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The book, “Freefall – America, Free Markets and the sinking of world economy” has
been written by Nobel Prize winner economist Joseph Eugene Stiglitz
1
. Through his
book Freefall he takes the opportunity to take on all the supporters and propagators
of free market economics and to assert his prepositions against a market guided
system. In this book he traces the reasons behind the 2008 economic recession,
explains the subtle causes behind the occurrence of such economic catastrophe and
goes on to suggest remedies to deal with such crisis. Stiglitz, through his book, has
explained how leaving every economic phenomenon in the invisible hands of market
can prove dilapidating for the economic system. He advocates government
intervention in economic phenomenon and finds it suitable for government to play a
role of regulator of market processes. He has criticized the policies of George W
Bush and Barrack Obama for blindly supporting the ideologies that led to the global
recession of 2008. The book has been lucidly written and does not require a lot of
economic knowledge to understand the root cause of the second most horrifying
economic experience since the great depression of 1930s. Unlike other books
published on the economic recession of 2008, Freefall presents an ideal picture of
how things should work in an economic system.
The book begins with a sharp criticism of the policies of Bush and Obama regimes.
It then explains that the crisis of 2008 could not be termed unforeseen and shows
how the policy makers failed to develop this foresight. Stiglitz maintains that blind chauvinism towards free market economy led to structural loop holes in the US
economic system which spurred the economic meltdown of 2008. The policy makers
and economist in the US assumed that any defect in the economic machinery of the
country would be fixed by the self correcting mechanism of market forces. It is this
assumption, says Stiglitz that led to the crisis.
Stiglitz rose to international acclaim by his theory where he explained that the
belief of markets being inherently efficient system was wrong. He won the Nobel
Prize on this theory of his. He has used the same theory to explain the financial
crisis of 2008. According to him, the zero sum nature of the market where a victory
for someone would essentially lead to a loss for some other makes the market
system inefficient. This zero sum game combined with externalities in the system
aggravates the condition. The major theme of the book is to portray government as
a mild and balanced regulator. The government should reduce the impact of
negative externalities through its regulating mechanism. Also, it should be the job
of the government to maximize the impact of positive externalities which could in
turn lead to an increased investment and growth. Stiglitz further argues that any
system cannot claim infallibility just on the ground of it being a very enormous
setup. At a time when the supporters of Volcker rule – a rule restricting banks from
speculative investments- are increasing, Stiglitz’ analysis provides impetus to the
recovery process.
There have been plethora of books giving a detailed insight into the structures and
processes that led to the crisis of 2008 but Stiglitz works comes into a different
league because of the analysis of the global elements of the process. His idea of a
global reserve currency is an intriguing one. J M Keynes was the propagator of a
global reserve currency. His ideas emerged about 100 years ago. Stiglitz’ lucent
work demonstrates the relevance of Keyne’s ideas in the twenty-first century. As a
chief economist at the World Bank, Stiglitz had an insight into the deficiencies
stemming due to movement towards globalization and development of unregulated
free trade. He has also pointed out towards growing global imbalances and the ill
effects they can bring upon the health of global economy. It is his contention that
global imbalances lead
 

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Review: Freefall: America, Free Markets, and the Sinking of the World Economy

User Review  - Scott Lupo - Goodreads

For an economist, Joseph Stiglitz writes very well in order for the average person to understand the complexity of the American economy. This book reflects and focuses on the Great Recession (as its ... Read full review

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