Customer Reviews

The Chastening: Inside the Crisis That Rocked the Global Financial System and Humbled the IMF

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As an economics professor, I'm always skeptical of books about economics written by journalists. Economics can be quite complicated, and far too often journalists without serious (graduate-level) training in economics show a remarkable lack of understanding of even basic economic issues. They pose as "experts" but they don't really know what they're talking about...

So I was very pleasantly surprised when I picked up this book. Blustein does a really impressive job of examining in detail the crisis of 1997-1998 and the role of the IMF. The economics is impeccable and he explains it clearly. And he's tremendously effective at bringing to life the "drama" of the crisis and the very difficult decisions that policy-makers face during a crisis like this one.

I also appreciated the fact that, while being quite critical of the IMF, Blustein is also balanced in his assessment, and careful about avoiding gratuitous "IMF bashing" and about making it clear that there are a lot of very smart people at the IMF who work very hard to do their job well.

This is a great book for anybody who wants to gain a greater understanding of the international financial system and of the role of the IMF. Lively, accurate, never boring, it's one of the best non-technical books about an economic event that I've ever read.

This superb book should become the standard popular reference on the International Monetary Fund and the financial crises that swept the globe in 1997-98. Paul Blustein has a background in economics and first-hand experience in Asia where the crises originated. The book is well documented: Blustein conducted hundreds of interviews (unlike his Washington Post colleague Woodward, he actually names his sources) and is familiar with the academic literature on the subject. Indeed, this entertaining book does a marvelous job of explaining the substantive economic issues while at the same time conveying the very human disorder of crisis management as practiced during these episodes. It is less doctrinaire than Friedman's cheerleading for globalization in "The Lexus and the Olive Tree" and is far better informed on economic policy making than Woodward's "Maestro." (Simply compare Blustein's highly informative descriptions of the Korean and Long Term Capital Management crises with the complete hash of the same episodes that Woodward produced in "Maestro.") Highly recommended.

This is a highly readable account about a serious economic crisis that most Americans missed. But Blustein makes you care--and makes you understand why the so-called Committee to Save the World (Greenspan, Rubin and Summers) made some poor choices and only through sheer luck managed to escape with their reputations enhanced. Blustein's description of the International Monetary Fund is eye-opening, and he will make you think twice the next time you read a story buried in the business section about another IMF loan to a struggling country. Blustein knows his stuff and has done his homework. This is a rare book that teaches you something new--and makes you think.

Enter the world of high international finance. Mr. Blustein has managed to present an extremely readable (fun, dramatic, engaging) account of the tragic economic crises that are now called the "first of the XXI century".

Not only will you learn the economic details of the crises in Thailand, South Korea, Indonesia, Russia, Brazil and Long-Term Capital Management. You will also find yourself in the rooms where IMF staff negotiated with authorities. You will take a glimpse at the halls of the Treasury and the Fed, where Rubin, Greenspan and Co., proved their genius as policymakers. You will be humbled by the ferocity of international capital and about "how close we where".

Still the great lesson is that we need not oppose globalization to build a better future. Rather you will fell as having read the first steps of a new world which we are only beggining to understand. Hence the need to understand what happened to build a stronger international financial architecture with stronger institutions.

I read this book after reading Dr. Stiglitz criticism on the IMF. Actually, Stiglitz quotes him. Contrary to Stiglitz', Mr. Blustein's book reads fast, makes some of the same criticism Stiglitz does but one does not feel he has an ax to grind. If you want to read a good book on the Asian financial crisis and Russia's default on its own ruble debt, this is the book for you. Very informative and entertaining.

This book was hard to put down. It managed to make monetary policies and international banking lucid and meaningful. It does this in the context of telling the gripping "story behind the headlines" of a number of recent international financial meltdowns. The book made these events much clearer and put them in a coherent perspective. Recent events in Argentina and Japan make far more sense to me having read the book. However, I am also far more concerned both about the potential consequences and about the industrialized countries' inability to avert financial disasters. I have passed the book on to two others who share my opinion of it.

There are many good reasons to bash the IMF but few reasons to do so if you don't know what you're talking about -- this books lets you do both.

I've spent years in social circles that carry on a tragic lament of third world debt to first world countries, a lament I agree with but often find is expressed through oft-repeated anti-globalization mantras with no perception of how hideously complex the situation is.

This book gives you the tools to make cogent criticisms of the IMF while simultaneously learning about the herculean chore the IMF has before it. Blustein describes the mechanics of how financial crises arose in the fateful year of 1997 in Thailand, Indonesia, Malaysia, and Korea, and later in Russia and Brazil. A combination of cookie-cutter shock therapy schemes, out-of-touch IMF officials, incompetent and often corrupt finance ministry officials and Wall Street Bankers converge to make it nearly impossible for countries to escape the wrath of an increasingly volatile group of investors the author appropriately dubs the "Electronic Herd."

The pattern is now a familiar one -- irresponsible fiscal and monetary policy leaves a country exposed to predatory lenders and currency speculators. Investors and debt holders see the country's dwindling hard currency reserves as sign of imminent collapse and begin to sell off every asset they have there, creating a vicious circle of panic. The IMF is called in to make sure the country doesn't go bankrupt by providing loans of hard currency -- but who's being bailed out, the country itself of the lenders that put their money there?

Blustein explains how this dynamic was repeated in each of the countries of the 1997 and 1998 crises, with the IMF response working in everyone's favor in only two cases among a string of dismal failures. He extensively explores the issue of "moral hazard," or the idea that big loan packages to economies in crisis just reinforces irresponsible behavior on the part of both the lenders and the borrowers.

Can get a little tedious at times, and the sequence of events is sometimes hard to follow because so much is being explained at once -- but overall a well written work by a reporter who covered the subject for years.

The Chastening is a ripping, white-knuckle read. This IS the best single book about the IMF, but it is also a lesson in political theory. Like Milton Friedman's "Monetary History of the United States," David Halberstam's "The Best and the Brightest," and Robert Conquest's "Harvest of Sorrow," this book is a case study in how superempowered and unaccountable bureaucrats tend make natural disasters incalculably worse. It is an object lesson in how policymaking ambitions are frustrated by human fallibility, especially when the policymaker in question fails to account for that fallibility. At every step, the Fund's planners made horrible missteps with smug confidence, thereby prolonging the suffering of untold millions of people. At every step, they were shocked when reality failed to coorespond to theory and their best intentions backfired. In a subtle way, the doctrinaire rationalist approach taken by the Fund during the Asian crisis presages the failure of the remaking of Iraq. The inherent weakness of theory-laden, top-down political and economic planning is a lesson we must apparently learn over and over again. (For those who appreciate this philosophical dimension to the book, I highly recommend James C. Scott's Seeing Like a State: How Certain Schemes to Improve the Human Condition Have Failed (The Institution for Social and Policy St).")

The IMF is the most powerful single human force on the planet and yet it remains totally almost unknown to public at large. Blustein is to be commended for making the Fund transparent and accessible to all educated people.

One of the best book ever written. Insightful, clever, informative, articulate, sometimes even humorious. Mr. Blustein fully grasp the human psychology as well as how the IMF functions. It is great book for people from all background, its easy to read and absorb. He explains all concept carefully and often using analogy to make them easy to understand. I learned more from this book than my summer research on IMF as well as all other books and articles written on IMF and their policies. One of the BEST book I ever read. A+++

This is a superb journalistic account of the financial crises that rocked Asia, Russia, and Brazil in 1997-98. It has enough journalism to be an exciting read, and enough economics to inform readers about modern international finance. It's hard to put down -- which is something that can be said about very few books dealing with the IMF.

There are two schools of thought about the crises of the late 1990s. One school -- the Markets-Don't-Err school -- blames poor economic management in the stricken countries. In this view, investors lost confidence in emerging markets after government deficits put downward pressure on exchange rates and poor banking practices led to corporate overindebtedness. The second school -- the Markets-as-Herd school -- blames the dynamics of international capital itself. Investors, having recklessly plowed money into emerging markets in the early 1990s, got cold feet when Thailand's currency collapsed in 1997. They then stampeded to liquidate their positions in other emerging-market currencies, punishing countries willy-nilly regardless of their underlying economic fundamentals.

It's a measure of the book's success that members of both schools can find evidence to support their position. My only complaint -- not serious enough to give the book less than 5 stars -- is the patchy quality of the narrative. Malaysia is barely mentioned at all, for example. I suspect this is because sections of the book were recycled from Washington Post articles.