We Have a World-Class Mess . . . Now What?
" Amid the carnage of bankruptcies, soaring unemployment, and
millions of families losing their homes during the financial crisis
of 2007-2009 lay the bloody corpse of a set of ideas that had
underpinned the economics of the previous thirty years. A system
that had been delivering unprecedented prosperity on a global scale
suddenly teetered on the verge of collapse. Capitalism was
seemingly exposed as a house of cards. The blame game became a new
national pastime as doomsayers predicted the end of America's
leadership of the world economy."
We're at a crossroads, and decisions about how to reshape a
discredited capitalism will profoundly affect whether the coming
years will be ones of depression, stagnation, or renewed
Instant analysis since the collapse of the financial system in the
fall of 2008 has produced no end of ideas about what to do--ranging
from those of free market ideologues (let the market do its work
and damn the consequences) to extreme government interventionists
determined to keep the animal spirits of capitalism penned up.
But if there is anything worse than toxic financial assets it is
toxic ideas. We need to reject the old orthodoxies and conventional
wisdoms. Matthew Bishop and Michael Green take a step back and
analyze what can be learned from financial crises of the past--from
the Tulip Craze of the seventeenth century through the Great
Depression of the 1930s, Japan's Great Deflation, and the Long-Term
Capital debacle of the 1990s to the unprecedented interventions of
the government during the past year--to set the agenda for a
reformed twenty-first-century capitalism. The result is an
enlightening perspective on what set us on the road to ruin, as
well as road signs to guide us back to prosperity.
--Why bubbles are the consequence of financial innovations that
generate economic breakthroughs, but why it would be wrong to
abandon these inventions of the financial engineers. The Road from
Ruin explains how stifling innovation and risk-taking comes at a
huge cost to future prosperity.
--Why the economy needed a fiscal stimulus to recover from the
crisis. Bishop and Green show how economic dogmatists of the Right,
who opposed the stimulus, got it wrong, but warn that those on the
Left who want the stimulus to run and run could usher in a new era
of high inflation.
--Why company bosses became too focused on short-term results and
did not see the crisis coming. "The Road from Ruin "shows how we
can get business leaders to put the interests of society ahead of
their own pay-packets.
--The danger of focusing on the financial symptoms of the crisis
without tackling the underlying economic causes, such as the world
operating on the dollar standard. Bishop and Green show why the
role of the dollar as the world's reserve currency is not just a
problem for the rest of the world but for the United States as
--Why many of capitalism's champions--especially the advocates of
the efficient market hypothesis--lost touch with reality. "The Road
from Ruin" provides insights into new ideas in economics that
recognize how the complexity and irrationality of the human beings
who make up the economy can be harnessed to build a better
Remarkably, the issues we face today have presented themselves in
one form or another over the past three centuries. Matthew Bishop
and Michael Green skillfully draw both the lessons learned and
prescriptions for reform to prevent another catastrophic meltdown
and put America back on top.
"From the Hardcover edition."
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