Book Review

The End of Wall St and The Failure of Free-Market Economics


* By John Murray

Roger Lowenstein, The End of Wall St, Scribe Publications, Melbourne, 2010, 368pp, pb. $35, ISBN: 9781921640414

Martin Feil, The Failure of Free-Market Economics, Scribe Publications, Melbourne, 2010, 288pp, pb. $35,
ISBN: 9781921215544

The Failure of Wall Street
The Failure of Free-Market Economics
One of the fascinating aspects of the global financial crisis (GFC) has been the sheer speed at which it has been produced and consumed in press. There have also been a number of parties involved who have a taken an active role in casting events in a particular light, to absolve themselves of blame and redirect it towards either the banks, the greedy bankers, the rogue bankers, the incentive pay systems, the economic models, the financial products, the financial system, the regulators, the government, the lenders, the borrowers, the capitalist system and so on. The combination of speed and multiple parties to attribute blame has produced a variety of theories about what really happened, amongst which the only real sense of any agreement is that a relatively small bunch of bankers earns an absolutely astronomical amount of money. These authors contribute their own two cents to the debate.

One of the first American contributors to the popular literature on the GFC, Lowenstein provides a fascinating insight into a lot of the behind the scenes events, both in the lead up to, and as the crisis unfolded. The chapters are organised as detailed and discrete stories that deal with different people, their movements, and their organisations. The author clearly has remarkable access to the key players in the drama and the detailed coverage of the behind the scenes goings-on provides genuine insight into the crisis.

One of the things missing from the book is any analysis at a broader level - the book is clearly marked by the attempt to report on 'just the facts'. To be fair, this material is more than enough to carry the book and provides for some fascinating reading. Too often however, the movements of the key players are presented as folly, and moreover, folly which was determinant of the subsequent outcomes. The danger is that the combination of a 'just the facts' reporting style and a cause-effect narrative invites a lack of reflection. This is most evident in the instances when Lowenstein simply recoils from the complexity of financial products, as though they are unnatural and therefore unsound, when further interrogation might reveal something beneath. This is disappointing as some readers of the book will not recoil from complexity as unnatural, especially in light of the political effort to naturalise financial markets in the economy and assert the capacity of financial markets to self-regulate. Disappointing too, because the ingenuity of these financial products demonstrates an ability to satisfy an inherent restlessness in capital, and this story would appear to offer more than the suggestion that individual folly amongst a series of poorly incentivised bankers lay at the heart of the crisis. These misgivings aside, at face value this book provides some enjoyable reading in a blow-by-blow format for anyone interested in the GFC.

As one of the first Australian authors to contribute to the burgeoning popular literature on the GFC, Martin Feil makes a somewhat muffled plea for a new economic order. He wades into the debate over free market economic theory and the uncomfortable test habitually presented by 'real world' economies. Ironically the book relies heavily on anecdote to make its empirical critique, which at least makes for some entertaining reading. Many of these anecdotes take the form of the author's own foresight, understood in hindsight, a genre most commonly associated with the political autobiography. The same dangers apply here and the author fails to avoid them, returning to settle some old scores without taking the opportunity to advance an alternative. Surely the more appropriate question is, where do we go from here, now?

One wonders if this was a wholly different book prior to the GFC. It may be that there was a perfectly well organised treatise on the intended and unintended successes and failures of various federal governments to 'manage' the economy, and the GFC presented an opportunity to cast the material in a different light. Or maybe not. Whether in its original form or recast opportunistically, the end result is the version in print, and in this it is difficult to discern individual points, their significance, and the overall argument. Yes, at times free-market economics appears to have failed - in this instance it appears as though Feil has unintentionally revealed that there is no alternative. Ultimately this is the fascinating aspect of the neoliberal project - it has so successfully carved out a space and a discourse around economics that when a crisis occurred in the financial system, we re-financed.

* (Dr John Murray teaches in the Discipline of Work and Organisational Studies at the University of Sydney)

Published 21 December 2010

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