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

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W. W. Norton & Company, 2010 - Business & Economics - 361 pages
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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.

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This book is exactly how a book on economics should be written. It is clear, to the point, and does not waste time on unnecessary digressions about anything and everything *except* the thing at hand. Instead, Stiglitz decides to zero-in on the cause of the 2008-9 recession by looking at its origins and ends up uncovering (or rather shedding light on) quite a few things.
Far be it from me to call myself an "expert" on economics, but based on my knowledge of how the world works, it seems to me that business is remarkably simple all-around. There is cause and effect and there are patterns to human behavior. A lot of it is irrational and most of it quite selfish. This is the book's argument really, and Stiglitz shows in detail how important it is to rein in the worst of these tendencies in order to minimize the worst effects of capitalism.
Hard to understand why pro-business interests ever took root in popular economic thinking, but that's the case and here is the fallout. Can't imagine someone reading through this book and not being angry at America's disavowal of the most basic of reasoning.

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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
. 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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About the author (2010)

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.

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