chain, Google Earth, guest worker program, Hans Island, hydrogen economy, ice-free Arctic, informal economy, Intergovernmental Panel on Climate Change (IPCC), invention of agriculture, invisible hand, land tenure, Martin Wolf, megacity, Mikhail Gorbachev, New Urbanism, oil shale / tar sands, oil shock, peak oil, Pearl River Delta, purchasing power parity, Ronald Reagan, Ronald Reagan: Tear down this wall, side project, Silicon Valley, smart grid, sovereign wealth fund, special economic zone, The Wealth of Nations by Adam Smith, Thomas Malthus, trade liberalization, trade route, UNCLOS, UNCLOS, urban planning, Washington Consensus, Y2K

Ibid. 25 Jared Diamond, “What’s Your Consumption Factor?” The New York Times, January 2, 2008. 26 For a brief introduction to globalization see Manfred Steger’s Globalization: A Very Short Introduction (Oxford: Oxford University Press, 2003). See also Global Transformations by David Held et al., eds. (Palo Alto: Stanford University Press, 1999); Runaway World by Anthony Giddens (New York: Routledge, 2000); Why Globalization Works by Martin Wolf (New Haven: Yale University Press, 2004); Globalization and the Race for Resources by Steven Bunker and Paul Ciccantell (Baltimore: The Johns Hopkins University Press, 2005); Hegemony: The New Shape of Global Power by John A. Agnew (Philadelphia: Temple University Press, 2005); In Defense of Globalization by Jagdish Bhagwati (Oxford: Oxford University Press, 2007); The Power of Place: Geography, Destiny, and Globalization’s Rough Landscape by Harm de Blij (USA: Oxford University Press, 2008); Social Economy of the Metropolis: Cognitive-Cultural Capitalism and the Global Resurgence of Cities by Allen J.


pages: 443 words: 112,800

The Third Industrial Revolution: How Lateral Power Is Transforming Energy, the Economy, and the World by Jeremy Rifkin

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3D printing, additive manufacturing, Albert Einstein, barriers to entry, borderless world, carbon footprint, centre right, collaborative consumption, collaborative economy, Community Supported Agriculture, corporate governance, decarbonisation, distributed generation, en.wikipedia.org, energy security, energy transition, global supply chain, hydrogen economy, income inequality, industrial cluster, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, job automation, knowledge economy, manufacturing employment, marginal employment, Martin Wolf, Masdar, megacity, Mikhail Gorbachev, new economy, off grid, oil shale / tar sands, oil shock, open borders, peak oil, Ponzi scheme, post-oil, purchasing power parity, Ray Kurzweil, Ronald Reagan, Silicon Valley, Simon Kuznets, Skype, smart grid, smart meter, Spread Networks laid a new fibre optics cable between New York and Chicago, supply-chain management, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, too big to fail, transaction costs, trickle-down economics, urban planning, urban renewal, Yom Kippur War, Zipcar

The high cost of oil represents a loss of 0.5 percent of OECD gross domestic product.14 Developing countries were even harder hit in 2010, with oil imports rising by $20 billion, equal to a loss of income of nearly 1 percent of the GDP. The ratio of countries’ oil import bills to GDP is nearing the levels seen in 2008, just before the collapse of the global economy, leading the IEA to publicly worry that “the oil import bills are becoming a threat to the economic recovery.”15 On the same day that the IEA made its 2010 report public, Martin Wolf, the economic columnist for the Financial Times, wrote an essay on the historic convergence taking place in “output per head” in China, India, and the Western powers. According to data published by the US Conference Board, between the 1970s and 2009, the ratio of Chinese output per head to that of the United States rose from 3 percent to 19 percent. In India, the ratio rose from 3 percent to 7 percent.16 Wolf notes that China’s output per head, relative to that of the United States, is approximately the same as Japan’s when it began its economic recovery after World War II.


pages: 538 words: 121,670

Republic, Lost: How Money Corrupts Congress--And a Plan to Stop It by Lawrence Lessig

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asset-backed security, banking crisis, carried interest, circulation of elites, cognitive dissonance, corporate personhood, correlation does not imply causation, crony capitalism, David Brooks, Edward Glaeser, Filter Bubble, financial deregulation, financial innovation, financial intermediation, invisible hand, jimmy wales, Martin Wolf, meta analysis, meta-analysis, Mikhail Gorbachev, moral hazard, Pareto efficiency, place-making, profit maximization, Ralph Nader, regulatory arbitrage, rent-seeking, Ronald Reagan, Silicon Valley, single-payer health, The Wealth of Nations by Adam Smith, too big to fail, upwardly mobile, WikiLeaks, Zipcar

Hart and Zingales, “Curbing Risk on Wall Street,” 20, 21. 39. “Trade Offs—National Priorities Project: Bringing the Federal Budget Home,” available at link #149 (last visited June 21, 2011) (Select “State: United States; “Program: proposed Unemployment Compensation in FY2012”; “Trade Off: All”). 40. Hacker and Pierson, Winner-Take-All Politics, 1. 41. Krugman, “Zombie Financial Ideas”; Martin Wolf of the Financial Times has described it similarly. See Hacker and Pierson, Winner-Take-All Politics, 67. 42. Luigi Zingales, “A Market-Based Regulatory Policy to Avoid Financial Crisis,” Cato Journal 30, no. 3 (Fall 2010): 535 43. Luigi Zingales has another method not tied to controlling the size of banks. See ibid., 536. 44. Sebastian Mallaby has argued—powerfully, in my view—that these criticisms of Wall Street banks don’t extend to hedge funds.


pages: 497 words: 143,175

Pivotal Decade: How the United States Traded Factories for Finance in the Seventies by Judith Stein

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1960s counterculture, affirmative action, airline deregulation, anti-communist, Ayatollah Khomeini, barriers to entry, Berlin Wall, blue-collar work, Bretton Woods, capital controls, centre right, collective bargaining, Credit Default Swap, crony capitalism, David Ricardo: comparative advantage, deindustrialization, desegregation, energy security, Fall of the Berlin Wall, falling living standards, feminist movement, financial deregulation, floating exchange rates, full employment, Gunnar Myrdal, income inequality, income per capita, intermodal, invisible hand, knowledge worker, laissez-faire capitalism, liberal capitalism, Long Term Capital Management, manufacturing employment, market bubble, Martin Wolf, new economy, oil shale / tar sands, oil shock, open economy, Paul Samuelson, payday loans, post-industrial society, post-oil, price mechanism, price stability, Ralph Nader, RAND corporation, reserve currency, Robert Gordon, Ronald Reagan, Simon Kuznets, strikebreaker, trade liberalization, union organizing, urban planning, urban renewal, War on Poverty, Washington Consensus, working poor, Yom Kippur War

Frieden, “Economic Integration and the Politics of Monetary Policy in the United States,” Oct. 1992, Occasional Papers Series, Center for American Politics and Public Policy, http://cappp.ucla.edu/papers/cappp932.pdf. 117. Robert Ingersoll, “Nixon-Tanaka Summit Background Paper V: Trade and Payments—Issues and Recommendations, June 29, 1972, Central Foreign Policy Files, 1970–73, POL 7 Japan, RG 59, DNSA. 118. William A. Lovett, Alfred E. Eckes Jr., and Richard L. Brinkman, U.S. Trade Policy: History, Theory, and the WTO (Armonk, N.Y.: M. E. Sharpe, 1999), 14–15. 119. Martin Wolf, “Why Obama Must Mend a Sick World Economy,” Financial Times, Jan. 20. 2009; Nouriel Roubini, “Bretton Woods III?” http://www forbes.com/2009/04/19/bretton-woods-economic-ecrisis-renminbi-opinions. CHAPTER 3. 1972 1. Arthur H. Miller, Warren E. Miller, Alden S. Raine, and Thad A. Brown, “A Majority Party in Disarray: Policy Polarization in the 1972 Election,” The American Political Science Review, 70 (Sept. 1976), 755. 2.


pages: 464 words: 116,945

Seventeen Contradictions and the End of Capitalism by David Harvey

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accounting loophole / creative accounting, bitcoin, Branko Milanovic, Bretton Woods, BRICs, British Empire, business climate, California gold rush, call centre, central bank independence, clean water, cloud computing, collapse of Lehman Brothers, colonial rule, creative destruction, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, demographic dividend, Deng Xiaoping, deskilling, drone strike, end world poverty, falling living standards, fiat currency, first square of the chessboard, first square of the chessboard / second half of the chessboard, Food sovereignty, Frank Gehry, future of work, global reserve currency, Guggenheim Bilbao, Gunnar Myrdal, income inequality, informal economy, invention of the steam engine, invisible hand, Isaac Newton, Jane Jacobs, Jarndyce and Jarndyce, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Just-in-time delivery, knowledge worker, low skilled workers, Mahatma Gandhi, market clearing, Martin Wolf, means of production, microcredit, new economy, New Urbanism, Occupy movement, peak oil, phenotype, Plutocrats, plutocrats, Ponzi scheme, quantitative easing, rent-seeking, reserve currency, road to serfdom, Robert Gordon, Ronald Reagan, short selling, Silicon Valley, special economic zone, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, transaction costs, Tyler Cowen: Great Stagnation, wages for housework, Wall-E, women in the workforce, working poor, working-age population

Faltering Innovation Confronts the Six Headwinds’, Working Paper 18315, Cambridge, MA, National Bureau of Economic Research, 2012. The public reaction to Gordon’s arguments are covered in Thomas Edsall, ‘No More Industrial Revolutions’, New York Times, 15 October 2012. The general public reaction was that Gordon probably had a point but that he was too pessimistic on the future impact of innovations. Martin Wolf, an influential economist with the Financial Times, however, accepted much of what Gordon had to say and concluded that economic elites in the high-income world would welcome the future that Gordon described but everyone else would like it ‘vastly less. Get used to this. It will not change.’ Other contributions would be Tyler Cowen, The Great Stagnation: How America Ate all the Low-Hanging Fruit of Modern History, Got Sick and Will (Eventually) Feel Better, E-special from Dutton, 2011.


pages: 538 words: 147,612

All the Money in the World by Peter W. Bernstein

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Albert Einstein, anti-communist, Berlin Wall, Bill Gates: Altair 8800, call centre, corporate governance, corporate raider, creative destruction, currency peg, David Brooks, Donald Trump, estate planning, family office, financial innovation, George Gilder, high net worth, invisible hand, Irwin Jacobs: Qualcomm, Jeff Bezos, job automation, job-hopping, John Markoff, Long Term Capital Management, Marc Andreessen, Martin Wolf, Maui Hawaii, means of production, mega-rich, Menlo Park, Mikhail Gorbachev, new economy, Norman Mailer, PageRank, Peter Singer: altruism, pez dispenser, popular electronics, Renaissance Technologies, Rod Stewart played at Stephen Schwarzman birthday party, Ronald Reagan, Sand Hill Road, school vouchers, Search for Extraterrestrial Intelligence, shareholder value, Silicon Valley, Silicon Valley startup, stem cell, Stephen Hawking, Steve Ballmer, Steve Jobs, Steve Wozniak, the new new thing, Thorstein Veblen, too big to fail, traveling salesman, urban planning, wealth creators, William Shockley: the traitorous eight, women in the workforce

David Brock, a former conservative journalist-turned-whistleblower: David Brock, “How I Almost Brought Down the President,” The Guardian, Mar. 12, 2002. 40. Scaife is not exactly: Robert G. Kaiser, “The Conservative Godfather,” Austin American-Statesman, May 9, 1999. 41. In 1970 he pledged $100,000: Kuntz, “Citizen Scaife.” 42. in 1972 he donated: John Kay, Richard Lambert, Geoffrey Owen, and Martin Wolf, “Spending Power,” Financial Times, Nov. 13, 2004. 43. He then went on to fund: Kuntz, “Citizen Scaife.” 44. When Bill Clinton was elected president in 1992: Brock, “How I Almost Brought Down the President.” 45. The relentless attacks: Kaiser, “The Conservative Godfather.” 46. Ford owned the Michigan weekly: Hardy Green, “A Titan of Industry—and a Bigot,” BusinessWeek, Jan. 21, 2002. 47.


pages: 515 words: 132,295

Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

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3D printing, accounting loophole / creative accounting, activist fund / activist shareholder / activist investor, additive manufacturing, Airbnb, algorithmic trading, Alvin Roth, Asian financial crisis, asset allocation, bank run, Basel III, bonus culture, Bretton Woods, British Empire, call centre, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, centralized clearinghouse, clean water, collateralized debt obligation, commoditize, computerized trading, corporate governance, corporate raider, corporate social responsibility, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, crowdsourcing, David Graeber, deskilling, Detroit bankruptcy, diversification, Double Irish / Dutch Sandwich, Emanuel Derman, Eugene Fama: efficient market hypothesis, financial deregulation, financial intermediation, Frederick Winslow Taylor, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, High speed trading, Home mortgage interest deduction, housing crisis, Howard Rheingold, Hyman Minsky, income inequality, index fund, information asymmetry, interest rate derivative, interest rate swap, Internet of things, invisible hand, John Markoff, joint-stock company, joint-stock limited liability company, Kenneth Rogoff, knowledge economy, labor-force participation, labour mobility, London Whale, Long Term Capital Management, manufacturing employment, market design, Martin Wolf, money market fund, moral hazard, mortgage debt, mortgage tax deduction, new economy, non-tariff barriers, offshore financial centre, oil shock, passive investing, Paul Samuelson, pensions crisis, Ponzi scheme, principal–agent problem, quantitative easing, quantitative trading / quantitative finance, race to the bottom, Ralph Nader, Rana Plaza, RAND corporation, random walk, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, Satyajit Das, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Silicon Valley startup, Snapchat, sovereign wealth fund, Steve Jobs, technology bubble, The Chicago School, the new new thing, The Spirit Level, The Wealth of Nations by Adam Smith, Tim Cook: Apple, Tobin tax, too big to fail, trickle-down economics, Tyler Cowen: Great Stagnation, Vanguard fund, zero-sum game

Gretchen Morgenson and Patrick McGeehan, “Wall St. and the Nursery School: A New York Story,” New York Times, November 14, 2002. 72. Gillian Tett, Fool’s Gold: The Inside Story of J.P. Morgan and How Wall Street Greed Corrupted Its Bold Dream and Created a Financial Catastrophe (New York: Free Press, 2010), 97. 73. My favorites include Alan Blinder, After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead (New York: Penguin Press, 2013); and Martin Wolf, The Shifts and the Shocks: What We’ve Learned—and Have Still to Learn—from the Financial Crisis (New York: Penguin Press, 2014). For specifics on the complex securitization leading up to the crisis, see Charles R. Morris, The Two Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash (New York: PublicAffairs, 2009); and Tett, Fool’s Gold. 74. Author interview with Warren for this book. 75.


pages: 331 words: 60,536

The Sovereign Individual: How to Survive and Thrive During the Collapse of the Welfare State by James Dale Davidson, Rees Mogg

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affirmative action, agricultural Revolution, bank run, barriers to entry, Berlin Wall, borderless world, British Empire, California gold rush, clean water, colonial rule, Columbine, compound rate of return, creative destruction, Danny Hillis, debt deflation, ending welfare as we know it, epigenetics, Fall of the Berlin Wall, falling living standards, feminist movement, financial independence, Francis Fukuyama: the end of history, full employment, George Gilder, Hernando de Soto, illegal immigration, income inequality, informal economy, information retrieval, Isaac Newton, Kevin Kelly, market clearing, Martin Wolf, Menlo Park, money: store of value / unit of account / medium of exchange, new economy, New Urbanism, offshore financial centre, Parkinson's law, pattern recognition, phenotype, price mechanism, profit maximization, rent-seeking, reserve currency, road to serfdom, Ronald Coase, school vouchers, seigniorage, Silicon Valley, spice trade, statistical model, telepresence, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thomas Malthus, trade route, transaction costs, Turing machine, union organizing, very high income, Vilfredo Pareto

(London: Pickering & Chatto, 1991). 5. For example, see Weber, op. cit., p.2. 6. Clive Jenkins and Barrie Sherman, The Collapse of Work (London: Methuen, 1979),p. 103. 7. Robert H. Frank and Philip J. Cook, The Winner-Take-All Societv (New York: The Free Press, 1995). 322 8. Clay Chandler, 'Buchanan's Success Frightens Business," Washington Post, February 22, 1996, p. D12. 9. Stephanie Flanders and Martin Wolfe, "Haunted by the Trade Spectre," Financial Times, July 24, 1995, p.11. They quote from the World Bank's most recent world development report, on workers in an integrating world economy. 10. See Mancur Olson, "Diseconomies of Scale and Development," Cato Journal, vol.7, no.1 (Spring/Summer 1987). 11. Ibid. 12. Basil Davidson, The Black Mans' Burden: Africa and the Curse of the Nation State (New York: Times Books, 1992), p.290. 13.


pages: 504 words: 126,835

The Innovation Illusion: How So Little Is Created by So Many Working So Hard by Fredrik Erixon, Bjorn Weigel

Airbnb, Albert Einstein, asset allocation, autonomous vehicles, barriers to entry, Basel III, Bernie Madoff, bitcoin, Black Swan, blockchain, BRICs, Burning Man, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, Clayton Christensen, Colonization of Mars, commoditize, corporate governance, corporate social responsibility, creative destruction, crony capitalism, dark matter, David Graeber, David Ricardo: comparative advantage, discounted cash flows, distributed ledger, Donald Trump, Elon Musk, Erik Brynjolfsson, fear of failure, first square of the chessboard / second half of the chessboard, Francis Fukuyama: the end of history, George Gilder, global supply chain, global value chain, Google Glasses, Google X / Alphabet X, Gordon Gekko, high net worth, hiring and firing, Hyman Minsky, income inequality, income per capita, index fund, industrial robot, Internet of things, Jeff Bezos, job automation, job satisfaction, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, Joseph Schumpeter, Just-in-time delivery, Kevin Kelly, knowledge economy, labour market flexibility, laissez-faire capitalism, lump of labour, Lyft, manufacturing employment, Mark Zuckerberg, market design, Martin Wolf, mass affluent, means of production, Mont Pelerin Society, Network effects, new economy, offshore financial centre, pensions crisis, Peter Thiel, Potemkin village, price mechanism, principal–agent problem, Productivity paradox, QWERTY keyboard, RAND corporation, Ray Kurzweil, rent-seeking, risk tolerance, risk/return, Robert Gordon, Ronald Coase, Ronald Reagan, savings glut, Second Machine Age, secular stagnation, Silicon Valley, Silicon Valley startup, Skype, sovereign wealth fund, Steve Ballmer, Steve Jobs, Steve Wozniak, technological singularity, telemarketer, The Chicago School, The Future of Employment, The Nature of the Firm, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, transaction costs, transportation-network company, tulip mania, Tyler Cowen: Great Stagnation, University of East Anglia, unpaid internship, Vanguard fund, Yogi Berra

There are several thinkers today that can be put in the same category. If you get bored by all those who just repeat the conventional wisdom about the economy and how it evolves, pick any work from these economic thinkers and you will immediately be reinvigorated: David Autor, Tyler Cowen, Deirdre McCloskey, Malcolm Gladwell, David Graeber, Deepak Lal, Joel Mokyr, Matt Ridley, Richard Sennett, Robert Solow, Lawrence Summers, Peter Thiel, and Martin Wolf. Their works have contributed to our thinking for this book. Likewise, there are many successful investors and entrepreneurs whose thinking about innovation and business creation have inspired us. Innovation happens through entrepreneurship and it is impossible to grasp innovation without understanding the business motivations behind it. In reality, books like ours cannot substitute for studies of successful entrepreneurs like Warren Buffett, Steve Jobs, Jeff Bezos, Elon Musk, and Sam Walton, and the business environment they and others created in their respective firms.


India's Long Road by Vijay Joshi

Affordable Care Act / Obamacare, barriers to entry, Basel III, basic income, blue-collar work, Bretton Woods, business climate, capital controls, central bank independence, clean water, collapse of Lehman Brothers, collective bargaining, colonial rule, congestion charging, corporate governance, creative destruction, crony capitalism, decarbonisation, deindustrialization, demographic dividend, demographic transition, Doha Development Round, eurozone crisis, facts on the ground, failed state, financial intermediation, financial repression, first-past-the-post, floating exchange rates, full employment, germ theory of disease, Gini coefficient, global supply chain, global value chain, hiring and firing, income inequality, Indoor air pollution, Induced demand, inflation targeting, invisible hand, land reform, Mahatma Gandhi, manufacturing employment, Martin Wolf, means of production, microcredit, moral hazard, obamacare, Pareto efficiency, price mechanism, price stability, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, race to the bottom, randomized controlled trial, rent-seeking, reserve currency, rising living standards, school choice, school vouchers, secular stagnation, Silicon Valley, smart cities, South China Sea, special drawing rights, The Future of Employment, The Market for Lemons, too big to fail, total factor productivity, trade liberalization, transaction costs, universal basic income, urban sprawl, working-age population

Reddy, Dani Rodrik, Manish Sabharwal, Shyam Saran, Abhijit Sen, Amartya Sen, Anupama Sen, Kunal Sen, Shekhar Shah, Shylashri Shankar, Alok Sheel, Parthasarathi Shome, Rukshad Shroff, Henry Shue, Abhijit Singh, Manmohan Singh, Nirvikar Singh, Devinder Sivia, T. N. Srinivasan, Margaret Stevens, Frances Stewart, Duvvuri Subbarow, Arvind Subramanian, Kate Sullivan, Kamakshya Trivedi, Maya Tudor, Ravi Vaidya, John Vickers, David Vines, Bhaskar Vira, Arvind Virmani, Jessica Wallack, Michael Walton, Andrew Whitehead, John Williamson, Dominic Wilson, Martin Wolf, Ngaire Woods, Simon Wren-​Lewis, and Yogendra Yadav. I have also learned a great deal from my participation in the highly stimulating India Policy Forum annual conferences in Delhi, organized by the Brookings Institution and the National Council of Applied Economic Research. For all the people mentioned above, the usual disclaimer applies with more than the customary force. They are not responsible for the errors in the book or the thoughts expressed therein.


pages: 403 words: 132,736

In Spite of the Gods: The Rise of Modern India by Edward Luce

affirmative action, Albert Einstein, Bretton Woods, call centre, centre right, clean water, colonial rule, crony capitalism, cuban missile crisis, demographic dividend, energy security, financial independence, friendly fire, Gini coefficient, Haight Ashbury, informal economy, job-hopping, land reform, Mahatma Gandhi, Martin Wolf, megacity, new economy, Plutocrats, plutocrats, profit motive, purchasing power parity, Silicon Valley, trade liberalization, upwardly mobile, uranium enrichment, urban planning, women in the workforce, working-age population, Y2K

Pachauri interview. 23. Looking Back to Think Ahead (New Delhi: TERI Publications, March 1998). 24. Estimates provided by India’s Planning Commission. 25. Global Fund to Fight AIDS, Tuberculosis and Malaria, Geneva. 26. Cited in Jo Johnson, “Road to Ruin,” Financial Times, August 13, 2005. 27. United Nations Development Program, 2005 Human Development Report. 28. Johnson, “Road to Ruin.” 29. Ibid. 30. Martin Wolf, the Financial Times’ main economics commentator and assistant editor, who worked extensively on India in the 1970s when he was employed by the World Bank. 31. Quoted in Johnson, “Road to Ruin.” 32. Cited in Christophe Jaffrelot, ed., The Sangh Parivar, A Reader (New Delhi: Oxford University Press, 2005), pp. 4–12. 33. Article by Anil Ambani on the op-ed page of the Indian Express, September 4, 2004. 34.


pages: 540 words: 168,921

The Relentless Revolution: A History of Capitalism by Joyce Appleby

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1919 Motor Transport Corps convoy, agricultural Revolution, anti-communist, Asian financial crisis, asset-backed security, Bartolomé de las Casas, Bernie Madoff, Bretton Woods, BRICs, British Empire, call centre, collateralized debt obligation, collective bargaining, Columbian Exchange, commoditize, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, deskilling, Doha Development Round, double entry bookkeeping, epigenetics, equal pay for equal work, European colonialism, facts on the ground, failed state, Firefox, fixed income, Ford paid five dollars a day, Francisco Pizarro, Frederick Winslow Taylor, full employment, Gordon Gekko, Henry Ford's grandson gave labor union leader Walter Reuther a tour of the company’s new, automated factory…, Hernando de Soto, hiring and firing, illegal immigration, informal economy, interchangeable parts, interest rate swap, invention of movable type, invention of the printing press, invention of the steam engine, invisible hand, Isaac Newton, James Hargreaves, James Watt: steam engine, Jeff Bezos, joint-stock company, Joseph Schumpeter, knowledge economy, land reform, Livingstone, I presume, Long Term Capital Management, Mahatma Gandhi, Martin Wolf, moral hazard, Parag Khanna, Ponzi scheme, profit maximization, profit motive, race to the bottom, Ralph Nader, refrigerator car, Ronald Reagan, Scramble for Africa, Silicon Valley, Silicon Valley startup, South China Sea, South Sea Bubble, special economic zone, spice trade, spinning jenny, strikebreaker, the built environment, The Wealth of Nations by Adam Smith, Thomas L Friedman, Thorstein Veblen, total factor productivity, trade route, transatlantic slave trade, transatlantic slave trade, transcontinental railway, union organizing, Unsafe at Any Speed, Upton Sinclair, urban renewal, War on Poverty, working poor, Works Progress Administration, Yogi Berra, Yom Kippur War

Crafts, “The Golden Age of Economic Growth in Western Europe, 1950–1973,” Economic History Review, 48 (1995): 429–30; Angus Maddison, Dynamic Forces in Capitalist Development: A Long-Run Comparative View (Oxford, 1991), 164. 6. Diethelm Prowe, “Economic Democracy in Post–World War II Germany: Corporatist Crisis Response, 1945–1948,” Journal of Modern History, 57 (1985): 452–58. 7. Paul L. Davies, “A Note on Labour and Corporate Governance in the U.K.,” in Klaus J. Hopt et al, eds., Comparative Corporate Governance: The State of the Art and Emerging Research (Oxford, 1999), 373; Martin Wolf, “European Corporatism Must Embrace Change,” Financial Times, January 23, 2007. 8. Maddison, Dynamic Forces in Capitalist Development, 274–75; Frieden, Global Capitalism, 289. 9. John Gillingham, “The European Coal and Steel Community: An Object Lesson,” in Barry Eichengreen, ed., Europe’s Post-War Recovery (Cambridge, 1995), 152–53, 166. 10. Barry Eichengreen, “Mainsprings of Economic Recovery,” in ibid.: 6–21. 11.