Freefall: America, Free Markets, and the Sinking of the World Economy by Joseph E. Stiglitz
An incisive look at the global economic crisis, our flawed response, and the implications for the world’s future prosperity.
The Great Recession, as it has come to be called, has impacted more people worldwide than any crisis since the Great Depression. Flawed government policy and unscrupulous personal and corporate behavior in the United States created the current financial meltdown, which was exported across the globe with devastating consequences. The crisis has sparked an essential debate about America’s economic missteps, the soundness of this country’s economy, and even the appropriate shape of a capitalist system.
Few are more qualified to comment during this turbulent time than Joseph E. Stiglitz. Winner of the 2001 Nobel Prize in Economics, Stiglitz is “an insanely great economist, in ways you can’t really appreciate unless you’re deep into the field” (Paul Krugman, New York Times). In Freefall, Stiglitz traces the origins of the Great Recession, eschewing easy answers and demolishing the contention that America needs more billion-dollar bailouts and free passes to those “too big to fail,” while also outlining the alternatives and revealing that even now there are choices ahead that can make a difference. The system is broken, and we can only fix it by examining the underlying theories that have led us into this new “bubble capitalism.”
Ranging across a host of topics that bear on the crisis, Stiglitz argues convincingly for a restoration of the balance between government and markets. America as a nation faces huge challenges—in health care, energy, the environment, education, and manufacturing—and Stiglitz penetratingly addresses each in light of the newly emerging global economic order. An ongoing war of ideas over the most effective type of capitalist system, as well as a rebalancing of global economic power, is shaping that order. The battle may finally give the lie to theories of a “rational” market or to the view that America’s global economic dominance is inevitable and unassailable.
For anyone watching with indignation while a reckless Wall Street destroyed homes, educations, and jobs; while the government took half-steps hoping for a “just-enough” recovery; and while bankers fell all over themselves claiming not to have seen what was coming, then sought government bailouts while resisting regulation that would make future crises less likely, Freefall offers a clear accounting of why so many Americans feel disillusioned today and how we can realize a prosperous economy and a moral society for the future.
Joseph E. Stiglitz is a Nobel Prize–winning economist and the best-selling author of The Great Divide, Rewriting the Rules of the American Economy, The Price of Inequality, Freefall: America, Free Markets, and the Sinking of the World Economy, and Globalization and Its Discontents. He is a columnist for the New York Times and Project Syndicate and has written for Vanity Fair, Politico, The Atlantic, and Harper’s. He teaches at Columbia University and lives in New York City.
Freefall 3.5 out of 5based on
More than 1 year ago
This header sentence captures the book's message for me. I read slowly because I found it hard to deal with sadness and anger at what my boomer action has helped to perpetrate. I do not include my parent's generation in this mess.
Joseph Stiglitz presents a thoughtful refreshing message for those willing to reflect and, possibly, change course.
The book may be dismissed as LIBERAL pandering by flippant conservatives, (there are good conservative thinkers out there by the way). They might point to weak minded socialist-oriented thinking. Idea: think about educating yourself about socialism and then speak.
Their basic plan is to simply move on - pick ourselves up by the bootstraps and, with help from above, do just what we have been doing because it's the BEST way to prevail and because free markets with minimal regulation correct themselves! Why listen to anyone else? Done! Ah, remember there were those who suggested the world was round!
Alternative: Ask yourselves why B companies, established with the intent of combining growth and profit with a compassionate hand to environmental and world citizen support are prospering and maybe change course. If you don't know about these companies - read about them!
As a late 60's 3rd world traveling hippie teenager turned MBA work grinder and top "spin" producing executive, I have been both involved in the corporate, (BANKING!), world and I have also traveled throughout third world countries, both as the child of an immigrated WWII European father and as an adult. I have perspective and I'm a right leaning Centrist politically.
Read this book with the headline phrase in mind and think about the last 40 years - especially if you have lived through all of it. I've lived and worked both sides of the equation. I've done everything a good capitalist might do but no longer question why I'm disengaged with my surroundings and work. I'm relieved to see a few others in this chaos have a voice to speak publicly about this latest "Emperor's New Clothes" wardrobe. I'm changing clothes because they no longer fit.
Many of us have no time and take no time to do anything but drop exhausted from debt slavery and TV-PC world - not really listening to what the rest of the world has to say. We comfort ourselves with individual coping strategies. It's going to be OKAY.
We just always assume that we have the ultimate answers - akin to the elder, controlling, aged, but not wiser, Grandfather at the head of the table gesturing and stabbing the air with dictums while everyone else rolls their eyes and moves on - no longer respecting this individual's presence or experience mainly because Grandpa doesn't listen to anyone and simply demands what he has always believed and won't change. What might we think if he would, instead, listen and ask questions - or, change places with someone else at the table and become the wise elder mentor? I'm looking for a mentor ... and this author has caught my eye and my respect.
Well, it's time for some of us to get a grip. I believe that, as a nation, we too, believe that we are TOO BIG TO FAIL. We still talk too much and dictate too much - time to start observing and and taking stock.
Think about it.
More than 1 year ago
Joseph Stiglitz's description of our current economic system (i.e., Wall Street machinations) as 'ersatz capitalism' is spot on. Wall Street-style capitalism is far removed from the capitalism of Adam Smith's 'invisible hand.' The near demise of America's manufacturing industry and deterioration of the United States infrastructure (e.g., bridges, roads, electrical grid, etc.) are illustrations of how 'ersatz capitalism' is causing the United States to become a second rate power a la Great Britain. We ignore Stiglitz's apropos call for a new economic system at the risk of our own economic peril.
More than 1 year ago
In this brilliant book, the noted American economist Joseph Stiglitz explores why the crisis happened. Across the world, the crisis destroyed 50 million jobs and thrust 200 million people down into extreme poverty. From December 2007 to October 2009 the US economy lost 8 million jobs and unemployment rose to 10.2 per cent. Only 58.5 per cent of the working age population was in work. 2.3 million Americans lost their homes in 2008 alone. Bank executives' contracts were sacred; workers' wage contracts were negotiable - down.
Stiglitz has a chapter called The Great American Robbery. The top 50 hedge and private equity fund managers got an average $588 million each in 2007. Nine US banks, which made record losses of $100 billion, got $175 billion public money, and promptly paid out a record $33 billion in bonuses. As the Chair of one of the House of Representatives' Committees said, "the banks run the place . they give three times more money than the next biggest group." Stiglitz notes that the UK's partial privatisation of pensions shifted 40 per cent of their value out of the pensions and into financiers' fees.
The US government, like the British, has lent money to the banks at very low interest rates. Stiglitz asks, "Why not use the government's ability to borrow at a low interest rate to provide less expensive credit to homeowners under stress?" Banks that are 'too big to fail' gain from this access to cheaper capital because lenders know that taxpayers will pick up the losses. So these banks grow at the expense of their smaller rivals.
Public money went to the big banks, which didn't lend to small and medium businesses, but kept the money for themselves, in bonuses and dividends. Early in 2009, Hank Paulson, Secretary of the Treasury, ex-Goldman Sachs, gave AIG $180 billion, which then gave Goldman Sachs $13 billion. By contrast, US aid to Africa in 2008 was $6.5 billion.
In the USA, financial firms back the student loans programme, a Public-Private Partnership in which the taxpayer bears the risk and private firms get the gains. The US government issues the loans, so there is no risk of non-payment, but the lenders still charge interest rates as if there were such a risk. Thus the US government gave the private sector $80 billion of taxpayers' money over the last ten years, because using private firms cost that much more than if the government had lent the money itself.
Stiglitz shows that markets are not efficient and self-correcting; they do not allocate resources efficiently, especially not to innovation; and they redistribute wealth (from the poor to the rich), they do not create it. He points out that "Tax cuts encourage consumption, when the government should be promoting investment."
The US government has embraced finance capital, so there is "a predictable outcome - future crises; undue risk-taking at the public expense, no matter what the promise of a new regulatory regime; and greater inefficiency."
More than 1 year ago
This is a must read. The Nobel Economist dissects the economic collapse in a concise, accessible way and then critiques the government response. He prescribes better fixes and long term strategies to create a more stable, less capricious economic system. He also addresses the failures of his own profession and, indeed, its complicity in the false sense of security that enabled the financial fraud to continue so long.
More than 1 year ago
Stiglitz exoplains most of what went wrong and names names.
More than 1 year ago
More than 1 year ago
I've read 4 "crisis of 2008" books now and with each lesson, a little more clarity about how these markets will fail us has been predominant. Nothing will get better and the world will not work together to create a eutopian civilization...we're on our own. Don't trust any financial institution or governmental agency...we're all screwed. From the hometown credit union, the family pediatrician, the middle school science teacher to the state legislatures, the federal senators, and foreign diplomats....everyone is out for themselves and we're all screwed.
By 1950 General George C. Marshall was seen by the American public an outstanding hero
of their time; his masterful direction as chief of the US Army Staff during World War Two has set him up as an almost unassailable ...
Las claves para entender la nueva economía que emergerá de la crisis. La llamada Gran
Recesión ha afectado a más personas que ninguna otra crisis desde la Gran Depresión. En Estados Unidos, las políticas públicas deficientes y una falta de ...
Filled with illuminating examples, stories from the field, and dozens of forms for drafting franchising
agreements and licensing programs, the fourth edition of Franchising & Licensing covers all the strategic, legal, financial, and operational aspects of these complex but highly ...
Cogent, well-written . . . critiques unalloyed globalization enthusiasts, taking aim at their desire to
fully liberalize foreign trade ad capital movements. Foreign AffairsIn this eloquent challenge to the reigning wisdom on globalization, Dani Rodrik reminds us of the importance ...
The leading program evaluation reference, updated with the latest tools and techniques The Handbook of
Practical Program Evaluation provides tools for managers and evaluators to address questions about the performance of public and nonprofit programs. Neatly integrating authoritative, high-level information ...
A captivating and lucid narrative of America's revolutionary generation, Jefferson's America takes the reader from
the earliest rumblings of colonial dissent, through the crises of revolution and nation-making, to the heroic drama of the War of 1812. Risjord deftly weaves ...
La década de los noventa marcó el surgimiento de la Nueva Economía, caracterizada por unos
incrementos de productividad que duplicaban, o triplicaban, lo conocido durante las dos décadas precedentes. La década de los noventa marcó el surgimiento de la Nueva ...
For the Third Edition, 2001 Nobel laureate Joseph Stiglitz joins forces with new co-author Carl
Walsh, who brings both economic expertise and teaching savvy to the project. Together, Stiglitz and Walsh thoroughly integrate contemporary economics into the traditional curriculum. Recognizing ...