Freefall

Review by Dan Kenney of: Freefall: America, Free Markets, and the Sinking of the World Economy By Joseph Stiglitz

A decade ago the former chief economist of the World Bank, Joseph Stiglitz showed clearly how the free-market ideologues at the US Treasury and the International Monetary Fund had failed in their attempts to handle the Asian financial crisis of the late 1990s. It was an attack from a Washington insider with no holds barred.

Stiglitz concluded his article with this warning to the IMF and the US Treasury that unless they began a dialogue with their critics “things will continue to go very, very wrong.”

Stiglitz’s warnings were ignored by those who believed totally in the market’s self-correcting nature, which allowed for the conditions that led to the worst financial and economic shock since the great depression in the 1930s.

Thus you can expect more than a fair share amount of “I told you so.” He also singles out Larry Summers, former Secretary of the Treasury under Bill Clinton, and now chief economic adviser to Obama. Stiglitz says Summers was too much of a “yes man” to the demands of Wall Street in the 90s and is making the same wrong choice now. It was after all Summers who orchestrated Stiglitz’s departure from the World Bank.

But there is much more to this book than getting even and gloating. In Freefall Stiglitz does a very good job of tracing the origins of the Great Recession. He debunks any notions that America needs more billion-dollar bailouts and free passes to those “too big to fail.” He argues that the system is broken, and we can only fix it by examining the under lying theories.

Stiglitz would like this moment in history to be a time of reassessment of the sort of economy in which Wall Street banks and financiers enriched themselves by selling over-priced and risky products to some of the most vulnerable citizens in America. He takes the stand that American greed at the top now far outweighs moral commitment. This has led to a huge break down in trust.

He ends the book by asking; “Will we seize the opportunity to restore our sense of balance between the market and the state, between individualism and the community, between man and nature, between means and ends?” Roosevelt met such a challenge in the 1930s. Stiglitz has grave doubts whether Obama can rise to the occasion as successfully. We can always hope that he will let in other views than the ones he has chosen to surround himself with thus far.