Books on the crisis ECONOMIC BOOKS
The fashionable subject of the economic literature published this year
How quickly times change: Twelve months ago, books on the long-term development of capitalism were in the centre of the annual review in 2007. In contrast, the economic literature of the year 2008 is clearly marked by the financial and economic crisis. At least a dozen books are currently available on this subject in German language.
Several of these books analyse the current crisis as a logical and inevitable result of the economic liberalisation of the last decades. The most comprehensive, most consequently structured and best written book of this genre is by Ulrich Schäfer, the co-director of the economics department at "Süddeutsche Zeitung". In his book, the disaster starts with the Mont Pelerin Society in general and Friedrich von Hayek and Milton Friedman in particular. Ronald Reagan and Margaret Thatcher then start to put the theories into practice; and via first turbulences, such as the Asian financial crisis in 1997 or the collapse of the hedge fund LTCM, one gets to the current mega crisis. As a consequence, Schäfer demands a return from an "unchained market economy" to a market economy with a strong state, as originally imagined by the neoliberals. Even if you do not agree with the author's sometimes a little oversimplified political positions, this book can still be an interesting read. Only the last chapter, in which Schäfer offers a rather incoherent patchwork of regulation proposals, is inferior to the rest of the book.
Sahra Wagenknecht offers the unexpected. The idol of the PDS (Party of Democratic Socialism) likes to refer to Marx and sometimes suffers verbal failures ("When Bush and Vice President Cheney had achieved their putsch and gained power in 1999 in the US..." ). However, in total, she did not write a political, but an economic book. Wagenknecht explicitly explains hedge fund strategies or the importance of the former Euromarkets in London for the German monetary policy, and of course she is familiar with the history of the huge financial crises. Her technical knowledge is in fact impressive, but detrimental to the reading flow. Politically-wise, she demands – unsurprisingly and unconvincingly – the nationalisation of key industries, among others the financial sector.
Lucas Zeise draws similar conclusions. He once worked for "Börsen-Zeitung" and now is a columnist for "Financial Times Deutschland". "The financial crisis terminates the specific form of development of the capitalistic global economy in the last 20 to 30 years. It puts an end to a phase of economically liberal globalisation, dominated by the financial market", he states in his compactly written book (Lucas Zeise: Ende der Party, Papyrossa Verlag, Köln 2008, 196 Seiten, 14,90 €). Zeise does not beat about the bush as much as Schäfer, but draws similar political conclusions.
A second group of books on the crisis does not search for the comprehensive explanation of the world or capitalism, but gives precise insights into the modern and partly unbelievably complex financial markets. A book by four authors of the German Institute of Corporate Finance, among others Michael Bloss, is written in the later fashion and contains numerous graphics and information boxes, making it almost look like a textbook. Titles such as "Wie haben Hypothekenbanken Kredite vergeben" (How did mortgage banks give credits), "Welche Finanzprodukte haben Investmentbanken geschaffen" (Which financial products were created by investment banks) or "Wie sind Private-Equity-Gesellschaften und Hedge-Fonds von der Finanzkrise betroffen" (How are private equity corporations and hedge funds concerned by the crisis) underline the authors' claim to thoroughly analyse the matter. They achieve it marvellously, even though the book, with its detailed explanations, is not as easy a read as a book offering an analysis of the crisis in terms of economic policy. However, those who really want to know what has happened on the international financial markets in the last years will be very pleased with the book.
That is also true for the work written by economic journalist Wolfgang Münchau. The credit market is in the centre of his explanations ("a modern weapon of mass destruction"). Münchau describes in detail not only the traded products, such as credit default swaps and collateralized debt obligations (CDO), but also the central actors. Münchau is equal to his claim to transparently explain these complex subjects also to laypersons. The explanation how the unexpected takeover bid by Kirk Kerkorian for General Motors thwarted the strategies of hedge funds is exemplary.
Shortly before Christmas, the German version of the latest book by the popular Yale economist Robert Shiller was published (Robert Shiller: Die Subprime-Lösung (original title in English: The Subprime Solution). Verlag Börsenmedien. Kulmbach 2008. 192 p., €19.90). Shiller does not only describe what has happened in the last years on the American mortgage market and the financial markets. He also critically tackles reproaches against bankers and politicians. Shiller supports a psychological explanation of the crisis, according to which human beings get involved in speculations even though they know that there were cataclysms before.
The prevailing financial crisis is not the first one, so the books on its predecessors are also in demand. For example, in almost any modern book on the crisis, John Kenneth Galbraith's reference book on the stock market crash in 1929 is mentioned – it was not randomly reprinted this autumn. Especially Galbraith's three-step theory of crises on the financial market was taken over by modern authors and applied to the current crisis: At the beginning, there is an apparently convincing investment idea, then the required play money for the speculation is provided and finally, there is a general euphoria, ending in a crash.
1907? What happened in 1907? A stock market crash – right on Wall Street. The drop of the stock prices that went almost unnoticed outside of the United States is described by Robert F. Bruner and Sean D. Carr in a detailed an entertaining way. The most powerful banker of his time, John Piermont Morgan, decisively contributed to the termination of the turbulences. Finally and only mentioned briefly, as written by economic journalists working for FAZ, should be named a book that is divided into two equal parts: one half treats historical financial crises and the other half deals with the prevailing crisis. GERALD BRAUNBERGER, FAZ