The Road from Ruin: How to Revive Capitalism and Put America Back on Top

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Overview

We Have a World-Class Mess . . . Now What?

Amid the carnage of bankruptcies, soaring unemployment, and millions of families losing their homes during the financial crisis of 2007–2009 lay the bloody corpse of a set of ideas that had underpinned the economics of the previous thirty years. A system that had been delivering unprecedented prosperity on a global scale suddenly teetered on the verge of collapse. Capitalism was seemingly exposed as a house of cards. The blame game became a new national pastime as doomsayers predicted the end of America’s leadership of the world economy.

We’re at a crossroads, and decisions about how to reshape a discredited capitalism will profoundly affect whether the coming years will be ones of depression, stagnation, or renewed prosperity.

Instant analysis since the collapse of the financial system in the fall of 2008 has produced no end of ideas about what to do—ranging from those of free market ideologues (let the market do its work and damn the consequences) to extreme government interventionists determined to keep the animal spirits of capitalism penned up.

But if there is anything worse than toxic financial assets it is toxic ideas. We need to reject the old orthodoxies and conventional wisdoms. Matthew Bishop and Michael Green take a step back and analyze what can be learned from financial crises of the past—from the Tulip Craze of the seventeenth century through the Great Depression of the 1930s, Japan’s Great Deflation, and the Long-Term Capital debacle of the 1990s to the unprecedented interventions of the government during the past year—to set the agenda for a reformed twenty-first-century capitalism. The result is an enlightening perspective on what set us on the road to ruin, as well as road signs to guide us back to prosperity.

—Why bubbles are the consequence of financial innovations that generate economic breakthroughs, but why it would be wrong to abandon these inventions of the financial engineers. The Road from Ruin explains how stifling innovation and risk-taking comes at a huge cost to future prosperity.

—Why the economy needed a fiscal stimulus to recover from the crisis. Bishop and Green show how economic dogmatists of the Right, who opposed the stimulus, got it wrong, but warn that those on the Left who want the stimulus to run and run could usher in a new era of high inflation.

—Why company bosses became too focused on short-term results and did not see the crisis coming. The Road from Ruin shows how we can get business leaders to put the interests of society ahead of their own pay-packets.

—The danger of focusing on the financial symptoms of the crisis without tackling the underlying economic causes, such as the world operating on the dollar standard. Bishop and Green show why the role of the dollar as the world’s reserve currency is not just a problem for the rest of the world but for the United States as well.

—Why many of capitalism’s champions—especially the advocates of the efficient market hypothesis—lost touch with reality. The Road from Ruin provides insights into new ideas in economics that recognize how the complexity and irrationality of the human beings who make up the economy can be harnessed to build a better capitalism.

Remarkably, the issues we face today have presented themselves in one form or another over the past three centuries. Matthew Bishop and Michael Green skillfully draw both the lessons learned and prescriptions for reform to prevent another catastrophic meltdown and put America back on top.

Editorial Reviews

Harry Hurt III

In their provocative and refreshing book…Matthew Bishop and Michael Green blame "toxic ideas" rather than "toxic assets," and call for a fundamental reinvention of the free-market system…The book is at its best in re-examining what did—and did not—lead various nations to ruin in the past…if their book has its shortcomings, Mr. Bishop and Mr. Green make a persuasive case that America needs to transform its basic economic theory and practice, or the road out of our current mess will be at least as long and winding as the road that got us in it.
—The New York Times

Product Details

ISBN-13: 9780307464224
Publisher: Crown Publishing Group
Publication date: 1/26/2010
Pages: 384
Sales rank: 865,413
Product dimensions: 6.60 (w) x 9.30 (h) x 1.30 (d)

Meet the Author

MATTHEW BISHOP is the U.S. business editor of The Economist and a former faculty member of the London Business School.

MICHAEL GREEN is a London-based writer who previously taught economics at Warsaw University and was a senior official in the British government. He is coauthor (with Matthew Bishop) of Philanthrocapitalism.

Introduction To Ruin and Back

What went wrong and what we must do to put it right 1

Pt. 1 The Road to Ruin

How Things Go Wrong

1 Nobel Laureates and Shoeshine Boys

How innovation leads to bubbles 27

2 The Moral Maze

How governments people the world with fools 63

3 Money Makes the World Go Wrong

A brief history of global imbalances 91

4 The Dangers of Denial

How inaction leads to depression 128

5 The Reformer's Challenge

Don't throw out the baby with the bathwater 156

Pt. 2 The Road from Ruin

6 Economics With a Human Face

Toward a less dismal science 195

7 A New World Order

The world must redesign how it is governed 233

8 The Age of Philanthro Capitalism

Capitalism must rediscover its soul 267

9 We Are the Change

Making the right choices means increasing the wisdom of crowds 302

10 Conclusion

The road ahead 331

Acknowledgments 351

A Note on Sources 353

Index 363

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Tennesseedog

Posted August 28, 2010

more from this reviewer

From Soup to Nuts, and Kramer Too!

A masterful analysis of the recent global economic crisis which continues in a less intensive manner at the present time. The authors present historical economic events in an easy to understand prose which is both entertaining and highly informative. Economic principles in finance, currency, trade and monetary techniques are fully explored and broken down for the reader as to how they interacted and developed in this current crisis. The authors present interesting vignettes concerning famous economists, swindlers and power brokers around the world. They tie everything together in readable chapters forming their arguments for a rational approach to prevent future crises from reaching the height most recently seen and from ever reaching the disaster that was the Great Depression of the 1930's. Some will say that their ideas of reform and needed institutional and consumer change are utopian and unattainable. They would argue that to avoid future calamity we MUST institute these reforms. How fitting that after the United States government has tried some of the reform ideas pushed by these authors and took a Keynesian view of pumping cash into the system to avert a depression, many political and some economic theorists are reawakening the previously underplayed economic theory that government intervention is the problem. That the Wall Street Journal recently wrote of an economist at George Mason University who is pushing for the revival of the so-called Austrian School of Economics, it is surely necessary for more of the American citzenry to educate themselves in the subject of economics. More knowledge will lead to better decision-making in this highly charged political environment. This enjoyable and instructive work will help to educate us in this mysterious, soft science called economics. We live it everyday and we must master our part in its operations.
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