| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
Neither Skidelsky's review or apparently Wolf's book are exactly strolls in the park. Indeed, it may have taken Skidelsky so long to review Wolf because of a text he admits is technical, dense, "overloaded with diagrams and tables." Wolf focuses in on the macroeconomic causes of the crisis, notably chronic trade imbalances. This is interesting in that Wolf, whose columns in the FT display the certainty of an economic deity, has a certain amount of revising of earlier positions to make. Wolf's previous book, in 2004, was titled "Why Globalization Works," which, Skidelsky writes that he "saw globalization as a mighty engine for ending global poverty, and was scornful of arguments against it, most of which he dismissed as lacking professional competence." So let us, bereft of professional competence that we are, tread carefully. Skidelsky, who became life peer Baron Skidelsky in 1991, himself assumes a magisterial air, so the NYRB essay is like one god reviewing the other. Is this an economic tendency? That air of technical omni-competence is shared by other top-drawer economists-turned-columnists like The New York Times' Paul Krugman, and is ironic given that the crisis seems to fallen upon most of them with the same suddenness it hit the rest of us. In his book, as he has often enough in his column, Wolf focuses in on the growth of savings in an export-driven Asia, notably China, fueled by "excessive American spending." The causal mechanism here is complex, but it comes down to a realization in Asia after the late '90s Asia crisis that domestic savings had to be encouraged in order to reduce borrowing from the West, thus keeping the currency artificially low and maximizing exports. The results, particularly in the case of China: a vast buying program of U.S. Treasuries, which, in turn, kept rates low in the U.S. and enabled deficit spending by the federal government and American households. For all its complexities, the crash, from a macroeconomic perspective, now possesses an inevitable air. Wolf offers a number of solutions, none of them easy: Emerging markets like China need expansionary fiscal policy to stir consumer demand while the U.S. tightens its belt. Wolf focuses on technical adjustments; Skidelsky uses Wolf's own argument as a jumping-off point to examine what the crisis says about the role of the U.S. dollar and, by extension, American power. Not surprisingly, Skidelsky points to the failure of Keynes' Clearing Union scheme, which would have remedied countries hoarding currency reserves through trade surpluses. Instead, American dollars "helped reconstruct Europe after the war, and kept global demand buoyant," Skidelsky writes. That worked, because it fueled European exports to the U.S. and supported the cost of the U.S. defending Europe against the Soviet Union. Skidelsky's larger point is that the central role of the dollar allowed it to continue its post-World War II imperial ambitions. "Americans acquiesced in the unbalanced economic relations initiated by the East Asian governments in their undervaluation of their currencies because they ensured the persistence of unbalanced political relations," he writes. His conclusion: Resolving this chronic imbalance is not just about making Wolfian adjustments in fiscal policies. "A willingness by the U.S. government to end macroeconomic imbalances thus depends on its willingness to accept a much more plural world. ... It will require a huge mental realignment in the United States." Consider for instance Matt Taibbi's much talked about attempted takedown of Goldman, Sachs & Co. (NYSE:GS) in that economic journal, Rolling Stone. (Rolling Stone only has a short version of the article online; you have to buy the magazine for the entire story.) Taibbi's thesis is that Goldman has been involved in creating and exploiting every financial bubble since the Great Depression; and that, particularly since the rise of Robert Rubin, Goldman has essentially captured financial regulation and bent it to its own profit-making intentions. Taibbi writes an invective-laced prose that is, in his own distinctive way, as absolute in its judgments as Wolf. True, on many different fronts, you can question Taibbi's facts or his interpretations; and the meme that he only has to be right about the "big things" rather than a bunch of irritating facts is already circulating. It's also true that in classic paranoid fashion, anyone who questions Taibbi opens himself to the charge that he too is "captured" by the conspiracy. But compare Taibbi's piece to Skidelsky and Wolf. If the latter pair are even close to the truth, then even a firm as wealthy and powerful as Goldman looks like a woodchip in a raging macroeconomic current. Indeed, Skidelsky at one point makes the point, which is indisputable, that global imbalances allowed those with political and financial power in the U.S. to "earn huge profits that should have been shared with their workers." But Skidelsky is also clear that this system extends back at least into the '60s and perhaps to World War II, long before Rubin tried his hand at arbitrage and back when Goldman was still struggling to recover from the Crash of '29. For Taibbi to make his case for Goldman's Oz-like power would be to suggest that the firm, which did achieve preeminence on Wall Street in the '90s, has been manipulating American geopolitical power relations since Roosevelt, through Nixon and Reagan and into the Bush years. That's clearly absurd, which is not to say Goldman (or any firm) was free of all responsibility. But the larger question that all these pieces raise is what exactly is the relationship between macroeconomics and microeconomics when it comes to cause -- and how should that affect reforms that are currently being debated. Wolf has touched on this tentatively in his columns, urging "surplus" nations like China and Germany to stimulate. But, given the centrality he and Skidelsky place on global imbalances, a failure of regulation and a clear case of regulatory capture, at least ideologically, seem suddenly less imperative. Could the best regulation in the world have kept this crisis at bay? If Goldman had never existed, would we still be sitting here trying to put things back together? How macro must the conspiracy be to become credible? - Robert Teitelman See Skidelsky's story from The New York Book Review
 Deal Video
    Community
 Elsewhere on The Deal.comDealwatch
The Deal MagazineCorporate Dealmaker
The Deal VideoCategories
Blog roll
Archives
| |||||||||||||||||||||||||
There is still a world beyond blogs and columns, but you have to work at it. The new issue of The New York Review of Books has a long and 
|
|
|
|
|
Everybody knows that the dice are loaded
Everybody rolls with their fingers crossed
Everybody knows that the war is over
Everybody knows the good guys lost
Everybody knows the fight was fixed
The poor stay poor, the rich get rich
Thats how it goes
Everybody knows
Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died
Everybody talking to their pockets
Everybody wants a box of chocolates
And a long stem rose
Everybody knows
Everybody knows that you love me baby
Everybody knows that you really do
Everybody knows that youve been faithful
Ah give or take a night or two
Everybody knows youve been discreet
But there were so many people you just had to meet
Without your clothes
And everybody knows
Everybody knows, everybody knows
Thats how it goes
Everybody knows
Everybody knows, everybody knows
Thats how it goes
Everybody knows
And everybody knows that its now or never
Everybody knows that its me or you
And everybody knows that you live forever
Ah when youve done a line or two
Everybody knows the deal is rotten
Old black joes still pickin cotton
For your ribbons and bows
And everybody knows
And everybody knows that the plague is coming
Everybody knows that its moving fast
Everybody knows that the naked man and woman
Are just a shining artifact of the past
Everybody knows the scene is dead
But theres gonna be a meter on your bed
That will disclose
What everybody knows
And everybody knows that youre in trouble
Everybody knows what youve been through
From the bloody cross on top of calvary
To the beach of malibu
Everybody knows its coming apart
Take one last look at this sacred heart
Before it blows
And everybody knows
Everybody knows, everybody knows
Thats how it goes
Everybody knows
Oh everybody knows, everybody knows
Thats how it goes
Everybody knows
Everybody knows
________________________________________________________________________
Written by the Great Leonard Cohen and Sharon Robinson
________________________________________________________________________
Some of you may have heard the above song by Leonard Cohen... Very appropriate for these times... even though it was written about a generation ago.......