Issue, mate?
I don't mean to namedrop but Mark Thomas* recommended this book to me, backstage at the Bloomsbury before Christmas. He said it was the definitive book on the current global financial crisis, in that it's the definitive book about the previous one, in 1929. The Great Crash 1929 by JK Galbraith proved a very quick first book of 2009. I couldn't stop reading it. It's not that long anyway, and Galbraith's style is such a breeze, especially for an economist. The parallels between the original crash and our current one are astounding. Both booms were built on unregulated banking and speculation, and both busts came about because nobody in the financial services sector wanted it to stop and nobody wanted to be the spoilsport who stopped it, so they kept on going, treating the stock market like a roulette wheel and sitting back and counting their money while investment firms spread their investments among another layer of investment firms until nobody actually had any real money in their hands any more, it was all hypothetical and the whole edifice came crumbling down.Either today's brokers and money-jugglers have never read this book (if they have time to read a book when there's all that shouting and looking at screens to be done), or, like the speculators and get-rich-quick schemers of 1929, they have their fingers in their ears and are going la-la-la-la. Galbraith's book was written in 1954, and he was amazed then that so little had changed, when the Crash was only 25 years in the past. I wonder what he'd have made of today's little difficulties?
* Mark's new series of interviews on matters fiscal, It's The Economy, Stupid, are available as podcasts here and from iTunes.
posted by Andrew Collins @ 3:46 PM
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JKG (as the cool kids call him) is probably my all-time hero - one of the greatest men of the 20th century in my book. He was such a wonderful writer that you'd swear he wasn't an economist. If you've never read any of his other books, then you should. Money - Whence it Came..., The Great Crash, The New Industrial State, The Age of Uncertainty, and The Affluent Society should be compulsory reading for everyone.
Anyway, if you want something else like The Great Crash, try A Brief History of Financial Euphoria. There's a really really lovely collection of essays collated as A View From the Stands too.
JKG is next on my list on the recommendation of Emily Maitliss. Not personally of course, but through the pages of Word magazine.
I recently read about the Enron scandal ("The Smartest Guys in the Room") and although criminal activity eventually came into play, a contributing factor lay in the securitisation of gas contracts which allowed risks to be sold on the market, much as securitised sub-prime mortgages have been a factor globally. Sales staff received their bonuses on contract signature and at the same time the projected profits were declared to Wall Street. Cost overruns or problems with contract delivery were inadequately addressed up front. Indeed risk management went out of the window, losing the ability to say no to dodgy contracts. Maintaining growth to meet Wall Street expectations became the driver for everything. Naysayers or those who stated that the emperor had no clothes were derided. Until of course it all, inevitably, collapsed.
Like the current global situation, it was obvious a posteriori that something was wrong. Those inside the bubble just couldn't see the approaching needle point ready to pop it. It is one thing for present day economists to forget/ignore the lessons of 80 years ago, but to me (a non-Economist) the Enron scandal just looks like the credit crunch in microcosm. It happened 10 years ago and to miss the warning signs of something so recent seems inexcusable.
(As an aside, not being an economist I've found Evan Davis' BBC series very informative. Did you catch it at all?)
I have "taped" the Great Crash 1929 documentary, but haven't watched any of the rest of the BBC's City strand. Did I miss something good?
I picked this up after you mentioned Mark Thomas had recommended it on the podcast a few weeks back - I'm glad I did, and you're right, it's really engagingly written for a subject you'd assume to be quite dry. That said, I do still feel fairly ignorant about the whole thing. But slightly less so, so thanks! I'd like to be able to write "Maybe Herring was wrong about you" here, but unfortunately I also read Bad Science. In particular the chapter on homeopathy.
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Not really - the Great Crash documentary was OK but suffered from the current TV obsession of seeking the views of "ordinary" people who were involved. Obviously, all of the Big Bears from that time are long gone so it was left to the descendants to give second or third hand accounts of the events.
What we really would have benefited from would have been more detail and a less glib overview.
At the end of the programme you wouldn't really be any the wiser about how it happened: the causes, roots and determinations - the lies and cheating - the cover-ups and misrepresantions - unless you'd done some prior reading of Galbraith et al. and were able to overlay this knowledge onto the on screen presentation.
The same holds true for most of the "City" season : far too much anecdote and half-remembered fables from people who, in many cases, were at arms length from the events.
The bottom line (ha!) is that economics generally (and the current events specifically) aren't easily suited to presentation on TV or indeed radio.
These are very complex and jargon ridden areas and, for once, the use of copious footnotes and explanatory sidebars is not only required but pretty much essential.
To fully grasp the awful, hideous series of events that led us to this point in just a few months you really do need to read and read widely around the subject.
Special mention to the BBC's Robert Peston and his blog which is written in a near-layman style with plenty of links to outside resources when the going gets a bit too theoretical or jargon heavy.
And, having dismissed TV's coverage, it should be noted that Paul Mason ("Newsnight's economics editor and Northern Soul fan) has been excellent throughout. But I suspect that this is because his programme's editor has a good idea of the knowledge base of the viewer and the reports haven't needed to be too watered down in order to connect with the audience. In stark contrast with the hopeless attempts of stand in economices editor Hugh Pym's attempts to explain the complicated and precise by way of vox-pop and hand wavng on the main BBC News bulletins.
The good news there being that real editor Stephanie Flanders is now back from maternity leave and should be able to guide us through the difficult months ahead.
In short : read widely but always bear in mind that economics is a political subject and that the people expressing views may have a dogmatic agenda beind them.
Oh, economists are often excellent writers. As are mathematicians. I think the more mundane your topic is perceived to be, the more interesting you can make it seem.
Living in a town which is quite besotted by the fact that it spawned both Adam Smith and Gordon Brown, it's cool to be an economist here.
I find Robert Peston a very good writer. That might just be me. I know there are other examples, I just can't remember them because it's very nearly silly o' clock
Listened to this on audiobook (yes!) as per your recommendation. Good stuff. But I think the format is more suited to fiction as I wanted to see the numbers.
On a similar note, happened on an old Adam Curtis TV documentary about Nick Leeson which is very good too. I'd love it if Mr Curtis did one about the current depression.
Chiselledfrommushroom: Mr Herring is right about me. I am dangerous. Don't be fooled by this fleeting anomaly of conventional wisdom.
Like Bill Dukenfield I've been following the BBC blogs and have found them very informative. A quick look at the comments they (particularly Robert Peston) get will show that most bloggers can find themselves kicking off some pretty vitriolic and personal exchanges over the most innocent of points. Might raise your spirits a bit when you find yourself in another "homeopathy-gate".
Unlike Bill Dukenfield, I'm not very well informed about economics and am trying to catch up enough to understand the basic principles. For example until the first part of Evan Davis' series I didn't "get" the concept of selling risks via securitisation, but felt by the end of Pt 1 that I knew, at a top level, what it was about. Pt 3 was definitely the weakest and I agree with others that it concentrated too heavily on "case studies". My answer to your question would be "it depends how much you already know". A quick look at Part 1 of Evan Davis' series on iPlayer will either turn out to be quite illuminating or excruciatingly noddy.
I agree with Dan that Galbraith's other books (especially The Age of Uncertainty) are well worth investigating. Humane, comprehensive and perpetually relevant.
As regards the TV stuff, I've personally found Evan Davis' programmes very concise and useful, given the enormity and complexity of the subject matter. They certainly helped me get my head round a few concepts that I previously hadn't understood at all. Made me feel even more helpless and despairing, but there you go.
Have you read any (whispers) Marx, on his concept of False Consciousness, Andrew? An old favourite of mine. Might ring a few bells (should have rung a load, about twenty years ago.).
I read Niall Ferguson's Ascent of Money just before Christmas - there was a Channel 4 series as well but I didn't watch it - which as someone for whom economics is reasonably mysterious, I found very interesting and informative. A history of money and banking, it was written in Spring 2008 so is pretty up to date. He explores the 1929 crash in detail and also looks at other crashes, particulalry in South America. I must thank him for the shudder of horror I felt when I read a headline suggesting the government might start printing more money...
Evangeline
I arrogantly believe Niall Ferguson (that's blog commenter Dan, sitting in his pants, commenting on Harvard academic, Niall Ferguson) to be a bit of a clown. I can't really comment on his counterfactual history (except to say that it looks like it is up there with the most egregiously horrible apologies for empire) but his economics stuff seems really really terrible. I only saw clips of The Ascent of Money but quickly filed it under "idiotic propaganda" when he started extolling the virtues of the Chilean stockmarket. I also heard him on NPR's Planet Money podcast (a really excellent source on the credit crunch btw - http://www.npr.org/blogs/money/ - and they also did a couple of really really great programmes for This American Life - http://www.thislife.org/radio_episode.aspx?episode=355 and http://www.thislife.org/Radio_Episode.aspx?sched=1263) and he seemed not to fully understand what "wealth" actually means wrt share ownership and short-selling.
And if we're going down the road of mentioning long-dead economists whose writing is enjoyable and relevant, can I recommend Thorstein Veblen?
Hmmm, so after slating Niall F. Ferguson this morning, I've tonight been given a copy of The Ascent of Money.
I'm up to page 4 and have noted horrendously idiotic mistake number one: "In 2006 the measured economic output of the entire world was around $47 trillion. The total market capitalisation of the world's stock markets was $51 trillion, 10% larger. The total value of domestic and international bonds was $68 trillion, 50% larger. The amount of derivatives outstanding was $473 trillion, more than ten times larger. Planet Finance is beginning to dwarf Planet Earth". Either he doesn't understand the difference between stocks and flows (I find this hard to believe) or he's just deliberately talking meaningless shit.
I also looked at the bit on the Chilean military coup of 1973 (looking for the bit I saw on TV about their privatised pension schemes) and it is the most appalling, appalling rubbish. He's a shameless propagandist, plain and simple.
I really need a blog.
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