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Managed by the Markets: How Finance Re-Shaped America [Hardcover]

by Gerald F. Davis
4.1 out of 5 stars  See all reviews (47 customer reviews)

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Book Description

June 15, 2009 0199216614 978-0199216611
In recent years, we've been rocked by a series of economic jolts, and all of them seemed to revolve around finance. And the most recent, the American mortgage meltdown, has sent shock waves around the world. Managed by the Markets, which won the 2010 George R. Terry Book Award, offers an illuminating account of how finance has replaced manufacturing at the center of the American economy over the past three decades, explaining how the new finance-centered system works, how we got here, and what challenges lay ahead.

Since the early 1980s, Gerald F. Davis shows, finance and financial considerations have increasingly taken center stage, dramatically reshaping American society. Corporations now have an overriding focus on creating shareholder value, while their personnel practices no longer provide secure employment, economic mobility, health insurance, or retirement benefits. Instead, employees must become shareholding free-agents, left to their own fate. Banking has shifted from the traditional role of taking in deposits and making loans to the widespread use of "securitization," turning loans (such as mortgages or corporate debt) into bonds owned by institutional investors. The financial services industry is both more concentrated among large banks and mutual funds, yet more spread out among under-regulated specialists such as mortgage finance companies and hedge funds. And states increasingly act as "vendors" in a global marketplace of law, emulating firms such as Nike, hiring contractors to do much of the work of government.

As a result, individuals and households find their welfare tied to the stock market and the mortgage market as never before. And the turbulence of recent years starkly underscores the dangers of depending too much on financial markets. Written in the spirit of C. Wright Mills' penetrating The Power Elite and White Collar, this brilliant study provides an invaluable map of the finance-driven American society.

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Editorial Reviews

From Publishers Weekly

This academic analysis of our evolution from an industrial to a postindustrial portfolio society offers provocative clues for anyone seeking to understand the current financial crisis and Americans' financial security. Davis, professor of management at the University of Michigan, asserts that in the eras of financial capitalism (1900–1930) and managerial capitalism (1930–1980), Americans looked to the corporation and long-term savings to provide them with security. In the wake of the takeovers and financial move to high risk savings in the 1980s, and deregulation and corporate scandals in the late 1990s, however, Americans have become disillusioned with the corporation as a source of lifetime employment and retirement capital and have instead relied on financial markets for security and wealth creation. In describing George W. Bush's ownership society, Davis notes that when individuals come to see themselves as free agent investors, the consequences for society can be dire. While a compelling read, this book offers few predictions for the new investor society, suggesting only that big government might have to clean up the mess that individual Americans have made. (May)
Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved.


"An ambitious, magisterial, and yet not-too-long effort to sketch the social consequences of a finance-driven economy."--Matthew Yglesias, The American Prospect

"A compelling read...offers provocative clues for anyone seeking to understand the current financial crisis and Americans' financial security."--Publishers Weekly

"Timely and thought-provoking."--CHOICE

"This is a valuable and novel perspective...In contemplating the wreckage of the crisis, one should follow Davis's example, and ask whether this was either inevitable or desirable, and what, if anything, we might learn from it." --Strategy+Business

"Jerry Davis has been one of our most thoughtful researchers on the topic of how publicly traded corporations have changed in the past 25 years. ...many of the remedies proposed here are wending their way into law. ...a good place to start for anyone who is interested in what really [caused the financial crisis]."--Administrative Science Quarterly

"A valuable, timely and gripping analysis...Davis's book should be required reading for anyone, whether academic, practitioner, or policy maker, who needs to think critically about finance which, rather than a mechanistic set of transactions, is presented in the book as a social phenomenon that is invading our lives."--Accounting, Economics, and Law

"The meltdown of American financial markets has been catastrophic but the cause elusive. In Managed by the Markets, Gerald Davis offers a compelling explanation for it and so much more. To understand the disintegration of big corporations, securitization of just about everything, and transformation of our zeitgeist from producing products to making money, this is the book, a gripping portrait of the triumph of financial markets over all else."--Michael Useem, Professor of Management and Director of the Leadership Center at the Wharton School, University of Pennsylvania

"In this intellectual tour de force, Jerry Davis describes the evolution of the American economy to where we are now-where everything is a security or an option and, therefore, tradable in some sort of market. He also details the profound costs we have paid for this evolution. Timely, engaging, and filled with facts and analysis, Managed by the Markets explains how we got to where we are and maybe, just maybe, where we need to go next."--Jeffrey Pfeffer, Professor of Organizational Behavior at Stanford University and author of What Were They Thinking? Unconventional Wisdom About Management

"Davis's book is as compact and clear a description of how we screwed up a fine economy as you will find...Managed by the Markets is not some mere Progressive or left-liberal polemic against Wall Street manipulators. Because it is based in an accurate historical review of the stepwise process by which financial considerations replaced virtually every other concept of economic or social good, Davis's book delivers a solid, and negative, verdict against management by unregulated markets, which always crash." --Maui News

"This is a valuable and novel perspective...In contemplating the wreckage of the crisis, one should follow Davis's example, and ask whether this was either inevitable or desirable, and what, if anything, we might learn from it." --Strategy+Business

"Davis reminds his readers of the history of U.S. corporate law, and how individuals states competed to offer favorable law of incorporation to large firms." -- Contemporary Sociology

Product Details

  • Hardcover: 320 pages
  • Publisher: Oxford University Press, USA (June 15, 2009)
  • Language: English
  • ISBN-10: 0199216614
  • ISBN-13: 978-0199216611
  • Product Dimensions: 9.2 x 6.1 x 1.2 inches
  • Shipping Weight: 1.6 pounds (View shipping rates and policies)
  • Average Customer Review: 4.1 out of 5 stars  See all reviews (47 customer reviews)
  • Amazon Best Sellers Rank: #947,371 in Books (See Top 100 in Books)

More About the Author

Gerald F. Davis is the Wilbur K. Pierpont Collegiate Professor of Management at the University of Michigan's Ross School of Business. He has published widely in management, sociology, and finance. Recent books include Social Movements and Organization Theory (with Doug McAdam, W. Richard Scott, and Mayer N. Zald) and Organizations and Organizing: Rational, Natural, and Open System Perspectives (with W. Richard Scott). He is currently Associate Editor of Administrative Science Quarterly and Co-Director of the Interdisciplinary Committee on Organization Studies (ICOS) at the University of Michigan.

Customer Reviews

Most Helpful Customer Reviews
5 of 5 people found the following review helpful
5.0 out of 5 stars How the portfolio society went bust October 4, 2009
Format:Hardcover|Vine Customer Review of Free Product (What's this?)
Except for the title, which should be "Mismanaged by the Markets," University of Michigan business professor Gerald Davis's book is as compact and clear a description of how we screwed up a fine economy as you will find.

It is presented in the form of a quick history of the changes in American business over the past century or so, and while I think it leaves out some important stuff, it does hit the high points.

One thing it leaves out is that until the 1920s, about two-fifths of American households were primary producers (farmers, mostly) or almost totally and directly dependent on primary producers (country stores, millers). These people represented a good deal less than two-fifths of wealth, but they were not greatly dependent on big city banks. They were dependent on wider markets and suffered when prices crashed in 1922, but if there had been a run on National City Bank, they would hardly have noticed.

Bankers were important, but their role was circumscribed. There could not have been a national housing bubble in the '20s, because mortgage lending was local, as was much banking. There was no FDIC, although some states, like Nebraska, had state bank deposit insurance (which, in the case of Nebraska, went bust in '28, without setting off any wider tremors). As Davis recognizes, banking was about to become even more circumscribed in the middle years of the century.

The dominant firms of the American economy, the giant manufacturers, were so profitable that they didn't need Wall Street or banks for any fundamental task: They found the capital they needed for expansion and renewal in their retained earnings.
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6 of 7 people found the following review helpful
5.0 out of 5 stars Smart, Savvy and An Absolute Essential June 5, 2009
Format:Hardcover|Vine Customer Review of Free Product (What's this?)
This is hands-down one of the most well written books covering the current economic crisis that I've read to date...and as a college instructor (business) and writer, I've read more than my share. It's intelligent, well organized, clear and right on the mark.

Those that are trying to make sense of what is taking place and why will find the background information easy to understand without insulting ones intelligence...however, unlike the vast majority of writers, the author doesn't stop with the basics. He takes time to explore where we came from, where we are today (as a nation and globally) and where we are likely heading in the future but without giving into the "easy money" hype of trying to forecast the future or make wild claims. Instead, he presents the information in a factual manner that allows the readers to draw their own conclusions and spot opportunity as well as risk inherent in the system itself.

During every major transition there are those that continue to work/invest from the former perspective while others realize that change is taking place. This is not an investment book per se but rather an in-depth exploration of the transition along a likely continuum.

Who Will Like This Book...
-Investors - those that want to understand the investment environment not merely those searching for a 'how to' or checklist.
- Business Owners
- Government Officials
- Political and/or Social Science Buffs
- Anyone seeking to better understand how we got here and were it heads into the future

Plain and simple, this is for those that don't mind to think...and think you will because the information, direction and long term consequences will not be easily digested - or resolved. Inform yourself.
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6 of 8 people found the following review helpful
Format:Hardcover|Vine Customer Review of Free Product (What's this?)
Managed by the Markets is an exquisite overview of modern finance-based "capitalism" as defined by most mainstream observers. The author shines when discussing corporate governance, as he has specialized in this area. The author also provides a strong overview of securitization, although his coverage of derivatives was weaker than hoped. The author covers a bit of the bubble as well, which would make this a useful text for younger students who missed that era, though older observers might skip it. The author flirts with mentioning the Money Trust that created the Fed, by citing Brandeis' classic "Other People's Money, and How the Bankers Use it". However, he dismisses the conspiratorial view that financial elites may have deliberately imploded the economy in order to own a larger portion of it.

"From Sovereign to Vendor-State" was a useful chapter, but the following chapter, "From Employee and Citizen to Investor" was not. Although people may have defined themselves in such terms circa 2005 or even 2007, the vast loss of wealth since then has introduced a new frugality. People are reconsidering their status as financial cogs, and rediscovering the human element. I have noticed this in previous recessions as well - perhaps the personal empire building reverses when one's financial coliseum collapses.

For this reason, and a few others too detailed to cover here, the Conclusion seems inaccurate and premature. The pervasiveness of finance has not created a portfolio society, but rather has been revealed as tremendously destructive force when coupled with extremely loose monetary policy. Modern cowboy finance as practised by the large banks has become a wealth destroyer and a parasite, not a wealth enhancer.
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Most Recent Customer Reviews
4.0 out of 5 stars A rootin tootin good read
This book provides an interesting and insightful look into the world of financial markets. It creates a timeline from the late 1800's to present day describing the policy steps,... Read more
Published 5 months ago by David Trautmann
4.0 out of 5 stars Good historical overview of the markets
In this book, the author shows how we Americans found themselves in such a volatile place financially. Read more
Published 12 months ago by L. Staley
4.0 out of 5 stars Interesting yet dry
This was a dry somewhat of a hard read about the financial market. I found the book to be invoking some of the mainstream ideas/concepts of how America transitioned from a... Read more
Published on August 25, 2011 by SAM
5.0 out of 5 stars Historical Background Supports Contemporary Observations
This is an academic study -- a bit dry, but admirably thorough -- of how American found itself at a difficult economic crossroads. Read more
Published on January 19, 2011 by Theseus
3.0 out of 5 stars mainstream and obvious
This is basically a dry, academic assessment of how financial powers became ever more powerful in the last century. The writing is good, although the book lacks a sense of flow. Read more
Published on January 15, 2011 by Jon Norris
4.0 out of 5 stars A primary source book for understanding our financial revolution
Professor Davis offers a serious non-polemical macro view of the on-going and important changes in America's financial structure. Read more
Published on April 28, 2010 by John E. Drury
4.0 out of 5 stars Anything for Shareholder Value
After the economic collapse of in 2008, I thought it would be interesting to learn more about what really happened. I came across "Managed By the Markets" by Gerald F. Read more
Published on January 29, 2010 by Russell Diederich
5.0 out of 5 stars Will help you understand what happened
I work in the financial industry and understand a decent amount of the "hows" and "whys" of what happened in the recent crisis. But, this book deepened my understanding. Read more
Published on December 17, 2009 by Tim Martin
5.0 out of 5 stars A View from Above
In Managed by the Markets, Gerald Davis provides a thorough, lucid and intelligent explanation of the forces shaping the financial markets and, more significantly, how the... Read more
Published on December 14, 2009 by E. Swope
4.0 out of 5 stars Essential outline of a "Copernican shift" in the world economy: from...
While the marketing and timing of this book's appearance may suggest that it explains the current economic meltdown, Gerald Davis's real aims are more general: to outline and... Read more
Published on October 24, 2009 by N. Andersen
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