10 of 12 people found the following review helpful:
5.0 out of 5 stars
Brilliant study of a failed system, September 11, 2008
In this brilliant book, Larry Elliott, the economics editor of the Guardian, and Dan Atkinson, the economics editor of the Mail on Sunday, explain why the economy is in such a mess.
Previously, strong unions, progressive taxation, managed trade and controls on capital and immigration produced higher living standards for the majority. As the authors note, "A fifth factor, immigration controls, also contributed to rising real incomes of blue-collar workers." Now the opposite policies are producing stagnant or falling incomes, massive debts, tepid growth, and soaring income inequality and economic insecurity. Workers are subjected to material losses and moral uplift. GB plc is not a decent industrial company but a dodgy hedge fund.
Elliott and Atkinson blame what they call the twelve gods of globalisation - communication, financialization, privatisation, liberalisation, competition, and their partners speculation, recklessness, greed, arrogance, oligarchy and excess. They show how the Labour party, the European Commission, the IMF, the World Bank, the World Trade Organisation and the International Court of Justice have all embraced these gods. As the authors note, bodies like the EU "far from being essential in order to exercise some sort of control over large companies ... look rather more like being essential to the simplification of large companies' dealings with political authorities."
The present crisis arose because US companies promoted enormous `ninja' loans to those with No Income, No Job or Assets. So US household debt is now three times the economy's annual output, the highest proportion since 1929. Two million insolvent borrowers means insolvent lenders, builders and hedge funds. Every previous crash in the US housing market has led to a full-blown recession and this one will too, largely because the US economy has relied not on increased production but on growing debt. Its productivity has grown less since 1973 than it did in 1947-73 and it created no more jobs between 2000 and 2005 than anywhere else.
Elliott and Atkinson show how the Treasury, its Financial Services Authority, and the Bank of England all failed in the Northern Rock debacle which signalled the start of the crisis in Britain. Their answer was to nationalise the losses and privatise the profits. The authors sum up finance capitalists' plight, "They have to borrow money from the public purse because their system does not work."
Instead, Elliott and Atkinson urge a New Populism focusing on a real-world agenda of jobs, living standards and security in retirement. Its aims should be to subordinate finance to industry, establish personal and social security (mainly by providing high-quality pensions), enhance democracy, curb the semi-detached super-rich, strengthen the professions, value social stability above market efficiency or shareholder value, and reaffirm the liberty of the person.
They urge protection for our industries, tighter controls on lending and credit, splitting retail from investment banking, smaller banks, proper vetting of all financial products, higher taxes on hedge funds and private equity partners, and deregulation for smaller businesses and the self-employed.
This is a bold set of proposals, whose implementation would go a long way towards saving industry and rebuilding Britain. Those who worship the twelve gods would, of course, fiercely resist, and it would take the strength of the organised working class to make this New Populism work - but we could do it.
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4 of 4 people found the following review helpful:
4.0 out of 5 stars
A scathing but very useful review - more detail than in the NA media, January 5, 2009
Two financial writers in the UK have penned quite a scathing review of the present financial situation. It gives you a good touch point to review the US and Cdn media takes. Things are not that great all over, but they really make a case that core to rebuilding our system is a strong robust middle class. The banks need to be regulated and taken back to their basic functions. What they say we all can expect ( no surprises):
* Taxes will rise.
* Oil will drop then rise steadily (there is not enough)
* House prices will fall -worldwide
* The bad news continues with little guess how many years.
* If food energy costs rise we risk a wage- price spiral
* A set of environmental disasters would be very hard to recover from at this time. (Eg Katrina)
* Geopolitics will be unstable eg. Russia will club others with their oil and gas riches.
* China could suffer the Olympic "curse" unless they spend even more on their infrastructure than they spent on Beijing.
* State supervision and control of financial sector will dramatically impact business behavior.
* Large reforms of the banking sector
* Unions to survive will become more pro-trade
They make quite a statement about the need to use democracy to force accountability through all politics with now the present public ownership in some business sectors. This needs an increase in public attention to voting etc. To Governments they suggest:
* Don't spend what you do not have
* Increase taxes on the wealthy
* Reduce corporate welfare
* Increase the safety net for the poor
* Invest in education, technology, and forward facing infrastructure.
Check them out at [...]
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5 of 6 people found the following review helpful:
4.0 out of 5 stars
Low interest rates had nothing to do with the current economic collapse, April 2, 2009
This review is from: The Gods that Failed: How Blind Faith in Markets Has Cost Us Our Future (Hardcover)
The authors are correct that the main problem causing the current severe economic worldwide crisis has been the massive speculation in financial assets engaged in by the private commercial banking industry and the private investment banks on Wall Street.So far so good.A problem arises when the authors,who are both economists,ascribe the speculative excesses primarily to what they claim were excessively low rates of interest engineered by Alan Greenspan and various other central banks .This is simply not the case.The major problem has always been the loan practices of the private banking system.The important question is to whom are the banks making loans ? It appears that the authors have not read Adam Smith and/or John Maynard Keynes carefully.They claim that " In all truth,you do not need to be Adam Smith or John Maynard Keynes to work out what had gone wrong and why "(p.192).This is not the case.
Both Smith and Keynes advocate a policy regime of low rates of interest maintained permanently over the long run.Smith's version would set thia rate a little bit higher than the market clearing rate charged to the most credit worthy of customer (prime customers).The crucial part of Smith's preventitive approach is the implementation of a policy of credit restriction imposed on the banks by a privately controled central bank that is independent of the government AND THE PRIVATE BANKING INDUSTRY.THE GOAL OF THE CENTRAL BANK IS TO PREVENT THE EXTENSION OF LOANS TO PROJECTORS,IMPRUDENT RISK TAKERS ,AND PRODIGALS (Keynes advocated a policy of credit restriction in his Treatise on Money(1930) and post GT articles on the finance demand for money where the unsatisfied fringe of borrowers would always consist of speculators and rentiers .These two categories are the same as Smith's three categories).Smith correctly realized that loans made to these categories of borrower will be " ...wasted and destroyed...".This is exactly what has happened today.It has absolutely nothing to do with a policy of low interest rates and everything to do with WHO is getting the loans.Is it the Smithian " sober people " who use the loans to start new businesses and/or expand existing businesses ,or are the loans going to the private equity firms/hedge firms,who are using the loans to finance leveraged buyouts or engage in debt leverage in the financial markets ? Both Smith and Keynes had the wisdom to realize that it was what the loans were used for that was crucial.
In summary, the authors have written an above average book that describes what went wrong and why.However,their belief that you don't need to read what Keynes and Smith wrote on this topic leads them into erroneously ascribing speculation to low interest rates when such speculation is in fact due to the loan policies of the private commercial banks.Unfortunately,the large private commercial banks in the USA have been able to maintain effective political control over the central bank,the Federal Reserve System.This explains the current 6 trillion dollar bailout of such banks and other allied financial institutions,such as AIG.
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