Customer Reviews

The Roaring Nineties: A New History of the World's Most Prosperous Decade

5 star:		(9)
4 star:		(4)
3 star:		(2)
2 star:		(4)
1 star:		(3)

 

 

It's easy to see why this book might be difficult for those from the conservative school of economics. Stiglitz - a Nobel Prize winner - is not a simple man, and neither are his ideas and theories; like economics itself, this book covers complex issues and problems that cannot be solved by a mere sweeping ideology of "taxes are bad" and "deregulation is good."

While the ideas Stiglitz explores are complex, the book is nothing near an impossible or dry read - to the contrary. Stiglitz's premise is clear: While there will probably always be cycles of boom and bust, and bubbles like those of the 90s will burst, policies still matter and are important. It is policies that can help lengthen expansions and shorten recessions, and help us through cycles of boom and bust.

This book is a fascinating read. It's especially terrific if you're looking for a book that links economics and policies in a cohesive, understandable way, and doesn't just speak about one at a time. Stiglitz does an excellent job of showing how the two are intimately intertwined.

I profited just as much as the next person from the booming business in the 90's. I also was one of its victims. We all were and, as usual, there we're federal policies, greedy individuals and corporations and dishonesty that when mixed in with the prosperity helped undermine it. Certainly there are always periods of booms and busts--it's how we deal with aftermath and the excesses that matter.

Stiglitz's well written book examines the process of creation and the decay and corruption that can help undo these bursts of economic activity. Stiglitz doesn't point the finger at any one group of individuals more than another--he feels comfortable doling out the blame where it belongs and Washington is just as much a target as corporate America. Without the political stilts to support economic circus we all participate in, it would never happen. As a reflection on what's wrong (and occasionally right) with America's political and economic system, The Roaring Nineties is unstinting look at the harshness and ugliness underneath the system. It's also a book that argues for reform in a way to keep the economy moving without allowing criminal profiteering.

Only a Nobel Prize-winning economist could disguise a political broadside against conservatives and the George W. Bush administration inside a Trojan horse mea culpa of the Bill Clinton White House. No one could argue with Joseph Stiglitz's assertion that an effective modern economy must strike a reasonable balance between free markets and government oversight - but what is reasonable? Stiglitz regrets what is arguably the shining achievement of the Clinton Administration, namely, its success in balancing the U.S. budget. Credit him for consistency: he opposed Clinton's tax cut, just as he opposed George W. Bush's. Stiglitz's academic and professional chops are beyond question, and his insights into corporate welfare and inefficient markets are quite valuable if somewhat short of profound. We find that this volume provides strong insights into the inner workings of the American economic juggernaut. Your reaction will depend whether you agree or disagree with the author's contentions that the Clinton Administration was not liberal enough and that the present Bush Administration believes in small government.

That is what the 90's was all about according to this book; specifically easy money that came about due to speculation, easy credit laws, and loosened federal regulations of the financial sector. The end of the Cold War and the resulting "peace dividend" brought about an era of optimism. Added to this was the takeover of Congress and many state governments by Republicans bent on loosening rules on businesses and making a more investment - friendly environment. Together, this created a bull market across the financial markets of the world, which in turn helped pushed up property prices. The target of this new money, the Internet and businesses involved with it. Hence the dot.com bubble. This story of greed, speculation, and risk-taking is laid out by this Nobel-Prize winner of Economics and Clinton advisor; Joseph Stiglitz. The book flows well and provides insider insight into what was going on in business and government circles both here and around the world. Overall, a good read.

All together an absolutely riveting book put together by someone who's seen it all and been there. Few academics, indeed very few, have had the ringside view as Joseph Stiglitz had, first as the Chairman of the Council of Economic Advisers from 1993 to 1997 and then Sr. Vice President and Chief Economist at the World Bank from 1997 to 200. And all this on top of a sterling academic career at places like Stanford, Princeton and Columbia which earned him a Nobel in 2001-all in all, an absolutely sterling set of credentials.

The book in itself is completely riveting. I started reading it at about 9 p.m. on a lazy January evening during the holidays and could not put it down till 3 a.m. when I was finally finished. The book is structured into several different chapters, 12 in total, the first 11 of which talk about the ills that plagued the free market system in the decade of the 1990s. In the final chapter, to round it all up, he proposes a set of alternative ways and means labeling it as the "New Democratic Idealism." All the usual suspects that you would expect to find in a book critical of free markets are there such as Enron, the accounting scandals, the stock market bubble and capital account liberalization. But then there are things which you would not expect in a typical book, for instance, a fairly critical stance on the role played by the Fed, including its venerable chairman, Alan Greenspan as also a harsh scrutiny of several practices at Wall Street which involved serious conflicts of interest.

Unlike his book titled "Globalization and its discontents" which for the most part, is a rant against the IMF and relates to his experiences with international economies at the World Bank, the present volume relates more to domestic politics and policies and was shaped largely by the role he played in the Clinton administration and the debates that he had with other arms of the government such as the Treasury and the Fed. Only one chapter in the book is exclusively devoted to the topic of globalization in developing economies, the heightened level of insecurity globalization breeds in these nations and how the process of globalization has to better take into account the aspirations of the disadvantaged.

The book, as I have said above, is good. Not just the content, but the way it is structured, the overall readability (including but not limited to the font size) is great. However it suffers from a set of problems like his earlier book "Globalization and Its Discontents." In some ways, it mentions all the ills of the free market system without mentioning any of the redeeming features of the system which have led to a huge improvement in living standards around the world, particularly in those countries which have embraced free markets with zeal. Beyond the general criticism, some specifics would be as follows:

a) Professor Stiglitz mentions that the 2001 recession was among the worst seen in the post-war period-Incorrect! The fact remains that the recession, (if it can be called that since we did not have actual negative GDP growth), lasted for only 2 quarters from March 2001 to November 2001 and was among the shortest recessions in the post war period.
b) With regard to social security, he presents a far too rosy scenario focusing on the system today and not on its potential insolvency in the not too distant future. Again he does an injustice by not mentioning the actual state of affairs.
c) Also with respect to his love for European version of social democracy, especially the Scandinavian style, it needs to be tempered with the stories of the pathetic growth rates of these economies in the recent past.

Overall a great book but one you need to balance out by keeping in mind the ideological sympathies of the author and taking some of his comments with a pinch, just a pinch of salt.

Joseph Stiglitz, formerly Chief Economist at the World Bank, has written a fierce attack on finance capital. He warns, "what was good for Wall Street might not be - and often was not - good for the country. ... The captains of industry - the leaders to whom all Americans were told to look up to [sic], those who served as the aspiration [sic] for others - have, it turns out, acted in ways which benefited themselves at the expense of others. ... The market system had provided incentives in which by doing well for themselves they did not benefit others, but rather their gains were at the expense of those they were supposed to be working for."

As he points out, "In spite of the confidence that is so often expressed in how well markets work, there is a huge body of research suggesting that many investors are simply not rational, and if that is the case, then the prices that emerge in the market may not provide good `directions' for what to invest in." This refutes capitalism's main claim, that only the market can produce a rational price system. So the market system is neither fair nor efficient.

Yet the US state tries to force all other states along the same path, using the IMF, the World Bank and the World Trade Organization. Stiglitz notes, "While we talked about democracy, we did everything we could to maintain our control of the global economic system, and to make sure that it worked for our interests, or more accurately, for the financial and corporate interests that dominated this part of our national life."

He sums up the US record, "the treaties that we had hailed so proudly were seen as unbalanced, [and] trade liberalization as a new way in which the rich and powerful could exploit the weak and the poor. Just as the market economy had not delivered what it had promised to the countries of the former Soviet Union - it brought unprecedented poverty, not unprecedented prosperity - trade liberalization did not deliver what it had promised. ... What a peculiar world, in which the poor countries are in effect subsidizing the richest."

The nineties, like the 1920s, led to a crash. The bubble was bigger, and so was the crash. For 200 years of capitalism, boom has led to bust and as inevitably to liberal promises to create `a gentler, more humane capitalism'. As Stiglitz admits, "rather than attacking the premises, the ideology, we accepted the terms of the debate as they had been framed." We do not need reforms of this failed, destructive system; we need a new and better system.

A nice critique of Rubinomics from the worlds best liberal economist. A little dated now, but as a history of Bill Clinton's economic policy, it works well. Recommended if you want to see how things will shake out if HRC wins the nomination and general election. Pick up "Making Globalization Work" while you're at it for an insightful commentary on where we need to go from here.

Joseph Stiglitz's analysis of the national and international social and economic policies of the Bush II governments is devastating.

Nationally, the state of the union is far from brilliant with its huge wealth inequality, a large number of people in prison, anxiety and insecurity (millions without health insurance), high infant mortality rates, unconcern about the deterioration of the environment and health care provisions below those of far poorer countries.
In the `roaring nineties', Stiglitz sees the fundamentalist free market ideology of the Bush II governments as a façade for a political agenda: crony capitalism (Enron, Worldcom), downsizing of government, favouring the wealthy. Overwhelming private interests and corporate greed lead to misguided and biased deregulation, bad tax policies, misguided accounting policies, too little investment in vital public needs, education, infrastructure and basic research. Tax cuts were hypocritically sold as good for everyone (trickle-down economy), while the result was frugality for the poor and generosity for the well-off.

Internationally, the US speaks of the rule of law, but it rejects this rule time and again (UN, International Criminal Court, Kyoto Agreements, strategic arms treaty).
Dr. Sam delivered misguided economic prescriptions to the rest of the world via the US controlled IMF. Its free trade rhetoric conceals the fact that the US lives year after year beyond its means, while it lectures others not to do it. In fact, the poor countries are subsidizing the richest: the total value of the benefits that the US gets out of the current system exceeds by a considerable amount the total foreign aid the US provides.

Stiglitz own precepts, called `Democratic Idealism', are based on 3 cornerstones: social justice, political values (democracy and freedom) and the relationship between individuals and communities. It is a vision with a balanced role for government (investments in education and technology, social protection), an attempt to achieve social justice at local and global level, and based on individual and national responsibility.

This book is superbly sarcastic: the conglomerate discount instead of the conglomerate premium (the synergies didn't work out). Or, the 3 Golden Rules of corporate capitalism: first, oppose subsidies except for your own sector; secondly, favour competition except for your own business; thirdly, favour openness and transparency except for your own books.

With his superb free mind, Professor Stiglitz's book served perfectly his adage that `information is more important than ever': a well-informed public is the basis of a well-functioning democracy.

A must read.

I also highly recommend Walden Bello's `Dilemmas of Domination' (a voice from the South) and Robert Heilbroner's `Behind the Veil of Economics `.

The main (and very important critique) of this book is its lack of an explanation as to how and why the economy of the nineties evolved and how and why it eventually led to a bursting bubble. One would think that a nobel prize winning economist would be able to provide insights into these questions. This is especially considering the case that he won his Nobel prize in Economics for his work in assymmetric information and markets, a factor that seems (at least on the surface) to have lead to ephermal growth of the nineties and its bubble. A very dissapointing book.

I take issue with the analysis Mr. Stiglitz offers in the section titled "How pension 'reform' increased economic vulnerability" (pp. 185-8). Accept for the moment Mr. Stiglitz' premise: the reason why corporate pension trust funds are underfunded is because unrealistic, overly optimistic assumptions were made about future returns on investment; namely, it was assumed that investments would return 9-10% instead of 4-5%. The question presents itself: Who made these unrealistic assumptions? Well, corporate financial officers, to start with. And yet, corporate officers are not the only interested parties when it comes to pension trust funds: pension benefits are negotiated on behalf of beneficiaries (union workers) by their union officers; furthermore, the financial soundness of the trust funds is overseen by agencies of the federal government.

When union leaders are negotiating a collective bargaining agreement with management or when federal officials are examining the adequacy of pension funding, they are in the same position a loan officer is in when trying to decide whether to grant a loan to an applicant. The loan officer has a fiduciary responsibility to depositors to make sure that the applicant will be able to pay off the loan. In like manner, union leaders and federal officials have a fiduciary responsibility to union members to make sure that management will be able to pay promised pension and healthcare benefits. If the loan officers don't follow this discipline, the bank will make lots of bad loans. If the union leaders and federal officials don't follow this discipline, the unions will accept promises in collective bargaining agreements that management will not be able to keep. In the case of massive bad loans, the bank becomes insolvent and the FSLIC steps in to guarantee deposits (as happened in the S&L debacle). In the case of unions and federal officials accepting promises that management can't keep, the pension fund becomes insolvent and the PBGC steps in to guarantee the pension benefits of the members.

In other words, if a borrower fails to pay off a loan, it is a failure not only on the part of the borrower, but also on the part of the loan officer who did such a poor job of assessing the borrower's ability to pay the loan back. Likewise, if a corporation fails to pay pension benefits, it is a failure not only on the part of the corporation, but also on the part of the union officials who negotiated the benefits package and the government officials who oversaw the entire process.

So, either ALL parties, corporate executives, union leaders, and federal officials, should be faulted for making overly optimistic assumptions about pension funding, or NO party should be faulted. It is quite possible that no moral fault is to be assigned to ANY party in this case. A plausible explanation is that executives, union leaders, and federal officials were acting in good faith and with best knowledge at the time the obligations were agreed on, but that the situation has changed so dramatically that the actuarial assumptions originally used to calculate funding adequacy are simply no longer valid. The many recent bankruptcies in the steel, airline, and automobile industries, hastened by crushing pension and OPEB liabilities, have made it painfully evident that defined benefit pension plans, so prevalent in decades past, are no longer viable in our current era of globalization and offshore competition. Instead of acknowledging the existence of a new era, Mr. Stiglitz seems to place the blame exclusively on corporate executives, "the firms," as he calls them. This is unfair.

Despite the problems I have with Mr. Stiglitz' one-sided view of the causes of the underfunding of pensions, "The Roaring Nineties," like so many of his other writings, is not to be missed. We must appreciate a passionate and brilliant author who thinks seriously about so wide a range of issues.