Book Review: Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present by Jeff Madrick
For many liberals and progressives, the cause of all of America's economic woes begins and ends with the presidency of Ronald Reagan. As a historian, Jeff Madrick feels that to fully comprehend our country's current economic angst, it is necessary to cast a slightly wider net:
"Coupled with the Watergate scandal and the continuation of the Viet-Nam War, which Nixon had promised to end quickly, it was Nixon more than anyone else who undermined the nation's faith in what it could accomplish and pride in what it was. He not only created the conditions that led to punishing stagflation but, by making the nation so distrustful of government, he lay the groundwork for an age of greed freed of federal oversight."
Madrick is a well-known journalist and academic who has covered the field of economics since the 1970s. His writing credits include The New York Times, Money Magazine and Business Week. In addition he has been a NBC News reporter and commentator and has even won an Emmy. In "The Age of Greed," Madrick presents a straight-ahead history of recent economic disasters and the political decisions that made them possible.
While its subtitle might suggest that the book holds capitalism to blame for America's decline, Madrick's analyses are decidedly more practical than utopian. "Throughout history, financial crises have generally been similar to each other. An asset -- land, housing, stocks, bonds, and so on -- rises in price, financial institutions lend to investors to buy more, and prices are driven up to unsustainable levels. When the bubble bursts, investors sell assets to repay their loans and prices fall further, often in panic. Bad debts rise on the books of the financial institutions, credit stops flowing, businesses and consumers sharply reduce spending, and the economy slides into serious recession." Thus, the author concludes, our recent economic crises, are not so much the product of "an inevitable failure of a system," but instead are largely the result of "decisions by individuals, set upon making fortunes and becoming one of the Kings of the mountain."
Madrick's criticisms of our economic system lie mainly in the area of regulation. In case after case, the author demonstrates how boom-and-bust cycles, crests of inflation and depths of recession have been enabled and even caused by government's increasing unwillingness and/or inability to rein in the speculative excesses of the marketplace. For example, when analyzing the recent credit debacle that resulted in the stock market crash of 2008, Madrick writes: "The law was simply inadequate to the task of regulation, and the regulators failed to enforce strongly what laws there were. Fines were usually meaningless [and] most of the options market was over-the-counter trading and fell entirely between the cracks; many new contracts