Managed by the Markets: How Finance Re-Shaped America

Overview

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...

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Managed by the Markets: How Finance Re-Shaped America

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Overview

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

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.
From the Publisher
"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

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Product Details

  • ISBN-13: 9780199216611
  • Publisher: Oxford University Press, USA
  • Publication date: 6/15/2009
  • Pages: 320
  • Product dimensions: 6.30 (w) x 9.30 (h) x 1.10 (d)

Meet 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.

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Table of Contents

Preface
1. The New Financial Capitalism
2. Financial Markets and Corporate Governance
3. From Institution to Nexus: How the Corporation Got, then Lost, its Soul
4. From Banks to Markets: How Securitization Ended the "Wonderful Life"
5. From Sovereign to Vendor-State: How Delaware and Liberia Became the McDonalds and Nike of Corporate Law
6. From Employee and Citizen to Investor: How Talent, Friends, and Homes Became "capital"
7. Conclusion: A Society of Investors?

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