market fundamentalism

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pages: 484 words: 136,735

Capitalism 4.0: The Birth of a New Economy in the Aftermath of Crisis by Anatole Kaletsky

"Robert Solow", bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Black Swan, bonus culture, Bretton Woods, BRICs, business cycle, buy and hold, Carmen Reinhart, cognitive dissonance, collapse of Lehman Brothers, Corn Laws, correlation does not imply causation, creative destruction, credit crunch, currency manipulation / currency intervention, David Ricardo: comparative advantage, deglobalization, Deng Xiaoping, Edward Glaeser, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, F. W. de Klerk, failed state, Fall of the Berlin Wall, financial deregulation, financial innovation, Financial Instability Hypothesis, floating exchange rates, full employment, George Akerlof, global rebalancing, Hyman Minsky, income inequality, information asymmetry, invisible hand, Isaac Newton, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, laissez-faire capitalism, Long Term Capital Management, mandelbrot fractal, market design, market fundamentalism, Martin Wolf, money market fund, moral hazard, mortgage debt, Nelson Mandela, new economy, Northern Rock, offshore financial centre, oil shock, paradox of thrift, Pareto efficiency, Paul Samuelson, peak oil, pets.com, Ponzi scheme, post-industrial society, price stability, profit maximization, profit motive, quantitative easing, Ralph Waldo Emerson, random walk, rent-seeking, reserve currency, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, sovereign wealth fund, special drawing rights, statistical model, The Chicago School, The Great Moderation, The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, too big to fail, Vilfredo Pareto, Washington Consensus, zero-sum game

The chief theorists and political leaders of this forty-year period assumed that market forces were often wrong and that the single most important function of government was to manage the economy, by taming and controlling unstable market forces. Capitalism 3, the Thatcher-Reagan monetarist counterrevolution that culminated in the Bush-Greenspan market fundamentalism described in this book as Capitalism 3.3, adopted the opposite approach. Instead of treating economics as a branch of politics, it treated politics as a branch of economics. Its most important leaders believed that governments were usually wrong and always inefficient; therefore markets should be empowered wherever possible to discipline and control venal politicians. Assuming that the era of market fundamentalism ended with the 2007-09 crisis, what should we expect as the defining characteristic of Capitalism 4? It will probably be a recognition that governments and competitive markets can both be wrong and that the world is too unpredictable and complex to be managed by any immutable institutional structure.

Bank of American Banking crises overview Sweden (1990s) See also Financial crisis of 2007-09 Banking/financial markets accounting bonuses capital structures guarantees and as indispensable in new economy regulation taxpayer protection and Bankruptcy, national defaults developing countries (1980s) myth on Russia Barro, Robert Bear Stearns sale/effects Behavioral finance (boom-bust cycle theory) Beijing Consensus Berlin Wall dismantling Bernanke, Ben Friedman tribute Great Moderation speech market fundamentalism talk vs. actions TARP and Berners-Lee, Tim Bevan, Aneurin Bismarck Black Swan, The (Taleb) Blair, Tony Blanchard, Olivier Blankfein, Lloyd Blinder, Alan Bonuses, financial institutions Boom-bust cycles change vs. repetition emotions at top/bottom examples greed/fear and misinterpreting theories See also Financial crises; specific cycles Bretton Woods international currency system about breakdown/effects Brittan, Samuel Brown, Gordon Buchanan, James Burns, Arthur Bush, George W./administration crisis of 2007 and dollar decline and health care issues market fundamentalism oil prices/shock and policy “names,” See also Paulson, Henry/financial crisis (2007-09) Caballero, Ricardo Calvinist ideology and capitalism Capitalism adaptation and adaptation time and competition principle and crises of/in capitalism economics transformations and requirements solving social problems stages summary survival needs term timing of transitions transitions overview Western/Asian values rivalry Capitalism 1 overview Capitalism 2 overview Capitalism 3.3 summary description overview labor militancy See also Thatcher-Reagan revolution Capitalism beginnings of complexity of world and description summary economic “laws” and experimentation and finance/banking pessimism and skepticism and uncertainty/unpredictability and See also Economy of future Capitalism 4.0/economic policy ambiguity and big government and complexity and global growth rebalancing government debt crisis and managing banking crises multiple targets of nominal GDP and OPEC/oil protectionism/global competition public debt reduction stagflation unions/wages See also Macroeconomics Capitalism 4.0/global consequences business interests and currencies/financial relations environment and global governance limits to growth/physical resources prosperity without growth trade/industrial structures U.S.

./ administration; Lehman Brothers collapse Pension/health entitlements People’s Daily, China Personalities importance Petronius, Gaius Phelps, Edmund Planck, Max Platform Companies (Platco) Plato “Policy Ineffectiveness Proposition” (Sargent/Wallace) Prince, Charles Protectionism Protestant Ethic and the Spirit of Capitalism, The (Weber) Public Choice theory Rajan, Ranghuram Ramo, Joshua Rand, Ann Rational Expectations Hypothesis (REH) Rationality concept Reagan, Ronald See also Thatcher-Reagan revolution Reflexivity description See also Theory of Reflexivity Reich, Robert Reinhart, Carmen Ricardian Equivalence theory, Barro Ricardo, David Robinson, Joan Rogoff, Kenneth Roosevelt, Franklin Rowthorn, Robert Rumsfeld, Donald Samuelson, Paul Sargent, Thomas Sarkozy, Nicolas Savings Schumpeter, Joseph Seabright, Paul Sen, Amartya Shakespeare Shiller, Robert Short sellers Simon, Herbert Simon, John Singh, Jaswant Skidelsky, Robert Slaughter, Anne-Marie Smith, Adam Capitalism 1 and ideas/impact “invisible hand” of competitive markets concept Smith, Vernon Solow, Robert Sorkin, Andrew Ross Soros, George boom-bust cycles and boom-bust cycles/Theory of Reflexivity “market fundamentalism” term/concept South Sea Bubble/effects Sovereign wealth funds Specialization Spence, Michael Stagflation 1970s causes/conditions for description threat of Stiglitz, Joe Stimulus. See Government stimulus, postcrisis Structure of Scientific Revolutions, The (Kuhn) Summers, Lawrence Sunset clauses Taleb, Nassim TARP (Troubled Asset Relief Program) Taxes conservatives vs. the Left increases and oil use/industry progressive income tax beginnings progressive taxation effects structure issues Tea Party demonstrations Tett, Gillian Thatcher, Margaret Thatcher-Reagan revolution 1970s challenges and 2007-09 crisis and about failures of narrative of See also Capitalism Market fundamentalism; Monetarism Theory of Moral Sentiments (Smith) Theory of Reflexivity Thrift paradox Tobin, James Toffler, Alvin Trillion Dollar Meltdown, The (Morris) Tulipmania/effects Turner, Adair Unemployment central bankers and demand management and labor unions and monetarists and “natural-rate hypothesis,” targeted levels Value chain Viniar, David Volcker, Paul Federal Funds rate on finances inflation and monetarism Voltaire , Wachovia Wallace, Neil Washington Consensus Washington Mutual Watson, Thomas J.


pages: 105 words: 18,832

The Collapse of Western Civilization: A View From the Future by Naomi Oreskes, Erik M. Conway

anti-communist, correlation does not imply causation, creative destruction, en.wikipedia.org, energy transition, Intergovernmental Panel on Climate Change (IPCC), invisible hand, laissez-faire capitalism, market fundamentalism, mass immigration, means of production, oil shale / tar sands, Pierre-Simon Laplace, road to serfdom, Ronald Reagan, stochastic process, the built environment, the market place

Many scientists, to their credit, recognized the difficulties they were facing, and grappled with how to communicate their knowledge effectively.4 Some tried to create institutional structures to support less reductionist modes of inquiry that analyzed broad patterns and the interactions between natural and social systems. While they were making some headway, a large part of Western society was rejecting that knowledge in favor of an empirically inad-equate yet powerful ideological system. Even at the time, some recognized this system as a quasi-religious faith, hence the label market fundamentalism. 38 M a r k e t F a i l u r e Market fundamentalism—and its various strands and interpretations known as free market fundamentalism, neoliberalism, laissez-faire economics, and laissez-faire capitalism—was a two-pronged ideological system. The first prong held that societal needs were served most efficiently in a free market economic system. Guided by the “invisible hand” of the marketplace, individuals would freely respond to each other’s needs, establishing a net balance between solutions (“supply”) and needs (“demand”).

L e x i c o n o f A r c h A i c T e r m s 59 invisible hand A form of magical thinking, popularized in the eighteenth century, that economic markets in a capitalist system were “balanced” by the actions of an unseen, immaterial power, which both ensured that markets functioned efficiently and that they would address human needs. Belief in the invisible hand (sometimes also called the invisible hand of the marketplace) formed a kind of quasi-religious foundation for capitalism (see capitalism; external costs; market failure; market fundamentalism). market failure The social, personal, and environmental costs that market economies imposed on individuals and societies were referred to as “market failures.” The concept of market failure was an early recognition of the limits of capitalist theory (see external costs; invisible hand ). market fundamentalism A quasi-religious dogma (see invisible hand) promoting unregulated markets over all other forms of human socioeconomic organization. During the Penumbra, market fundamentalists tended to deny the existence of market failure, thus playing a key role in the denial of the changes that were already under way and therefore in the catastrophes that ensued.

Historical analysis also shows that Western civilization had the technological know-how and capability to effect an orderly transition to renewable energy, yet the available technologies were not implemented in time.1 As with all great historical events, there is no easy answer to the question of why this catastrophe occurred, but key factors stand out. The thesis of this analysis is that Western civilization became trapped in the grip of two inhibiting ideologies: positivism and market fundamentalism. Twentieth-century scientists saw themselves as the descendants of an empirical tradition often referred to as positivism—after the nineteenth-century French philosopher, Auguste Comte, who developed the concept of “positive” knowledge (as in, “absolutely, positively true”)—but 36 M a r k e t F a i l u r e the overall philosophy is more accurately known as Baconianism. This philosophy held that through experience, observation, and experiment, one could gather reliable knowledge about the natural world, and that this knowledge would empower its holder.


pages: 154 words: 47,880

The System: Who Rigged It, How We Fix It by Robert B. Reich

affirmative action, Affordable Care Act / Obamacare, Bernie Madoff, Bernie Sanders, business cycle, clean water, collective bargaining, corporate governance, corporate raider, corporate social responsibility, Credit Default Swap, crony capitalism, cryptocurrency, Donald Trump, ending welfare as we know it, financial deregulation, Gordon Gekko, immigration reform, income inequality, Jeff Bezos, job automation, London Whale, Long Term Capital Management, market fundamentalism, mass incarceration, mortgage debt, Occupy movement, Ponzi scheme, race to the bottom, Robert Bork, Ronald Reagan, shareholder value, too big to fail, trickle-down economics, union organizing, women in the workforce, working poor, zero-sum game

The doctrine of divine right of kings ended with England’s Glorious Revolution in the seventeenth century and the American and French revolutions in the eighteenth. The modern equivalent of the divine right of kings might be termed “market fundamentalism,” a creed that has been promoted by the American oligarchy with no less zeal than the old aristocracy advanced divine right. It holds that if the free market has caused a few at the top to aggregate vast wealth and power, the result must be right and good because it is natural and inevitable. One of market fundamentalism’s founders was the philosopher Ayn Rand. Former Fed chair Alan Greenspan was a follower of Rand, and, as we’ve seen, his doctrinaire views almost sank the American economy. Today’s oligarchs are not as rigidly doctrinaire, but they still regard the economy as a holy grail.

It proselytizes beliefs that are belied by recent history—that everyone gains from boosts in productivity and efficiency even though the oligarchy has received the lion’s share; that national competitiveness increases American wages even though it has mainly increased the profits of global corporations headquartered in the United States; that the stock market is the best measure of progress even though the unbridled pursuit of profits is putting our democracy under siege and threatening the very existence of life on Earth, and most of the stock market gains since the late 1980s have come out of the paychecks of workers. Just as with the divine right of kings whose power was thought to come from God, those who embrace market fundamentalism want Americans to ignore how a powerful few have shaped the system for their own benefit. The creed doesn’t acknowledge that the rules of the free market come from government officials whose jobs increasingly depend on an oligarchy that benefits from those decisions. It doesn’t accept that laws are routinely violated by corporations and CEOs that treat fines as a cost of doing business. Adherents to market fundamentalism don’t see the ruthless profit-seeking behind the smooth public relations con of corporate social responsibility. They reject “socialism” without acknowledging how the oligarchy has cushioned itself against downside losses and insulated itself from personal accountability.

Today’s oligarchs are not as rigidly doctrinaire, but they still regard the economy as a holy grail. As I’ve said, the oligarchy wants Americans to view the system as a neutral meritocracy in which anyone can make it with enough guts, gumption, and hard work. The standard platitudes of market fundamentalism are that people “pull themselves up by their bootstraps” and that America is a nation of “self-made men” (and women), both of which translate into a moral code: People deserve whatever they earn in the market. Income and wealth are measures of worth. If you amass a billion dollars, then you must deserve it because that’s what the market awarded you. If you barely scrape by, then you have only yourself to blame. It is assumed that the system, and how power is allocated within it, plays no role whatsoever. Of course, the oligarchy doesn’t want Americans to see its mounting wealth as the engorged winnings of a game whose rules it has decided on.


pages: 334 words: 82,041

How Did We Get Into This Mess?: Politics, Equality, Nature by George Monbiot

Affordable Care Act / Obamacare, Alfred Russel Wallace, bank run, bilateral investment treaty, Branko Milanovic, Capital in the Twenty-First Century by Thomas Piketty, collective bargaining, Corn Laws, creative destruction, credit crunch, David Attenborough, dematerialisation, demographic transition, drone strike, en.wikipedia.org, first-past-the-post, full employment, Gini coefficient, hedonic treadmill, income inequality, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, invisible hand, land reform, land value tax, market fundamentalism, meta analysis, meta-analysis, Mont Pelerin Society, moral panic, Naomi Klein, Northern Rock, obamacare, oil shale / tar sands, old-boy network, peak oil, place-making, plutocrats, Plutocrats, profit motive, rent-seeking, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, urban sprawl, wealth creators, World Values Survey

See also Fire Brigades Union (FBU); General, Municipal, Boilermakers and Allied Trade Union (GMB); National Farmers’ Union (NFU); National Union of Rail, Maritime and Transport Workers (RMT); Transport and General Workers’ Union (TGWU) breaking of/smashing of, 218, 220 Gordon Brown government and, 263–7 shaking off of, 190 subsidies and, 121 testing of, 264 and Tories, 265 Unison, 266 Unite, 265 United Kingdom (UK) abortion rate, 74 and age of criminal responsibility, 69 children’s well-being in, 22 consumer debt in, 217 income in, 191 market fundamentalism in, 16 neoliberalism in, 15 pay gap in, 187 taxation in, 276–7 teenage pregnancy rate, 75 wage of care workers in, 185 United States (US) abortion rate, 74 bridge inspections in, 217 cocaine use in, 33 Conservatives in, 288 crime rates in, 161 deaths caused by pollution from coal plants in, 170, 171 demands of blue-collar workers in, 285 and drone strikes. See drone strikes and illegal money transfers, 239 income in, 191, 205, 272 lead withdrawn from petrol, 161 market fundamentalism in, 16 neoliberalism in, 15 productivity in, 191 reforestation in, 97 shift of wealth in, 218 taxation in, 209–12 teenage pregnancy rate, 75 wage of care workers in, 185 Universal Declaration of Human Rights, 196 universalism, 285 University of Milan, 11 University of Tasmania, 83 UN Office on Drugs and Crime, 32, 34 upland grazing, 121–2 US Congress, millionaires in, 24 utility, inverse relationship of with reward, 184 V values, importance of in changing political map, 288 van Valkenburgh, Blaire, 89 Verhaeghe, Paul, 14, 15, 17 vertebrate wildlife, loss of, 88 Victorians, 60, 61 Virgil, 120 Virunga national park (Africa), 177 W wages of care workers, 185 redistribution of, 187 Wales coal mining in, 147, 155 livestock farming in, 121 tree-planting grants in, 132 Walking Football, 13 Wallace, Alfred Russell, 234 WalMart, 193 Walton, Izaac, 22, 137 war of every man against every man/war of all against all, 9, 10, 12 Warwick agreement, 265, 267 Warwick University, 50 Washington, George, 230 wealth as ambition, 10–11, 12 correlation between global warming and, 105–6 global wealth, 12, 176 shift of in US, 218 wealth creators, 190, 221, 276 Weekly Standard, 230 Wellcome Trust, 182 Welz, Adam, 204 West Antarctic ice sheet, 176 whale poo, 79, 82, 83 whale pump, 82, 84 whales, as maintaining populations of animals they eat, 82–3 whaling, impact of on Californian condors, 84–5 What About Me?

So few are the countervailing voices, and so thoroughly have they been excluded from most of the media, including the public broadcasters (now locked in a permanent state of terror and anticipatory compliance as they await the next assaults on their budgets), that the dominant forms of power remain almost unchallenged. Take, for example, the ideology that now governs our lives. Not only is it seldom challenged; it is seldom even identified. As a result, no one seems to know what to call it. Neoliberalism? Market fundamentalism? Laissez-faire economics? Though it is a clear and consistent belief system, though it is the ideology to which most governments and major opposition parties subscribe, and though it determines everything from the distribution of wealth to the treatment of the living planet, it has no standard or widely recognised name. Everyone knows, or thinks they know, what communism and anarchism mean, though both are now endangered species.

: The Struggle for Identity in a Market-Based Society is one of those books that, by making connections between apparently distinct phenomena, permits sudden new insights into what is happening to us and why. We are social animals, Verhaeghe argues, and our identity is shaped by the norms and values we absorb from other people. Every society defines and shapes its own normality – and its own abnormality – according to dominant narratives, and seeks either to make people comply or to exclude them if they don’t. Today the dominant narrative is that of market fundamentalism, widely known in Europe as neoliberalism. The story it tells is that the market can resolve almost all social, economic and political problems. The less the state regulates and taxes us, the better off we will be. Public services should be privatised, public spending should be cut and business should be freed from social control. In countries such as the UK and the US, this story has shaped our norms and values for around thirty-five years, since Thatcher and Reagan came to power.


Termites of the State: Why Complexity Leads to Inequality by Vito Tanzi

"Robert Solow", accounting loophole / creative accounting, Affordable Care Act / Obamacare, Andrei Shleifer, Andrew Keen, Asian financial crisis, asset allocation, barriers to entry, basic income, bitcoin, Black Swan, Bretton Woods, business cycle, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, central bank independence, centre right, clean water, crony capitalism, David Graeber, David Ricardo: comparative advantage, deindustrialization, Donald Trump, Double Irish / Dutch Sandwich, experimental economics, financial repression, full employment, George Akerlof, Gini coefficient, Gunnar Myrdal, high net worth, hiring and firing, illegal immigration, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Jean Tirole, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labor-force participation, libertarian paternalism, Long Term Capital Management, market fundamentalism, means of production, moral hazard, Naomi Klein, New Urbanism, obamacare, offshore financial centre, open economy, Pareto efficiency, Paul Samuelson, price stability, principal–agent problem, profit maximization, pushing on a string, quantitative easing, rent control, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, Second Machine Age, secular stagnation, self-driving car, Silicon Valley, Simon Kuznets, The Chicago School, The Great Moderation, The Market for Lemons, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, Tyler Cowen: Great Stagnation, universal basic income, unorthodox policies, urban planning, very high income, Vilfredo Pareto, War on Poverty, Washington Consensus, women in the workforce

However, central banks became more accommodating to the market with their monetary policies, believing in the rationality and the honesty of those who could get and use easy credit from the banks. The central banks did not believe that there could be “irrational exuberance,” or other phenomena that could lead to excessive borrowing and to eventual bursting of bubbles. In spite of the growth and popularity of what came to be called “market fundamentalism,” especially in the United States, the United Kingdom, and some other countries, the levels of public spending and of taxes, as shares of the countries’ GDPs, kept rising throughout much of the second half of the twentieth century, until the last decade of that century. An exception was the United States. For a variety of reasons, including growing taxpayer resistance, changed policies, and the increased ability of large corporations and rich individuals who operated globally to avoid taxes, the increase in tax levels came to a stop, in most countries, in the 1990s, according to data provided by the Organization for Economic Co-operation and Development (OECD).

Shadow fiscal policy can be related to the concept of fiscal illusion, which had been analyzed by the Italian economist Amilcare Puviani more than a century ago, in 1903. Fiscal illusions are often easier to create with regulations than with taxes and spending. It can be concluded that, as the twentieth century came to an end, by and large, market forces had been allowed to play a larger role, in many, though not all, of the advanced countries, especially during the last decade of that century, the period of the Washington Consensus and of market fundamentalism, than they had played in earlier decades, in spite of the higher levels of taxes and of public spending in most countries, and in spite of various structural obstacles that continued to exist in the markets of many countries. At the same time the redistributive role that governments had played in the decades immediately after World War II was being reduced, in response to efficiency and incentive concerns that had led to important policy changes, especially in tax policy but also in spending policies such as the welfare reform of 1996 in the United States.

The return of faith in the free operations of the market economy contributed to creating, in conservative circles and among an increasing number of economists, an almost ethical or religious belief that the market could not be wrong, that its results were always legitimate, and that it did not need to be (much) regulated, because it was able to regulate itself. The affinity of this view with religious beliefs merited the term that came to describe it: “market fundamentalism.” Fundamentalism can come in many colors and shapes! An implication of this view was that, if the government would just stay out of the way and let the market do its work, it would promote efficiency and would not make mistakes. The higher economic growth that it would generate would help solve many social problems, thus making it possible to reduce the social and redistributive role of the state.


pages: 182 words: 53,802

The Production of Money: How to Break the Power of Banks by Ann Pettifor

Ben Bernanke: helicopter money, Bernie Madoff, Bernie Sanders, bitcoin, blockchain, borderless world, Bretton Woods, capital controls, Carmen Reinhart, central bank independence, clean water, credit crunch, Credit Default Swap, cryptocurrency, David Graeber, David Ricardo: comparative advantage, debt deflation, decarbonisation, distributed ledger, Donald Trump, eurozone crisis, fiat currency, financial deregulation, financial innovation, financial intermediation, financial repression, fixed income, Fractional reserve banking, full employment, Hyman Minsky, inflation targeting, interest rate derivative, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, light touch regulation, London Interbank Offered Rate, market fundamentalism, Martin Wolf, mobile money, Naomi Klein, neoliberal agenda, offshore financial centre, Paul Samuelson, Ponzi scheme, pushing on a string, quantitative easing, rent-seeking, Satyajit Das, savings glut, secular stagnation, The Chicago School, the market place, Thomas Malthus, Tobin tax, too big to fail

The ILO reports that across the world at least 197 million people are unemployed, and that this figure is set to rise by 2.3 million in 2016 and by another 1 million in 2017.42 Market fundamentalism – globalisation – failed catastrophically to provide meaningful work, incomes, dignity and respect to almost 200 million people in the Middle East, Africa, Latin America, parts of Asia and Europe. In the United States, globalisation has undermined the living standards of millions of working people. Market fundamentalism has also failed to prepare for or tackle the grave threats now facing a range of societies around the world. As Karl Polanyi rightly predicted in his book The Great Transformation, it is no wonder that populist movements gathered strength everywhere, and strong leaders were called upon to defend whole societies from the utopian but destructive predations of market fundamentalism. Given these frightening economic and political conditions, it is urgent for the public sector to step in and spend: on, for example, meaningful, secure work; on transforming the economy away from fossil fuels; on addressing the challenges of both youthful and ageing populations; on re-skilling and up-skilling workforces; on higher wages for public employees; on repairing decaying infrastructure like America’s pot-holed highways and energy-inefficient buildings – witness to J.K.

Governments were urged to use ‘public investment to support growth’.6 But these new, late converts to fiscal expansion may just as well have banged their heads against a brick wall, for all the listening done by the US Congress and by neoliberal finance ministers such as Germany’s Wolfgang Schäuble, Finland’s Alexander Stubb, or Britain’s George Osborne. The ideology of ‘austerity’ – aimed at slashing and privatising the public sector – wedded to free market fundamentalism is now so deeply embedded in western government treasuries that tragically neither politicians nor policy-makers are capable of action. In desperation, some central banks (the European Central Bank and the central banks of Switzerland, Sweden and Japan) have crossed the Rubicon of the Zero Lower Bound, and made interest rates negative. This means lenders pay money to central banks in exchange for the privilege of parking funds (in the form of loans) at the central bank.

As a result of this ‘social silence’ citizens were unprepared for the crisis, and they remain on the whole ignorant of the workings of the financial system and its operations. The experience of financial deregulation has shown that capitalism insulated from popular democracy degenerates into rent-seeking, criminality and grand corruption. As Karl Polanyi predicted in his famous book The Great Transformation, societies are building resistance to the ‘self-regulating market comprising labour, land and money’ – or market fundamentalism, even when blind resistance appears irrational.9 In the US, as I write, the voters of the United States have sought protection from a demagogic president-elect who promised to defend them by erecting a wall between the United States and Mexico. In Europe, leaders that would impose authoritarian nationalist control over economies are gaining in popularity. Just as in the 1920s and ’30s, societies are moving towards authoritarian leaders in the vain belief that their new ‘masters’ will provide protection from ‘the stupid master’ identified by the British Labour Party in 1944: deregulated, globalised finance.


pages: 515 words: 142,354

The Euro: How a Common Currency Threatens the Future of Europe by Joseph E. Stiglitz, Alex Hyde-White

bank run, banking crisis, barriers to entry, battle of ideas, Berlin Wall, Bretton Woods, business cycle, buy and hold, capital controls, Carmen Reinhart, cashless society, central bank independence, centre right, cognitive dissonance, collapse of Lehman Brothers, collective bargaining, corporate governance, correlation does not imply causation, credit crunch, Credit Default Swap, currency peg, dark matter, David Ricardo: comparative advantage, disintermediation, diversified portfolio, eurozone crisis, Fall of the Berlin Wall, fiat currency, financial innovation, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, housing crisis, income inequality, incomplete markets, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Kenneth Arrow, Kenneth Rogoff, knowledge economy, light touch regulation, manufacturing employment, market bubble, market friction, market fundamentalism, Martin Wolf, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, neoliberal agenda, new economy, open economy, paradox of thrift, pension reform, pensions crisis, price stability, profit maximization, purchasing power parity, quantitative easing, race to the bottom, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, secular stagnation, Silicon Valley, sovereign wealth fund, the payments system, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, transfer pricing, trickle-down economics, Washington Consensus, working-age population

Moreover, the founders of the euro were guided by a set of ideas, notions about how economies function, that were fashionable at the time but that were simply wrong.12 They had faith in markets and lacked an understanding of the limitations of markets and what was required to make them work. The unwavering faith in markets is sometimes referred to as market fundamentalism, sometimes as neoliberalism.13 Market fundamentalists believed, for instance, that if only the government would ensure that inflation was low and stable, markets would ensure growth and prosperity for all. While in most of the world, market fundamentalism has been discredited, especially in the aftermath of the 2008 global financial crisis, those beliefs survive and flourish within the eurozone’s dominant power, Germany. They are held with such conviction and certainty, immune to new contrary evidence, that these beliefs are rightly described as an ideology.

We will explain in chapter 8 how current reforms in the banking system may actually exacerbate the problem of economic divergence noted earlier. THE UNDERLYING PROBLEM: MARKET FUNDAMENTALISM—IDEOLOGY RULES The problem is not only the lack of broad consensus as to what is required to ensure the healthy functioning of an economy and the eurozone. The problem is that Germany has used its economic dominance to impose its own views, and those views are not only rejected by large parts of the eurozone but also by the majority of economists. Of course, in some areas—like seeing the coming of the 2008 crisis—the majority of economists did not do well. But later in this book, I explain why they were especially right about the effects of austerity.32 Market fundamentalism, to which we referred earlier, assumed that markets on their own are efficient and stable. Adam Smith, often viewed as the godfather of this perspective, actually argued to the contrary: that there was an important role for government.

Research in economics over the past half-century has shown that not only is there a presumption that markets are not efficient and stable; it has also explained why that is so and what governments can do to improve societal well-being.33 Today, even market fundamentalists (sometimes also referred to as “neoliberals”) admit that there is a need for government intervention to maintain macro-stability—though they typically argue that government interventions should be limited to a rules-based monetary policy focused on price stability—and to ensure property rights and contract enforcement. Otherwise, regulations and restrictions should be stripped away. There was no economic rationale for this conclusion—it flies in the face of a huge body of economic research showing that there is a need for a wider role for government. The world has paid a high price for this devotion to the religion of market fundamentalism/neoliberalism, and now it’s Europe’s turn. In later chapters, we will see the role that these misguided ideas played in shaping the structure of the eurozone; in the design of policy responses to the crisis as it evolved and to the imbalances and distortions that arose before 2008. The eurozone embedded many of these neoliberal ideas into the currency’s “constitution”—without providing for enough flexibility to respond to changing circumstances or revised understandings of how economies function.


Global Financial Crisis by Noah Berlatsky

accounting loophole / creative accounting, asset-backed security, banking crisis, Bretton Woods, capital controls, Celtic Tiger, centre right, circulation of elites, collapse of Lehman Brothers, collateralized debt obligation, corporate raider, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, Doha Development Round, energy security, eurozone crisis, financial innovation, Food sovereignty, George Akerlof, God and Mammon, Gordon Gekko, housing crisis, illegal immigration, income inequality, market bubble, market fundamentalism, mass immigration, moral hazard, new economy, Northern Rock, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, reserve currency, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, South China Sea, structural adjustment programs, too big to fail, trade liberalization, transfer pricing, working poor

Markets Must Be Regulated The crisis has shattered all the myths associated with the neoliberal paradigm [arguments that stress the benefits of unregulated markets]. It has provided fundamental lessons for Africa and the global South. These lessons should lead to one simple conclusion: a rejection of failed and discredited neoliberal policies and the institutions that promoted them over the last three decades, namely the IMF [International Monetary Fund] and the World Bank. 1) The collapse of market fundamentalism. The first important lesson is the collapse of market fundamentalism. The crisis shows that the emperor has no clothes anymore. Market fundamentalists claim that markets should 187 The Global Financial Crisis be left to their own devices because whatever happens, they have self-correcting mechanisms and that market failures are less costly than state failures. But the reality shows otherwise. The devastations caused by the financial crisis are staggering, as evidenced by the trillions of dollars needed to clean up the mess they spread to the entire globe.

What was the estimated value of the trade between Africa and China in 2008, according to the author? Demba Moussa Dembele, “The Global Financial Crisis: Lessons and Responses from Africa,” Pambazuka News, March 19, 2009. Reproduced by permission. 186 Solutions to the Global Financial Crisis T he international financial crisis reflects the collapse of laissez-faire economics and the growing discredit of market fundamentalism. What was being hailed yesterday as the only road to ‘growth and prosperity’ is now under fierce attack by the same countries and institutions that promoted it for years. In leading developed countries, states have drawn up massive rescue plans to bail out industries or nationalise banks and financial institutions. Markets Must Be Regulated The crisis has shattered all the myths associated with the neoliberal paradigm [arguments that stress the benefits of unregulated markets].

And these costs will be ultimately borne by the taxpayer, that is, the state. Even the most zealous market fundamentalists must have lost their illusions about the ability of markets to discipline themselves and correct their own mistakes. Markets are not impersonal forces, believed to be all powerful and placed above human beings. They are man-made forces whose decisions are ultimately influenced by selfish vested interests. With the collapse of market fundamentalism, it is the legitimacy of the entire neoliberal system that is being questioned. Even some of its most fervent ideologues are now in disarray. Some of its most sacred myths and dogmas are falling apart. Things that were unthinkable just a few months ago have become a daily reality. Nationalisations of banks and financial institutions, rescue plans for industrial companies, strong state intervention everywhere and attacks against ‘unbridled capitalism’; all this is being observed in Europe and even in the United States. . . .


pages: 281 words: 95,852

The Googlization of Everything: by Siva Vaidhyanathan

1960s counterculture, activist fund / activist shareholder / activist investor, AltaVista, barriers to entry, Berlin Wall, borderless world, Burning Man, Cass Sunstein, choice architecture, cloud computing, computer age, corporate social responsibility, correlation does not imply causation, creative destruction, data acquisition, death of newspapers, don't be evil, Firefox, Francis Fukuyama: the end of history, full text search, global pandemic, global village, Google Earth, Howard Rheingold, informal economy, information retrieval, John Markoff, Joseph Schumpeter, Kevin Kelly, knowledge worker, libertarian paternalism, market fundamentalism, Marshall McLuhan, means of production, Mikhail Gorbachev, moral panic, Naomi Klein, Network effects, new economy, Nicholas Carr, PageRank, Panopticon Jeremy Bentham, pirate software, Ray Kurzweil, Richard Thaler, Ronald Reagan, side project, Silicon Valley, Silicon Valley ideology, single-payer health, Skype, Social Responsibility of Business Is to Increase Its Profits, social web, Steven Levy, Stewart Brand, technoutopianism, The Nature of the Firm, The Structural Transformation of the Public Sphere, Thorstein Veblen, urban decay, web application, zero-sum game

The Internet in the late twentieth century was too global, too messy, and too gestational to justify national or international regulation.49 Some illiberal states, such as the People’s Republic of China, chose to step in and aggressively perform those regulatory duties either through direct action or through proxies in the quasi-private sector.50 In the more liberal world of the United States and—to a lesser extent— Europe, a presumption that market forces can best solve problems and build structures so dominated political debate from about 1981 onward that even considering the possibility of state involvement in something so delicate and new as the Internet was implausible.51 After the recent collapse of the corrupt and disastrous command-and-control economies of Eastern Europe, it was difficult to propose a way of doing things 40 R END E R UNTO CAESA R that fell between the poles of triumphant market fundamentalism and incompetent, overbearing state control. Of course the market had survived and thrived. There seemed to be no other mechanism that could deliver positive results to a diverse, connected world.52 The notion of gentle, creative state involvement to guide processes toward the public good was impossible to imagine, let alone propose. This vision was known as neoliberalism. Although Ronald Reagan and Margaret Thatcher championed it, Bill Clinton and Tony Blair mastered it. It had its roots in two prominent ideologies: techno-fundamentalism, an optimistic belief in the power of technology to solve problems (which I describe fully in chapter 3), and market fundamentalism, the notion that most problems are better (at least more efficiently) solved by the actions of private parties rather than by state oversight or investment.53 And it was not just a British and American concept.

See financial status, Google’s East Germany, 108, 112, 113, 121, 123 economic relations: in China, 119, 124–25; and corporate responsibility, 42–44; and 259 free rider problem, 31; and Google’s profitability during downturn, 17–18; and market failure, 40–41; and market fundamentalism, 39–40, 43; and neoliberalism, 40; and public failure, 40–42; state intervention in, 39–40, 43, 44 Egypt, 47, 143 Eldritch Press, 157 e-mail service, Google’s. See Gmail employees, Google’s: and attitudes toward company, 72–74, 75; layoffs experienced by, 18; number of, 18; as technocrats, 67–71 encryption, 116, 125, 126 England. See United Kingdom English-language Web sites, 141, 142 eschatology, techno-fundamentalist, 55 Europe: Google Books challenged in, 153; Google News content aggregation challenged in, 32; Google Street View in, 102, 104–8, 237n24; government regulation in, 47; market fundamentalism in, 39, 40; privacy policy in, 87 European Union, 25, 115 Excite (Internet portal), 56 Facebook, 16, 43, 82, 90–92, 99, 112, 116, 118 fair use: and European law, 32; and Google Books project, 153, 160–61, 162, 165–66, 168–70, 172; and YouTube, 38 faith in Google, users’, xii, xiii, xiv, 2–5, 50, 53, 55, 59–60, 75, 77, 80; dangers of, 5–6, 77–81.

I saw my great hopes for an open and free Internet corrupted by the simultaneous pressures of inadequate security (in the form of fraud, spam, viruses, and malware) and the attempts at a corporate lockdown of culture and technology.2 I saw that the resistance to openness, transparency, accountability, and democracy was stronger than I had imagined and present in parts of the world—including my own— where I thought the forces of light had triumphed long ago.3 I worried that the environment generated by the global reach of the Internet was pulling us in opposite directions—toward both anarchy and oligarchy— and draining the institutions and environments that would foster more P RE FAC E xiii reasonable, republican virtues, such as measured deliberation, critical thought, and mutual respect.4 I noted the ways in which those who promoted the digitization and networking of all things reverted to simplistic and wrongheaded views of how technology works in society.5 I grew weary of others’ attempts to describe technology as an irresistible force that young people have mastered and old people must conform to or wither away trying to resist.6 And I had an intellectual allergic reaction to the growing notion that one company—Google—could or would solve some of the greatest and most complex human problems simply by applying the principles of engineering.7 So I sought a way to explore both my disenchantment with and my approval of changes in our global information ecosystem. I wanted to embrace and champion values and goals such as liberty, creativity, and democracy while offering criticisms of trends and trajectories that I consider harmful or dangerous, such as blind faith in technology and market fundamentalism. And Google exemplifies all these trends. Because books move more slowly than large, rich Internet companies, I have not attempted to catalog or analyze the company’s recent initiatives. Instead, I have tried to discern broad and significant themes and patterns that should hold constant for some years. If Google has dramatically changed course between the date that I finished this text and the date you begin reading it, I apologize in advance.


The Economics Anti-Textbook: A Critical Thinker's Guide to Microeconomics by Rod Hill, Anthony Myatt

American ideology, Andrei Shleifer, Asian financial crisis, bank run, barriers to entry, Bernie Madoff, business cycle, cognitive dissonance, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, different worldview, endogenous growth, equal pay for equal work, Eugene Fama: efficient market hypothesis, experimental economics, failed state, financial innovation, full employment, gender pay gap, Gini coefficient, Gunnar Myrdal, happiness index / gross national happiness, Home mortgage interest deduction, Howard Zinn, income inequality, indoor plumbing, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, liberal capitalism, low skilled workers, market bubble, market clearing, market fundamentalism, Martin Wolf, medical malpractice, minimum wage unemployment, moral hazard, Pareto efficiency, Paul Samuelson, Peter Singer: altruism, positional goods, prediction markets, price discrimination, principal–agent problem, profit maximization, profit motive, publication bias, purchasing power parity, race to the bottom, Ralph Nader, random walk, rent control, rent-seeking, Richard Thaler, Ronald Reagan, shareholder value, The Myth of the Rational Market, the payments system, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, ultimatum game, union organizing, working-age population, World Values Survey, Yogi Berra

It describes a world of perfect markets in which given resources are allocated as if by an invisible hand in a way that maximizes the value of total production. The belief that this model approximates how markets operate in the real world is often referred to as ‘market fundamentalism’.3 4 Minimum wage laws, usury laws, truth-in-advertising laws, laws to regulate fraud, health-and-safety codes, anti-discrimination laws, building inspection codes, environmental laws, investor protection rules, and many other rules and regulations have each and severally been breezily, even haughtily, dismissed by market fundamentalists and the many columnists and politicians who invoke their arguments. It’s quite true that many qualifications to market fundamentalism can be found in the mainstream texts, but they are made in such a way that they appear of secondary, rather than primary, importance. The theory of perfect markets is all too often applied reflexively to policy questions, without any discussion of whether it is relevant or appropriate.

It could justify blanket deregulation – despite the fact that Scherer and Ross (ibid.: 679) themselves cite the role of anti-trust policy in keeping the costs of monopoly power ‘modest’. Prasch (2008: 3) writes: ‘Since the late 1970s American economic policy has been almost exclusively informed by … market fundamentalism. For a remarkable range of issues … the “conventional wisdom” has been to aggressively promote deregulation and privatization.’ This trend began around the time that economists concluded that the social costs of monopoly power were ‘modest’. It was surely a contributing factor to the swing towards market fundamentalism. And this is surely ironic. Instead of concluding that perfect competition isn’t really an ideal market type, the result was sold as indicating that the actual economy was pretty close to being ideal! Instead of concluding that existing regulation was working quite well, it justified widespread dismantling of regulation!

As Dani Rodrik explains, ‘one’s skill as an economist depends on the ability to pick and choose the right model for the situation’. Instead, the texts offer a one-size-fits-all model – the theory of perfect markets – and apply it to any and every situation. It is this deeply ingrained training which leads even professional economists to reach for that theory when offering ‘a quick opinion on a policy issue’, as Rodrik observes. What’s wrong with this world-view? Market fundamentalism – the analysis that dominates the mainstream textbooks – assumes perfect and costless information. Much research in recent decades has explored the implications of relaxing this extreme assumption and con­ sidering what happens in a setting of imperfect information, where some people know more than others (termed ‘asymmetric’ information). The Anti-Textbook highlights the many places where this more realistic approach is relevant.


pages: 717 words: 150,288

Cities Under Siege: The New Military Urbanism by Stephen Graham

addicted to oil, airport security, anti-communist, autonomous vehicles, Berlin Wall, call centre, carbon footprint, clean water, congestion charging, creative destruction, credit crunch, DARPA: Urban Challenge, defense in depth, deindustrialization, digital map, edge city, energy security, European colonialism, failed state, Food sovereignty, Gini coefficient, global supply chain, Google Earth, illegal immigration, income inequality, knowledge economy, late capitalism, loose coupling, market fundamentalism, mass incarceration, McMansion, megacity, moral panic, mutually assured destruction, Naomi Klein, New Urbanism, offshore financial centre, one-state solution, pattern recognition, peak oil, planetary scale, private military company, Project for a New American Century, RAND corporation, RFID, Richard Florida, Scramble for Africa, Silicon Valley, smart transportation, surplus humans, The Bell Curve by Richard Herrnstein and Charles Murray, urban decay, urban planning, urban renewal, urban sprawl, Washington Consensus, white flight, white picket fence

SAPs have thus worked in many cases to ‘decimate public employment, destroy import-substitution industries, and displace tens of thousands of rural producers unable to complete against the heavily subsidized agri-capitalism of the rich countries.’12 Such processes have been a key driving force behind the global ratcheting-up of inequality within the past three decades. Across the world, social fissures and extreme polarization – intensified by the global spread of neoliberal capitalism and market fundamentalism – have tended to concentrate most visibly and densely in burgeoning cities. The urban landscape is now populated by a few wealthy individuals, an often precarious middle class, and a mass of outcasts. Almost everywhere, it seems, wealth, power and resources are becoming ever more concentrated in the hands of the rich and the super-rich, who increasingly sequester themselves within gated urban cocoons and deploy their own private security or paramilitary forces for the tasks of boundary enforcement and access control.

At the same time, according to Philip Bond in the Independent, ‘the speculative capital that could be deployed or invested by the bottom 50 per cent of the British population fell from 12 per cent to just 1 per cent’.24 1.3 Radical growth in income inequality in the UK between 1961 and 2002/3 for income before housing costs (BHC) and after housing costs (AHC), as measured by the Gini coefficient. The imposition of market fundamentalism had particularly spectacular effects on the ex-Communist Comecon block after the collapse of communism in the late 1980s. Not only did this create a handful of billionaires and oligarchs but, at the same time, it increased the number of people living in poverty and deep insecurity from three million in 1988 to 170 million in 2004.25 Globally, by 2007, well over a billion people – a third of all urban dwellers – were leading a highly precarious existence in fast-growing slums and informal settlements.26 Increasingly, the developing world has come to be dominated by immiserized shanty-town populations whose daily insecurities encourage a receptivity to radical, violently anti-Western ideologies and movements.

In this sense, all are imagined as combatants and all terrain the site of battle.’87 In the case of the United States, for example, this process allows the nation’s military to overcome traditional legal obstacles to deployment within the nation itself.88 As a consequence, the US military’s PowerPoint presentations talk of urban operations in Mogadishu, Fallujah or Jenin in the same breath as those during the Los Angeles riots, the anti-globalization confrontations in Seattle or Genoa, or the devastation of New Orleans by Hurricane Katrina. Such a paradigm permits a host of transnational campaigns and movements – for social justice or ecological sustainability, against state oppression or the devastating effects of market fundamentalism – to be rendered as forms of ‘netwar’, in effect turning the ideas of the Zapatistas into the equivalent of the radical and murderous Islamism of al-Qaeda.89 Finally, this blurring means that the militarization and walling of national borders, such as that between the US and Mexico, not only involve the same techniques and technologies as the walling-off of neighbourhoods in Baghdad or Gaza, but sometimes actually involve lucrative contracts being awarded to the same military and technology corporations.


Globalists: The End of Empire and the Birth of Neoliberalism by Quinn Slobodian

Asian financial crisis, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, business cycle, capital controls, central bank independence, collective bargaining, David Ricardo: comparative advantage, Deng Xiaoping, desegregation, Dissolution of the Soviet Union, Doha Development Round, eurozone crisis, Fall of the Berlin Wall, floating exchange rates, full employment, Gunnar Myrdal, Hernando de Soto, invisible hand, liberal capitalism, liberal world order, market fundamentalism, Martin Wolf, Mercator projection, Mont Pelerin Society, Norbert Wiener, offshore financial centre, oil shock, open economy, pattern recognition, Paul Samuelson, Pearl River Delta, Philip Mirowski, price mechanism, quantitative easing, random walk, rent control, rent-seeking, road to serfdom, Ronald Reagan, special economic zone, statistical model, The Chicago School, the market place, The Wealth of Nations by Adam Smith, theory of mind, Thomas L Friedman, trade liberalization, urban renewal, Washington Consensus, Wolfgang Streeck, zero-sum game

ENCASEMENT, NOT LIBERATION One of the obstacles to understanding neoliberals on their own terms has been an excessive reliance on a set of ideas borrowed from the Hungarian economic historian Karl Polanyi, who has become, as one scholar notes, “­after Michel Foucault, prob­ably the most popu­lar theorist among social scientists t­ oday.”24 Across many attempts to account for neo­ liberal globalization, the retroactive influence of Polanyi’s 1944 book The ­Great Transformation is marked. According to t­ hose who adapt Polanyi’s narrative, the “market fundamentalism” of neoliberals led them to seek to “disembed” the “natu­ral” market from society and thus realize their utopian dream of a “self-­regulating market.” It is noted routinely that Polanyi was actually writing about the nineteenth c­ entury, but critics often make the leap to say that this was a critique of neoliberalism before the fact. Of a piece with the Polanyian language is the idea that the goal of neoliberals is to liberate markets or set them ­free.

Like him, they saw the ­Great Depression as evidence that the old form of capitalism was unworkable, and they set about theorizing the broader conditions required for its survival. In the words of one scholar, both Hayek and Polanyi w ­ ere “concerned with socio-­institutional responses to the ­free market.”29 In fact, Hayek developed his own idea of “­free markets as socially embedded.”30 If we place too much emphasis on the category of market fundamentalism, we ­will fail to notice that the real focus of neoliberal proposals is not on the market per se but on redesigning states, laws, and other institutions to protect the market. L ­ egal scholars have been clear on the increasing “legalization” or “juridicization” of world trade.31 Focusing on Hayek and his collaborators allows us to understand this within the intellectual history of neoliberal thought.

The right institutions, laws, and binding commitments would safeguard the well-­being of the ­whole. This is not a narrative of triumph—­the sputtering of the WTO is at best a pyrrhic victory for the specific strain of neoliberal globalism I describe in the following chapters. Instead the narrative shows that neoliberalism as a body of thought clearly originated in an early twentieth-­ century crisis about how to or­ga­nize the ­whole earth. MILITANT GLOBALISM, NOT MARKET FUNDAMENTALISM Ordoglobalism was haunted by two puzzles across the twentieth c­ entury: first, how to rely on democracy, given democracy’s capacity to destroy itself; and second, how to rely on nations, given nationalism’s capacity to “disintegrate the world.” The first tension is familiar to students of modern Eu­rope. It is well known that democracy can have illiberal outcomes and can even lead to its own self-­annihilation by demo­cratic means.


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Rewriting the Rules of the European Economy: An Agenda for Growth and Shared Prosperity by Joseph E. Stiglitz

Airbnb, balance sheet recession, bank run, banking crisis, barriers to entry, Basel III, basic income, Berlin Wall, bilateral investment treaty, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, corporate governance, corporate raider, corporate social responsibility, creative destruction, credit crunch, deindustrialization, discovery of DNA, diversified portfolio, Donald Trump, eurozone crisis, Fall of the Berlin Wall, financial intermediation, Francis Fukuyama: the end of history, full employment, gender pay gap, George Akerlof, gig economy, Gini coefficient, hiring and firing, housing crisis, Hyman Minsky, income inequality, inflation targeting, informal economy, information asymmetry, intangible asset, investor state dispute settlement, invisible hand, Isaac Newton, labor-force participation, liberal capitalism, low skilled workers, market fundamentalism, mini-job, moral hazard, non-tariff barriers, offshore financial centre, open economy, patent troll, pension reform, price mechanism, price stability, purchasing power parity, quantitative easing, race to the bottom, regulatory arbitrage, rent-seeking, Robert Shiller, Robert Shiller, Ronald Reagan, selection bias, shareholder value, Silicon Valley, sovereign wealth fund, TaskRabbit, too big to fail, trade liberalization, transaction costs, transfer pricing, trickle-down economics, tulip mania, universal basic income, unorthodox policies, zero-sum game

We have argued in this chapter, and elsewhere in this book, that current rules are too favorable to corporate interests, supported by an ideology—a misguided theory—about how the economy functions. Almost a half century of research has exposed the flaws in this ideology, in what we have referred to elsewhere as market fundamentalism. And four decades of experimentation in economies around the world that have, to one extent or another, adopted rules guided by this ideology, have shown the ways in which it leads to a distorted economy marked by inequality and instability. In fact, market fundamentalism has not even produced the high growth that was promised. The fact that there are trade-offs makes the design of rules difficult. Accordingly, each country must choose rules that reflect its own values. Europe faces a particular challenge in enabling individual countries to do this because it complicates another EU goal: cementing the integration of the internal market.

Within the varied experiences of the countries of the EU, there were and are good ideas for maintaining a prosperous and equitable European economy. Economists dryly label the particular set of economic ideas about the efficiency and stability of unfettered markets that the European Union embraced in the early 1990s as “neoclassical economics.” Others have categorized these ideas as neoliberalism or market fundamentalism. Whatever we call this belief system, it eventually hardened into a blind faith in markets in the following decades. The financial upheavals of 2008, the harrowing recession and hapless government response that followed, and the sovereign debt crisis that nearly tore the Eurozone apart originated, in large measure, with this set of ideas. The markets-will-save-us mentality seeped into every subject this book addresses.

Advances in economics over the past four decades have shown, however, that when there is imperfect information, imperfect competition, or an incomplete set of risk markets (which is always the case), this is not true. Firms can increase their profits by taking advantage of others, for example, through market manipulation or insider trading. These activities distort the economy both in the short run and the long. When these schemes are discovered, there is a loss of trust in financial markets, which means that markets will be even less able to perform their essential functions. Market fundamentalism simply ignored the implications of these pervasive market imperfections, these real-world deviations from a textbook ideal. The kind of exploitation that we have seen simply could not occur if everyone was perfectly informed. One of the central roles of financial markets is to gather and process information to best allocate scarce capital. To assume perfect information is to assume away the central function of financial markets.


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Culture and Prosperity: The Truth About Markets - Why Some Nations Are Rich but Most Remain Poor by John Kay

"Robert Solow", Albert Einstein, Asian financial crisis, Barry Marshall: ulcers, Berlin Wall, Big bang: deregulation of the City of London, business cycle, California gold rush, complexity theory, computer age, constrained optimization, corporate governance, corporate social responsibility, correlation does not imply causation, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, Donald Trump, double entry bookkeeping, double helix, Edward Lloyd's coffeehouse, equity premium, Ernest Rutherford, European colonialism, experimental economics, Exxon Valdez, failed state, financial innovation, Francis Fukuyama: the end of history, George Akerlof, George Gilder, greed is good, Gunnar Myrdal, haute couture, illegal immigration, income inequality, industrial cluster, information asymmetry, intangible asset, invention of the telephone, invention of the wheel, invisible hand, John Meriwether, John Nash: game theory, John von Neumann, Kenneth Arrow, Kevin Kelly, knowledge economy, light touch regulation, Long Term Capital Management, loss aversion, Mahatma Gandhi, market bubble, market clearing, market fundamentalism, means of production, Menlo Park, Mikhail Gorbachev, money: store of value / unit of account / medium of exchange, moral hazard, Myron Scholes, Naomi Klein, Nash equilibrium, new economy, oil shale / tar sands, oil shock, Pareto efficiency, Paul Samuelson, pets.com, popular electronics, price discrimination, price mechanism, prisoner's dilemma, profit maximization, purchasing power parity, QWERTY keyboard, Ralph Nader, RAND corporation, random walk, rent-seeking, Right to Buy, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, second-price auction, shareholder value, Silicon Valley, Simon Kuznets, South Sea Bubble, Steve Jobs, telemarketer, The Chicago School, The Market for Lemons, The Nature of the Firm, the new new thing, The Predators' Ball, The Wealth of Nations by Adam Smith, Thorstein Veblen, total factor productivity, transaction costs, tulip mania, urban decay, Vilfredo Pareto, Washington Consensus, women in the workforce, yield curve, yield management

These then are the basic roles of government in a free society: to provide a means whereby we can modify the rules, to mediate differences among us on the meaning of the rules, and to enforce compliance with the rules on the part of those few who would otherwise not play the game" (Friedman [1962], 25). s The claims of the American business model are of four kinds: self-interest rules-self-regarding materialism governs our economic lives. · market fundamentalism-markets should operate freely, and attempts to regulate them by social or political action are almost always undesirable. the minimal state-the economic role of government should not extend much beyond the enforcement of contracts and private property rights. Government should not itself provide goods and services, or own productive assets. low taxation-while taxation is necessary to finance these basic functions of the minimal state, tax rates should be as low as possible and the tax system should not seek to bring about redistribution of income and wealth. Among those sympathetic to the ABM, there are two views of how market fundamentalism is to be reconciled with the minimal state. Some proponents believe an antitrust policy is needed to preserve competitive markets.

Some supporters of the ABM see government action in economic matters as an attack on liberty, an improper use of the coercive power of the state. Freedom of contract requires a minimal state; market fundamentalism and low taxation are immediate corollaries. Although people who believe this mostly also believe that the ABM is economically efficient, presumably they would still favor it if it were not. If it could be shown that some regulation of markets would make everyone, or very many, people better off, they would still judge it wrong for government to implement it. Others find the premise of self-interested motivation morally repugnant. Even if it is true, it ought not to be true, and social institutions should restrain greed rather than accommodate it. The accountability of democracy is preferable to the anonymity of markets. If market fundamentalism, the minimal state, and low taxation are necessary for economic efficiency, material sacrifices must be made to secure a just society.

Nor, for that matter, does the United States-in fact, it has the most powerful government in the history of the world and is less and less embarrassed to remind people of that. Norway and Denmark also have high tax rates, some of the highest found anywhere. Taxes are lower in Switzerland, but the Swiss have a structure of government like no other: hugely {16} John Kay powerful and massively decentralized. Whatever else is true of Denmark, Norway, and Switzerland, they are not societies characterized by unrestrained greed, market fundamentalism, and a minimal state. Denmark, Norway, and Switzerland are small countries whose total population is less than that of California. But it may not be an accident that many prosperous societies are very small. 8 A small state with open borders can combine social cohesion with a dynamic economy in a manner that larger states find difficult to emulate. And it can sustain its idiosyncratic identity.


Making Globalization Work by Joseph E. Stiglitz

affirmative action, Andrei Shleifer, Asian financial crisis, banking crisis, barriers to entry, Berlin Wall, business process, capital controls, central bank independence, corporate governance, corporate social responsibility, currency manipulation / currency intervention, Doha Development Round, Exxon Valdez, Fall of the Berlin Wall, Firefox, full employment, Gini coefficient, global reserve currency, Gunnar Myrdal, happiness index / gross national happiness, illegal immigration, income inequality, income per capita, incomplete markets, Indoor air pollution, informal economy, information asymmetry, Intergovernmental Panel on Climate Change (IPCC), inventory management, invisible hand, John Markoff, Jones Act, Kenneth Arrow, Kenneth Rogoff, low skilled workers, manufacturing employment, market fundamentalism, Martin Wolf, microcredit, moral hazard, new economy, North Sea oil, offshore financial centre, oil rush, open borders, open economy, price stability, profit maximization, purchasing power parity, quantitative trading / quantitative finance, race to the bottom, reserve currency, rising living standards, risk tolerance, Silicon Valley, special drawing rights, statistical model, the market place, The Wealth of Nations by Adam Smith, Thomas L Friedman, trade liberalization, trickle-down economics, union organizing, Washington Consensus, zero-sum game

East Asia had learned that while globalization, well managed, had brought them enormous prosperity, globalization—when it meant opening themselves up to destabilizing speculative flows—had also brought economic devastation. As officials there reflect on the lessons of that brutal experience, they have come to reject even more firmly the Washington Consensus market fundamentalism which opened their countries to the ravages of the speculators. And they have put more emphasis on equity and on policies to help the poor. Growth has recovered, but these students of the “class of’97” have not forgotten the lessons. Latin America East Asia demonstrated the success of a course markedly different from the Washington Consensus, with a role for government far larger than the minimalist role allowed by market fundamentalism. Meanwhile, Latin America embraced the Washington Consensus policies more wholeheartedly than any other region (indeed, the term was first coined with reference to policies advocated for that region).

When I came to the World Bank, I was troubled by what I saw: the Bank—and, even more, the IMF—pushing conservative economic policies (such as the privatization of social security) that were exactly the opposite of those for which I had fought so hard when I was at the White House. Worse, they were using models that my theoretical work had done so much to discredit. (I was, of course, even more troubled to learn that Clinton’s own Treasury was pushing these policies.) My economic research had shown the deep underlying flaws in IMF economics, in “market fundamentalism,” the belief that markets by themselves lead to economic efficiency. Intellectual consistency—consistency with my earlier academic work—impelled me to voice my concerns that the policies which they were pushing in, for instance, East Asia, might only make matters worse. To do any less would have been a dereliction of my responsibilities. What we had fought for while I was in the Clinton administration was relevant, not just to Americans but to the rest of the world as well.

Even if they could admit that markets, by themselves, might not engender a socially acceptable distribution of income, they argued that issues of efficiency and equity should be separated. In this conservative view, economics is about efficiency, and issues of equity (which, like beauty, so often lies in the eyes of the beholder) should be left to politics. Today, the intellectual defense of market fundamentalism has largely disappeared.2 My research on the economics of information showed that whenever information is imperfect, in particular when there are information asymmetries—where some individuals know something that others do not (in other words, always)—the reason that the invisible hand seems invisible is that it is not there.3 Without appropriate government regulation and intervention, markets do not lead to economic efficiency.4 In recent years we have seen dramatic illustrations of these theoretical insights.


pages: 543 words: 147,357

Them And Us: Politics, Greed And Inequality - Why We Need A Fair Society by Will Hutton

Andrei Shleifer, asset-backed security, bank run, banking crisis, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, Big bang: deregulation of the City of London, Blythe Masters, Boris Johnson, Bretton Woods, business cycle, capital controls, carbon footprint, Carmen Reinhart, Cass Sunstein, centre right, choice architecture, cloud computing, collective bargaining, conceptual framework, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, debt deflation, decarbonisation, Deng Xiaoping, discovery of DNA, discovery of the americas, discrete time, diversification, double helix, Edward Glaeser, financial deregulation, financial innovation, financial intermediation, first-past-the-post, floating exchange rates, Francis Fukuyama: the end of history, Frank Levy and Richard Murnane: The New Division of Labor, full employment, George Akerlof, Gini coefficient, global supply chain, Growth in a Time of Debt, Hyman Minsky, I think there is a world market for maybe five computers, income inequality, inflation targeting, interest rate swap, invisible hand, Isaac Newton, James Dyson, James Watt: steam engine, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, knowledge worker, labour market flexibility, liberal capitalism, light touch regulation, Long Term Capital Management, Louis Pasteur, low cost airline, low-wage service sector, mandelbrot fractal, margin call, market fundamentalism, Martin Wolf, mass immigration, means of production, Mikhail Gorbachev, millennium bug, money market fund, moral hazard, moral panic, mortgage debt, Myron Scholes, Neil Kinnock, new economy, Northern Rock, offshore financial centre, open economy, plutocrats, Plutocrats, price discrimination, private sector deleveraging, purchasing power parity, quantitative easing, race to the bottom, railway mania, random walk, rent-seeking, reserve currency, Richard Thaler, Right to Buy, rising living standards, Robert Shiller, Robert Shiller, Ronald Reagan, Rory Sutherland, Satyajit Das, shareholder value, short selling, Silicon Valley, Skype, South Sea Bubble, Steve Jobs, The Market for Lemons, the market place, The Myth of the Rational Market, the payments system, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, unpaid internship, value at risk, Vilfredo Pareto, Washington Consensus, wealth creators, working poor, zero-sum game, éminence grise

When viewed in these terms, the mind-boggling scale and cost of the credit crunch – in total governments worldwide have so far spent $14 trillion on supporting their banking systems – is almost as big a crisis for market fundamentalism and financial capitalism as the collapse of the Soviet Union was for economic planning and communism. What happened between 1989 and 1992 did not just represent the triumph of liberal capitalism; it was claimed as the triumph of the market fundamentalist ideologues who believed that they had engineered it. If communism was the logical conclusion of left thinking, it had collapsed. Some twenty years later the same can be said of market fundamentalism, the logical conclusion of right thinking. The extremes of left and right alike have both been tried – and found wanting. Both Labour and the Conservatives have thus lost their moral and ideological moorings.

., 17, 36, 135, 177 Cabinet Office, 218–19, 336, 337 Cable, Vincent, 220 Cambridge University, 9, 363 Cameron, David, 20, 179, 233–4, 235, 318, 338, 342; ‘Big Society’ policy, 19–20, 234, 271, 280 Campbell, Alastair, 141, 142, 224, 312 Canada, 121, 354, 358–9, 383 capital controls, abolition of, 32, 161 capitalism: see also entrepreneurs; innovation; amorality of, 16–19; ‘arms race’ effects, 105; boom and bust cycle, 181–7, 392; deregulation (from 1970s), 159–63, 388; fairness and, ix, x, 23–7, 41, 106, 122–3, 206–7, 210, 249, 385, 386, 394; as immutable force of nature, ix, 23, 40–2; incumbent firms, 29–30, 31, 105, 106, 110, 111–12, 253–5, 257, 297; interconnectedness of markets, 200–2, 204; knowledge-entrepreneurship dynamic, 27–8, 31, 103, 110–11, 112–13; liquidity as totemic, 199, 200, 202, 240, 243; need for ‘circuit breakers’, 197, 199, 202, 203; network theory and, 199–204, 206; required reforms of, 205–9, 215–16; stakeholder, x, 148–9; undue influence of, 32–3 Carlaw, Kenneth, 108, 263 Carnegie, Andrew, 195, 303 cars, motor, 91, 108, 109, 134, 269 Castells, Manuel, 317 Cayne, Jimmy, 173–4 CCTV cameras, 10 celebrity culture, 282, 314 central banks, 154, 157, 158, 160, 182, 185, 187, 208; see also Bank of England; Federal Reserve, 169–70, 176, 177, 183 Cerberus Capital Management, 177 Cervantes, Miguel de, 274 Channel 4, 330, 350 Charles I, King of England, 124–5 Charter One Financial, 150 chavs, mockery of, 25, 83, 272, 286–8 child poverty, 12, 21, 74–5, 83, 278, 279, 288–90, 291 China, x, 101, 112, 140, 144, 160, 226, 230, 354–5, 385; consumption levels, 375–6, 379, 380, 381; economic conflict with USA, 376–7, 378–80, 381, 382, 383; export led growth, 36, 169, 208, 226, 355–6, 375–7, 379–81, 382–3; rigged exchange rates, 36, 169, 355, 377, 378–9; surpluses of capital and, 149, 154, 169, 171, 208, 226, 375; unfairness of world system and, 383, 385 Christianity, 53, 54, 352, 353 Church of England, 128 Churchill, Winston, 138, 273, 313 Churchill Insurance, 150 Cisco, 253 Citigroup, 152, 158, 172, 177, 184, 202, 203, 242, 247 city academies, 278, 307 City of London, 34, 137, 138, 178–9, 252, 359; as incumbent elite, 14, 26, 31, 32–3, 210, 249, 355; in late nineteenth-century, 128–30; light-touch regulation of, 5, 32, 138, 145, 146–7, 151, 162, 187, 198–9; New Labour and, x–xi, 5, 19, 22, 142, 144–5, 355; remuneration levels see pay of executives and bankers civic engagement, 86, 313 civil service, 13, 221, 273, 312, 343 Clasper, Mike, 178 Clayton Act (USA, 1914), 133 Clegg, Nick, 22, 218, 318, 327–8, 342, 391 Clifton, Pete, 321 Clinton, Bill, 140, 177, 183 coalition government (from May 2010), 14, 20, 22, 37, 307, 311, 343, 346, 390–2; abolition of child trust fund, 302; capital spending cuts, 370–1; deficit reduction programme, xi, 19, 34, 214, 227, 357, 360–1, 364, 369–71, 373, 390–2; emergency budget (June 2010), 369–70; market fundamentalism and, 370; political reform commitment, 35, 341, 343–4, 346, 350, 390, 391; proposed financial reforms, 208, 209, 245, 252, 371; repudiation of Keynesian economics, xi, 390–1 Cohan, William, 158–9 Cohen, Ronald, 12, 245 collapse/crash of financial system, x, xi, 4, 9, 41, 144, 146, 152–4, 158–9, 168; costs of, 7, 19, 138, 152–3, 172, 214–15; errors responsible for, 136, 187–96, 197–204; global interconnectedness, 375, 382–3; lessening of internationalism following, 376–83; need to learn from/understand, 36–7; predictions/warnings of, 148, 153, 180, 182–5; recommended policy responses, 215–16; results of previous credit crunches, 358, 359–60, 361–2 collateralised debt obligations (CDOs), 155, 167–8, 174 colonialism, 109, 124 Commodity Future Trading Commission, 182–3 communism, collapse of in Eastern Europe, 16, 19, 135, 140, 163 competition, 29, 30, 33, 51, 156, 185, 186, 207–8, 251; see also ‘open-access societies’; City of London and, 160, 178, 179, 198–9; deregulated banking and, 160, 161, 163, 164, 178, 179, 181; European Union and, 251, 258, 259; fairness and, 89–90, 99, 272; incumbent elites/oligarchs and, 104, 114, 129–30, 131–4, 257; innovation and, 40, 114, 257–60; national authorities/regimes, 201–2, 257–60, 316, 318; state facilitation of, 31 Competition Commission, 257–8 computer games, 233 Confederation of British Industry (CBI), 4, 6–7 Conservative Party, xi, 5, 11, 14, 97–8, 220, 343, 378; broken Britain claims, 16, 227, 271; budget deficit and, 19, 224, 357, 360–1, 368, 379; City/private sector funding of, 179, 257, 344; decline of class-based politics, 341; deregulation and, 32, 160, 161; fairness and, 83, 302, 374, 390; general election (1992) and, 140–1; general election (2010) and, 20, 97, 227, 234, 271, 357, 374, 379, 390; Conservative Party – continued government policies (1979-97), 32, 81, 275–6, 290; inheritance/wealth taxes and, 74, 302–3; market fundamentalism and, 5, 17, 138, 147, 160, 161; poverty and, 21, 279; reduced/small state policy, 20, 22, 233–4, 235 construction industry, 5, 33, 268 consumer goods, types of, 266–7 Continental Illinois collapse, 152, 162 Convention on Modern Liberty, 340 Cook, Robin, 142 Cootner, Paul, 194–5 Copenhagen climate change talks (2009), 226, 231, 385 Corporate Leadership Council, US, 93 Corzine, Jon, 177 county markets, pre-twentieth-century, 90 Coutts, Ken, 363 Cowell, Simon, 314, 315 ‘creative destruction’ process, 111, 112, 134 creative industries, 11, 71, 355 credit cards, 64, 354 credit crunch: see collapse/crash of financial system credit default swaps, 151, 152, 166–8, 170, 171, 175, 176, 191, 203, 207 Crédit Lyonnais collapse, 152 credit-rating agencies, 151, 165, 175, 196, 197, 248, 269, 362, 388; funding of, 151, 196, 207 criminal activity/allegations, 7, 101, 103, 104–5, 138, 167–8 Crosby, James, 178 Cuba, 61 culture, British, 12, 187, 282, 314 Dacre, Paul, 324, 326, 329 Daily Mail, 218, 286, 288, 315, 324, 325–7, 339, 342 Daily Telegraph, 288, 317, 319, 327 Darling, Alistair, 149, 204, 252 Darwin, Charles, 31 Data Monitor, 186 Davies, Howard, 198 Davies, Nick, Flat Earth News, 319, 321, 323–4, 326, 331–2 de Gaulle, Charles, 65 debt, 33, 155, 209, 351–63; corporate/commercial, 8, 29, 181, 245, 248, 352, 354, 359, 363, 374; moral attitudes towards, 351–4, 357, 360–1; necessity of, 155, 351, 353, 354; private, 5, 186, 187, 210, 226, 279–80, 354–7, 359, 363, 373; public, 9, 34, 164, 166, 167, 182, 203, 214, 224–6, 356–7, 362–3, 375, 388, 393; sustainable level of, 356–7, 368–9 Defence Advanced Research Projects Agency (DARPA), 265 defence and armed forces, 34, 372 deficit, public, 4, 34, 213, 224–6, 335, 364–74; coalition’s reduction programme, xi, 19, 34, 214, 227, 357, 360–1, 364, 369–71, 373, 390–2, 393; need for fiscal policy, 224–5, 226, 357–8, 364, 365–9, 370, 374; speed of reduction of, 213, 224–5, 360–1, 368, 371 Delingpole, James, 287 Delong, Brad, 27, 106 democracy, 13–15, 235, 310–16, 333–48; centralisation of power and, 14–15, 35, 217, 313, 334, 337, 342; fair process and, 86, 89, 96–9; incumbent elites and, 35, 99; industrial revolution and, 128; media undermining of, 315–16, 317–18, 321–9, 333, 350; ‘open-access societies’ and, 136, 314 Democratic Party, US, 18, 140, 183, 379 Demos, 289 Deng Xiao Ping, 140 Denham, John, 21 deprivation and disadvantage, 10, 34, 288–93, 307–8, 393; low-earning households, 11–12, 13, 291, 361; weight of babies and, 13; young children and, 74–5, 83, 288–90 derivatives, 140, 145, 150–1, 164–8, 171, 175, 188, 207, 209; City of London and, 32, 137, 150–1, 157, 199; mathematical models (‘quants’) and, 188, 191; regulation and, 183, 197–8, 199 desert, due, concept of, 4, 24, 38–43, 45–7, 50–63, 64–8, 73–7, 80–2, 223, 395; see also effort, discretionary; proportionality; big finance and, 40–2, 82, 167, 174, 176, 210; debt and, 351–2; diplomacy/international relations and, 385–6; Enlightenment notions of, 53–6, 58–9, 112; luck and, 70, 73–7, 273; poverty relief systems and, 80–2, 277–8; productive entrepreneurship and, 102–3, 105–6, 112, 222, 392–3; taxation and, 40, 220, 266 Deutsche Bank, 170 developing countries, 71–2, 160, 354–5, 375, 376, 385 Diamond, Bob, 24 Dickens, Charles, 353 digitalisation, 34, 231, 320, 349, 350 Doepke, Matthias, 115–16 dot.com bubble, 9, 193 Drugs Advisory Panel, 11 Duffy, Gillian, 394 Durham University, 263 Dworkin, Ronald, 70 Dyson, James, 28, 33 East India Company, 130 Easyjet, 28, 233 eBay, 136 economic theory, 43–4, 188–9, 366; see also Keynesian economics; market fundamentalism economies of scale, 130–1, 254–5, 258 The Economist, 326, 330, 349 economy, British: see also capitalism; financial system, British; annual consumption levels, 375; balance of payments, 363–4; as ‘big firm’ economy, 254; change in landscape of trading partners, 230–1; coalition capital spending cuts, 370–1; collapse of tax base, 224, 368; cumulative loss of output caused by crash, 138, 153, 172, 214–15; desired level of state involvement, 234–5; domination of market fundamentalism, 16–17; economic boom, 3–4, 5–6, 12, 143, 173, 181–7, 244–5; fall in volatility, 365; fiscal deficit, 368; fiscal policy, 208, 224–5, 226, 357–8, 364–9, 370, 374; growth and, 9–10, 214–15, 218–19, 224, 359, 363; inefficient public spending, 335; investment in ‘intangibles’, 232–3; in late nineteenth-century, 128–30; ‘leading-edge’ sectors, 218–19; need for engaged long term ownership, 240–4, 249–51; as non-saver, 36, 354; potential new markets/opportunities, 231–3; public-private sector interdependence and, 219–22, 229–30, 261, 265–6, 391, 392; required reforms of, 20, 239–44, 249–52, 264–6, 371–4 see also national ecosystem of innovation; ‘specialising sectors’, 219; urgent need for reform, 36–7; volatility of, 297–8; vulnerability of after credit crunch, 358–64 economy, world: acute shortfall of demand, 375–6; Asian and/or OPEC capital surpluses and, 149, 153–4, 169, 171, 208, 226, 354, 375; conflicts of interest and, 137, 138; deregulation (from 1970s), 159–63; emerging powers’ attitudes to, 226; entrenched elites and, 137–8, 210; fall in volatility, 365; international institutions as unfair, 383, 385; London/New York axis, 149, 150–1, 157–8, 160, 187, 202; need for international cooperation, 357–8, 379–80, 381–3, 384, 385–6; post-crunch deleverage pressures, 359–60, 374–5; protectionism dangers, 36, 358, 376–7, 378, 379, 382, 386; savers/non-savers imbalance, 36, 169, 208, 222, 355, 356, 375–6, 378–83; shift of wealth from West to East, 36, 383–4; sovereign debt crises, 167, 203, 214; unheeded warnings, 182–5; wrecking of European ERM, 140, 144 Edinburgh University, 145 education, 10, 20–1, 128, 131, 272–4, 276, 278, 292–5, 304–8, 343; Building Schools for the Future programme, 371; cognitive and mental skills, 288–90, 304–6; private, 13, 114, 264–5, 272–3, 276, 283–4, 293–5, 304, 306 effort, discretionary, 50, 53, 54–5, 58–60, 80, 90–1, 114, 134; see also desert, due, concept of; fair process and, 91–4; indispensability and, 65–7; innovation and invention, 62, 65, 102–3, 105–6, 112, 117, 131, 223, 262–3, 392–3; luck and, 26–7, 65, 67, 70, 71, 73–4, 75–7; productive/unproductive, 43, 46–7, 51–2, 62, 64–5, 102–3, 392–3; proportionate reward for, 26, 39–40, 44, 47, 61, 74, 76–7, 84, 122, 272, 273, 2 84 egalitarianism, 27, 53–4, 55–6, 61, 75, 78–80, 144, 341, 343; Enlightenment equal worth concept, 53, 55, 59–60 Ehrenfeld, Rachel, 333 Eisman, Steve, 207 electoral politics: see also general election (6 May 2010); general elections, 97, 138, 277, 315; fair process and, 96–9; franchise, 128; general election (1992), x, 138, 140–1, 144, 148, 277; general election (1997), x, 138, 141 electricity, 134, 228, 256 electronic trading, 105 elites, incumbent, 23, 31–3, 99, 131; City of London, 14, 26, 31, 32–3, 210, 249, 355; competition and, 104, 113, 114, 129–30, 131–4, 257; democracy and, 35, 99; Enlightenment and, 122; history of (from 1880s), 131–4; history of in Britain (to 1900), 124–30; innovation and, 29–30, 110, 111–12, 113, 114, 115, 116; modern big finance and, 135, 137–8, 180, 210, 387–9; in ‘natural states’, 111, 113, 114–15, 116, 123–4, 127; New Labour’s failure to challenge, x–xi, 14, 22, 388, 389–90; world economy and, 137–8, 210 EMI, 28, 247, 248 employment and unemployment, 6, 75, 291–3, 295, 300, 373, 393; employment insurance concept, 298–9, 301, 374; lifelong learning schemes, 300, 301; lifelong savings plans, 300; unemployment benefit, 81, 281 Engels, Friedrich, 121–2 English language as lingua franca, 124 Enlightenment, European, 22, 30–1, 146, 261, 314–15; economics and, 104, 108–9, 116–17, 121–3; notions of fairness/desert, 53–6, 58–9, 112, 122–3, 394; science and technology and, 31, 108–9, 112–13, 116–17, 121, 126–7 Enron affair, 147 entrepreneurs: see also innovation; productive entrepreneurship; capitalist knowledge dynamic, 27–8, 31, 110–11, 112–13; challenges of the status quo, 29–30; Conservative reforms (1979-97) and, 275; private capital and, 241; public-private sector interdependence and, 219–22, 229–30, 261, 265–6, 391, 392; rent-seeking and, 61–2, 63, 78, 84, 101, 105, 112, 113–14, 116, 129, 135, 180; unproductive, 28–9, 33, 61–2, 63, 78, 84, 101–2, 103–5, 180 environmental issues, 35–6, 71–2, 102, 226, 228, 231, 236, 385, 390, 394; due desert and, 68; German Greens and, 269 Erie Railroad Company, 133 Essex County Council, 325, 332 European Commission, 298 European Exchange Rate Mechanism (ERM), 140, 144, 166 European Union (EU), 11, 82, 179, 379–80, 383–4, 385; British media and, 15, 328, 378; Competition Commissioner, 251, 258, 259; scepticism towards, 15, 36, 328, 377, 378, 386 eurozone, 377 Fabian Society, 302–3 factory system, 126 fairness: see also desert, due, concept of; proportionality; abuse/playing of system and, 24–5, 27; asset fairness proposals, 301–3, 304; behavioural psychology and, 44, 47–50, 59–61; Blair’s conservative view of, 143; Britishness and, 15–16, 392–3, 395; capitalism and, ix, x, 23–7, 41, 106, 122–3, 206–7, 210, 249, 385, 386, 394; challenges to political left, 78–83; coalition government (from May 2010) and, 22, 37; commonly held attitudes, 44, 45–7; deficit reduction and, 226, 227, 374; economic and social determinism and, 56–8; Enlightenment notions of, 53–6, 58–9, 112, 122–3, 394; fair process, 84–94, 96, 98–9, 272; as foundation of morality, 24, 26, 45, 50; individual responsibility and, 39, 78–9; inequality in Britain, 78, 80, 275–6, 277–8, 342; international relations and, 226, 385–6; ‘Just World Delusion’, 83; luck and, 72–7; management-employee relationships, 90–2; models/frameworks of, 43–58; need for shared understanding of, 25, 37, 43; partisanship about, 42–3; politicians/political parties and, 22, 83, 271–2, 302–3, 374, 391–2; popular support for NHS and, 75, 77, 283; pre-Enlightenment notions, 52–3; shared capitalism and, 66, 92–3; state facilitation of, ix–x, 391–2, 394–5; welfare benefits to migrants and, 81–2, 282, 283, 284 Farnborough Sixth Form College, 294 Federal Reserve, 169–70, 176, 177, 183 Fees Act (1891), 128 Fertile Crescent, 106 feudalism, European, 53–4, 74, 104, 105 financial instruments, 103, 148, 157, 167–8 Financial Services and Markets Act (2001), 198 Financial Services Authority (FSA), 24, 147, 162, 178, 198–9, 208 financial system, British: see also capitalism; economy, British; Asian and/or OPEC capital surpluses and, 149, 154, 354; big finance as entrenched elite, 136, 137–8, 176, 178–80, 210, 387–9; declining support for entrepreneurship, 241; deregulation (1971), 161; fees and commissions, 33; importance of liquidity, 240, 243; lack of data on, 241; London/New York axis, 149, 150–1, 157–8, 160, 187, 202; massive growth of, 137, 138, 209, 219; need for tax reform, 209–10; regulation and see regulation; required reforms to companies, 249–50; savings institutions’ share holdings, 240–1; short termism of markets, 241, 242–3; unfairness of, 138, 210 Financial Times, 12, 149, 294, 330, 349, 361 Fink, Stanley, 179 fiscal policy, 208, 224–5, 226, 357–8, 364–9, 374; coalition rejection of, 370 fish stocks, conservation of, 394 Fitch (credit-rating agencies), 248 flexicurity social system, 299–301, 304, 374 Forbes’ annual list, 30 Ford, Henry, 195, 302 foreign exchange markets, 32, 161, 164, 165, 168, 363, 367; China’s rigged exchange rate, 36, 169, 355, 377, 378–9; currency options, 166, 191; eurozone, 377 foreign takeovers of British firms, 8, 388 Fortune magazine, 94 Foster, Sir Christopher, 313 foundation schools, 307 France, 51–2, 123–4, 163, 372, 375, 377 free trade, 163, 334, 379 Frey, Bruno, 60, 86 Friedman, Benjamin, 282–3 Fukuyama, Francis, 140 Fuld, Dick, 192 Future Jobs Fund, 373 G20 countries, 209, 358, 368, 374 Galliano, John, 143 Gardner, Howard, 274, 305–6 gated communities, 13 Gates, Bill, 71 Gates, Bill (Senior), 222 Gaussian distribution, 190–1, 194 ‘gearing’, 6 general election (6 May 2010), 97, 142, 179, 214, 217, 227, 234, 271, 314, 318, 327–8, 334, 378; Gillian Duffy incident, 394; result of, xi, 20, 345–6, 390 ‘generalised autoregressive conditional heteroskedasicity’ (GARCH), 194 genetically modified crops, 232 Germany, 36, 63, 244, 262, 269, 375–6, 379, 380; export led growth, 355–6, 375, 381–2; Fraunhofer Institutes, 252, 264; Greek bail-out and, 377; pre-1945 period, 128, 129, 134, 382, 383 Gieve, Sir John, 339–40 Gilligan, Andrew, 329 Gladwell, Malcolm, 76–7 Glasgow University, 323 Glass-Steagall Act, 162, 170, 202–3 Glastonbury festival, 143 globalisation, 32, 98, 140, 143, 144, 153–4, 163, 182, 297, 363, 366, 380 Goldman Sachs, 42, 63, 103, 150, 167–8, 174, 176, 177, 205 Goodwin, Sir Fred, 7, 150, 176, 340 Google, 131, 136, 253, 255, 258, 262 Goolsbee, Austin, 52 Gorbachev, Mikhail, 140 Gough, Ian, 79 Gould, Jay, 133 Gould, Philip, 142 government: see also democracy; political system, British; cabinet government, 312, 334, 337; centralisation of power, 14–15, 35, 217, 313, 334, 337, 341, 342; control of news agenda, 14, 224, 313; disregard of House of Commons, 14–15, 223, 339, 345; Number 10 Downing Street as new royal court, 14, 337, 338, 346, 347; press officers/secretaries, 14, 180, 224, 312; Prime Ministerial power, 337, 344, 345, 346 GPS navigation systems, 233, 265 Gray, Elisha, 221 Great Depression, 159, 162, 205, 362 Greece: classical, 25, 26, 38, 39, 44–5, 52–3, 59, 96, 107, 108; crisis and bail-out (2010), 167, 371, 377, 378 Green, Sir Philip, 12, 29, 33 Green Investment Bank, proposed, 252, 371 Greenhead College, Huddersfield, 294 Greenspan, Alan, 145–6, 165, 177, 183, 184, 197–8 Gregory, James, 277 growth, economic: Britain and, 9–10, 214–15, 219, 221, 359, 364; education and, 305–6; export led growth, 36, 169, 208, 226, 355–6, 375–7, 378–83; social investment and, 280–1 GSK, 219, 254 the Guardian, 319, 330, 349 Gupta, Sanjeev, 367 Gutenberg, Johannes, 110–11 Habsburg Empire, 127 Haines, Joe, 312 Haji-Ioannous, Stelios, 28 Haldane, Andrew, 8, 151, 153, 193, 214, 215 the Halifax, 186, 251 Hamilton, Lewis, 64, 65 Hammersmith and Fulham, Borough of, 167 Hampton, Sir Philip, 173 Hands, Guy, 28, 178, 246–8 Hanley, Lynsey, 291, 293, 302 Hanushek, Eric, 305–6 Hart, Betty, 289 Harvard University, 47, 62, 198 Hashimoto administration in Japan, 362 Hastings, Max, 217–18 Hauser, Marc, 47–50 Hawley, Michael, 65–6 Hayward, Tony, 216–17 HBOS, 157, 158, 178, 251 health and well-being, 9, 75, 77, 106, 232, 233, 290–1; see also National Health Service (NHS) Heckman, James, 290 hedge funds, 6, 21, 103, 157–8, 167–8, 172, 203, 205, 206, 240; collapses of, 152, 173–4, 187, 202; as destabilisers, 166–7, 168; destruction of ERM, 140, 144, 166; near collapse of LTCM, 169–70, 183, 193, 200–1 hedging, 164, 165–6 Heinz, Henry John, 302 Hermes fund management company, 242 Herrman, Edwina, 179 Herstatt Bank collapse, 152 Hetherington, Mark, 84 Hewitt, Patricia, 180 Hewlett-Packard, 30 Hills Report on social housing, 290 Hilton, Paris, 304 Himmelfarb, Gertrude, 146 Hirst, Damien, 12 history, economic, 121–36, 166, 285–6, 353–4 Hobhouse, Leonard, 220, 222, 234, 235, 261, 266 Hobsbawm, Eric, 100 Hoffman, Elizabeth, 60 Holland, 113, 124, 230 Honda, 91, 269 Hong Kong, 168 Hopkins, Harry, 300 Horton, Tim, 277 House of Commons, 14–15, 223, 312–13, 337–9, 345 House of Lords, 15, 128, 129, 312, 334, 344, 346–7 housing, social, 10, 289, 290–1, 292, 308–9 housing cost credits, 308–9 HSBC, 181, 251 Huhne, Chris, 346 Hunt family, sale of cattle herds, 201 Hurka, Thomas, 45–6 Hutton, Will, works of, x; The State We’re In, x, 148–9 IBM, 29, 164, 254 Iceland, 7, 138 ICT industry, 9, 29–30, 109, 134, 135–6, 182, 229 immigration, 11, 143, 326, 328, 342, 343, 386, 394; from Eastern Europe, 82, 281–2, 283; welfare state and, 81–2, 281–2, 283, 284 incapacity benefit, 27 the Independent, 93, 330 Independent Safeguarding Authority, 339 India, 144, 226, 230, 254, 354–5 individual responsibility, 17, 38, 39, 78–9 individualism, 54, 57, 66, 111, 221, 281, 341, 366; capitalism/free market theories and, ix, 17, 19, 27, 40, 145, 221, 234–5 Indonesia, 168 Industrial and Commercial Finance Corporation (now 3i), 250 industrial revolution, 28, 112, 115, 121–3, 124, 126–8, 130, 315 inflation, 6, 32, 355, 364, 365; targets, 163, 165, 208, 359 Ingham, Bernard, 312 innovation: see also entrepreneurs; national ecosystem of innovation; as collective and social, 40, 131, 219–22, 261, 265–6, 388; comparisons between countries, 67; competition and, 40, 114, 257–60; development times, 240, 243; discretionary effort and, 62, 65, 102–3, 105–6, 131, 222, 392–3; dissemination of knowledge and, 110–11, 112–13, 219–22, 265–6; due desert and, 40, 62, 67, 112, 117; ‘financial innovation’, 63–4, 138, 147, 149, 153–4, 182; general-purpose technologies (GPTs), 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384; high taxation as deterrent, 104, 105; history of, 107–17, 121–7, 131–4, 221; increased pace of advance, 228–9, 230, 266–7; incremental, 108, 254, 256; incumbent elites and, 29–30, 104, 106, 109, 111–12, 113, 114, 115, 116, 257; large firms and, 251–2, 254–5; as natural to humans, 106–7, 274; need for network of specialist banks, 251–2, 265, 371; in ‘open-access societies’, 109–13, 114, 116–17, 122–3, 126–7, 131, 136, 315; patents and copyright, 102, 103, 105, 110, 260–1, 263; private enterprise and, 100–1; regulation and, 268–70; risk-taking and, 6, 103, 111, 189; short term investment culture and, 33, 242–3, 244; small firms and, 252, 253–4, 255–6; universities and, 261–5 Innovation Fund, 21, 251, 252 Institute of Fiscal Studies, 275–6, 363, 368–9, 372 Institute of Government, 334, 335, 337, 343 insurance, 165–6, 187, 240, 242 Intel, 255, 256 intellectual property, 260–1 interest rates, 164, 191, 352–3, 354, 357, 359, 360, 361, 362, 367, 380 internal combustion engine, 28, 109, 134 International Monetary Fund (IMF), 9, 152–3, 177–8, 187, 207, 226, 383, 384; Asian currency crisis (1997) and, 168–9; proposed bank levy and financial activities tax, 209; support for fiscal policy, 367 internet, 11, 28, 52, 109, 134, 227, 256, 265; news and politics on, 316–17, 321, 349; pay-walls, 316, 349; as threat to print media, 324, 331, 349 iPods, 105, 143 Iraq War, 14–15, 18, 36, 144, 329 Ireland, 138 iron steamships, 126 Islam, 352, 353 Islamic fundamentalism, 283, 384 Israel, 251, 322–3 Italy, 101, 103, 317, 328 ITN, 330, 331 James, Howell, 180 Japan, 36, 67, 140, 163, 168, 244, 369, 375, 376, 385, 386; credit crunch (1989-92), 359–60, 361–2, 382; debt levels, 356, 362, 363; incumbent elites in early twentieth-century, 134; Tokyo Bay, 254; Top Runner programme, 269 Jenkins, Roger, 296 Jobcentre Plus, 300 Jobs, Steve, 29–30, 65–6, 71 John Lewis Group, 66, 67, 93, 246 Johnson, Boris, 179 Johnson, Simon, 177 Jones, Tom, 242 Joseph Rowntree Foundation, 21, 278–9 journalism, 318–21, 323–4, 326–7 Jovanovic, Boyan, 256 JP Morgan, 169, 191–2, 195–6 judges, 15 justice systems, 30–1, 44–5, 49; symbolised by pair of scales, 4, 40 Kahneman, Daniel, 94–5 Kant, Immanuel, 73, 112, 274 Kay, John, 175 Kennedy, Helena, 340 Keynesian economics, x, xi, 184, 190, 196–7, 354, 362, 390–1 Kindleberger, Charles, 184 King, Mervyn, 213 Kinnock, Neil, 142 kitemarking, need for, 267 Klenow, Peter, 52 Knetsch, Jack, 94–5 Knight, Frank, Risk, Uncertainty and Profit (1921), 189, 191, 196–7 knowledge: capitalist advance of, 27–8, 31, 110–11, 112–13; public investment in learning, 28, 31, 40, 131, 220, 235, 261, 265 knowledge economy, 8, 11–12, 34, 135–6, 229–33, 258, 273–4, 341, 366; credit growth and, 355; graduate entry to, 295; large firms and, 251–2, 254–5; small firms and, 252, 253–4, 255–6, 261; state facilitation of, 219–22, 229–30 Koizumi administration in Japan, 362 Koo, Richard, 360, 361–2 Kuper, Simon, 352 Kwak, James, 64, 177 labour market, 52, 62, 83, 95; flexibility, 5, 275, 276, 299, 364–5, 387 laissez-faire ideology, 153, 198–9, 259 Laker, Freddie, 30 Lambert, Richard, 6–7 language acquisition and cognitive development, 288, 289 Large Hadron Collider, 263 Latin American debt crisis, 164 Lavoisier, Antoine, 31 Lazarus, Edmund, 179 Leahy, Sir Terry, 295 Learning and Skills Council, 282, 300 left wing politics, modern, 17, 38, 78–83 Lehman Brothers, 150, 152, 165, 170, 181, 192, 204 lender-of-last-resort function, 155, 158, 160, 187 Lerner, Melvin, 83 leverage, 6, 29, 154–6, 157, 158, 172, 179, 180, 198, 204, 209–10, 254, 363; disguised on balance sheet, 181, 195; effect on of credit crunches, 358, 359, 360, 361, 374–5; excess/massive levels, 7, 147–8, 149, 150–1, 158, 168, 170, 187, 192, 197, 203; need for reform of, 206, 207, 208; private equity and, 245–6, 247 Lewis, Jemima, 282, 287 Lewis, Joe, 12 libel laws, 332–3, 348–9 Liberal Democrats, xi, 11, 98, 141, 343, 360–1, 368; general election (2010) and, 97, 142, 179, 271, 390 libertarianism, 234 Likierman, Sir Andrew, 180 limited liability (introduced 1855), 353–4, 363 Lind, Allan, 85 Lindert, Peter, 280–1 Lipsey, Richard, 108, 263 Lisbon earthquake (1755), 54 Lisbon Treaty Constitution, 328 literacy and numeracy, 20–1 livestock fairs, pre-twentieth-century, 90 Lloyds Bank, 176, 178, 186, 202, 204, 251, 259 Lo, Andrew, 195 loan sharks, illegal, 291 local government, 307, 347–8 Locke, John, 54–5, 59 London School of Economics (LSE), 246 London Stock Exchange, 90, 162 London Underground, financing of, 336, 389 lone parent families, 292 Long Term Capital Management (LTCM), 169–70, 183, 193, 194, 200–1 long-term incentive plans (LTIPs), 6 Loomes, Graham, 59 luck, 23, 26–7, 38, 39, 40, 41, 67, 68, 69–77, 222, 273, 393–4; diplomacy/international relations and, 385–6; disadvantaged children and, 74–5, 83, 288–90; executive pay and, 138; taxation and, 73–4, 75, 78, 303 Luxembourg, 138 MacDonald, Ramsey, 315 Machiavelli, Niccolo, 62 Machin, Steve, 283–4 Macmillan Committee into City (1931), 179 Madoff, Bernie, 7 mafia, Italian, 101, 104–5 Major, John, 138, 180, 279, 334 Malaysia, 168 malls, out-of-town, 143 Mandelbrot, Benoit, 194, 195 Mandelson, Peter, 21, 24, 142, 148, 220 manufacturing sector, decline of, 5, 8, 219, 272, 292, 341, 363 Manza, Jeff, 281, 282 Marconi, 142–3 market fundamentalism, 9–19, 32–3, 40–2, 366; belief in efficiency of markets, 188–9, 190, 193, 194, 235–9, 366; coalition government (from May 2010) and, 370; collapse of, 3–4, 7–9, 19, 20, 219–20, 235, 392; Conservative Party and, 5, 17, 138, 147, 160, 161; domination of, 5–6, 14, 16–17, 163, 364–5, 387–90; likely resurgence of, 5, 8; New Labour and, x–xi, 5, 19, 144–9, 388, 389–90; post-communist fiasco in Russia, 135; rejection of fiscal policy, 224–5, 364–5, 367 mark-to-market accounting convention, 175 Marland, Lord Jonathan, 179 Marquand, David, 328 Marsh, Jodie, 64, 65 Marx, Karl, 56–8, 121–2 Maslow’s hierarchy of needs, 232, 274–5 mass production, 109, 134, 182 Masters, Blythe, 196 mathematical models (‘quants’), 105, 149, 151, 152, 165, 169, 188, 190–6, 203; extensions and elaborations, 194; Gaussian distribution, 190–1, 194; JP Morgan and, 195–6 Matthewson, Sir George (former chair of RBS), 25 Maude, Francis, 180 Mayhew, Henry, 285–6 McCartney, Paul, 247 McGoldrick, Mark, 174 McKinsey Global Institute, 253, 358–9, 360, 363 McQueen, Alexander, 143 media, mainstream, 6, 35, 312, 315–20, 321–32, 348–50; commoditisation of information, 318–20, 321; communications technology and, 316, 320, 349; domination of state by, 14, 16, 223–4, 338, 339, 343; fanatical anti-Europeanism, 15, 328, 378; foreign/tax exile ownership of, 218; hysterical tabloid campaigns, 10–11, 298, 319–20; ‘info-capitalism’, 317–18, 327, 328, 342; lauding of celebrity, 281, 314; modern 24/7 news agenda, 13, 224, 321, 343; regional newspapers, 331; as setter of agenda/narrative, 327–31, 342; television news, 330–1; undermining of democracy, 315–16, 317–18, 321–9, 333, 350; urgent need for reform, 35, 218, 344, 348–50, 391; view of poverty as deserved, 25, 53, 83, 281, 286; weakness of foreign coverage, 322, 323, 330 Mencken, H.L., 311 mergers and takeovers, 8, 21, 33, 92, 245, 251, 258, 259, 388 Merkel, Angela, 381–2 Merrill Lynch, 150, 170, 175, 192 Merton, Robert, 169, 191 Meucci, Antonnio, 221 Mexico, 30, 385 Meyer, Christopher, 332 Michalek, Richard, 175 Microsoft, 71, 114, 136, 253, 254, 258–9 Milburn, Alan, 273 Miles, David, 186–7 Milgram, Stanley, 200 millennium bug, 319 Miller, David, 70, 76, 77 minimum wage, 142, 278 Minsky, Hyman, 183, 185 Mirror newspapers, 319, 329 Mlodinow, Leonard, 72–3 MMR vaccine, 327 mobile phones, 30, 134, 143, 229, 349 modernity, 54–5, 104 Mokyr, Joel, 112 monarchy, 15, 312, 336 Mondragon, 94 monetary policy, 154, 182, 184, 185, 208, 362, 367 monopolies, 74, 102, 103, 160, 314; history of, 104, 113, 124, 125–6, 130–4; in the media, 30, 317, 318, 331, 350; modern new wave of, 35, 135–6, 137–8, 201–2, 258–9; ‘oligarchs’, 30, 65, 104 Monopolies and Mergers Commission, 258, 318 Moody’s (credit-ratings agency), 151, 175 morality, 16–27, 37, 44–54, 70, 73; see also desert, due, concept of; fairness; proportionality; debt and, 351–4, 357, 360–1 Morgan, JP, 67 Morgan, Piers, 329 Morgan Stanley, 150 Mulas-Granados, Carlos, 367 Murdoch, James, 389 Murdoch, Rupert, 317–18, 320, 327 Murphy, Kevin, 62, 63 Murray, Jim ‘Mad Dog’, 321 Myners, Paul, 340 Nash bargaining solution, 60 National Audit Office, 340 National Child Development Study, 289–90 national ecosystem of innovation, 33–4, 65, 103, 206, 218, 221, 239–44, 255–9, 374; state facilitation of, 102, 219–22, 229–30, 233, 251–2, 258–66, 269–70, 392 National Health Service (NHS), 21, 27, 34, 92, 265, 277, 336, 371–2; popular support for, 75, 77, 283 national insurance system, 81, 277, 302 national strategy for neighbourhood renewal, 278 Navigation Acts, abolition of, 126 Neiman, Susan, 18–19 neo-conservatism, 17–18, 144–9, 387–90 network theory, 199–201, 202–4, 206; Pareto curve and, 201–2 New Economics Foundation, 62 New Industry New Jobs strategy, 21 New Labour: budget deficit and, 224, 335, 360, 368, 369; business friendly/promarket policies, x–xi, 139–40, 142, 145, 146–7, 162, 198–9, 382; City of London and, x–xi, 5, 19, 22, 142–3, 144–5, 355; decline of class-based politics, 341; failure to challenge elites, x–xi, 14, 22, 388, 389–90; general election (1992) and, 138, 140–1, 144, 148, 277; general election (2005) and, 97; general election (2010) and, 20, 271, 334, 374, 378; light-touch regulation and, 138, 145, 146–7, 162, 198–9; New Industry New Jobs strategy, 21; one-off tax on bank bonuses, 26, 179, 249; record in government, 10–11, 19, 20–2, 220, 276–80, 302, 306, 334–6, 366–7, 389–90; reforms to by ‘modernisers’, 141; responses to newspaper campaigns, 11 New York markets, 140, 152, 162; Asian and/or OPEC capital surpluses and, 169, 171, 354; London/New York axis, 149, 150–1, 157–8, 160, 188, 202 Newsweek, 174 Newton, Isaac, 31, 127, 190 NHS Direct, 372 Nicoli, Eric, 13 non-executive directors (NEDs), 249–50 Nordhaus, William, 260 Nordic countries, 262; Iceland, 7, 138; Norway, 281; Sweden, 264, 281 North, Douglas, 113, 116, 129–30 Northern Rock, 9, 156, 157, 158, 186, 187–8, 202, 204, 251, 340–1 Norton Publishing, 93 Nozick, Robert, 234, 235 nuclear non-proliferation, 226, 384, 394 Nussbaum, Martha, 79 Obama, Barack, 18, 183, 380, 382–3, 394–5 the Observer, 141, 294, 327 Office for Budget Responsibility, 360 Office of Fair Trading (OFT), 257, 258 OFSTED, 276 oil production, 322; BP Gulf of Mexico disaster (2010), 216–17, 392; finite stocks and, 230, 384; OPEC, 149, 161, 171; price increase (early 1970s), 161; in USA, 130, 131, 132 Olsen, Ken, 29 Olympics (2012), 114 open markets, 29, 30, 31, 40, 89, 92, 100–1, 366, 377, 379, 382, 384; see also ‘open-access societies’; as determinants of value, 51–2, 62; fairness and, 60–1, 89–91, 94–6; ‘reference prices’ and, 94–6 ‘open-access societies’, 134, 135, 258, 272, 273, 275, 276, 280–1, 394; Britain as ‘open-access society’ (to 1850), 124, 126–7; democracy and, 136, 314; Enlightenment and, 30–1, 314–15, 394; innovation and invention in, 109–13, 114, 116–17, 122–3, 126–7, 131, 136, 315; partial political opening in, 129–30; US New Freedom programme, 132–3 opium production, 102 options, 166, 188, 191 Orange County derivatives losses, 167 Organisation for Economic Co-operation and Development (OECD), 180, 337, 373 Orwell, George, 37 Osborne, George, 147, 208, 224, 245, 302, 338 Overend, Gurney and Co., 156–7 Oxbridge/top university entry, 293–4, 306 Oxford University, 261 Page, Scott, 204 Paine, Tom, 347 Pareto, Vilfredo, 201–2 Paribas, 152, 187 Parkinson, Lance-Bombardier Ben, 13 participation, political, 35, 86, 96, 99 Paulson, Henry, 177 Paulson, John, 103, 167–8 pay of executives and bankers, 3–4, 5, 6–7, 22, 66–7, 138, 387; bonuses, 6, 25–6, 41, 174–5, 176, 179, 208, 242, 249, 388; high levels/rises of, 6–7, 13, 25, 82–3, 94, 172–6, 216, 296, 387, 393; Peter Mandelson on, 24; post-crash/bail-outs, 176, 216; in private equity houses, 248; remuneration committees, 6, 82, 83, 176; shared capitalism and, 66, 93; spurious justifications for, 42, 78, 82–3, 94, 176, 216 pension, state, 81, 372, 373 pension funds, 240, 242 Pettis, Michael, 379–80 pharmaceutical industry, 219, 255, 263, 265, 267–8 Phelps, Edmund, 275 philanthropy and charitable giving, 13, 25, 280 Philippines, 168 Philippon, Thomas, 172–3 Philips Electronics, Royal, 256 Pimco, 177 piracy, 101–2 Plato, 39, 44 Player, Gary, 76 pluralist state/society, x, 35, 99, 113, 233, 331, 350, 394 Poland, 67, 254 political parties, 13–14, 340, 341, 345, 390; see also under entries for individual parties political system, British: see also democracy; centralised constitution, 14–15, 35, 217, 334; coalitions as a good thing, 345–6; decline of class-based politics, 341; devolving of power to Cardiff and Edinburgh, 15, 334; expenses scandal, 3, 14, 217, 313, 341; history of (to late nineteenth-century), 124–30; lack of departmental coordination, 335, 336, 337; long-term policy making and, 217; monarchy and, 15, 312, 336; politicians’ lack of experience outside politics, 338; required reforms of, 344–8; select committee system, 339–40; settlement (of 1689), 125; sovereignty and, 223, 346, 347, 378; urgent need for reform, 35, 36–7, 218, 344; voter-politician disengagement, 217–18, 310, 311, 313–14, 340 Pommerehne, Werner, 60 population levels, world, 36 Portsmouth Football Club, 352 Portugal, 108, 109, 121, 377 poverty, 278–9; child development and, 288–90; circumstantial causes of, 26, 283–4; Conservative Party and, 279; ‘deserving’/’undeserving’ poor, 276, 277–8, 280, 284, 297, 301; Enlightenment views on, 53, 55–6; need for asset ownership, 301–3, 304; political left and, 78–83; the poor viewed as a race apart, 285–7; as relative not absolute, 55, 84; Adam Smith on, 55, 84; structure of market economy and, 78–9, 83; view that the poor deserve to be poor, 25, 52–3, 80, 83, 281, 285–8, 297, 301, 387; worldwide, 383, 384 Power2010 website, 340–1 PR companies and media, 322, 323 Press Complaints Commission (PCC), 325, 327, 331–2, 348 preventative medicine, 371 Price, Lance, 328, 340 Price, Mark, 93 Prince, Chuck, 184 printing press, 109, 110–11 prisoners, early release of, 11 private-equity firms, 6, 28–9, 158, 172, 177, 179, 205, 244–9, 374 Procter & Gamble, 167, 255 productive entrepreneurship, 6, 22–3, 28, 29–30, 33, 61–2, 63, 78, 84, 136, 298; in British history (to 1850), 28, 124, 126–7, 129; due desert/fairness and, 102–3, 105–6, 112, 223, 272, 393; general-purpose technologies (GPTs) and, 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384 property market: baby boomer generation and, 372–3; Barker Review, 185; boom in, 5, 143, 161, 183–4, 185–7, 221; bust (1989-91), 161, 163; buy-to-let market, 186; commercial property, 7, 356, 359, 363; demutualisation of building societies, 156, 186; deregulation (1971) and, 161; Japanese crunch (1989-92) and, 361–2; need for tax on profits from home ownership, 308–9, 373–4; property as national obsession, 187; residential mortgages, 7, 183–4, 186, 356, 359, 363; securitised loans based mortgages, 171, 186, 188; shadow banking system and, 171, 172; ‘subprime’ mortgages, 64, 152, 161, 186, 203 proportionality, 4, 24, 26, 35, 38, 39–40, 44–6, 51, 84, 218; see also desert, due, concept of; contributory/discretionary benefits and, 63; diplomacy/ international relations and, 385–6; job seeker’s allowance as transgression of, 81; left wing politics and, 80; luck and, 73–7, 273; policy responses to crash and, 215–16; poverty relief systems and, 80–1; profit and, 40, 388; types of entrepreneurship and, 61–2, 63 protectionism, 36, 358, 376–7, 378, 379, 382, 386 Prussia, 128 Public Accounts Committee, 340 Purnell, James, 338 quantitative easing, 176 Quayle, Dan, 177 race, disadvantage and, 290 railways, 9, 28, 105, 109–10, 126 Rand, Ayn, 145, 234 Rawls, John, 57, 58, 63, 73, 78 Reagan, Ronald, 135, 163 recession, xi, 3, 8, 9, 138, 153, 210, 223, 335; of 1979-81 period, 161; efficacy of fiscal policy, 367–8; VAT decrease (2009) and, 366–7 reciprocity, 43, 45, 82, 86, 90, 143, 271, 304, 382; see also desert, due, concept of; proportionality Reckitt Benckiser, 82–3 Regional Development Agencies, 21 regulation: see also Bank of England; Financial Services Authority (FSA); Bank of International Settlements (BIS), 169, 182; Basel system, 158, 160, 163, 169, 170–1, 196, 385; big as beautiful in global banking, 201–2; Big Bang (1986), 90, 162; by-passing of, 137, 187; capital requirements/ratios, 162–3, 170–1, 208; dismantling of post-war system, 149, 158, 159–63; economists’ doubts over deregulation, 163; example of China, 160; failure to prevent crash, 154, 197, 198–9; Glass-Steagall abolition (1999), 170, 202–3; light-touch, 5, 32, 138, 151, 162, 198–9; New Deal rules (1930s), 159, 162; in pharmaceutical industry, 267–8; as pro-business tool, 268–70; proposed Financial Policy Committee, 208; required reforms of, 267, 269–70, 376, 377, 384, 392; reserve requirements scrapped (1979), 208; task of banking authorities, 157; Top Runner programme in Japan, 269 Reinhart, Carmen, 214, 356 Repo 105 technique, 181 Reshef, Ariell, 172–3 Reuters, 322, 331 riches and wealth, 11–13, 272–3, 283–4, 387–8; see also pay of executives and bankers; the rich as deserving of their wealth, 25–6, 52, 278, 296–7 Rickards, James, 194 risk, 149, 158, 165, 298–302, 352–3; credit default swaps and, 151, 152, 166–8, 170, 171, 175, 176, 191, 203, 207; derivatives and see derivatives; distinction between uncertainty and, 189–90, 191, 192–3, 196–7; employment insurance concept, 298–9, 301, 374; management, 165, 170, 171, 189, 191–2, 193–4, 195–6, 202, 203, 210, 354; securitisation and, 32, 147, 165, 169, 171, 186, 188, 196; structured investment vehicles and, 151, 165, 169, 171, 188; value at risk (VaR), 171, 192, 195, 196 Risley, Todd, 289 Ritchie, Andrew, 103 Ritter, Scott, 329 Robinson, Sir Gerry, 295 Rogoff, Ken, 214, 356 rogue states, 36 Rolling Stones, 247 Rolls-Royce, 219, 231 Rome, classical, 45, 74, 108, 116 Roosevelt, Franklin D., 133, 300 Rothermere, Viscount, 327 Rousseau, Jean-Jacques, 56, 58, 112 Rousseau, Peter, 256 Rowling, J.K., 64, 65 Rowthorn, Robert, 292, 363 Royal Bank of Scotland (RBS), 25, 150, 152, 157, 173, 181, 199, 251, 259; collapse of, 7, 137, 150, 158, 175–6, 202, 203, 204; Sir Fred Goodwin and, 7, 150, 176, 340 Rubin, Robert, 174, 177, 183 rule of law, x, 4, 220, 235 Russell, Bertrand, 189 Russia, 127, 134–5, 169, 201, 354–5, 385; fall of communism, 135, 140; oligarchs, 30, 65, 135 Rwandan genocide, 71 Ryanair, 233 sailing ships, three-masted, 108 Sandbrook, Dominic, 22 Sands, Peter (CEO of Standard Chartered Bank), 26 Sarkozy, Nicolas, 51, 377 Sassoon, Sir James, 178 Scholes, Myron, 169, 191, 193 Schumpeter, Joseph, 62, 67, 111 science and technology: capitalist dynamism and, 27–8, 31, 112–13; digitalisation, 34, 231, 320, 349, 350; the Enlightenment and, 31, 108–9, 112–13, 116–17, 121, 126–7; general-purpose technologies (GPTs), 107–11, 112, 117, 126–7, 134, 228–9, 256, 261, 384; increased pace of advance, 228–9, 253, 297; nanotechnology, 232; New Labour improvements, 21; new opportunities and, 33–4, 228–9, 231–3; new technologies, 232, 233, 240; universities and, 261–5 Scotland, devolving of power to, 15, 334 Scott, James, 114–15 Scott Bader, 93 Scott Trust, 327 Second World War, 134, 313 Securities and Exchanges Commission, 151, 167–8 securitisation, 32, 147, 165, 169, 171, 186, 187, 196 self-determination, 85–6 self-employment, 86 self-interest, 59, 60, 78 Sen, Amartya, 51, 232, 275 service sector, 8, 291, 341, 355 shadow banking system, 148, 153, 157–8, 170, 171, 172, 187 Shakespeare, William, 39, 274, 351 shareholders, 156, 197, 216–17, 240–4, 250 Sher, George, 46, 50, 51 Sherman Act (USA, 1890), 133 Sherraden, Michael, 301 Shiller, Robert, 43, 298, 299 Shimer, Robert, 299 Shleifer, Andrei, 62, 63, 92 short selling, 103 Sicilian mafia, 101, 105 Simon, Herbert, 222 Simpson, George, 142–3 single mothers, 17, 53, 287 sixth form education, 306 Sky (broadcasting company), 30, 318, 330, 389 Skype, 253 Slim, Carlos, 30 Sloan School of Management, 195 Slumdog Millionaire, 283 Smith, Adam, 55, 84, 104, 112, 121, 122, 126, 145–6 Smith, John, 148 Snoddy, Ray, 322 Snow, John, 177 social capital, 88–9, 92 social class, 78, 130, 230, 304, 343, 388; childcare and, 278, 288–90; continued importance of, 271, 283–96; decline of class-based politics, 341; education and, 13, 17, 223, 264–5, 272–3, 274, 276, 292–5, 304, 308; historical development of, 56–8, 109, 115–16, 122, 123–5, 127–8, 199; New Labour and, 271, 277–9; working-class opinion, 16, 143 social investment, 10, 19, 20–1, 279, 280–1 social polarisation, 9–16, 34–5, 223, 271–4, 282–5, 286–97, 342; Conservative reforms (1979-97) and, 275–6; New Labour and, 277–9; private education and, 13, 223, 264–5, 272–3, 276, 283–4, 293–5, 304; required reforms for reduction of, 297–309 social security benefits, 277, 278, 299–301, 328; contributory, 63, 81, 283; flexicurity social system, 299–301, 304, 374; to immigrants, 81–2, 282, 283, 284; job seeker’s allowance, 81, 281, 298, 301; New Labour and ‘undeserving’ claimants, 143, 277–8; non-contributory, 63, 79, 81, 82; targeting of/two-tier system, 277, 281 socialism, 22, 32, 38, 75, 138, 144, 145, 394 Soham murder case, 10, 339 Solomon Brothers, 173 Sony, 254–5 Soros, George, 166 Sorrell, Martin, 349 Soskice, David, 342–3 South Korea, 168, 358–9 South Sea Bubble, 125–6 Spain, 123–4, 207, 358–9, 371, 377 Spamann, Holger, 198 special purpose vehicles, 181 Spitzer, Matthew, 60 sport, cheating in, 23 stakeholder capitalism, x, 148–9 Standard Oil, 130–1, 132 state, British: anti-statism, 20, 22, 233–4, 235, 311; big finance’s penetration of, 176, 178–80; ‘choice architecture’ and, 238, 252; desired level of involvement, 234–5; domination of by media, 14, 16, 221, 338, 339, 343; facilitation of fairness, ix–x, 391–2, 394–5; investment in knowledge, 28, 31, 40, 220, 235, 261, 265; need for government as employer of last resort, 300; need for hybrid financial system, 244, 249–52; need for intervention in markets, 219–22, 229–30, 235–9, 252, 392; need for reshaping of, 34; pluralism, x, 35, 99, 113, 233, 331, 350, 394; public ownership, 32, 240; target-setting in, 91–2; threats to civil liberty and, 340 steam engine, 110, 126 Steinmueller, W.

But for more than twenty years, since the Berlin Wall came down and communism collapsed in Eastern Europe, Britain has been in the vanguard of building a civilisation consecrated to business and the ideals of a particular kind of capitalism – one in which financial values and the interests of big finance rule supreme. To prosper in the economic sphere, human beings must put aside their instincts for morality and living a meaningful life. Instead, they must embrace self-interest and whatever response is forced on them by impersonal market judgements. Conservatives have been at the forefront of championing this amoral market fundamentalism. In this universe morality becomes a personal matter of conscience. It has no role in the economic sphere, and in social and interpersonal relationships individuals must accept personal responsibility. We are no longer social animals; to do things together collectively denies our essential individualism. These propositions are wrapped up in the rhetoric of freedom. It may be a highly partial and indeed incorrect view of human nature, but at least it has a moral message: do right by yourself and your individual conscience.


pages: 394 words: 85,734

The Global Minotaur by Yanis Varoufakis, Paul Mason

active measures, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bretton Woods, business climate, business cycle, capital controls, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, colonial rule, corporate governance, correlation coefficient, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, declining real wages, deindustrialization, endogenous growth, eurozone crisis, financial innovation, first-past-the-post, full employment, Hyman Minsky, industrial robot, Joseph Schumpeter, Kenneth Rogoff, Kickstarter, labour market flexibility, light touch regulation, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, market fundamentalism, Mexican peso crisis / tequila crisis, money market fund, mortgage debt, Myron Scholes, negative equity, new economy, Northern Rock, paper trading, Paul Samuelson, planetary scale, post-oil, price stability, quantitative easing, reserve currency, rising living standards, Ronald Reagan, special economic zone, Steve Jobs, structural adjustment programs, systematic trading, too big to fail, trickle-down economics, urban renewal, War on Poverty, WikiLeaks, Yom Kippur War

It is clear that the brief moment when Wall Street was weak enough to be forced into significant concessions had passed. The Minotaur’s most unsightly handmaiden had been emancipated. The question that now remains is: how will it manage without the Global Minotaur? We shall leave such speculation to the end of the book. The return of predatory governance, vacuous economics and the curious tragedy of market fundamentalism Free market fundamentalism, at the levels both of political ideas and of economic theory, has already featured as one of our Minotaur’s handmaidens (see chapter 5, Toxic theory, parts A and B). In a sense, it functioned in ways not much different from the way in which Marxism was employed under the Soviet regime: more honoured in the breach than in the observance. In both cases, lofty ideals, underpinned by fascinating economic treatises, were utilized for baser purposes: to legitimize a particular social group’s usurpation of power and wealth.

The top earners, the parts of American society that worked in or around the financial institutions, the fossil fuel industry, the industrial sectors attached to the military-industrial complex (mainly the electronics, IT-related, aeronautical and mechanical engineering sectors). It also benefited those lucky enough to own a part of Walmart-type, highly exploitative firms. The Minotaur worked for them. And free market fundamentalism was its ideological handmaiden. As for the actual ideals underpinning free market fundamentalism, their fate was identical to that of Marxism in Moscow: they became the first victims of its political champions’ rise to power. Indeed, when, in 1981, Ronald Reagan entered the White House, he spoke the language of supply-side economics, balanced budgets, the withering of big government (ironically, an expression first coined by Marx), etc.

., 82 Elizabeth II, Queen, 4, 5 ERAB (Economic Recovery Advisory Board), 180, 181 ERM (European Exchange Rate Mechanism), 197 EU (European Union): economies within, 196; EFSF, 174; European Financial Stability Mechanism, 174; financial support for the US, 216; origins, 73, 74, 75; SPV, 174 euro see eurozone eurobonds, toxic, 175–7 Europa myth, 201 Europe: aftermath of Crash of 2008, 162; bank bail-outs, 203–5; Crash of 2008, 2–3, 12–13, 183; end of Bretton Woods system, 95; eurozone problems, 165; Geithner–Summers Plan, 174–7; oil price rises, 98; unemployment, 164 see also specific countries European Central Bank see ECB European Coal and Steel Community (ECSC), 74, 75–6 European Commission, 157, 203, 204 European Common Market, 195 European Exchange Rate Mechanism (ERM), 197 European Financial Stability Facility (EFSF), 174, 207, 208–9 European Financial Stability Mechanism, 174, 175–7 European Investment Bank (EIB), 210 European Recovery Progam see Marshall Plan European Union see EU eurozone, 61, 62, 156, 164; crisis, 165, 174, 204, 208–9, 209–11; European banks’ exposure to, 203; formation of, 198, 202; France and, 198; Germany and, 198–201; and Greek crisis, 207 exchange rate system, Bretton Woods, 60, 63, 67 falsifiability, empirical test of, 221 Fannie Mae, 152, 166 Fed, the (Federal Reserve): aftermath of Crash of 2008, 159; Crash of 2008, 148, 149, 151, 153, 155, 156, 157; creation, 40; current problems, 164; Geithner–Summers Plan, 171–2, 173, 230; Greenspan and, 3, 10; interest rate policy, 99; sub-prime crisis, 147, 149; and toxic theory, 15 feudalism, 30, 31, 64 Fiat, 159 finance: as a pillar of industry, 31; role of, 35–8 Financial Crisis Inquiry Commission, 166 financialization, 30, 190, 222 First World War, Gold Standard suspension, 44 food: markets, 215; prices, 163 Ford, Henry, 39 formalist economic model, 139–40 Forrestal, James, 68 Fortis, 153 franc, value against dollar, 96 France: aid for banks, 157; colonialism criticized, 79; EU membership, 196; and the euro, 198; gold request, 94; Plaza Accord, 188; reindustrialization of Germany, 74; support for Dexia, 154 Freddie Mac, 152, 166 free market fundamentalism, 181, 182 French Revolution, 29 G7 group, 151 G20 group, 159, 163–4 Galbraith, John Kenneth, 73 GATT (General Agreement on Tariffs and Trade), 78 GDP (Gross Domestic Product): Britain, 4–5, 88, 158; eurozone, 199, 204; France, 88; Germany, 88, 88; Japan, 88, 88; US, 4, 72, 73, 87, 88, 88, 161; world, 88 Geithner–Summers Plan, 159, 169–83; in Europe, 174–7; results, 178–81; in the US, 169–74, 170, 230 Geithner, Timothy, 170, 173, 230 General Motors (GM), 131–2, 157–8, 160 General Theory (Keynes), 37 geopolitical power, 106–8 Germany: aftermath of the Second World War, 68, 73–4; competition with US, 98, 103; current importance, 251; and Europe, 195–8; and the eurozone, 198–201, 211; global capital, 115–16; Global Plan, 69, 70; Greek crisis, 206; house prices, 129; Marshall Plan, 73; reunification, 201–3; support for Hypo Real Estate, 155; trade surplus, 251; trade surpluses, 158 Giscard d’Estaing, Valery, 93 Glass–Steagall Act (1933), 10, 180 global balance, 22 global imbalances, 251–2 Global Plan: appraisal, 85–9; architects, 68; end of, 100–1, 182; geopolitical ideology, 79–82; Germany, 75; Marshall Plan, 74; origins, 67–71; real GDP per capita, 87; unravelling of, 90–4; US domestic policies, 82–5 global surplus recycing mechanism see GSRM global warming, 163 globalization, 12, 28, 125 GM (General Motors), 131–2, 157–8, 160 gold: prices, 96; rushes, 40; US reserves, 92–3 Gold Exchange Standard, collapse, 43–5 Goodwin, Richard, 34 Great Depression, 55, 58, 59, 80 Greece: currency, 205; debt crisis, 206–8 greed, Crash of 2008, 9–12 Greek Civil War, 71, 72, 79 Greenspan, Alan, 3, 10–11 Greenwald, Robert, 125–6 Gross Domestic Product see GDP GSRM (global surplus recycling mechanism), 62, 66, 85, 90, 109–10, 222, 223, 224, 248, 252–6 HBOS, 153, 156 Heath, Edward, 94 hedge funds, 147, 204; LTCM, 2, 13; toxic theory, 15 hedging, 120–1 history: consent as driving force, 29; Marx on, 178; as undemocratic, 28 Ho Chi Minh, 92 Holland, 79, 120, 155, 196, 204 home ownership, 12, 127–8; reposessions, 161 Homeownership Preservation Foundation, 161 Hoover, Herbert, 42–3, 44–5, 230 House Committee on Un-American Activities, 73 house prices, 12, 128–9, 129, 138; falling, 151, 152 human nature, 10, 11–12 humanity, in the workforce, 50–2, 54 Hypo Real Estate, 155 Ibn Khaldun, 33 IBRD (International Bank for Reconstruction and Development) see World Bank Iceland, 154, 155, 156, 203 ICU (International Currency Union) proposal, 60–1, 66, 90, 251 IMF (International Monetary Fund): burst bubbles, 190; cost of the credit crunch, 151; Crash of 2008, 155–6, 156, 159; demise of social services, 163; on economic growth, 159; European banking crisis, 208; G20 support for, 163–4; Greek crisis, 207; origins, 59; South East Asia, 192, 193; Third World debt crisis, 108; as a transnational institution, 253, 254 income: distribution, 64; national, 42; US national, 43 India: Britain’s stance criticized, 79; Crash of 2008, 163; suicides of farmers, 163 Indochina, and colonization, 79 Indonesia, 79, 191 industrialization: Britain, 5; Germany, 74–5; Japan, 89, 185–6; roots of, 27–8; South East Asia, 86 infinite regress, 47 interest rates: CDOs, 7; post-Global Plan, 99; prophecy paradox, 48; rises in, 107 International Bank for Reconstruction and Development (IBRD) see World Bank International Currency Union (ICU) proposal, 60–1, 66, 90, 253 International Labour Organisation, 159 International Monetary Fund see IMF Iran, Shah of, 97 Ireland: bankruptcy, 154, 156; EFSF, 175; nationalization of Anglo Irish Bank, 158 Irwin, John, 97 Japan: aftermath of the Second World War, 68–9; competition with the US, 98, 103; in decline, 186–91; end of Bretton Woods system, 95; financial support for the US, 216; global capital, 115–16; Global Plan, 69, 70, 76–8, 85–6; house prices, 129; labour costs, 105; new Marshall Plan, 77; Plaza Accord, 188; post-war, 185–91; post-war growth, 185–6; relations with the US, 187–8, 189; South East Asia, 91, 191–2; trade surpluses, 158 joblessness see unemployment Johnson, Lyndon B.: Great Society programmes, 83, 84, 92; Vietnam War, 92 JPMorgan Chase, 151, 153 keiretsu system, Japan, 186, 187, 188, 189, 191 Kennan, George, 68, 71 Kennedy, John F., New Frontier social programmes, 83, 84 Keynes, John Maynard: Bretton Woods conference, 59, 60, 62, 109; General Theory, 37; ICU proposal, 60, 66, 90, 109, 254, 255; influence on New Dealers, 81; on investment decisions, 48; on liquidity, 160–1; trade imbalances, 62–6 Keynsianism, 157 Kim Il Sung, 77 Kissinger, Henry, 94, 98, 106 Kohl, Helmut, 201 Korea, 91, 191, 192 Korean War, 77, 86 labour: as a commodity, 28; costs, 104–5, 104, 105, 106, 137; hired, 31, 45, 46, 53, 64; scarcity of, 34–5; value of, 50–2 labour markets, 12, 202 Labour Party (British), 69 labourers, 32 land: as a commodity, 28; enclosure, 64 Landesbanken, 203 Latin America: effect of China on, 215, 218; European banks’ exposure to, 203; financial crisis, 190 see also specific countries lead, prices, 96 Lebensraum, 67 Left-Right divide, 167 Lehman Brothers, 150, 152–3 leverage, 121–2 leveraging, 37 Liberal Democratic Party (Japan), 187 liberation movements, 79, 107 LIBOR (London Interbank Offered Rate), 148 liquidity traps, 157, 190 Lloyds TSB, 153, 156 loans: and CDOs, 7–8, 129–31; defaults on, 37 London School of Economics, 4, 66 Long-Term Capital Management (LTCM) hedge fund collapse, 13 LTCM (Long-Term Capital Management) hedge fund collapse, 2, 13 Luxembourg, support for Dexia, 154 Maastricht Treaty, 199–200, 202 MacArthur, Douglas, 70–1, 76, 77 machines, and humans, 50–2 Malaysia, 91, 191 Mao, Chairman, 76, 86, 91 Maresca, John, 106–7 Marjolin, Robert, 73 Marshall, George, 72 Marshall Plan, 71–4 Marx, Karl: and capitalism, 17–18, 19, 34; Das Kapital, 49; on history, 178 Marxism, 181, 182 Matrix, The (film), 50–2 MBIA, 149, 150 McCarthy, Senator Joseph, 73 mercantilism, in Germany, 251 merchant class, 27–8 Merkel, Angela, 158, 206 Merrill Lynch, 149, 153, 157 Merton, Robert, 13 Mexico: effect of China on, 214; peso crisis, 190 Middle East, oil, 69 MIE (military-industrial establishment), 82–3 migration, Crash of 2008, 3 military-industrial complex mechanism, 65, 81, 182 Ministry for International Trade and Industry (Japan), 78 Ministry of Finance (Japan), 187 Minotaur legend, 24–5, 25 Minsky, Hyman, 37 money markets, 45–6, 53, 153 moneylenders, 31, 32 mortgage backed securities (MBS) 232, 233, 234 NAFTA (North American Free Trade Agreement), 214 National Bureau of Economic Research (US), 157 National Economic Council (US), 3 national income see GDP National Security Council (US), 94 National Security Study Memorandum 200 (US), 106 nationalization: Anglo Irish Bank, 158; Bradford and Bingley, 154; Fortis, 153; Geithner–Summers Plan, 179; General Motors, 160; Icelandic banks, 154, 155; Northern Rock, 151 NATO (North Atlantic Treaty Organization), 76, 253 negative engineering, 110 negative equity 234 neoliberalism, 139, 142; and greed, 10 New Century Financial, 147 New Deal: beginnings, 45; Bretton Woods conference, 57–9; China, 76; Global Plan, 67–71, 68; Japan, 77; President Kennedy, 84; support for the Deutschmark, 74; transfer union, 65 New Dealers: corporate power, 81; criticism of European colonizers, 79 ‘new economy’, 5–6 New York stock exchange, 40, 158 Nietzsche, Friedrich, 19 Nixon, Richard, 94, 95–6 Nobel Prize for Economics, 13 North American Free Trade Agreement (NAFTA), 214 North Atlantic Treaty Organization (NATO), 76 North Korea see Korea Northern Rock, 148, 151 Obama administration, 164, 178 Obama, Barack, 158, 159, 169, 180, 230, 231 OECD (Organisation for Economic Co-operation and Development), 73 OEEC (Organisation for European Economic Co-operation), 73, 74 oil: global consumption, 160; imports, 102–3; prices, 96, 97–9 OPEC (Organization of the Petroleum Exporting Countries), 96, 97 paradox of success, 249 parallax challenge, 20–1 Paulson, Henry, 152, 154, 170 Paulson Plan, 154, 173 Penn Bank, 40 Pentagon, the, 73 Plaza Accord (1985), 188, 192, 213 Pompidou, Georges, 94, 95–6 pound sterling, devaluing, 93 poverty: capitalism as a supposed cure for, 41–2; in China, 162; reduction in the US, 84; reports on global, 125 predatory governance, 181 prey–predator dynamic, 33–5 prices, flexible, 40–1 private money, 147, 177; Geithner–Summers Plan, 178; toxic, 132–3, 136, 179 privatization, of surpluses, 29 probability, estimating, 13–14 production: cars, 70, 103, 116, 157–8; coal, 73, 75; costs, 96, 104; cuts in, 41; in Japan, 185–6; processes, 30, 31, 64; steel, 70, 75 production–distribution cycle, 54 property see real estate prophecy paradox, 46, 47, 53 psychology, mass, 14 public debt crisis, 205 quantitative easing, 164, 231–6 railway bubbles, 40 Rational Expectations Hypothesis (REH), 15–16 RBS (Royal Bank of Scotland), 6, 151, 156; takeover of ABN-Amro, 119–20 Reagan, Ronald, 10, 99, 133–5, 182–3 Real Business Cycle Theory (RBCT), 15, 16–17 real estate, bubbles, 8–9, 188, 190, 192–3 reason, deferring to expectation, 47 recession predictions, 152 recessions, US, 40, 157 recycling mechanisms, 200 regulation, of banking system, 10, 122 relabelling, 14 religion, organized, 27 renminbi (RMB), 213, 214, 217, 218, 253 rentiers, 165, 187, 188 representative agents, 140 Reserve Bank of Australia, 148 reserve currency status, 101–2 risk: capitalists and, 31; riskless, 5, 6–9, 14 Roach, Stephen, 145 Robbins, Lionel, 66 Roosevelt, Franklin D., 165; attitude towards Britain, 69; and bank regulation, 10; New Deal, 45, 58–9 Roosevelt, Theodore (‘Teddy’), 180 Royal Bank of Scotland (RBS), 6, 151, 156; takeover of ABN-Amro, 119–20 Rudd, Kevin, 212 Russia, financial crisis, 190 Saudi Arabia, oil prices, 98 Scandinavia, Gold Standard, 44 Scholes, Myron, 13 Schopenhauer, Arthur, 19 Schuman, Robert, 75 Schumpter, Joseph, 34 Second World War, 45, 55–6; aftermath, 87–8; effect on the US, 57–8 seeds, commodification of, 163 shares, in privatized companies, 137, 138 silver, prices, 96 simulated markets, 170 simulated prices, 170 Singapore, 91 single currencies, ICU, 60–1 slave trade, 28 SMEs (small and medium-sized enterprises), 186 social welfare, 12 solidarity (asabiyyah), 33–4 South East Asia, 91; financial crisis, 190, 191–5, 213; industrialization, 86, 87 South Korea see Korea sovereign debt crisis, 205 Soviet Union: Africa, 79; disintegration, 201; Marshall Plan, 72–3; Marxism, 181, 182; relations with the US, 71 SPV (Special Purpose Vehicle), 174 see also EFSF stagflation, 97 stagnation, 37 Stalin, Joseph, 72–3 steel production, in Germany, 70 Strauss-Kahn, Dominique, 60, 254, 255 Summers, Larry, 230 strikes, 40 sub-prime mortgages, 2, 5, 6, 130–1, 147, 149, 151, 166 success, paradox of, 33–5, 53 Suez Canal trauma, 69 Suharto, President of Indonesia, 97 Summers, Larry, 3, 132, 170, 173, 180 see also Geithner–Summers Plan supply and demand, 11 surpluses: under capitalism, 31–2; currency unions, 61; under feudalism, 30; generation in the EU, 196; manufacturing, 30; origin of, 26–7; privatization of, 29; recycling mechanisms, 64–5, 109–10 Sweden, Crash of 2008, 155 Sweezy, Paul, 73 Switzerland: Crash of 2008, 155; UBS, 148–9, 151 systemic failure, Crash of 2008, 17–19 Taiwan, 191, 192 Tea Party (US), 162, 230, 231, 281 technology, and globalization, 28 Thailand, 91 Thatcher, Margaret, 117–18, 136–7 Third World: Crash of 2008, 162; debt crisis, 108, 219; interest rate rises, 108; mineral wealth, 106; production of goods for Walmart, 125 tiger economies, 87 see also South East Asia Tillman Act (1907), 180 time, and economic models, 139–40 Time Warner, 117 tin, prices, 96 toxic theory, 13–17, 115, 133–9, 139–42 trade: balance of, 61, 62, 64–5; deficits (US), 111, 243; global, 27, 90; surpluses, 158 trades unions, 124, 137, 202 transfer unions, New Deal, 65 Treasury Bills (US), 7 Treaty of Rome, 237 Treaty of Versailles, 237 Treaty of Westphalia, 237 trickle-down, 115, 135 trickle-up, 135 Truman Doctrine, 71, 71–2, 77 Truman, Harry, 73 tsunami, effects of, 194 UBS, 148–9, 151 Ukraine, and the Crash of 2008, 156 UN Security Council, 253 unemployment: Britain, 160; Global Plan, 96–7; rate of, 14; US, 152, 158, 164 United States see US Unocal, 106 US economy, twin deficits, 22–3, 25 US government, and South East Asia, 192 US Mortgage Bankers Association, 161 US Supreme Court, 180 US Treasury, 153–4, 156, 157, 159; aftermath of the Crash of 2008, 160; Geithner–Summers Plan, 171–2, 173; bonds, 227 US Treasury Bills, 109 US (United States): aftermath of the Crash of 2008, 161–2; assets owned by foreign state institutions, 216; attitude towards oil price rises, 97–8; China, 213–14; corporate bond purchases, 228; as a creditor nation, 57; domestic policies during the Global Plan, 82–5; economy at present, 184; economy praised, 113–14; effects of the Crash of 2008, 2, 183; foreign-owned assets, 225; Greek Civil War, 71; labour costs, 105; Plaza Accord, 188; profit rates, 106; proposed invasion of Afghanistan, 106–7; role in the ECSC, 75; South East Asia, 192 value, costing, 50–1 VAT, reduced, 156 Venezuela, oil prices, 97 Vietnamese War, 86, 91–2 vital spaces, 192, 195, 196 Volcker, Paul: 2009 address to Wall Street, 122; demand for dollars, 102; and gold convertibility, 94; interest rate rises, 99; replaced by Greenspan, 10; warning of the Crash of 2008, 144–5; on the world economy, 22, 100–1, 139 Volcker Rule, 180–1 Wachowski, Larry and Andy, 50 wage share, 34–5 wages: British workers, 137; Japanese workers, 185; productivity, 104; prophecy paradox, 48; US workers, 124, 161 Wal-Mart: The High Cost of Low Price (documentary, Greenwald), 125–6 Wall Street: Anglo-Celtic model, 12; Crash of 2008, 11–12, 152; current importance, 251; Geithner–Summers Plan, 178; global profits, 23; misplaced confidence in, 41; private money, 136; profiting from sub-prime mortgages, 131; takeovers and mergers, 115–17, 115, 118–19; toxic theory, 15 Wallace, Harry, 72–3 Walmart, 115, 123–7, 126; current importance, 251 War of the Currents, 39 Washington Mutual, 153 weapons of mass destruction, 27 West Germany: labour costs, 105; Plaza Accord, 188 Westinghouse, George, 39 White, Harry Dexter, 59, 70, 109 Wikileaks, 212 wool, as a global commodity, 28 working class: in Britain, 136; development of, 28 working conditions, at Walmart, 124–5 World Bank, 253; origins, 59; recession prediction, 149; and South East Asia, 192 World Trade Organization, 78, 215 written word, 27 yen, value against dollar, 96, 188, 193–4 Yom Kippur War, 96 zombie banks, 190–1


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More From Less: The Surprising Story of How We Learned to Prosper Using Fewer Resources – and What Happens Next by Andrew McAfee

back-to-the-land, Bartolomé de las Casas, Berlin Wall, bitcoin, Branko Milanovic, British Empire, Buckminster Fuller, call centre, carbon footprint, clean water, cleantech, cloud computing, Corn Laws, creative destruction, crony capitalism, David Ricardo: comparative advantage, decarbonisation, dematerialisation, Deng Xiaoping, Donald Trump, Edward Glaeser, en.wikipedia.org, energy transition, Erik Brynjolfsson, failed state, Fall of the Berlin Wall, Haber-Bosch Process, Hans Rosling, humanitarian revolution, hydraulic fracturing, income inequality, indoor plumbing, intangible asset, James Watt: steam engine, Jeff Bezos, job automation, John Snow's cholera map, joint-stock company, Joseph Schumpeter, Khan Academy, Landlord’s Game, Louis Pasteur, Lyft, Marc Andreessen, market fundamentalism, means of production, Mikhail Gorbachev, oil shale / tar sands, Paul Samuelson, peak oil, precision agriculture, profit maximization, profit motive, risk tolerance, road to serfdom, Ronald Coase, Ronald Reagan, Scramble for Africa, Second Machine Age, Silicon Valley, Steve Jobs, Steven Pinker, Stewart Brand, telepresence, The Wealth of Nations by Adam Smith, Thomas Davenport, Thomas Malthus, Thorstein Veblen, total factor productivity, Uber and Lyft, uber lyft, Veblen good, War on Poverty, Whole Earth Catalog, World Values Survey

Much of the confusion stems from a caricature. Market fundamentalism describes the belief that capitalism alone is sufficient to ensure well-being of all members of a society, and that social safety nets are wasteful and unnecessary. Or, even worse, that they’re counterproductive because they reduce people’s incentive to work. The term is associated with the writings of the mid-twentieth-century novelist and political theorist Ayn Rand. The investor and philanthropist George Soros and others have used the term in connection with the policy agendas, initiated around 1980, of Ronald Reagan and Margaret Thatcher. But while Reagan and Thatcher clearly worked to shrink and change the welfare systems in their countries, they never sought to completely eliminate them. Market fundamentalism is a theoretical condition—a society with capitalism, but without welfare—that doesn’t exist in reality.

Market fundamentalism is a theoretical condition—a society with capitalism, but without welfare—that doesn’t exist in reality. Few people think that it should, outside of a few right-wing pundits in America (as the antitax crusader Grover Norquist said in 2001, “I don’t want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub”). Market fundamentalism is still a useful concept, though, because it anchors one end of the spectrum of belief about how much a government should rely on capitalism to ensure the well-being of its people. Market fundamentalists believe that capitalism by itself is enough. Social democrats, who occupy the next position on the spectrum, believe that it’s not. They believe that government should play an active role in helping out people who are temporarily or permanently left behind by capitalism, and in reducing its inequalities.

There would be no inequality, no money, no private property, no companies, no bosses, no governments, and no borders between nations. Marx provided few details on how a planetary communist economy would work—how goods and services would be produced and allocated to people—but he was sure that it would arise. He considered communism a historical inevitability, and socialism a kind of stepping-stone on the way to it. Market fundamentalism and communism are as different as it’s possible to imagine, but they do have one important thing in common: neither has ever existed in the real world. Countries that adopted Marx’s ideas never reached full communism; they instead remained at socialism (the full name of the Soviet Union—the Union of Soviet Socialist Republics—acknowledges this). North Korea still has money, private companies are allowed to operate in Cuba, and many sectors of the Chinese economy have a great deal of competition.


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If Mayors Ruled the World: Dysfunctional Nations, Rising Cities by Benjamin R. Barber

Affordable Care Act / Obamacare, American Legislative Exchange Council, Berlin Wall, bike sharing scheme, borderless world, Boris Johnson, Bretton Woods, British Empire, car-free, carbon footprint, Cass Sunstein, Celebration, Florida, clean water, corporate governance, crowdsourcing, David Brooks, desegregation, Detroit bankruptcy, digital Maoism, disintermediation, edge city, Edward Glaeser, Edward Snowden, Etonian, failed state, Fall of the Berlin Wall, feminist movement, Filter Bubble, George Gilder, ghettoisation, global pandemic, global village, Hernando de Soto, Howard Zinn, illegal immigration, In Cold Blood by Truman Capote, income inequality, informal economy, information retrieval, Jane Jacobs, Jaron Lanier, Jeff Bezos, London Interbank Offered Rate, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Masdar, megacity, microcredit, Mikhail Gorbachev, mortgage debt, mutually assured destruction, new economy, New Urbanism, Nicholas Carr, Norman Mailer, nuclear winter, obamacare, Occupy movement, Panopticon Jeremy Bentham, Peace of Westphalia, Pearl River Delta, peer-to-peer, planetary scale, plutocrats, Plutocrats, profit motive, Ralph Waldo Emerson, RFID, Richard Florida, Ronald Reagan, self-driving car, Silicon Valley, Skype, smart cities, smart meter, Steve Jobs, Stewart Brand, Telecommunications Act of 1996, The Death and Life of Great American Cities, The Fortune at the Bottom of the Pyramid, The Wealth of Nations by Adam Smith, Tobin tax, Tony Hsieh, trade route, UNCLOS, UNCLOS, unpaid internship, urban sprawl, War on Poverty, zero-sum game

Even normal democratic politics in the city helps to combat the bias against government and the public sector that has gripped national politics in the United States and the West. The three-decades-old assault on the public sector that has accompanied market fundamentalism has made the battle against inequality and injustice at every level of government more difficult.24 In the city, taking on the privatization ideology is both less practical (its causes lie well beyond the city in national political ideologies and divisive party principles) and yet also more doable because slurs against “big government” have less traction in municipal politics. The corrosive de-democratization in the political sphere that attends market fundamentalism nationally makes much less sense where government is neither big nor bureaucratic and where mayors are seen as fellow citizens struggling to address common problems.

A feeling of powerlessness fuels the assault on power; engaged citizenship assuages it. Citizens deride a theoretical “it”—an abstract sovereign “we” from which they have allowed themselves to become distanced. Not so the concrete municipal “we.” In the end, then, the antidote to market fundamentalism and political alienation is not less government but more transparency, more accountability, more public oversight and regulation; also more public interaction and consultation. In a word, more democracy. Strengthen the bonds with city government so that civic alienation is not an option. After all, it is not markets themselves but market fundamentalism with its animus to all public goods and government regulation that is the problem. Joseph E. Stiglitz has noted that a “more efficient economy and fairer society will also come from making markets work like markets—more competitive, less exploitative—and tempering their excesses.”27 Given the city’s scale, its immediacy, and the local character of city politics, cities have a better chance to do this temperately than any other level of government, both through intervention and public employment, and through public-private partnerships and collaboration with the business and NGO sectors.

I will not try to convince fans of Charles Murray he is mistaken in insisting that the word capitalist “has become an accusation” or that too many capitalists are themselves left-wingers who “appear to accept the mind-set that kept the world in poverty for millennia.”6 Miring ourselves in a fundamentalist critique of capitalism or the big-government/small-government quandary makes little sense. Instead of wrestling in the political mud, I want to explore pragmatic best practices that can affect segregation and inequality, and perhaps even ameliorate market fundamentalism down the line. I will be satisfied if we can achieve an outcome less inegalitarian and more democratic than any alternatives, and hence ensure that mayors do not in the first instance become planetary slumlords. Mayor Nenshi of Calgary worries that “great cities have inequality and wealth by definition: the reason they are cities is because people come from different parts of the income scale.”


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Economics Rules: The Rights and Wrongs of the Dismal Science by Dani Rodrik

airline deregulation, Albert Einstein, bank run, barriers to entry, Bretton Woods, business cycle, butterfly effect, capital controls, Carmen Reinhart, central bank independence, collective bargaining, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Donald Davies, Edward Glaeser, endogenous growth, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, Fellow of the Royal Society, financial deregulation, financial innovation, floating exchange rates, fudge factor, full employment, George Akerlof, Gini coefficient, Growth in a Time of Debt, income inequality, inflation targeting, informal economy, information asymmetry, invisible hand, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, labor-force participation, liquidity trap, loss aversion, low skilled workers, market design, market fundamentalism, minimum wage unemployment, oil shock, open economy, Pareto efficiency, Paul Samuelson, price stability, prisoner's dilemma, profit maximization, quantitative easing, randomized controlled trial, rent control, rent-seeking, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, school vouchers, South Sea Bubble, spectrum auction, The Market for Lemons, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, trade route, ultimatum game, University of East Anglia, unorthodox policies, Vilfredo Pareto, Washington Consensus, white flight

The agenda reflected an urge to unshackle these economies from the restraints of government regulation. The policy economists in Latin America and their advisers in Washington were convinced that government intervention had crushed growth and brought about the debt crisis of the 1980s. The remedy could be summarized in three words: “stabilize, privatize, and liberalize.” Williamson would frequently protest that his own list had described modest reforms that fell far short of “market fundamentalism,” the blanket term for the view that markets are the solution to all public policy problems. But the term “Washington Consensus” fit the zeitgeist of the era only too well. Advocates of the Washington Consensus—whether in its original or expanded versions—presented it as good economics. For them, the policies reflected what sound economics teaches: Free markets and competition enable the efficient allocation of scarce resources.

As three economists, themselves critics, put it, standard accounts “tend to miss the diversity that exists within the profession, and the many new ideas that are being tried out,” and they often overlook the reality that “one can be part of the mainstream and yet not necessarily hold ‘orthodox’ ideas.”1 The critics do have a point when they say economists act in ways that suggest otherwise, by preaching universal solutions or market fundamentalism. But critics also need to understand that economists who do this are, in fact, not being true to their own discipline. Such economists deserve their fellow economists’ rebuke as much as outsiders’ reproach. Once this point is recognized, many of the standard criticisms are nullified or lose their bite. Reconsidering the Usual Criticisms We have seen some of the leading criticisms under various guises in earlier chapters,.

Arthur, 32–33 “Life among the Econ” (Leijonhufvud), 9–10 Lincoln, Abraham, 52 Lipsey, Richard, 59 liquidity, 134–35, 155, 185 liquidity traps, 130 locational advantages, 108 London, England, congestion pricing and, 3 Lucas, Robert, 130, 131–32, 134–36 “Machiavelli’s Mistake: Why Good Laws Are No Substitute for Good Citizens” (Bowles), 71n macroeconomics, 39–40, 87, 102, 107, 143, 157n, 181 business cycles and, 125–37 capital flow and, 165–66 classical questions of, 101 demand-side view of, 128–30, 136–37 globalization and, 165–66 Madison, James, 187 Mäki, Uskali, 22n malaria, randomized testing and, 106, 204 Malthus, Thomas, 118 Manchester University, 197 Mankiw, Greg, 149, 150, 171n, 197 manufacturing: economic growth and, 163–64 exchange rate and, 100, 163 income inequality and, 141 marginal costs, 121, 122 marginalist economics, 119–22 marginal productivity, 120–21, 122–25 marginal utility, 121, 122 Mariel boatlift (1980), 57 market design models, 5 “Market for ‘Lemons’, The” (Akerlof), 69n market fundamentalism, 160, 178 markets: asymmetric information in, 68–69, 70, 71 behavioral economics and, 69–71, 104–7, 202–4 economic models and, see models economics courses and, 198 economists’ bias toward, 169–71, 182–83 efficiency in, xiii, 14, 21, 34, 48, 50, 51, 67, 98, 125, 147, 148, 150, 156–58, 161, 165, 170, 192–95, 196 general-equilibrium interactions in, 41, 56–58, 69n, 91, 120 in Great Recession, 156–59 imperfectly competitive types of, 67–69, 70, 136, 150, 162 incentives in, 7, 170, 172, 188–92 institutions and, 98, 161, 202 likely outcomes in, 17–18 multiple equilibria in, 16–17 perfectly competitive types of, 21, 27, 28, 47, 69n, 71, 122, 180 prisoners’ dilemma in, 14–15, 20, 21, 61–62, 187, 200 self-interest in, 21, 104, 158, 186–88, 190 social cooperation in, 195–96 supply and demand in, 13–14, 20, 99, 119, 122, 128–30, 136–37, 170 values in, 186–96 Washington Consensus and, 159–67, 169 Marshall, Alfred, 13n, 32, 119 “Marshallian Cross Diagrams and Their Uses before Alfred Marshall: The Origins of Supply and Demand Geometry” (Humphrey), 13n Marx, Groucho, 26 Marx, Karl, xi, 31, 116, 118 Massachusetts, University of (Amherst), 77 Massachusetts Institute of Technology (MIT), 107, 108, 165, 206 mathematical economics, 35 mathematical optimization, 30, 101, 202–3 mathematics: economic models and, 29–37, 47 social sciences and, 33–34 Maxwell’s equations, 66n Meade, James, 58 methodological individualism, 181 Mexico: antipoverty programs in, 3–4, 105–6 globalization and, 141, 166 microeconomics, 125–26, 131 microfounded models, 101 Miguel, Ted, 106–7 Milan, Italy, congestion pricing and, 3 Milgrom, Paul, 36n minimum wages, employment and, 17–18, 28n, 114, 115, 124, 143, 150, 151 Minnesota, University of, 131 Mishel, Lawrence, 124n models: authority and criticism of, 76–80 big data and, 38–39, 40 causal factors and, 40–41, 85–86, 99–100, 114–15, 179, 184, 200, 201, 204 coherent argument and clarity in, 80–81 common sense in, 11 comparative advantage principle and, 52–55, 58n, 59–60, 139, 170 compensation for risk and, 110 computers and, 38, 41 contextual truth in, 20, 174 contingency and, 25, 145, 173–74, 185 coordination and, 16–17, 42, 200 critical assumptions in, 18, 26–29, 94–98, 150–51, 180, 183–84, 202 criticisms of, 10–11, 178, 179–85 decision trees and, 89–90, 90 diagnostic analysis and, 86–93, 90, 97, 110–11 direct implications and, 100–109 dual economy forms of, 88 efficient-markets hypothesis and, 156–58 empirical method and, xii, 7, 46, 65, 72–76, 77–78, 137, 173–74, 183, 199–206 endogenous growth types of, 88 experiments compared with, 21–25 fables compared with, 18–21 field experiments and, 23–24, 105–8, 173, 202–5 general-equilibrium interactions and, 41, 56–58, 69n, 91, 120 goods and services and, 12 Great Recession and, 155–59 horizontal vs. vertical development and, 64n, 67, 71 hypotheses and, 46, 47–56 imperfectly competitive markets and, 67–69, 70, 136, 150, 162 incidental implications and, 109–11 institutions and, 12, 98, 202 intuition and, 46, 56–63 Keynesian types of, 40, 88, 101, 102, 127–30, 131, 133–34, 136–37 knowledge and, 46, 47, 63–72 main elements of, 31 mathematics and, 29–37, 47 neoclassical types of, 40, 88, 90–91, 121, 122 new classical approach to, 130–34, 136–37 parables and, 20 partial-equilibrium analysis and, 56, 58, 91 perfectly competitive markets and, 21, 27, 28, 47, 69n, 71, 122, 180 predictability and, 26–28, 38, 40–41, 85, 104, 105, 108, 115, 132, 133, 139–40, 184–85, 202 principle-agent types of, 155 questions and, 114–16 rationality postulate and, 202–3 real world application of, 171–72 rules of formulation in, 199–202 scale economy vs. local advantage in, 108 scientific advances by progressive formulations of, 63–72 scientific character of, 45–81 second-best theory and, 58–61, 163–64, 166 selection of, 83–112, 136–37, 178, 183–84, 208 simplicity and specificity of, 11, 179–80, 210 simplicity vs. complexity of, 37–44 social reality of, 65–67, 179 static vs. dynamic types of, 68 strategic interactions and, 61–62, 63 of supply and demand, 3, 13–14, 20, 99, 119, 122, 128–30, 136–37 theories and, 113–45 time-inconsistent preferences in, 62–63 tipping points arising from, 42 in trade agreements, 41 unrealistic assumptions in, 25–29, 180–81 validity of, 23–24, 66–67, 112 variety of, 11, 12–18, 26, 68, 72, 73, 114, 130, 198, 202, 208, 210 verbal vs. mathematical types of, 34 verification in selection of, 93–112 see also economics; macroeconomics; markets “Models Are Experiments, Experiments are Models” (Mäki), 22n monetary policies, 87 monopolies, 161 in imperfectly competitive markets, 67–68 in perfectly competitive markets, 122 price controls and, 28, 94–97, 150 Montesquieu, Charles-Louis de Secondat, Baron de La Brède et de, 196 mortality rates, 206 mortgage-backed securities, 155 mortgage finance, 39, 155 mosquito nets, randomized testing of, 106, 204 “Mr.


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This Changes Everything: Capitalism vs. The Climate by Naomi Klein

1960s counterculture, activist fund / activist shareholder / activist investor, battle of ideas, Berlin Wall, big-box store, bilateral investment treaty, British Empire, business climate, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, clean water, Climategate, cognitive dissonance, coherent worldview, colonial rule, Community Supported Agriculture, complexity theory, crony capitalism, decarbonisation, deindustrialization, dematerialisation, different worldview, Donald Trump, Downton Abbey, energy security, energy transition, equal pay for equal work, Exxon Valdez, failed state, Fall of the Berlin Wall, feminist movement, financial deregulation, food miles, Food sovereignty, global supply chain, hydraulic fracturing, ice-free Arctic, immigration reform, income per capita, Intergovernmental Panel on Climate Change (IPCC), Internet Archive, invention of the steam engine, invisible hand, Isaac Newton, James Watt: steam engine, Jones Act, Kickstarter, light touch regulation, market fundamentalism, moral hazard, Naomi Klein, new economy, Nixon shock, Occupy movement, offshore financial centre, oil shale / tar sands, open borders, patent troll, Pearl River Delta, planetary scale, post-oil, profit motive, quantitative easing, race to the bottom, Ralph Waldo Emerson, Rana Plaza, renewable energy transition, Ronald Reagan, smart grid, special economic zone, Stephen Hawking, Stewart Brand, structural adjustment programs, Ted Kaczynski, the scientific method, The Wealth of Nations by Adam Smith, trade route, transatlantic slave trade, trickle-down economics, Upton Sinclair, uranium enrichment, urban planning, urban sprawl, wages for housework, walkable city, Washington Consensus, Whole Earth Catalog, WikiLeaks

* * * Join our mailing list and get updates on new releases, deals, bonus content and other great books from Simon & Schuster. CLICK HERE TO SIGN UP or visit us online to sign up at eBookNews.SimonandSchuster.com CONTENTS * * * Epigraph Introduction  One Way or Another, Everything Changes PART ONE BAD TIMING 1. The Right Is Right: The Revolutionary Power of Climate Change 2. Hot Money: How Free Market Fundamentalism Helped Overheat the Planet 3. Public and Paid For: Overcoming the Ideological Blocks to the Next Economy 4. Planning and Banning: Slapping the Invisible Hand, Building a Movement 5. Beyond Extractivism: Confronting the Climate Denier Within PART TWO MAGICAL THINKING 6. Fruits, Not Roots: The Disastrous Merger of Big Business and Big Green 7. No Messiahs: The Green Billionaires Won’t Save Us 8.

The three policy pillars of this new era are familiar to us all: privatization of the public sphere, deregulation of the corporate sector, and lower corporate taxation, paid for with cuts to public spending. Much has been written about the real-world costs of these policies—the instability of financial markets, the excesses of the super-rich, and the desperation of the increasingly disposable poor, as well as the failing state of public infrastructure and services. Very little, however, has been written about how market fundamentalism has, from the very first moments, systematically sabotaged our collective response to climate change, a threat that came knocking just as this ideology was reaching its zenith. The core problem was that the stranglehold that market logic secured over public life in this period made the most direct and obvious climate responses seem politically heretical. How, for instance, could societies invest massively in zero-carbon public services and infrastructure at a time when the public sphere was being systematically dismantled and auctioned off?

Instead, large parts of the climate movement wasted precious decades attempting to make the square peg of the climate crisis fit into the round hole of deregulated capitalism, forever touting ways for the problem to be solved by the market itself. (Though it was only years into this project that I discovered the depths of collusion between big polluters and Big Green.) But blocking strong climate action wasn’t the only way that the triumph of market fundamentalism acted to deepen the crisis in this period. Even more directly, the policies that so successfully freed multinational corporations from virtually all constraints also contributed significantly to the underlying cause of global warming—rising greenhouse gas emissions. The numbers are striking: in the 1990s, as the market integration project ramped up, global emissions were going up an average of 1 percent a year; by the 2000s, with “emerging markets” like China now fully integrated into the world economy, emissions growth had sped up disastrously, with the annual rate of increase reaching 3.4 percent a year for much of the decade.


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What Went Wrong: How the 1% Hijacked the American Middle Class . . . And What Other Countries Got Right by George R. Tyler

8-hour work day, active measures, activist fund / activist shareholder / activist investor, affirmative action, Affordable Care Act / Obamacare, bank run, banking crisis, Basel III, Black Swan, blood diamonds, blue-collar work, Bolshevik threat, bonus culture, British Empire, business cycle, business process, buy and hold, capital controls, Carmen Reinhart, carried interest, cognitive dissonance, collateralized debt obligation, collective bargaining, commoditize, corporate governance, corporate personhood, corporate raider, corporate social responsibility, creative destruction, credit crunch, crony capitalism, crowdsourcing, currency manipulation / currency intervention, David Brooks, David Graeber, David Ricardo: comparative advantage, declining real wages, deindustrialization, Diane Coyle, disruptive innovation, Double Irish / Dutch Sandwich, eurozone crisis, financial deregulation, financial innovation, fixed income, Francis Fukuyama: the end of history, full employment, George Akerlof, George Gilder, Gini coefficient, Gordon Gekko, hiring and firing, income inequality, invisible hand, job satisfaction, John Markoff, joint-stock company, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, laissez-faire capitalism, lake wobegon effect, light touch regulation, Long Term Capital Management, manufacturing employment, market clearing, market fundamentalism, Martin Wolf, minimum wage unemployment, mittelstand, moral hazard, Myron Scholes, Naomi Klein, Northern Rock, obamacare, offshore financial centre, Paul Samuelson, pension reform, performance metric, pirate software, plutocrats, Plutocrats, Ponzi scheme, precariat, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, reshoring, Richard Thaler, rising living standards, road to serfdom, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sand Hill Road, shareholder value, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, sovereign wealth fund, Steve Ballmer, Steve Jobs, The Chicago School, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, too big to fail, transcontinental railway, transfer pricing, trickle-down economics, tulip mania, Tyler Cowen: Great Stagnation, union organizing, Upton Sinclair, upwardly mobile, women in the workforce, working poor, zero-sum game

As an example, one Apple executive mendaciously justified his Chinese labor force this way: “The US has stopped producing people with the skills we need.”12 Well, it’s theoretically possible that Apple is really responding to the superior training of Chinese workers, rather than their $145 per month salaries, but I seriously doubt it. In contrast, the family capitalism countries were proactive, prospering despite the tumult of global integration. They rejected trade controls, the commoditization of workers, and market fundamentalism in favor of canny mechanisms to maximize productivity and family income growth. Unhampered by ideology and buttressed with centuries of vigorous economic debate between the likes of Adam Smith and Friedrich Hayek, they focused on meeting election mandates demanding family prosperity. It wasn’t that difficult to accomplish, because these rich democracies came armed to the existential struggle with better tools than America.

Indeed, their rejection of mainstream economics was more far-reaching than just ignoring greed; it went to the heart of how gains from growth should be allocated within capitalism. I suspect President Reagan never actually understood this point. In the place of the carefully regulated market capitalism envisioned by Adam Smith and Keynes, his advisors urged with fervor a return to nineteenth-century market fundamentalism. That appeal was politically alluring to conservatives, including Ronald Reagan, who coalesced in the 1960s around the late Senator Barry Goldwater of Arizona and his inspiring themes of small government, low taxes, and self-regulation of industries. Their notion was that history was wrong and markets don’t require adult supervision, after all. Famously, in President Reagan’s resurrection of Gilded Age deregulation, government became the problem—not the solution.

New York University professor Nouriel Roubini—one of the few who predicted the Wall Street meltdown—concluded that: “… the Anglo-Saxon model of supervision and regulation of the financial system has failed…. [it] “relied on self-regulation that, in effect, meant no regulation; on market discipline that does not exist when there is euphoria and irrational exuberance; on internal risk management models that fail….”42 Behind Friedman’s Influence Market fundamentalism was pretty thin gruel for economists schooled in history. It quickly attracted as sharp critics the British economist Andrew Smithers and Yale economist Robert J. Shiller, who as early as 1984 judged the underlying theory “one of the most remarkable errors in the history of economic thought.”43 It actually faded in popularity quickly as the profession came to terms with its unreal assumptions.


pages: 462 words: 129,022

People, Power, and Profits: Progressive Capitalism for an Age of Discontent by Joseph E. Stiglitz

"Robert Solow", affirmative action, Affordable Care Act / Obamacare, barriers to entry, basic income, battle of ideas, Berlin Wall, Bernie Madoff, Bernie Sanders, business cycle, Capital in the Twenty-First Century by Thomas Piketty, carried interest, central bank independence, clean water, collective bargaining, corporate governance, corporate social responsibility, creative destruction, Credit Default Swap, crony capitalism, deglobalization, deindustrialization, disintermediation, diversified portfolio, Donald Trump, Edward Snowden, Elon Musk, Erik Brynjolfsson, Fall of the Berlin Wall, financial deregulation, financial innovation, financial intermediation, Firefox, Fractional reserve banking, Francis Fukuyama: the end of history, full employment, George Akerlof, gig economy, global supply chain, greed is good, income inequality, information asymmetry, invisible hand, Isaac Newton, Jean Tirole, Jeff Bezos, job automation, John Maynard Keynes: Economic Possibilities for our Grandchildren, John von Neumann, Joseph Schumpeter, labor-force participation, late fees, low skilled workers, Mark Zuckerberg, market fundamentalism, mass incarceration, meta analysis, meta-analysis, minimum wage unemployment, moral hazard, new economy, New Urbanism, obamacare, patent troll, Paul Samuelson, pension reform, Peter Thiel, postindustrial economy, price discrimination, principal–agent problem, profit maximization, purchasing power parity, race to the bottom, Ralph Nader, rent-seeking, Richard Thaler, Robert Bork, Robert Gordon, Robert Mercer, Robert Shiller, Robert Shiller, Ronald Reagan, secular stagnation, self-driving car, shareholder value, Shoshana Zuboff, Silicon Valley, Simon Kuznets, South China Sea, sovereign wealth fund, speech recognition, Steve Jobs, The Chicago School, The Future of Employment, The Great Moderation, the market place, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, two-sided market, universal basic income, Unsafe at Any Speed, Upton Sinclair, uranium enrichment, War on Poverty, working-age population

We have to be constantly on guard against this possibility, and set up rules and institutions to make it more difficult. The Founding Fathers also recognized that a critical and independent media is an essential part of any healthy democracy. Still another essential feature of a successful democracy is transparency. Many critics of the views I’ve put forward in this book combine a skepticism about government with an overarching—and unjustified—faith in markets. Earlier, I referred to the notion of market fundamentalism (sometimes also referred to as neoliberalism): the ideas that unfettered markets on their own were efficient and stable, and that if we just let markets work their wonders and grow the economy, everybody would benefit (called trickle-down economics). Previous chapters have debunked these ideas—as if the 2008 crisis, the episodic high levels of unemployment, and our massive inequality weren’t proof enough.

The ongoing debate over the role of government The real politik of twenty-first-century America is that those who seek to preserve our standards of living and the values I articulate in this book will have to persuade the rest of the country that there are alternative policies more consistent with their interests and values than the course the country is currently on, that is, Trump’s nativism and protectionism, or the “market fundamentalism” course that Reagan set the country on some four decades ago. Unfortunately, too often, social issues, like abortion and gay rights, have gotten in the way of our ability to address the basic economics—of how we can get to growth with equality.23 Today, though, a major impediment to the acceptance of the ideas I’ve put forward is the lack of trust in government. Even if collective action were desirable, those on the Right have encouraged a widespread distrust in government.

We didn’t understand the true foundations of our well-being—the increases in our standard of living as well as the fulfillment of our highest ideals—rested on the foundations of science, rational enquiry, and discourse, and the social institutions derived from them, including the rule of law based on democratic processes. The internationalism and free markets of neoliberalism with its false promises are now being replaced with primitive protectionism and nativism, whose promise of restoring the United States to prosperity is even less likely to be fulfilled. For an economist, it is easy to attack the market fundamentalism/neoliberalism that came to dominate in the years after Reagan. It was based on a set of refutable (and refuted) hypotheses. But at least one could have a rational discussion about neoliberalism, ascertaining whether there is a grain of truth in some of the arguments and empirical hypotheses. Not so for Trump, partly because the underlying ideas (if they can be dignified with that term) are inchoate.


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The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay by Emmanuel Saez, Gabriel Zucman

activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Berlin Wall, business cycle, Cass Sunstein, collective bargaining, corporate governance, Donald Trump, financial deregulation, income inequality, income per capita, informal economy, intangible asset, Jeff Bezos, labor-force participation, Lyft, Mark Zuckerberg, market fundamentalism, Mont Pelerin Society, mortgage debt, mortgage tax deduction, new economy, offshore financial centre, oil shock, patent troll, profit maximization, purchasing power parity, race to the bottom, rent-seeking, ride hailing / ride sharing, Ronald Reagan, shareholder value, Silicon Valley, single-payer health, Skype, Steve Jobs, The Wealth of Nations by Adam Smith, transfer pricing, trickle-down economics, uber lyft, very high income, We are the 99%

The second reason is, quite simply, fairness. The taxes the wealthy don’t pay, the rest of us must cover. It’s always possible to argue that everybody receives the market income they deserve; that the rich, who were unfairly treated in the 1960s and 1970s, are now getting their just deserts from ever more unfettered and global markets. We don’t agree with this ideology—sometimes known as market fundamentalism—but at least it’s a consistent world view. However, what argument can justify that billionaires should pay less than each of us, and pay less and less as they get wealthier and wealthier? What principle could justify such an obviously perverse situation? But probably the most fundamental reason to oppose America’s current tax regime is the inequality spiral that it feeds. As we’ve seen, the income share of the top 1% has ballooned while that of the working class has collapsed.

The international evidence suggests that government policies have redistributed income away from the working class and toward the top. Successive administrations since the 1980s have made deliberate choices in this regard, including letting the federal minimum wage erode, cutting taxes on the wealthy, restricting the power of unions, and increasing the costs of access to public universities.8 France and most other rich countries have experienced some of the same policy changes themselves, but the turn to market fundamentalism has been more drastic in America. IS GROWTH UNDERESTIMATED? The stagnation of working-class income over more than a generation is perhaps the most fundamental development in the US economy, one with profound political and economic implications. It is so striking that to some observers, it must be wrong. We must be underestimating the true progress in living conditions. This is an objection that we must discuss before we can draw policy lessons.

Instead, it’s been paying for a large share of the soaring health bill of the country. The “beneficiaries” of this largess cannot choose to spend it as they see fit. The money is not flowing to their bank account. It’s flowing to the bank accounts of health care providers, some of whom are comfortably in the top 1%. Are we sure the services provided in exchange are worth every penny? In the end, the most striking indictment of market fundamentalism emerges from what has happened to life expectancy in the United States. Life expectancy is easier to measure than income; in many ways it is also more informative than the more materialistic notions of well-being discussed so far. Most people care about living a long, healthy life more than anything else. On average, for every five dollars they earn every year, Americans pay one dollar to doctors, hospitals, pharmaceuticals, and insurance companies.


pages: 667 words: 149,811

Economic Dignity by Gene Sperling

active measures, Affordable Care Act / Obamacare, autonomous vehicles, basic income, Bernie Sanders, Cass Sunstein, collective bargaining, corporate governance, David Brooks, desegregation, Detroit bankruptcy, Donald Trump, Double Irish / Dutch Sandwich, Elon Musk, employer provided health coverage, Erik Brynjolfsson, Ferguson, Missouri, full employment, gender pay gap, ghettoisation, gig economy, Gini coefficient, guest worker program, Gunnar Myrdal, housing crisis, income inequality, invisible hand, job automation, job satisfaction, labor-force participation, late fees, liberal world order, longitudinal study, low skilled workers, Lyft, Mark Zuckerberg, market fundamentalism, mass incarceration, mental accounting, meta analysis, meta-analysis, minimum wage unemployment, obamacare, offshore financial centre, payday loans, price discrimination, profit motive, race to the bottom, RAND corporation, randomized controlled trial, Richard Thaler, ride hailing / ride sharing, Ronald Reagan, Rosa Parks, Second Machine Age, secular stagnation, shareholder value, Silicon Valley, single-payer health, speech recognition, The Chicago School, The Future of Employment, The Wealth of Nations by Adam Smith, Toyota Production System, traffic fines, Triangle Shirtwaist Factory, Uber and Lyft, uber lyft, union organizing, universal basic income, War on Poverty, working poor, young professional, zero-sum game

This frame is embraced across the conservative spectrum. It is entrenched in the current mainstream conservative movement, as seen in former Speaker of the House Paul Ryan’s concern that the safety net is “a hammock that lulls able-bodied people to lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives.”3 And while Trump may be at loggerheads with conservative market fundamentalism in the area of trade, when it comes to programs that benefit the less fortunate, he clings tightly to this orthodoxy while stressing its worst divisive racial undertones. His administration’s use of this simplistic transactional approach is perhaps best exemplified by the Trump administration’s Council of Economic Advisers’ July 2018 report on work requirements and the safety net.4 The report sets self-sufficiency as the main goal of economic policy and then analyzes it on two dimensions: “receipt of benefits from Medicaid, SNAP [Supplemental Nutrition Assistance Program], housing assistance or TANF [Temporary Assistance for Needy Families] at some point during the year” and “whether non-disabled working-age recipients work.”5 In other words, any receipt of government benefits is harmful because it detracts from self-sufficiency.

Helping workers overcome opioid addiction, providing intensive assistance for those leaving the criminal justice system, and ensuring that the cost of childcare is not an overwhelming de facto tax on work are all situations in which more intensive government help is essential for increasing self-sufficiency. The United States is an outlier in the OECD for its lack of universal paid leave and uniquely expensive childcare, both of which create barriers to work, as discussed elsewhere in this book. Unfortunately, conservatives miss these potential solutions—and ways to further their stated goal of self-sufficiency—because their market fundamentalism prevents them from even considering policy options that would require some increase in government involvement. C. MISSING WHERE MORE GOVERNMENT WOULD ENCOURAGE RISK-TAKING AND ENTREPRENEURSHIP The ideological commitment to less government also prevents conservatives from seeing those situations where more government can mean more risk-taking, more entrepreneurship, and more market innovation.

The era of bigger government responsibility is the obligation to ensure that an economic dignity compact is real in the lives of ordinary Americans. If our policy—or lack of policy—has led to or allowed gaping economic dignity gaps, then there is a responsibility to fix them, to make things work. It is an invitation to be open to more expansive government policies—to not be constrained by worship of market fundamentalism and small-government libertarianism, especially when they have come up short—but it is still a perspective that keeps our eyes on the end goal, on what works. It is consistent with FDR’s famous exhortation to policymakers, from a 1932 commencement speech, to focus with force on the end economic goal and to engage in continuous “bold, persistent experimentation” to achieve that end without limiting the range of measures for potential experimentation and ultimate success.47 A.


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Does Capitalism Have a Future? by Immanuel Wallerstein, Randall Collins, Michael Mann, Georgi Derluguian, Craig Calhoun, Stephen Hoye, Audible Studios

affirmative action, blood diamonds, Bretton Woods, BRICs, British Empire, business cycle, butterfly effect, creative destruction, deindustrialization, demographic transition, Deng Xiaoping, discovery of the americas, distributed generation, eurozone crisis, fiat currency, full employment, Gini coefficient, global village, hydraulic fracturing, income inequality, Isaac Newton, job automation, joint-stock company, Joseph Schumpeter, land tenure, liberal capitalism, liquidationism / Banker’s doctrine / the Treasury view, loose coupling, low skilled workers, market bubble, market fundamentalism, mass immigration, means of production, mega-rich, Mikhail Gorbachev, mutually assured destruction, offshore financial centre, oil shale / tar sands, Ponzi scheme, postindustrial economy, reserve currency, Ronald Reagan, shareholder value, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, too big to fail, transaction costs, Washington Consensus, WikiLeaks

France and America hoarded gold. There was ideological attachment by old regimes to laissez-faire economics, a stock market bubble, and an uncompleted transition from old to new forms of manufacturing, all of which lowered the employment potential of the economy. In America, the eye of the storm, grave policy mistakes were also made by Congress and by the Federal Reserve Board rooted in the market fundamentalism of this period which reached its ghastly climax in what was called “liquidationism”–the pursuit of austerity measures in order to destroy inefficient firms, industries, investors, and workers. Absent any two or three of these varied causes cascading on top of each other and we would have been labeling this a cyclical recession. But the cascade was by no means inevitable. The Depression is often treated as being global but it struck unevenly.

Republican ideology has also turned increasingly against science, which does not bode well for the future of America. The Republicans are more united over economic policies than are the Democrats, whose main problem is internal divisions. This has allowed the Republicans to dictate recent policy agendas. Republican leaders used to be ideological in their rhetoric but pragmatic in their actual policies. But free-market fundamentalism is more resonant in American popular culture than is state interventionism. In the postwar boom period real economic policy took the form of “commercial Keynesianism,” state-steered markets, a compromise between market and state. But the political rhetoric of the time, especially on the Republican side, focused almost entirely on free markets and free enterprise. Americans had actually gotten a large state, but they pretended they had not.

This turn to the right marked the end of the long period dominated by class politics with its familiar symbols, tactics, and well-rehearsed rituals of bargaining. The political reaction flew the colors of identity, which introduced into politics a nastily passionate charge because matters of identity tend to be uncompromising and nonnegotiable. The New Right came in two varieties, though often meshing in practice: ethnopatriotic or religious-patriotic fundamentalism and libertarian market fundamentalism. Both called for the militant defense of fundamental matters of faith—or whatever was claimed to be the founding identities in their societies. Notice that both fundamentalisms directed their ire at state bureaucracies, blaming them for being too secular, removed, devious and taxing. It tells us something important about Christian, Muslim, Jewish, Buddhist, Hindu and other contemporary fundamentalisms that their suspicions and phobias virtually everywhere went hand-in-hand with extolling the virtues of small business, small town life, and the patriarchal family.


The Smartest Investment Book You'll Ever Read: The Simple, Stress-Free Way to Reach Your Investment Goals by Daniel R. Solin

asset allocation, buy and hold, corporate governance, diversification, diversified portfolio, index fund, market fundamentalism, money market fund, Myron Scholes, passive investing, prediction markets, random walk, risk tolerance, risk-adjusted returns, risk/return, transaction costs, Vanguard fund, zero-sum game

Chapter 1: An Unbelievable Chimp Story Information about the Financial Times contest was reported in the Sunday Mail (Queensland, Australia), March 17, 2002. Commenting on her stunn ing victory over the highly credentialled "independent analyst," the five-year-old, Tia Roberts, thought it was "wicked." She has a point there. Studies thar show the merit, or Jack of merit, of analyst recommendations are nicely summarized in a paper entitled "An Empirical Model of Stock Analysts' Recommendations: Market Fundamentals, Conflicts of Interest, and Peer Effects," written by Patrick Bajari and John Krainer. You can find this paper online at http://ideas.repcc.orglp/nbrlnbenvo/t0665.html. Chapter 2: An Unbelievable True Story An anicle written by Jonathan C hevreau in the Financial Post on November 5, 2005. stated mat $554 billion was invested in all murual funds in Canada as of September 2005. Of that amount, $ 124 million was invested in Canadian equity funds.

Security Analyst Recommendations and Stock Returns," by Brad Barber, Reuvan Lehavy, Maureen McNichols and Brett Trueman, Graduate School of Business, Stanford University, available at https:11 gsba pps.stanford.ed ul researchpapers/Li brary/RP 154 1. pd f#search ",' anal ys t%2 0 recom m enda t i a ns% 20 under perform%20market. The study by Patrick Bajari and John Krainer is "An Empirical Model of Stock Analysts' Recommendations: Market Fundamentals, Conflicts of lmercst, and Peer Effects." This paper is available at htrp:llideas.repec.orglp/nbrlnberwol I0665.html. 158 The Real Way Smart In~·estors Beat 95%of the ·Pros· Chapter 16: Nobody Can Pick "Hot" Fund Managers The shon holding periods of investors in hyperactivcly traded mutual funds has been noted in a series of private studies done by Dalbar, Inc. A summary of these studies can be found at: http://www.latrobefinancialmanagemenLcom/2006%20 Research%20PDF/Chasing%20Mutual%20Fund%ZOInvestors %20 Earn%20 Lcss%20 In flation. pdf.


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Doughnut Economics: Seven Ways to Think Like a 21st-Century Economist by Kate Raworth

"Robert Solow", 3D printing, Asian financial crisis, bank run, basic income, battle of ideas, Berlin Wall, bitcoin, blockchain, Branko Milanovic, Bretton Woods, Buckminster Fuller, business cycle, call centre, Capital in the Twenty-First Century by Thomas Piketty, Cass Sunstein, choice architecture, clean water, cognitive bias, collapse of Lehman Brothers, complexity theory, creative destruction, crowdsourcing, cryptocurrency, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, dematerialisation, disruptive innovation, Douglas Engelbart, Douglas Engelbart, en.wikipedia.org, energy transition, Erik Brynjolfsson, Ethereum, ethereum blockchain, Eugene Fama: efficient market hypothesis, experimental economics, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, Financial Instability Hypothesis, full employment, global supply chain, global village, Henri Poincaré, hiring and firing, Howard Zinn, Hyman Minsky, income inequality, Intergovernmental Panel on Climate Change (IPCC), invention of writing, invisible hand, Isaac Newton, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, Kickstarter, land reform, land value tax, Landlord’s Game, loss aversion, low skilled workers, M-Pesa, Mahatma Gandhi, market fundamentalism, Martin Wolf, means of production, megacity, mobile money, Mont Pelerin Society, Myron Scholes, neoliberal agenda, Network effects, Occupy movement, off grid, offshore financial centre, oil shale / tar sands, out of africa, Paul Samuelson, peer-to-peer, planetary scale, price mechanism, quantitative easing, randomized controlled trial, Richard Thaler, Ronald Reagan, Second Machine Age, secular stagnation, shareholder value, sharing economy, Silicon Valley, Simon Kuznets, smart cities, smart meter, Social Responsibility of Business Is to Increase Its Profits, South Sea Bubble, statistical model, Steve Ballmer, The Chicago School, The Great Moderation, the map is not the territory, the market place, The Spirit Level, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, too big to fail, Torches of Freedom, trickle-down economics, ultimatum game, universal basic income, Upton Sinclair, Vilfredo Pareto, wikimedia commons

Scripting the play In 1947, the year before Samuelson published his iconic Circular Flow diagram, a small laissez-faire band of wannabe economic scriptwriters – including Friedrich Hayek, Milton Friedman, Ludwig von Mises and Frank Knight – gathered in the Swiss resort of Mont Pèlerin to start drafting what they hoped would one day become the dominant economic story. Inspired by the pro-market writings of classical liberals such as Adam Smith and David Ricardo they established what they called a ‘neoliberal’ agenda. Its aim, they said, was to push back hard against the threat of state totalitarianism, which was spreading fast thanks to the growing reach of the Soviet Union. But that aim gradually morphed into a hard push for market fundamentalism, and the meaning of ‘neoliberal’ morphed along with it. What’s more, when Paul Samuelson’s diagram appeared – depicting which actors were at the heart of the economy and which were pushed into the wings – it provided the perfect setting for their play. Scriptwriting began in the late 1940s with the launch of the Mont Pelerin Society, which lives on to this day.5 But Friedman, Hayek and the other hopeful playwrights knew they might have to wait some decades before their play could be performed.

That crucially depends, argue the economist Daron Acemoglu and political scientist James Robinson, on whether, in each country, the state’s economic and political institutions are inclusive or extractive. Put simply, inclusive institutions give many people a say in decision-making, unlike extractive ones that privilege the voice of the few and allow them to exploit and rule over others.44 The threat of the authoritarian state is very real, but so too is the danger of market fundamentalism. To avoid the tyranny of the state and the tyranny of the market alike, democratic politics are key – thus reinforcing the foundational role played by society in generating the civic engagement needed for participation and accountability in public and political life. FINANCE, which is in service – so make it serve society Three long-held myths make up the traditional story of finance: that commercial banks work by turning people’s savings into investments; that financial trading smoothes out the economy’s fluctuations; and that, therefore, the financial sector provides a valuable service to the productive economy.

Fälth, A. and Blackden, M. (2009) Unpaid Care Work, UNDP Policy Brief on Gender Equality and Poverty Reduction, Issue 01, New York: UNDP, available at http://www.undp.org/content/dam/undp/library/gender/Gender%20and%20Poverty%20Reduction/Unpaid%20care%20work%20English.pdf 36. Chang, H.J. (2010) 23 Things They Don’t Tell You About Capitalism. London: Allen Lane, p. 1. 37. Block, F. and Somers, M. (2014) The Power of Market Fundamentalism: Karl Polanyi’s critique. London: Harvard University Press, pp. 20–21. 38. Ostrom, E. (1999) ‘Coping with tragedies of the commons’, Annual Review of Political Science 2, pp. 493–535. 39. Rifkin, J. (2014) The Zero Marginal Cost Society. New York: Palgrave Macmillan, p. 4. 40. Milton Friedman Speaks. Lecture 4: ‘The Role of Government in a Free Society’, Stanford University, 1978, available at: https://www.youtube.com/watch?


Green Economics: An Introduction to Theory, Policy and Practice by Molly Scott Cato

Albert Einstein, back-to-the-land, banking crisis, banks create money, basic income, Bretton Woods, Buy land – they’re not making it any more, carbon footprint, central bank independence, clean water, Community Supported Agriculture, congestion charging, corporate social responsibility, David Ricardo: comparative advantage, deskilling, energy security, food miles, Food sovereignty, Fractional reserve banking, full employment, gender pay gap, income inequality, informal economy, Intergovernmental Panel on Climate Change (IPCC), job satisfaction, land reform, land value tax, Mahatma Gandhi, market fundamentalism, mortgage debt, passive income, peak oil, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, reserve currency, the built environment, The Spirit Level, Tobin tax, University of East Anglia, wikimedia commons

Robertson, Future Work, pp. 26–7. E. F. Schumacher (1973) Small is Beautiful: A Study of Economics as if People Mattered, London: Abacus. H. Braverman (1974) Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century, New York: Monthly Review Press. M. S. Cato (2007) ‘Climate change and the bioregional economy’, in A. Cumbers and G. Whittam (eds) Reclaiming the Economy: Alternatives to Market Fundamentalism in Scotland and Beyond, Glasgow: Scottish Left Review Press. Milani, Designing, p. 113. Hutchinson, What Everybody, p. 168. H. Henderson (1988) The Politics of the Solar Age: Alternatives to Economics, Indianapolis, IN: Knowledge Systems, p. 101. D. Boyle, S. Clark and S. Burns (2006) Hidden Work: Co-Production by People Outside Paid Employment, York: Joseph Rowntree Foundation. www.timebanks.co.uk.

Sale (2006) After Eden: The Evolution of Human Domination, Durham, NC: Duke University Press, p. 133. 23 M. S. Cato (2006) Market, Schmarket: Building the Post-Capitalist Economy, Gretton: New Clarion Press, p. 102. 24 Schumacher, D. (1998) ‘Introduction’, in This I Believe, Totnes: Green Books. 25 M. S. Cato (2007) ‘Climate change and the bioregional economy’, in A. Cumbers and G. Whittam (eds) Reclaiming the Economy: Alternatives to Market Fundamentalism in Scotland and Beyond, Glasgow: Scottish Left Review Press. 26 R. Douthwaite (2004) ‘Why localisation is essential for sustainability’, in Feasta Review 2: Growth: The Celtic Cancer, Dublin: Feasta, pp. 114–24, pp. 116–17. 10 Green Taxation When there is an income tax, the just man will pay more and the unjust less on the same amount of income. Plato (attrib.) From being the preserve of a handful of green economists in all but the most progressive of countries just a few years ago, green taxation has now moved to the mainstream of the political debate.

Because the tax relates to the wealth of the inheritor rather than the bequeather the system Table 10.1 Share of UK wealth owned by different sectors of the population Most wealthy 1% 5% 10% 25% 50% 1976 1986 1996 2001 2002 2003 29 47 57 73 88 25 46 58 75 89 26 49 63 81 94 34 58 72 88 98 37 62 74 87 98 34 58 71 85 99 Note: Percentages represent marketable wealth less the value of dwellings. Source: P. Sikka (2007) ‘Reclaiming the economy: Taming the corporations’, in A. Cumbers and G. Whittam (eds) Reclaiming the Economy: Alternatives to Market Fundamentalism in Scotland and Beyond, Glasgow: Scottish Left Review Press; data from UK Office for National Statistics. GREEN TAXATION 161 provides an incentive for those making bequests to choose poorer inheritors, thus ensuring redistribution. A similar policy was adopted by the Fabian Society in the UK.8 For green economists the most glaring inequality in today’s world is that between the rich nations of the West and the poor nations of the South.


pages: 237 words: 50,758

Obliquity: Why Our Goals Are Best Achieved Indirectly by John Kay

Andrew Wiles, Asian financial crisis, Berlin Wall, bonus culture, British Empire, business process, Cass Sunstein, computer age, corporate raider, credit crunch, Daniel Kahneman / Amos Tversky, discounted cash flows, discovery of penicillin, diversification, Donald Trump, Fall of the Berlin Wall, financial innovation, Gordon Gekko, greed is good, invention of the telephone, invisible hand, Jane Jacobs, lateral thinking, Long Term Capital Management, Louis Pasteur, market fundamentalism, Myron Scholes, Nash equilibrium, pattern recognition, Paul Samuelson, purchasing power parity, RAND corporation, regulatory arbitrage, shareholder value, Simon Singh, Steve Jobs, Thales of Miletus, The Death and Life of Great American Cities, The Predators' Ball, The Wealth of Nations by Adam Smith, ultimatum game, urban planning, value at risk

The eclecticism of his knowledge and the breadth of his interests made him the finest commentator on economics and finance of the twentieth century. Keynes resisted any attempt to explain social and economic phenomena with one big idea. In Keynes’s lifetime the one big idea most commonly used by hedgehogs to provide a unified explanation of economic and political events was Marxist socialism. Later in the century, as the appeal of socialism crumbled with the failed regimes that claimed to implement it, other ideologies, such as market fundamentalism and environmentalism, arose to fill the gap. But as Keynes emphasized in his exchange with Planck, most useful economic and political knowledge is simply not of this simple, universal kind. Churchill, the hedgehog, won his place in history by being presciently and ultimately triumphantly right about one big thing—perhaps the biggest thing of the twentieth century. But on other matters his judgment was poor, the causes he pursued to the point of failure misconceived: the ill-fated Gallipoli expedition of 1915 and the disastrous return to the gold standard ten years later, his quixotic support of the deposed Edward VIII in 1936 and his stubborn resistance to Indian independence.

leprosy Levitt, Theodore Lewis, Michael Liar’s Poker (Lewis) life expectancy Lincoln, Abraham Lindblom, Charles literacy rate Litton Industries Lives of the Painters (Vasari) loans lobsters local goals logic London Business School London Underground Long-Term Capital Management McDonnell Douglas Machiavelli, Niccolò MacIntyre, Alasdair McKeen, John McNamara, Robert Maginot Line Malaya Mallory, George Malthusianism management management consultants man-and-dog problem manuals maps market capitalization market economies market fundamentalism market research market segments Marks, Simon Marks & Spencer marriage Marxism mass production materialism mathematics Mean Business (Dunlap) Merck Merck, George Merton, Robert C. Messner, Reinhold metaphors Microsoft military affairs military contracts milk Mill, John Stuart misers mission statements Mobutu Sese Seko monetary targets monocultures “moral algebra” Morita, Akio mortgages Moses, Robert motorcycles mountain climbing Mount Everest “muddling through” Munger, Charles Munich Agreement (1938) music nail factories Napoleon I, emperor of France Nash equilibrium National Park Service, U.S.


pages: 357 words: 94,852

No Is Not Enough: Resisting Trump’s Shock Politics and Winning the World We Need by Naomi Klein

Airbnb, basic income, battle of ideas, Berlin Wall, Bernie Sanders, Brewster Kahle, Celebration, Florida, clean water, collective bargaining, Corrections Corporation of America, desegregation, Donald Trump, drone strike, Edward Snowden, Elon Musk, energy transition, financial deregulation, greed is good, high net worth, Howard Zinn, illegal immigration, income inequality, Internet Archive, Kickstarter, late capitalism, Mark Zuckerberg, market bubble, market fundamentalism, mass incarceration, Mikhail Gorbachev, moral panic, Naomi Klein, Nate Silver, new economy, Occupy movement, offshore financial centre, oil shale / tar sands, open borders, Peter Thiel, plutocrats, Plutocrats, private military company, profit motive, race to the bottom, Ralph Nader, Ronald Reagan, Saturday Night Live, sexual politics, sharing economy, Silicon Valley, too big to fail, trade liberalization, transatlantic slave trade, Triangle Shirtwaist Factory, trickle-down economics, Upton Sinclair, urban decay, women in the workforce, working poor

Democracy, Suspended until Further Notice Koch brothers: “libertarians” Jane Mayer, “Covert Operations,” New Yorker, August 30, 2010, http://www.newyorker.com/​magazine/​2010/​08/​30/​covert-operations. Doing It Fast and All at Once Machiavelli: “For injuries ought to be done all at one time…” Niccolò Machiavelli. The Prince, trans. W.K. Marriot, Project Gutenberg, https://www.gutenberg.org/​files/​1232/​1232-h/​1232-h.htm. Joseph Stiglitz: “market fundamentalism” D. Joseph Stiglitz, “Moving beyond Market Fundamentalism to a More Balanced Economy,” Annals of Public and Cooperative Economics 80, 3 (2009): 345–60, https://sipa.columbia.edu/​sites/​default/​files/​j.1467-8292.2009.00389.x.pdf. Milton Friedman book Capitalism and Freedom Milton Friedman, Capitalism and Freedom: Fortieth Anniversary Edition (Chicago: University of Chicago Press, 2002), ix. Richard Nixon: “make the economy scream” Peter Kornbluh, “Kissinger and Chile: The Declassified Record,” National Security Archive, George Washington University, September 11, 2013.

I was challenging a rosy version of history that many of us have grown up with—the version which tells us that deregulated markets and democracy advanced together, hand in hand, over the second half of the twentieth century. The truth, it turns out, is much uglier. The extreme form of capitalism that has been remaking our world in this period—which Nobel Prize–winning economist Joseph Stiglitz has termed “market fundamentalism”—very often could advance only in contexts where democracy was suspended and people’s freedoms were sharply curtailed. In some cases, ferocious violence, including torture, was used to keep rebellious populations under control. The late economist Milton Friedman called his most famous book Capitalism and Freedom, presenting human liberation and market liberation as flip sides of the same coin.


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Radical Uncertainty: Decision-Making for an Unknowable Future by Mervyn King, John Kay

"Robert Solow", Airbus A320, Albert Einstein, Albert Michelson, algorithmic trading, Antoine Gombaud: Chevalier de Méré, Arthur Eddington, autonomous vehicles, availability heuristic, banking crisis, Barry Marshall: ulcers, battle of ideas, Benoit Mandelbrot, bitcoin, Black Swan, Bonfire of the Vanities, Brownian motion, business cycle, business process, capital asset pricing model, central bank independence, collapse of Lehman Brothers, correlation does not imply causation, credit crunch, cryptocurrency, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, demographic transition, discounted cash flows, disruptive innovation, diversification, diversified portfolio, Donald Trump, easy for humans, difficult for computers, Edmond Halley, Edward Lloyd's coffeehouse, Edward Thorp, Elon Musk, Ethereum, Eugene Fama: efficient market hypothesis, experimental economics, experimental subject, fear of failure, feminist movement, financial deregulation, George Akerlof, germ theory of disease, Hans Rosling, Ignaz Semmelweis: hand washing, income per capita, incomplete markets, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Jeff Bezos, Johannes Kepler, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Snow's cholera map, John von Neumann, Kenneth Arrow, Long Term Capital Management, loss aversion, Louis Pasteur, mandelbrot fractal, market bubble, market fundamentalism, Moneyball by Michael Lewis explains big data, Nash equilibrium, Nate Silver, new economy, Nick Leeson, Northern Rock, oil shock, Paul Samuelson, peak oil, Peter Thiel, Philip Mirowski, Pierre-Simon Laplace, popular electronics, price mechanism, probability theory / Blaise Pascal / Pierre de Fermat, quantitative trading / quantitative finance, railway mania, RAND corporation, rent-seeking, Richard Feynman, Richard Thaler, risk tolerance, risk-adjusted returns, Robert Shiller, Robert Shiller, Ronald Coase, sealed-bid auction, shareholder value, Silicon Valley, Simon Kuznets, Socratic dialogue, South Sea Bubble, spectrum auction, Steve Ballmer, Steve Jobs, Steve Wozniak, Tacoma Narrows Bridge, Thales and the olive presses, Thales of Miletus, The Chicago School, the map is not the territory, The Market for Lemons, The Nature of the Firm, The Signal and the Noise by Nate Silver, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Davenport, Thomas Malthus, Toyota Production System, transaction costs, ultimatum game, urban planning, value at risk, World Values Survey, Yom Kippur War, zero-sum game

Modern humans rely on social kinship networks to buffer many risks: serious illness, redundancy, relationship breakdown. And since Bismarck’s creation of social insurance in late nineteenth-century Germany, the state has been there to help manage these risks, extending much further the size of the group which provides reciprocal assistance. Thus the association of evolution with far right causes, including racism and extreme market fundamentalism, and with the aggressive selfishness which tramples others underfoot to make way for ourselves and our offspring, could hardly be further from the mark. Human evolution gave us the capacity – exceptional among species – to communicate with each other, learn from each other, persuade each other. Humans typically function in groups. Other primates which form groups exhibit some of the traits of altruism, cooperation and empathy which axiomatic descriptions of ‘rational’ behaviour struggle to explain.

Religion has been the source of an overarching narrative in most societies. And for many people it still is, and today is mainly a benign force, providing a moral code and a sense of direction for its adherents. In the geographies and segments of societies in which religious beliefs have declined, the space left by the receding tide of religious faith was filled for many, first by Marxism, and more recently by market fundamentalism and environmentalism. George Eliot memorably caricatured the narrative of the pompous and pedantic Edward Casaubon, who imagined he had found the Key to All Mythologies. 7 Our individual lives are often centred on personal narratives – ‘metaphors we live by’. 8 The term ‘narrative paradigm’ originates with the American communication scholar Walter Fisher. In his seminal work on the role of narratives the central works are Arthur Miller’s Death of a Salesman and F.

TELLING STORIES THROUGH MODELS 1 Box (1979) p. 202. 2 Tucker (1983). 3 Of course, third parties may – and generally will – be adversely affected. 4 Ricardo (1817) pp. 158–60. 5 Akerlof (1970). 6 The term appears to originate in a Volkswagen advertising campaign of the 1960s. Importers were emphasising the superior quality of their product at a time when US consumers talked of ‘Friday’ or ‘Monday morning’ cars (see Coleman 2009). 7 Clapham (1913) p. 401. 8 Burns (1787). 9 Arrow and Debreu (1954). 10 We have reservations: Smith’s text does not sustain the market fundamentalism which some modern admirers, not necessarily his readers, attribute to him. And Arrow and Debreu were no market fundamentalists either. 11 Spence (1973). 12 Grossman and Stiglitz (1980). 13 That he made a fortune is certain; that part of it came from the incident outlined above is not. See Samuelson (2011) p. 251 but also Skousen (2001) p. 97. 14 Plender and Persaud (2006). 15 Vickrey (1961). 16 Capen et al. (1971). 17 In 2008, the UK government recapitalised RBS and at the time of writing the bank is still largely owned by the state. 18 Klemperer (2002) pp. 169–70. 19 Friedman (1953) pp. 21–2. 20 Ibid. p. 15. 21 Hausman (1984) pp. 231–49, 235. 22 Albeit not for the theory of relativity but for his discovery of the photoelectric effect which envisaged light as a particle and was the forerunner of the quantum theory of particles. 23 Duhem (1906) and Quine (1951). 24 Committee on Oversight and Government Reform (2008) p. 37. 25 It used a dynamic stochastic general equilibrium model to derive an efficient forward path for interest rates. 15.


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The New Depression: The Breakdown of the Paper Money Economy by Richard Duncan

asset-backed security, bank run, banking crisis, banks create money, Ben Bernanke: helicopter money, Bretton Woods, business cycle, currency manipulation / currency intervention, debt deflation, deindustrialization, diversification, diversified portfolio, fiat currency, financial innovation, Flash crash, Fractional reserve banking, income inequality, inflation targeting, Joseph Schumpeter, laissez-faire capitalism, liquidity trap, market bubble, market fundamentalism, mass immigration, Mexican peso crisis / tequila crisis, money market fund, money: store of value / unit of account / medium of exchange, mortgage debt, private sector deleveraging, quantitative easing, reserve currency, Ronald Reagan, savings glut, special drawing rights, The Great Moderation, too big to fail, trade liberalization

Wealth Preservation through Diversification The hard truth is that it is not easy to preserve wealth. If it were, the families who were wealthy 200 years ago would still be wealthy today—and generally, they are not. In the very harsh economic environment that is likely to prevail over the next ten years, it is likely that a great deal of wealth is going to be destroyed. The economic system is in crisis and government policy, rather than market fundamentals, will determine the direction of asset prices. If the government fails to borrow and spend enough, the economy will collapse into a deflationary spiral. If it borrows, prints, and spends too much, there will be very high rates of inflation. Future government policy simply cannot be foretold with any degrees of precision. Active wealth managers will have to rapidly adjust their portfolios in response to changes in policy.

Should they cease altogether, there would be a horrible debt-deflation similar—in cause and consequence—to that which occurred during the Great Depression. Government attempts to prevent that outcome, or political developments that drive policy in a harmful direction, could go astray and produce the opposite effect, very high rates of inflation. Given that the price level could either collapse or surge higher, it is necessary to be prepared for either scenario. It is also important to keep in mind that “market fundamentals” are no longer the only determinants of price movements. In the twenty-first century, various forms of government intervention frequently have an even greater impact. Supply and demand are still the ultimate arbitrators of value. Today, however, governments often have an extraordinary influence on both. Notes 1. From The Constitution of Liberty (Chicago: University of Chicago Press, 1960), p. 338. 2.


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Irrational Exuberance: With a New Preface by the Author by Robert J. Shiller

Andrei Shleifer, asset allocation, banking crisis, Benoit Mandelbrot, business cycle, buy and hold, computer age, correlation does not imply causation, Daniel Kahneman / Amos Tversky, demographic transition, diversification, diversified portfolio, equity premium, Everybody Ought to Be Rich, experimental subject, hindsight bias, income per capita, index fund, Intergovernmental Panel on Climate Change (IPCC), Joseph Schumpeter, Long Term Capital Management, loss aversion, mandelbrot fractal, market bubble, market design, market fundamentalism, Mexican peso crisis / tequila crisis, Milgram experiment, money market fund, moral hazard, new economy, open economy, pattern recognition, Ponzi scheme, price anchoring, random walk, Richard Thaler, risk tolerance, Robert Shiller, Robert Shiller, Ronald Reagan, Small Order Execution System, spice trade, statistical model, stocks for the long run, survivorship bias, the market place, Tobin tax, transaction costs, tulip mania, urban decay, Y2K

If all or most of these particular indicators point the same way on a given day, even if no single one of them is of any substantive importance by itself, their combined effect will be noteworthy. Both of these interpretations of the tenuous relationship between news and market movements assume that the public is paying continuous attention to the news—reacting sensitively to the slightest clues about market fundamentals, constantly and carefully adding up all the disparate pieces of evidence. But that is just not the way public attention works. Our attention is much more quixotic and capricious. Instead, news functions more often as an initiator of a chain of events that fundamentally change the public’s thinking about the market. News as the Precipitator of Attention Cascades The role of news events in affecting the market seems often to be delayed, and to have the effect of setting in motion a sequence of public attentions.

Moreover, Siegel himself does not claim that his evidence suggests that all prices are right, and he argues that today many Internet stocks have indeed been overpriced.12 Likewise, Peter Garber, in his analysis of the tulip mania, also stops short of a complete rejection of the evidence for mispricing. Noting that in January 1636 even common tulip bulbs, not only those infected with the mosaic virus, increased twentyfold in price and then underwent a precipitous decline, he confesses that he is “hard pressed to find a market fundamental explanation” for this event.13 Statistical Evidence of Mispricings It is difficult to make any solid judgments about market efficiency based on a few anecdotes about alleged extreme mispricing of assets. But in fact there is no shortage of systematic evidence that firms that are “overpriced” by conventional measures have indeed tended to do poorly afterward. Many articles in academic finance journals show this, not by colorful examples but by systematic evaluation of large amounts of data on many firms.

There is no way to judge the success of such rare statements in calming the markets, and we do not know how volatile they would have been otherwise. The trouble with such exercises of moral authority is that, although views that the market is either very overpriced or very underpriced may become commonplace among the experts, they are never universally held. The leaders who make such statements find themselves doing so based on personal opinion: an intuitive judgment about the state of market fundamentals and psychology, a judgment that is so hard to prove that they probably feel that it takes an act of courage to make such a statement in the first place. There probably is a role for such actions by opinion leaders, but it is only a minor one. If they are genuinely disinterested in their pronouncements and are perceived as true moral leaders, their pronouncements may have a small stabilizing effect on the market.


Fortunes of Change: The Rise of the Liberal Rich and the Remaking of America by David Callahan

affirmative action, Albert Einstein, American Legislative Exchange Council, automated trading system, Bernie Sanders, Bonfire of the Vanities, carbon footprint, carried interest, clean water, corporate social responsibility, David Brooks, demographic transition, desegregation, don't be evil, Donald Trump, Douglas Engelbart, Douglas Engelbart, Edward Thorp, financial deregulation, financial independence, global village, Gordon Gekko, greed is good, high net worth, income inequality, Irwin Jacobs: Qualcomm, Jeff Bezos, John Markoff, Kickstarter, knowledge economy, knowledge worker, Marc Andreessen, Mark Zuckerberg, market fundamentalism, medical malpractice, mega-rich, Mitch Kapor, Naomi Klein, NetJets, new economy, offshore financial centre, Peter Thiel, plutocrats, Plutocrats, profit maximization, quantitative trading / quantitative finance, Ralph Nader, Renaissance Technologies, Richard Florida, Robert Bork, rolodex, Ronald Reagan, school vouchers, short selling, Silicon Valley, Social Responsibility of Business Is to Increase Its Profits, stem cell, Steve Ballmer, Steve Jobs, unpaid internship, Upton Sinclair, Vanguard fund, War on Poverty, working poor, World Values Survey

In the 1950s, many corporate leaders saw government as a key partner in laying the foundations for growth and prosperity through such investments as the interstate highway system, public universities, and basic research. A good chunk of the business world turned against big government starting in the 1970s, amid fears of a growing regulatory state, which led to the alliance between business and conservatives that remade U.S. politics during the Age of Reagan. Now the pendulum is swinging back. After years of enfeebled government and festering national problems, more business leaders are souring on market fundamentalism and see the need to revive the partnership between the public and the private sector. Bill Gates, for instance, has repeatedly called for a vast increase in spending on scientific research. “In the past, federally funded research helped spark industries that today provide hundreds of thousands of jobs,” Gates reminded a congressional committee in 2008. “Countless products and technologies that we take for granted today had their origins in research conducted with federal funds.”

The global outlook seemed grimmer, too: climate change was happening faster than anticipated; the AIDS epidemic was accelerating, killing two million people a year; and rapid globalization had barely made a dent in entrenched global poverty. In these darker times, it became harder for the upper class to lead insulated lives. It also became harder for anyone to believe that the free market could solve the worst problems facing the United States and humanity. Market fundamentalism had few upper-class critics in the 1990s, when a rising tide was lifting all boats (more or less) and most of the affluent were still focused on building their fortunes. Things changed during the Bush years. Around the same time that more wealthy people stepped back from business—both the young who’d scored quick paydays and the old who’d had enough—the problems of capitalism were becoming more apparent.

A majority also said that their concern about CSR had increased in the last few years.8 Other polls found that more Americans were choosing where to work based on a company’s environmental or social reputation. This was particularly true of the Millennial generation, which tends to be more liberal than Gen Xers or baby boomers. Thus, even as the conservative movement reached a high-water mark under Bush, with control of both branches of the federal government, the public was fast turning against a key idea of market fundamentalism, namely, Milton Friedman’s narrow view of corporate obligation. This change has left executives with little choice but to evolve in their own outlook—or risk punishment in the marketplace. And that is exactly what many have done. Surveys of business leaders show a large-scale shift in attitudes about corporate responsibility in recent years. A 2005 McKinsey c10.indd 226 5/11/10 6:25:49 AM the corporate liberal 227 Global Survey of more than four thousand executives worldwide, for example, found that 84 percent said that large corporations should seek to balance higher returns to investors with contributions to the broader society.


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The Land Grabbers: The New Fight Over Who Owns the Earth by Fred Pearce

activist lawyer, Asian financial crisis, banking crisis, big-box store, blood diamonds, British Empire, Buy land – they’re not making it any more, Cape to Cairo, carbon footprint, clean water, corporate raider, credit crunch, Deng Xiaoping, Elliott wave, en.wikipedia.org, energy security, farmers can use mobile phones to check market prices, index fund, Jeff Bezos, Kickstarter, land reform, land tenure, Mahatma Gandhi, market fundamentalism, megacity, Mohammed Bouazizi, Nelson Mandela, Nikolai Kondratiev, offshore financial centre, out of africa, quantitative easing, race to the bottom, Ronald Reagan, smart cities, structural adjustment programs, too big to fail, undersea cable, urban planning, urban sprawl, WikiLeaks

Department of Agriculture echoed the common view of experts that “this kind of price spike happens only once in every three decades or so. It’s highly unlikely a price spike will be repeated especially in the next four to five years.” Around the same time, the UN’s food trade guru Hafez Ghanem insisted that “the market fundamentals are sound and very different from 2007–2008 . . . We don’t believe we are headed for a new food crisis.” But by the end of the year, prices were surging all over again. So if the “market fundamentals” were sound, what was the problem? Perhaps it was the markets themselves. For a while, some economists had been arguing that the freer markets that Zoellick saw as the solution to high food prices were in fact part of the problem. They were saying that speculation had played a big role in the price spikes of 2008.

So “greater powers need to be given to international institutions to prevent trade restrictions at times of crisis.” In an aside, he agreed that “empirical evidence” does not allow him to assess the importance of market speculators in pushing up prices during those dangerous months. But he absolves them anyway, by concluding that “improving the functioning of commodity markets can reduce the element of volatility that does not reflect underlying market fundamentals.” As we saw in chapter 2, not many people in the financial markets seem to agree with the professor’s sanguine assessment of how more and freer international trade will stabilize prices and feed the world. Several said so in their responses to Beddington’s report. “In reality, open markets do not necessarily deliver either affordability or balance to the market for food,” said Nick Tapp, the head of agribusiness at Bidwells, the London-based international property consultants.


pages: 436 words: 114,278

Crude Volatility: The History and the Future of Boom-Bust Oil Prices by Robert McNally

American energy revolution, Asian financial crisis, banking crisis, barriers to entry, Bretton Woods, collective bargaining, credit crunch, energy security, energy transition, housing crisis, hydraulic fracturing, index fund, Induced demand, interchangeable parts, invisible hand, joint-stock company, market clearing, market fundamentalism, moral hazard, North Sea oil, oil rush, oil shale / tar sands, oil shock, peak oil, price discrimination, price stability, sovereign wealth fund, transfer pricing

(One solution would be to invest in infrastructure to inject fully saturated brine instead of freshwater, although this would require expensive capital expenditures.64) Officials may not have sufficient information to inform decisions on when and how to add or subtract from the global market to keep prices stable, and could well run out of supplies before they managed to flatten prices. Moreover, even assuming political interference could be excluded, officials could try to defend price levels or ranges that are inconsistent with actual market fundamentals. If they tried to hold prices below levels justified by fundamentals, they would expend all of the reserves, giving them away at cheap prices to market participants. If SPR use failed to stabilize prices, it would reduce or eliminate whatever psychological impact having the untapped option conferred.65 Conversely, if officials were really willing to gut against the grain and attempt to prop up prices above levels justified by market supply and demand, they would have to buy and fill until capacity was reached, at which point prices would collapse below the official target levels.

June trading opened at $127 and ended the month just under $140 per barrel.85 Saudi and other OPEC officials continued to insist that supply was adequate and that speculators were driving up prices. U.S. Energy Secretary Samuel Bodman would hear none of that, tartly telling reporters on the eve of a June 22 emergency summit of oil-producing and oil-consuming countries in Jeddah, Saudi Arabia: “Market fundamentals show us that production has not kept pace with growing demand for oil, resulting in increasing prices and increasingly volatile prices. There is no evidence that we can find that speculators are driving futures prices” for oil.86 And United Kingdom Prime Minister Gordon Brown joined U.S. officials in calling for Saudi Arabia to increase production so that “instead of uncertainty and unpredictability, there is greater certainty, and instead of instability, there is greater stability.”87 Under tremendous international pressure, Saudi Arabia announced another production hike at the June 22 emergency summit.88 Saudi production was headed up to 9.7 mb/d, the highest level since 1981.

CNN Money, November 23, 2015. http://money.cnn.com/interactive/economy/the-cost-to-produce-a-barrel-of-oil/. Petroleum Centre Daily Record. “One Million Dollars Subscribed to the Petroleum Producers’ Agency.” November 6, 1872, 2. Pettengill, Samuel B. Hot Oil: The Problem of Petroleum. New York: Economic Forum Co., 1936. Plante, Michael D., and Mine K. Yücel. “Did Speculation Drive Oil Prices? Market Fundamentals Suggest Otherwise.” Federal Reserve Bank of Dallas. Economic Letter, 6, no. 11 (October 2011). Platt’s Oilgram News. “Giusti: OPEC Must Shift.” November, 21, 1996, 4. Plumer, Brad. “How Far Do Oil Prices Have to Fall to Throttle the US Shale Oil Boom?” Vox.com, December 3, 2014. http://www.vox.com/2014/12/3/7327147/oil-prices-breakeven-shale. Prakken, Joel L. Statement. “The Economic Impact of the Oil Price Collapse.”


Worldmaking After Empire: The Rise and Fall of Self-Determination by Adom Getachew

agricultural Revolution, Bretton Woods, British Empire, collective bargaining, colonial exploitation, colonial rule, failed state, financial independence, Gunnar Myrdal, land reform, land tenure, liberal world order, market fundamentalism, means of production, Monroe Doctrine, Mont Pelerin Society, Peace of Westphalia, Ronald Reagan, Scramble for Africa, structural adjustment programs, trade liberalization, transatlantic slave trade

While Beitz retained the NIEO’s egalitarian ambitions, a range of political actors—­from development economists at the World Bank to nongovernmental organizations—­shifted attention to absolute poverty over relative inequality.144 In the immediate aftermath of the global food crisis and famines in Bangladesh, Ethiopia, and elsewhere, alleviating human suffering and meeting the basic needs of individuals took center stage for policy makers and philosophers alike. At the core of this shift from equality to subsistence was on the one hand the view that global equality was either too far off or impractical, and on the other hand, an intuition that in the absence of a minimal standard, a Rawlsian difference principle could still leave the basic needs of the worst-­off individuals unmet.145 As the neoliberal counterrevolution instilled market fundamentalism in economic practice, social justice was globalized, individualized, and minimized in moral and political theory.146 In this context, returning to the NIEO’s welfare world reminds us of the anti-­imperial origins of contemporary debates about global justice. As one observer noted in the late 1970s, “whatever the other consequences of the demands by the Third World for a new, more egalitarian economic order, one thing is clear: those demands have given rise to an unprecedented debate on the subject of global distributive justice.”147 Just as striking, however, are the departures of this contemporary debate from the Third World’s vision of a welfare world.

Manley, 152; multilateral aid for, 162; and nationalism, 143–­44; and Nkrumah, 148–­51; and organi­zation [ 254 ] economic development (continued ) of African states, 132; and self-­ determination, 4, 93, 143, 214n4; and self-­reliance, 153; and state, 150; and Union of African States, 132; universality of, 150, 151; and Williams, 111, 127 “Economic Future of the Caribbean” conference, 111 economics, 54, 146, 152; cumulative causation thesis in, 149; market fundamentalism in, 175; neoliberal, 12, 162, 171, 174, 175, 180; and Nkrumah, 101, 148–­51; and politics, 138, 139; supply-­ side, 173 Economics of Nationhood report, 127, 129, 130, 134 economy: agricultural, 143; and anticolonial struggles, 111; and Azikiwe, 136; and balance of payments crises, 171; of colonialism, 54, 111–­12, 157; and decolonization, 143; and development model, 146–­51; domestic as analogous to international, 12, 145, 158, 159, 160, 167–­70; equilibrium between rural and urban sectors of, 153; of Ethiopia, 55, 56–­57, 61–­62; of Europe, 126; and exploitation of black labor, 81; and federations, 11, 109, 141; of Ghana, 148–­51; global, 25, 30–­31, 32, 92, 113; and imperialism, 3, 24, 25, 108; and indirect forms of coercion, 32; and Iraq, 62; of Jamaica, 152–­53, 156–­58, 171–­72, 180; and Lewis, 148; of Liberia, 54, 55, 60; and local elites, 155; and M.

., 217n48 Lugard, Frederick, 56–­57, 62–­63, 64 Lumumba, Patrice, 100 Macmillan, Harold, 16 Mali, 107–­8, 109, 136, 206n8 Mali Federation, 206n8 mandates, 22, 40, 55, 86; and Du Bois, 67–­68; and Iraq, 62; and League of Nations, 41–­42, 51; over Ethiopia, 53–­ 54, 56–­57, 58, 61; over Liberia, 53–­54; and presumed backward peoples, 41; and Second Pan-­African Congress, 52; and Smuts, 49–­50, 72; as trustees, 71; and UN Charter, 71; and unequal integration, 41–­42 Manela, Erez, 192n19 Manley, Michael, 2, 5, 145, 171–­72, 181; background of, 8–­9; and delinking, 157, 158; and democratic socialism, 151, 180; and economy, 12, 24–­25; on foreign corporations and local elites, 216–­17n46; and GATT, 164; and neoliberalism, 180; and New World Group, 152; and NIEO, 173; and Nye­ rere, 151; and politics of change, 151–­52; as prime minister, 151; and redistribution, 159; and self-­determination, 12; [ 262 ] Manley, Michael (continued ) and self-­reliance, 153–­54, 155–­57; and socialism, 168; and West Indian Federation, 8 Manley, Norman, 110, 125, 128–­29, 130, 151 market fundamentalism, 175 market(s), 157; domestic, 11, 131; free, 164; global, 55; and imperialism, 3, 82; and James, 69; and M. Manley, 180; mechanisms of, 174; and NIEO, 144; and poor nations, 164; regional, 131, 143 Martinique, 116 Marx, Karl: Capital, 3; Communist Man­ ifesto, 3, 73 Marxism, 4, 68, 76, 77, 81, 83, 145, 167 Marxists, 168 Mazzini, Giuseppe, 76 Médecins Sans Frontières (Doctors Without Borders), 104 metropole, 49, 78, 82, 111, 112 mines, 72, 82 Mitchell, Timothy, 50 Mobutu, Joseph, 100 modernization, 28, 148, 214n4 modernization theory, 147, 148, 152 Monroe Doctrine, 118 Mont Pèlerin Society, 174 most favored nation standard, 164, 165 Movement for Black Lives, 181 Moyn, Samuel, 92 Moynihan, Daniel Patrick, 176–­77, 178 Mozambique, 87 Mussolini, Benito, 69 Myrdal, Gunnar, 144, 159, 160–­62, 218n77; Beyond the Welfare State, 149, 161; Eco­ nomic Theory and Underdeveloped Regions, 148–­49; “The Equality Issue in World Development,” 162 Nardal, Paulette, 5, 184n16 nationalism, 159; and Berlin, 76; as compatible with internationalism, 170; congenital defects of, 30; and democratic state, 27; and economic development, 143–­44; good vs. bad, 27; and Habermas, 27; and Lenin, 37–­ 38; and liberalism, 26, 27; and liberal universalism, 28; as necessary for national independence, 24; pathological character of, 26; and postcolonial di- index lemmas, 25; and regional federations, 110; and United States of Europe, 113 National Party (South Africa), 48 nation-­building, 2, 11; and dependen­ cies after decolonization, 17; and ex­ ternal forces, 12; and internal instability, 29; international conditions for, 24; and international market, 144, 157; and NIEO, 167, 174; and self-­ determination, 15, 180; socialist, 154, 156, 157, 163; and worldmaking, 4, 15, 17, 22, 24, 28, 106, 154, 180 nation-­state, 96, 181; and anticolonial nationalism, 25; and decolonization, 112; decolonization as diffusion of, 26; decolonization as globalization of, 16; empirical and normative limits of, 30; as majoritarian, homogenizing, and exclusionary, 179; as normative, 4; rights of, 29; rise of, 3; and self-­ determination, 16; territorial form of, 25; universalization of, 1, 16, 112 Native Americans, 19–­20, 118 native rulers, 83–­84 natural resources, 89, 90, 91–­92, 144, 153, 170, 180, 215n17.


pages: 1,088 words: 228,743

Expected Returns: An Investor's Guide to Harvesting Market Rewards by Antti Ilmanen

Andrei Shleifer, asset allocation, asset-backed security, availability heuristic, backtesting, balance sheet recession, bank run, banking crisis, barriers to entry, Bernie Madoff, Black Swan, Bretton Woods, business cycle, buy and hold, buy low sell high, capital asset pricing model, capital controls, Carmen Reinhart, central bank independence, collateralized debt obligation, commoditize, commodity trading advisor, corporate governance, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, debt deflation, deglobalization, delta neutral, demand response, discounted cash flows, disintermediation, diversification, diversified portfolio, dividend-yielding stocks, equity premium, Eugene Fama: efficient market hypothesis, fiat currency, financial deregulation, financial innovation, financial intermediation, fixed income, Flash crash, framing effect, frictionless, frictionless market, G4S, George Akerlof, global reserve currency, Google Earth, high net worth, hindsight bias, Hyman Minsky, implied volatility, income inequality, incomplete markets, index fund, inflation targeting, information asymmetry, interest rate swap, invisible hand, Kenneth Rogoff, laissez-faire capitalism, law of one price, London Interbank Offered Rate, Long Term Capital Management, loss aversion, margin call, market bubble, market clearing, market friction, market fundamentalism, market microstructure, mental accounting, merger arbitrage, mittelstand, moral hazard, Myron Scholes, negative equity, New Journalism, oil shock, p-value, passive investing, Paul Samuelson, performance metric, Ponzi scheme, prediction markets, price anchoring, price stability, principal–agent problem, private sector deleveraging, purchasing power parity, quantitative easing, quantitative trading / quantitative finance, random walk, reserve currency, Richard Thaler, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Robert Shiller, Robert Shiller, savings glut, selection bias, Sharpe ratio, short selling, sovereign wealth fund, statistical arbitrage, statistical model, stochastic volatility, stocks for the long run, survivorship bias, systematic trading, The Great Moderation, The Myth of the Rational Market, too big to fail, transaction costs, tulip mania, value at risk, volatility arbitrage, volatility smile, working-age population, Y2K, yield curve, zero-coupon bond, zero-sum game

Recent criticism of the EMH Besides “anomalies” (patterns of return predictability that are not easily explained by rational models), the crash of 1987, the 1999–2002 tech bubble and bust, and the 2006–2009 boom–bust period have been major challenges to the EMH. In 2008–2009 some critics went further and blamed the EMH for being one cause of the crisis. They blamed widespread belief in the EMH, and more loosely “market fundamentalism”, for the laissez faire attitude of policymakers and regulators: letting leverage and asset booms grow unchecked and allowing ever more complex financial instruments and questionable sales practices flourish without restraint, under the cover that the market would inevitably get the prices of these securities right. Other criticisms come as though out of a scattergun: some attack the classical notion that competitive markets are inherently self-stabilizing, others blame the Fed’s asymmetric policy responses, while others fault the use of normal distribution and VaR-based risk management in a world where fat tails dominate.

That is how reflexivity gives rise to initially self-fulfilling but eventually self-defeating prophesies and processes” (Soros, 2003, p. 5). Soros (2008) argues that 2007–2008 is not only an end to a cyclical housing bubble but also to a more secular super-bubble—decades-long trends of credit creation, globalization of finance, and deregulation—whose underlying misconception was excessive reliance on the market mechanism (“market fundamentalism”). When Soros’s The Alchemy of Finance was first published in 1987, academics ignored or dismissed the reflexivity idea, partly because the practitioner-oriented book was written “in a different language”. Yet, it has found a large following among investors and it may have also influenced later academic work on positive-feedback trading and on bubbles. Other research also confirms that fast credit growth and financial deregulation /innovation are common characteristics of major booms that end in tears.

For example, the Treasury bond market apparently underpredicted inflation in the 1960s and 1970s (it was repeatedly surprised by higher inflation) and then overpredicted inflation in the 1980s and 1990s (it made the opposite systematic forecasting errors). With hindsight, we know that the inflation process underwent a structural change (higher, more volatile, more persistent inflation) and that the process was later reversed, but real-time bond investors could only learn about this development gradually. The long bull trend in emerging market assets amidst a gradual improvement in emerging market fundamentals is another example where data are consistent with investor irrationality as well as rational learning. Peso problems and learning stories help in interpreting past return predictability but contain no lessons about future profit opportunities. Market frictions Most academic predictability evidence is presented without taking into account trading costs and other market frictions. It is not surprising, then, that paper profits tend to be most consistent in illiquid assets (e.g., small-cap stocks) or in trading styles that involve high turnover (e.g., short-term reversal).


pages: 300 words: 78,475

Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream by Arianna Huffington

American Society of Civil Engineers: Report Card, Bernie Madoff, Bernie Sanders, call centre, carried interest, citizen journalism, clean water, collateralized debt obligation, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, extreme commuting, Exxon Valdez, full employment, greed is good, housing crisis, immigration reform, invisible hand, knowledge economy, laissez-faire capitalism, late fees, market bubble, market fundamentalism, Martin Wolf, medical bankruptcy, microcredit, new economy, New Journalism, offshore financial centre, Ponzi scheme, post-work, Report Card for America’s Infrastructure, Richard Florida, Ronald Reagan, Rosa Parks, single-payer health, smart grid, The Wealth of Nations by Adam Smith, too big to fail, transcontinental railway, trickle-down economics, winner-take-all economy, working poor, Works Progress Administration

Along the way, the social contract—especially the subsections protecting workers, poor people, and our air, water, and oceans—was fed into a shredder. Starting with the New Deal, we began constructing a social safety net to help the most vulnerable among us. But who needed a safety net when the laws of supply and demand were there to protect us, when the trickle-down theory would provide sustenance for us all? The missing tenet in this new free-market fundamentalism was the recognition, central to capitalism, that businessmen have responsibilities above and beyond the bottom line. Alfred Marshall, one of the founding fathers of modern capitalism, in an address to the British Economics Association in 1890, called it “economic chivalry.”15 He explained that “the desire of men for approval of their own conscience and for the esteem of others is an economic force of the first order of importance.”

Given how close we were in 2008 to the complete collapse of our economic and financial system, anyone who continues to make the case that markets do best when left alone should be laughed off his bully pulpit.17 Despite the fact that many banks, car companies, and so on would be defunct without government intervention, the free-market fundamentalists continue to live in denial, trying to convince the world that if only left alone, free markets would right themselves. Free-market fundamentalism didn’t fail because our leaders didn’t execute it well enough. In fact, during his time in office (until the economic house of cards finally collapsed at the end of his presidency), President George W. Bush and his team did a bang-up job executing a defective theory. The problem isn’t just the bathwater; the baby itself is rotten. William Seidman, the longtime GOP economic adviser who oversaw the savings and loan bailout in 1991, cuts to the chase: “[The Bush] administration made decisions that allowed the free market to operate as a barroom brawl instead of a prize fight.18 To make the market work well, you have to have a lot of rules.”


Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages by Carlota Pérez

agricultural Revolution, Big bang: deregulation of the City of London, Bob Noyce, Bretton Woods, business cycle, capital controls, commoditize, Corn Laws, creative destruction, David Ricardo: comparative advantage, deindustrialization, distributed generation, financial deregulation, financial innovation, Financial Instability Hypothesis, financial intermediation, full employment, Hyman Minsky, informal economy, joint-stock company, Joseph Schumpeter, knowledge economy, late capitalism, market fundamentalism, new economy, nuclear winter, offshore financial centre, post-industrial society, profit motive, railway mania, Robert Shiller, Robert Shiller, Sand Hill Road, Silicon Valley, Simon Kuznets, South Sea Bubble, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, trade route, tulip mania, Upton Sinclair, Washington Consensus

But the basic condition for ushering in a period of synergy, convergence and prosperity, at least in the developed countries and in those that have entered the paradigm and are in a catching-up process, is adaptive regulation, especially regarding the behavior of financial capital.174 This was clear to George Soros, a well-known major actor in the financial scene of the present surge. To him, it is impossible for national institutions, however effective they might be at their level, to properly regulate a global economy. 175 174. This is the core point of Susan Strange’s Mad Money (1998). 175. The need for global regulation is advocated by Soros in his book The Crisis of Global Capitalism (1998) where he presents ‘market fundamentalism’ as a threat to capitalism, the possible source of a serious crash and a danger to the ‘open society’. In his later book he emphasizes this need even further by incorporating it as a subtitle: Reforming Global Capitalism (Soros 2000). 114 Technological Revolutions and Financial Capital 11. The Turning Point: Rethinking, Regulation and Changeover The recessions that follow Frenzy – and the crashes that usually usher them in – are both the consequence of an untenable set-up.

This made it easier for finance capital to make a systematic assault on state intervention and regulation and for the monetarists to move to pre-eminence in the economics profession.229 Soon, the successful flourishing of the microelectronics revolution and the wave of real competition that characterizes the early installation period, facilitated the unearthing of the laissez-faire philosophies and the neo-classical theories in economics, championed by the Thatchers and the Reagans. The process of creative destruction taking place in the economy was accompanied by the demolition of the old edifice of state intervention and regulation, which had stopped being effective in that specific form. In the frenzy phase, the reign of market fundamentalism was supreme, to the benefit of the new technological entrepreneurs and especially of the violently growing financial capital, but to 226. See, for example, Negroponte (1995). 227. See, for example, Soete (2000). 228. While Milton Friedman and Anna Schwartz (1963:1971) held it never could work, there are Keynesians, such as Dow (1998), who hold that the policies were never properly applied. 229.


pages: 280 words: 74,559

Fully Automated Luxury Communism by Aaron Bastani

"Robert Solow", autonomous vehicles, banking crisis, basic income, Berlin Wall, Bernie Sanders, Bretton Woods, capital controls, cashless society, central bank independence, collapse of Lehman Brothers, computer age, computer vision, David Ricardo: comparative advantage, decarbonisation, dematerialisation, Donald Trump, double helix, Elon Musk, energy transition, Erik Brynjolfsson, financial independence, Francis Fukuyama: the end of history, future of work, G4S, housing crisis, income inequality, industrial robot, Intergovernmental Panel on Climate Change (IPCC), Internet of things, Isaac Newton, James Watt: steam engine, Jeff Bezos, job automation, John Markoff, John Maynard Keynes: technological unemployment, Joseph Schumpeter, Kevin Kelly, Kuiper Belt, land reform, liberal capitalism, low earth orbit, low skilled workers, M-Pesa, market fundamentalism, means of production, mobile money, more computing power than Apollo, new economy, off grid, pattern recognition, Peter H. Diamandis: Planetary Resources, post scarcity, post-work, price mechanism, price stability, private space industry, Productivity paradox, profit motive, race to the bottom, RFID, rising living standards, Second Machine Age, self-driving car, sensor fusion, shareholder value, Silicon Valley, Simon Kuznets, Slavoj Žižek, stem cell, Stewart Brand, technoutopianism, the built environment, the scientific method, The Wealth of Nations by Adam Smith, Thomas Malthus, transatlantic slave trade, Travis Kalanick, universal basic income, V2 rocket, Watson beat the top human players on Jeopardy!, Whole Earth Catalog, working-age population

Even now the most innovative private actor in the industry, SpaceX, remains dependent on NASA contracts to fund its research and development. What Jain wants, as we see repeatedly with the powerful, is to socialise the losses of publicly funded research and privatise the gains. Even the wording ‘liberated through private investment’ grates, as if millionaires piggy-backing publicly funded research were acting for the greater good. Yet that is in keeping with market fundamentalism and, as Marx writes, the likes of Jain have viewed the bounty of nature as somehow the result of capitalism for centuries: Natural elements entering as agents into production, and which cost nothing … do not enter as components of capital, but as a free gift of Nature to capital, that is, as a free gift of Nature’s productive power to labour, which, however, appears as the productiveness of capital, as all other productivity does under the capitalist mode of production.

Currently comprised of two institutions – the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA) – its stated goal is the reduction of global poverty through the promotion of foreign investment and international trade. But while its intended purpose is laudable, there can be little doubt it is failing. That is because its understanding of development is built on an ideological commitment to free trade and a worldview which, in the context of the Third Disruption, makes increasingly little sense. As our technologies move to extreme supply, such fidelity to market fundamentalism will only serve to entrench poverty rather than eliminate it. Without recognising this problem, global capitalism will under-develop these regions more acutely than ever, meaning that what should be the energy powerhouses of tomorrow will remain unable to even guarantee access to electricity for their citizens. Which is why, given the demands of transitioning from fossil fuels in the Global South – coupled with what successful transition might mean for economic development and climate change – a third body should be added to the World Bank Group.


pages: 501 words: 134,867

A Line in the Tar Sands: Struggles for Environmental Justice by Tony Weis, Joshua Kahn Russell

addicted to oil, Bakken shale, bilateral investment treaty, call centre, carbon footprint, clean water, colonial exploitation, conceptual framework, corporate social responsibility, decarbonisation, Deep Water Horizon, en.wikipedia.org, energy security, energy transition, Exxon Valdez, failed state, global village, guest worker program, happiness index / gross national happiness, hydraulic fracturing, immigration reform, Intergovernmental Panel on Climate Change (IPCC), investor state dispute settlement, invisible hand, liberal capitalism, LNG terminal, market fundamentalism, means of production, Naomi Klein, new economy, Occupy movement, oil shale / tar sands, peak oil, profit maximization, race to the bottom, smart grid, special economic zone, WikiLeaks, working poor

And while the Chinese government is certainly attempting to secure energy supplies by investing in the tar sands, the list of profiteers extracting bitumen is full of the names of US, Canadian, and European corporations, like Suncor/PetroCanada, Syncrude, Shell, Chevron, ConocoPhillips, Imperial Oil, TOTAL, and ExxonMobil, that receive Western state support. All of these companies are driving tar sands projects. China, Canada, and much of the rest of the world are in the grip of market fundamentalism—the promotion of economic growth, and the relentless pursuit of profits. This has led corporations to secure ideal investment climates by any means necessary. When the Free Trade Area of the Americas was defeated, national governments pursued bilateral trade agreements on behalf of their corporate sponsors. And when bilateral agreements were not enough, Special Economic Zones (SEZs) have been established, where corporations write their own labour laws, environmental regulations, and taxation regimes.

The lives of two Chinese migrant workers who died working in the tar sands in 2007 serve as a stark reminder of how the demonization of people of colour and other nationalities assists in creating brutally unsafe working environments that would be deemed unsuitable for Canadian workers. With the economic recession and a documented rise in white supremacist and neo-Nazi organizations throughout the West, any legitimacy given to these polarizing attitudes is extremely worrying. It seems that market fundamentalism and extreme racism have been making inroads together. How should we understand statements about how Canada is for sale? Public institutions, such as the health care system and water infrastructure, are threatened with privatization; international investors want in. While people resist the dictates of global finance to privatize the public, we must also recognize that the establishment of the Canadian state itself is based on one of the largest acts of violence and land grabs.

See also treaty rights Indigenous Tar Sands Campaign, 74 industrial genocide, 64, 69 “in situ extraction,” 9 “insourcing,” 84 institutional disruption, 293–94 institutional ecology, 298, 353n3; “green jobs” and, 301–4 Intergovernmental Panel on Climate Change (IPCC), 218 International Energy Agency (IEA), 27, 28, 101, 304 International Labour Organization, 303, 335n13, 353n10; Convention 169: 251 International Transport Workers’ Federation, 307 Inuit, 258, 316 Iraq: oil imports from, 31; US invasion of, 99 Israel: “extreme” tar sands extraction in, 105–7; trade agreement with, 93; Zionism in, 105–7 Israel Chemicals, 106 Israel Energy Initiatives (IEI), 105–7 Italy, 102 Jacobsen, David, 56 Jewish National Fund (JNF), 106–7 Jimisawaabandaaming, 237 Johanson, Reg, 163 Jonas, Howard, 107 Jones, Van, 244, 284 Jordan, “extreme” tar sands extraction in, 107–8 Jordan Energy and Mines Limited, 108 Journal of Power Sources, 283 jurisdictional contestation, 295–96; Indigenous form of, 295 Kalamazoo (Michigan), 116, 137, 182; Enbridge pipeline spill in, 195–206 Kalamazoo River, 17 Karak International Oil, 108 kerogen-infused oil shale, 105–7 kerogen shale, 6, 100–101 Keynesianism, 298, 302 Keystone XL (KXL) pipeline, 5, 12, 17, 18, 30, 41, 62–63, 77–79, 91, 102, 116, 149, 162, 165, 204–5, 232–36, 250, 282, 314, 315; direct action at White House to stop, 166–80, 279–81, 284, 312; Gulf Coast resistance to, 181–94; jobs and energy security brought by, 233; labour movement and, 219–23 Kihci Pikiskwewin (Speaking the Truth), 118–26 Kinder Morgan, 11, 116, 160, 260; Trans Mountain Pipeline, 11, 91, 95, 125, 149, 162 Klamath River Native organizing, 168 Klare, Michael, 313 Klein, Naomi, 170, 173, 246, 284 Klein, Ralph, 38, 51 Kluane people (Yukon), 153 Kyoto Protocol, 29, 53, 124, 218 La Boétie, Étienne de, 286 Laborers’ International Union of North America (LIUNA), 220–22 Labor Network for Sustainability, 220 Laboucan-Massimo, Melina, 209, 248 labour, intersection of with colonialism, the state, capital, and impoverishment, 87 labour movement, 287; and climate change, 217–25, 244; and environmental movement, 86, 88, 90 Lac-Méantic (Quebec), 81, 182 LaDuke, Winona, 246 Lakehead pipelines, 231 Lakota Nation, 235–36 Lameman, Alphonse, 122 Lax Kw’alaams Nation, 264 lead, 136 learning disabilities, 140 Leclerc, Christine, 163–64 Leduc #1, 40 Leggett, Sheila, 148–49, 156 Lenape people, 253 Lepine, Lionel, 208, 248 Levant, Ezra, 50–51 Lickers, Amanda, 265 Liepert, Ron, 56 Life of Mine permit, 169 liquefied natural gas (LNG), 241 Little Village Environmental Justice Organization, 280 Lockridge, Ada, 144 logging, protection of forests from industrial, 70 London Rising Tide, 209 Louisiana, 102, 183 Lovins, Amory, 356n25 Low Carbon Fuel Standard (LCFS), 60–62 Lubicon Cree: land settlement agreement, 115; struggle of, 113–17; undermining sovereignty of, 114 Lukacs, Martin, 57 LyondellBasell, 189 Mabee, Holly Spiro, 71–72 Machado, Antonio, 75 Mackenzie Basin, 33 Madagascar, “extreme” tar sands extraction in, 104–5 Madagascar Oil, 104–5 Maisonneuve magazine, 60 Malaysia, 102 Manitoba: destruction of treaty lands in, 125; soil and lake acidification in, 33 Marathon, 60 Marcellus Shale formation, 283, 314–15 “market ecology,” 46, 298, 302, 304, 309; green growth and, 300–301 market fundamentalism, 95 Marois, Pauline, 82 Marx, Karl: Grundrisse, 309 Masten, Scott, 202 Mathias Colomb Cree Nation (Pukatawagan), 74 Matthews, Hans, 149 Mayflower (Arkansas), 17, 182, 189 McKibben, Bill, 169, 170, 173, 220, 311 McMichael, Philip, 68 “megaload” corridor, 11 Mercredi, Mike, 248 mercury, 136, 254 methane, 15, 241, 324n33 Métis people, 4, 128, 131, 254, 258 Mexico, poverty in, 89 Meyer, John M., 316 Michif people, 253, 259 Michigan.


pages: 278 words: 82,069

Meltdown: How Greed and Corruption Shattered Our Financial System and How We Can Recover by Katrina Vanden Heuvel, William Greider

Asian financial crisis, banking crisis, Bretton Woods, business cycle, buy and hold, capital controls, carried interest, central bank independence, centre right, collateralized debt obligation, conceptual framework, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, declining real wages, deindustrialization, Exxon Valdez, falling living standards, financial deregulation, financial innovation, Financial Instability Hypothesis, fixed income, floating exchange rates, full employment, housing crisis, Howard Zinn, Hyman Minsky, income inequality, information asymmetry, John Meriwether, kremlinology, Long Term Capital Management, margin call, market bubble, market fundamentalism, McMansion, money market fund, mortgage debt, Naomi Klein, new economy, offshore financial centre, payday loans, pets.com, plutocrats, Plutocrats, Ponzi scheme, price stability, pushing on a string, race to the bottom, Ralph Nader, rent control, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, sovereign wealth fund, structural adjustment programs, The Great Moderation, too big to fail, trade liberalization, transcontinental railway, trickle-down economics, union organizing, wage slave, Washington Consensus, women in the workforce, working poor, Y2K

A lame-duck President Bush even felt compelled to offer a defense of the system of free-market capitalism, as he shoveled taxpayer cash out the door as fast as he could to bail out the people he once called his “base,” the rich. This collection, compiled from articles published in the magazine and on thenation.com, proceeds from the roots of crisis through its early stages to its alarming escalation, and it concludes with a series of pieces that tackle that age-old question, What is to be done? As none other than Milton Friedman, the father of free-market fundamentalism, once wrote, “Only a crisis—actual or perceived—produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around.” Friedman was right that ideas are important, but actions depend even more on who controls the levers of power, which segments of society they represent and what kind of pressure can be brought to bear on them from the outside.

We just wish that the Men in Black would draw inspiration from something besides the anachronistic language of the Gold Reserve Act of 1934, which tried to make Treasury’s decisions about the Exchange Stabilization Fund unreviewable by anyone else. (See the new plan’s incredible Section 8, something you would think only Dick Cheney could love.) And who can deny it? All the “Comrade Paulson” jokes should at least be good for a decent respite from Market Fundamentalism—the notion that unregulated markets automatically give you full employment and economic stability. Right now every individual financial institution is deleveraging—that is, reducing its use of borrowed money—at a terrifying pace. Financial houses are trying to recapitalize themselves by gouging depositors, borrowers, investors and credit card holders. As a group, they cannot succeed. They are collectively digging themselves into a black hole in which the gain of one is the loss of another, unless somebody from outside puts in new money.


pages: 318 words: 85,824

A Brief History of Neoliberalism by David Harvey

affirmative action, Asian financial crisis, Berlin Wall, Bretton Woods, business climate, business cycle, capital controls, centre right, collective bargaining, creative destruction, crony capitalism, debt deflation, declining real wages, deglobalization, deindustrialization, Deng Xiaoping, Fall of the Berlin Wall, financial deregulation, financial intermediation, financial repression, full employment, George Gilder, Gini coefficient, global reserve currency, illegal immigration, income inequality, informal economy, labour market flexibility, land tenure, late capitalism, Long Term Capital Management, low-wage service sector, manufacturing employment, market fundamentalism, mass immigration, means of production, Mexican peso crisis / tequila crisis, Mont Pelerin Society, mortgage tax deduction, neoliberal agenda, new economy, Pearl River Delta, phenotype, Ponzi scheme, price mechanism, race to the bottom, rent-seeking, reserve currency, Ronald Reagan, Silicon Valley, special economic zone, structural adjustment programs, the built environment, The Chicago School, transaction costs, union organizing, urban renewal, urban sprawl, Washington Consensus, Winter of Discontent

These orders were, some argued, in violation of the Geneva and Hague Conventions, since an occupying power is mandated to guard the assets of an occupied country and not sell them off.4 Some Iraqis resisted the imposition of what the London Economist called a ‘capitalist dream’ regime upon Iraq. A member of the US-appointed Coalition Provisional Authority forcefully criticized the imposition of ‘free market fundamentalism’, calling it ‘a flawed logic that ignores history’.5 Though Bremer’s rules may have been illegal when imposed by an occupying power, they would become legal if confirmed by a ‘sovereign’ government. The interim government, appointed by the US, that took over at the end of June 2004 was declared ‘sovereign’. But it only had the power to confirm existing laws. Before the handover, Bremer multiplied the number of laws to specify free-market and free-trade rules in minute detail (on detailed matters such as copyright laws and intellectual property rights), expressing the hope that these institutional arrangements would ‘take on a life and momentum of their own’ such that they would prove very difficult to reverse.6 According to neoliberal theory, the sorts of measures that Bremer outlined were both necessary and sufficient for the creation of wealth and therefore for the improved well-being of the population at large.

The Reagan administration, which had seriously thought of withdrawing support for the IMF in its first year in office, found a way to put together the powers of the US Treasury and the IMF to resolve the difficulty by rolling over the debt, but did so in return for neoliberal reforms. This treatment became standard after what Stiglitz refers to as a ‘purge’ of all Keynesian influences from the IMF in 1982. The IMF and the World Bank thereafter became centres for the propagation and enforcement of ‘free market fundamentalism’ and neoliberal orthodoxy. In return for debt rescheduling, indebted countries were required to implement institutional reforms, such as cuts in welfare expenditures, more flexible labour market laws, and privatization. Thus was ‘structural adjustment’ invented. Mexico was one of the first states drawn into what was going to become a growing column of neoliberal state apparatuses worldwide.24 What the Mexico case demonstrated, however, was a key difference between liberal and neoliberal practice: under the former, lenders take the losses that arise from bad investment decisions, while under the latter the borrowers are forced by state and international powers to take on board the cost of debt repayment no matter what the consequences for the livelihood and well-being of the local population.


pages: 310 words: 82,592

Never Split the Difference: Negotiating as if Your Life Depended on It by Chris Voss, Tahl Raz

banking crisis, Black Swan, clean water, cognitive bias, Daniel Kahneman / Amos Tversky, Donald Trump, framing effect, friendly fire, iterative process, loss aversion, market fundamentalism, price anchoring, telemarketer, ultimatum game, uranium enrichment

After discussing the deal and the market, my student and his boss decided that the asking price of $4.3 million was about $450,000 too high. At that point, my student called the broker again to discuss pricing and next steps. After initial pleasantries, the broker asked my student what he thought of the property. “It looks like an interesting property,” he said. “Unfortunately, we don’t know the market fundamentals. We like downtown and King Street in particular, but we have a lot of questions.” The broker then told him that he had been in the market for more than fifteen years, so he was well informed. At this point, my student pivoted to calibrated “How” and “What” questions in order to gather information and judge the broker’s skills. “Great,” my student said. “First and foremost, how has Charleston been affected by the economic downturn?”

If it were such a cash cow, why would someone sell a 100 percent occupied building located next to a growing campus in an affluent city? That was irrational by any measure. A little befuddled but still in the negotiation mindset, my student constructed a label. Inadvertently he mislabeled the situation, triggering the broker to correct him and reveal a Black Swan. “If he or she is selling such a cash cow, it seems like the seller must have doubts about future market fundamentals,” he said. “Well,” he said, “the seller has some tougher properties in Atlanta and Savannah, so he has to get out of this property to pay back the other mortgages.” Bingo! With that, my student had unearthed a fantastic Black Swan. The seller was suffering constraints that, until that moment, had been unknown. My student put the broker on mute as he described other properties and used the moment to discuss pricing with his boss.


pages: 621 words: 157,263

How to Change the World: Reflections on Marx and Marxism by Eric Hobsbawm

anti-communist, banking crisis, battle of ideas, Berlin Wall, British Empire, continuation of politics by other means, creative destruction, currency manipulation / currency intervention, deindustrialization, discovery of the americas, experimental subject, Fall of the Berlin Wall, full employment, Gunnar Myrdal, labour market flexibility, liberal capitalism, market fundamentalism, mass immigration, means of production, new economy, Simon Kuznets, Thorstein Veblen, Upton Sinclair, upwardly mobile, Vilfredo Pareto, zero-sum game

This attempt to hand over human society to the (allegedly) self-controlling and wealth- or even welfare-maximising market, populated (allegedly) by actors in rational pursuit of their interests, had no precedent in any earlier phase of capitalist development in any developed economy, not even the USA. It was a reductio ad absurdum of what its ideologists read into Adam Smith, as the correspondingly extremist 100% state-planned command economy of the USSR was of what the Bolsheviks read into Marx. Not surprisingly, this 10 Marx Today ‘market fundamentalism’, closer to theology than economic reality, also failed. The disappearance of the centrally planned state economies and the virtual disappearance of a fundamentally transformed society from the aspirations of the demoralised social-democratic parties have eliminated much of the twentieth-century debates on socialism. They were some way from Karl Marx’s own thinking, though very largely inspired by him and conducted in his name.

The Soviet-type model of socialism – the only attempt to build a socialist economy so far – no longer exists. On the other hand there has been an enormous and accelerating progress of globalisation and the sheer wealth-generating capacity of humans. This has reduced the power and scope of economic and social action by nation-states and therefore the classical policies of social-democratic movements, which depended primarily on pressing reforms on national governments. Given the prominence of market fundamentalism it has also generated extreme economic inequality within countries and between regions and brought back the element of catastrophe to the basic cyclical 11 How to Change the World rhythm of the capitalist economy, including what became its most serious global crisis since the 1930s. Our productive capacity has made it possible, at least potentially, for most human beings to move from the realm of necessity into the realm of affluence, education and unimagined life choices, although most of the world’s population have yet to enter it.

For almost twenty years after the end of the Soviet system its ideologists believed that they had achieved ‘the end of history’, ‘an unabashed victory of economic and political liberalism’ (Fukuyama), 2 growth in a definitive and permanent, self-stabilising social and political world order of capitalism, unchallenged and unchallengeable both in theory and practice. None of this is tenable any longer. The twentieth-century attempts to treat world history as an economic zero-sum game between private and public, pure individualism and pure collectivism, have not survived the manifest bankruptcy of the Soviet economy and of the economy of ‘market fundamentalism’ between 1980 and 2008. Nor is a return to the one more possible than a return to the other. Since the 1980s it has been evident that the socialists, Marxist or otherwise, were left without their traditional alternative to capitalism, at least unless or until they rethought what they meant by ‘socialism’ and abandoned the presumption that the (manual) working class would necessarily be the chief agent of social transformation.


pages: 467 words: 154,960

Trend Following: How Great Traders Make Millions in Up or Down Markets by Michael W. Covel

Albert Einstein, Atul Gawande, backtesting, beat the dealer, Bernie Madoff, Black Swan, buy and hold, buy low sell high, capital asset pricing model, Clayton Christensen, commodity trading advisor, computerized trading, correlation coefficient, Daniel Kahneman / Amos Tversky, delayed gratification, deliberate practice, diversification, diversified portfolio, Edward Thorp, Elliott wave, Emanuel Derman, Eugene Fama: efficient market hypothesis, Everything should be made as simple as possible, fiat currency, fixed income, game design, hindsight bias, housing crisis, index fund, Isaac Newton, John Meriwether, John Nash: game theory, linear programming, Long Term Capital Management, mandelbrot fractal, margin call, market bubble, market fundamentalism, market microstructure, mental accounting, money market fund, Myron Scholes, Nash equilibrium, new economy, Nick Leeson, Ponzi scheme, prediction markets, random walk, Renaissance Technologies, Richard Feynman, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, shareholder value, Sharpe ratio, short selling, South Sea Bubble, Stephen Hawking, survivorship bias, systematic trading, the scientific method, Thomas L Friedman, too big to fail, transaction costs, upwardly mobile, value at risk, Vanguard fund, William of Occam, zero-sum game

I hope that after reading Trend Following, the confusion and hesitation associated with making money in down markets, markets that are dropping or crashing, will dissipate. 7 Trend followers are traders, so I generally use the word “trader” instead of “investor” throughout. Fundamental Versus Technical There are two basic theories that are used to trade in the markets. The first theory is fundamental analysis. It is the study of external factors that affect the supply and demand of a particular market. Fundamental analysis uses factors such as weather, government policy, domestic and foreign political and economic events, price-earnings ratios, and balance sheets to make buy and sell decisions. By monitoring “fundamentals” for a particular market, one can supposedly predict a change in market direction before that change has been reflected in the price of the market with the belief that you can then make money from that knowledge.

Trend followers are the group of technical traders who use reactive technical analysis. Instead of trying to predict a market direction, their strategy is to react to the market’s movements whenever they occur. This enables them to focus on the market’s actual moves and not get emotionally involved with trying to predict direction or duration. Chapter 1 • Trend Following 11 One trend follower summarized the conundrum: “I could not analyze 20 markets fundamentally and make money. One of the reasons [trend following] works is because you don’t try to outthink it. You are a trend follower, not a trend predictor.”14 Discretionary Versus Mechanical I have established the concept that you can be an investor or trader. I have established that trading can be fundamentally or technically based. Further, technical trading can be predictive or reactive. And I’ve explained how trend followers are traders who use a reactive technical approach based on price.

Ride the bucking bronco, baby…or you can always accept the fake security of buy and hold investing. Trend Following Critics My interviews with the top traders confirmed what I have always believed and repeatedly say to be the primary reason people After word are confused about trend following. Their confusion is linked directly to a trading and investing culture familiar and therefore comfortable with only one approach to the markets: fundamental analysis (buy and hold, long only, etc.). Fundamental traders and investors think the only way to beat the market is to gather all the information you can find. They want news, they want CNBC, they want Jim Cramer, they want crop reports, they want OPEC rumors, they want Bernanke’s shoe size—they believe extraneous information will help them to make profitable trading decisions. Trend followers, on the other hand, say, “Enough!”


pages: 297 words: 91,141

Market Sense and Nonsense by Jack D. Schwager

3Com Palm IPO, asset allocation, Bernie Madoff, Brownian motion, buy and hold, collateralized debt obligation, commodity trading advisor, computerized trading, conceptual framework, correlation coefficient, Credit Default Swap, credit default swaps / collateralized debt obligations, diversification, diversified portfolio, fixed income, high net worth, implied volatility, index arbitrage, index fund, London Interbank Offered Rate, Long Term Capital Management, margin call, market bubble, market fundamentalism, merger arbitrage, negative equity, pattern recognition, performance metric, pets.com, Ponzi scheme, quantitative trading / quantitative finance, random walk, risk tolerance, risk-adjusted returns, risk/return, Robert Shiller, Robert Shiller, selection bias, Sharpe ratio, short selling, statistical arbitrage, statistical model, survivorship bias, transaction costs, two-sided market, value at risk, yield curve

Schwager Hedge Fund Market Wizards: How Winning Traders Win Market Wizards: Interviews with Top Traders The New Market Wizards: Conversations with America’s Top Traders Stock Market Wizards: Interviews with America’s Top Stock Traders Schwager on Futures: Technical Analysis Schwager on Futures: Fundamental Analysis Schwager on Futures: Managed Trading: Myths & Truths Getting Started in Technical Analysis A Complete Guide to the Futures Markets: Fundamental Analysis, Technical Analysis, Trading, Spreads, and Options Study Guide to Accompany Fundamental Analysis (with Steven C. Turner) Study Guide to Accompany Technical Analysis (with Thomas A. Bierovic and Steven C. Turner) Cover design: John Wiley & Sons, Inc. Copyright © 2013 by Jack D. Schwager. All rights reserved. Published by John Wiley & Sons, Inc., Hoboken, New Jersey. Published simultaneously in Canada.

Clarity Portfolio Viewer Closet benchmarker Closet index fund CNBC Coincident negative return (CNR) matrix Collateralized debt obligations (CDOs) vs. commercial paper Commercial paper, vs. collateralized debt obligations (CDOs) Commodity Futures Trading Commission (CFTC) Commodity prices Commodity trading advisors (CTAs) Comparison pitfalls markets strategy style time period Conservative investment Contango Contrarian indicator Convergence strategies Convertible arbitrage Convertible bond prices Correlation among managers and beta beyond coefficient of determination definition down months focus linear relationships to managers misconceptions about plus beta within portfolios spurious Correlation assumptions Correlation coefficient Correlation matrix Correlations going to one event Costs Countertrend strategies Countrywide Cramer, Jim Credit arbitrage Credit default swaps Credit hedge funds Credit quality Credit rating agencies Credit risk Credit spreads Critical financial applications CTA approaches The Daily Show Data relevance Default risk Deficient market hypothesis. See also Efficient market hypothesis (EMH) about beating the market fundamentals vs. price moves hedgers and governments human emotions investment insights luck vs. skill market collapse information negative value assets the price in not always right Delta hedging Direct investments in hedge funds Directional biases Distress investments Diversification amount of benefits of in funds of funds portfolio effects qualification regarding top down approach in traditional funds Diversification benefits in hedge funds Diversified hedge funds investment Diversified portfolio of hedge funds Dollar flow Dot-com mania Double fee structure Dow Theory Downside deviation Drawdowns Druckenmiller, Stanley Efficient market hypothesis (EMH) and empirical evidence flaws future world view Emerging market funds Emotional price distortion Emotion-driven bubble Emotions and fundamentals and reason Engelberg, Joseph Equity hedge funds Equity investors Equity market neutral funds Equity prices Equity trader ESW (Joseph Engelberg, Caroline Sasseville, and Jared Williams) Event driven funds Event risk Exchange rate mechanism Expert advice Comedy Central vs.


pages: 322 words: 87,181

Straight Talk on Trade: Ideas for a Sane World Economy by Dani Rodrik

3D printing, airline deregulation, Asian financial crisis, bank run, barriers to entry, Berlin Wall, Bernie Sanders, blue-collar work, Bretton Woods, BRICs, business cycle, call centre, capital controls, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, carried interest, central bank independence, centre right, collective bargaining, conceptual framework, continuous integration, corporate governance, corporate social responsibility, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Donald Trump, endogenous growth, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, financial deregulation, financial innovation, financial intermediation, financial repression, floating exchange rates, full employment, future of work, George Akerlof, global value chain, income inequality, inflation targeting, information asymmetry, investor state dispute settlement, invisible hand, Jean Tirole, Kenneth Rogoff, low skilled workers, manufacturing employment, market clearing, market fundamentalism, meta analysis, meta-analysis, moral hazard, Nelson Mandela, new economy, offshore financial centre, open borders, open economy, Pareto efficiency, postindustrial economy, price stability, pushing on a string, race to the bottom, randomized controlled trial, regulatory arbitrage, rent control, rent-seeking, Richard Thaler, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, Sam Peltzman, Silicon Valley, special economic zone, spectrum auction, Steven Pinker, The Rise and Fall of American Growth, the scientific method, The Wealth of Nations by Adam Smith, Thomas L Friedman, too big to fail, total factor productivity, trade liberalization, transaction costs, unorthodox policies, Washington Consensus, World Values Survey, zero-sum game, éminence grise

The new rising powers must demonstrate what they stand for and which values they will articulate and disseminate. They must develop their vision of a new global economy, beyond complaints about the asymmetric power structure. Unfortunately, it is not yet clear whether they have the inclination to rise above their immediate interests to address the globe’s common challenges. Their own development experience makes countries like China, India, and Brazil resistant to market fundamentalism and natural advocates for institutional diversity and pragmatic experimentalism in the world economy. They can build on this experience to articulate a new global narrative that emphasizes the real economy over finance, policy diversity over harmonization, national policy space over external constraints, and social inclusion over technocratic elitism. They must stop being supplicants, and act like real leaders, understanding that others too, including advanced countries, face challenges that sometimes require policies that put the domestic economy before the global one.

But the experience in Latin America and southern Europe reveals perhaps a greater weakness of the left: the absence of a clear program to refashion capitalism and globalization for the twenty-first century. From Greece’s Syriza to Brazil’s Workers’ Party, the left has failed to come up with ideas that are economically sound and politically popular, beyond ameliorative policies such as income transfers. Economists and technocrats on the left bear a large part of the blame. Instead of contributing to such a program, they abdicated too easily to market fundamentalism and bought in to its central tenets. Worse still, they led the hyperglobalization movement at crucial junctures. The enthroning of free capital mobility—especially of the short-term kind—as a policy norm by the European Union, the Organization for Economic Cooperation and Development, and the IMF was arguably the most fateful decision for the global economy in recent decades. As Rawi Abdelal has shown, this effort was spearheaded in the late 1980s and early 1990s not by free-market ideologues but by French technocrats such as Jacques Delors (at the European Commission) and Henri Chavranski (at the OECD), who were closely associated with the Socialist Party in France.2 Similarly, in the United States, it was technocrats associated with the more Keynesian Democratic Party, such as Lawrence Summers, who led the charge for financial deregulation.


pages: 98 words: 27,609

The American Dream Is Not Dead: (But Populism Could Kill It) by Michael R. Strain

Bernie Sanders, business cycle, centre right, creative destruction, deindustrialization, Donald Trump, feminist movement, full employment, gig economy, Gini coefficient, income inequality, job automation, labor-force participation, market clearing, market fundamentalism, new economy, Robert Gordon, Ronald Reagan, social intelligence, Steven Pinker, The Rise and Fall of American Growth, upwardly mobile, working poor

Olsen concludes by saying that “conservative populism in the real world is nothing more than an argument that new times require new measures.” This is not the case. It is much more than that. Of course new times require new measures. Of course government needs to do more to advance economic opportunity to those who need it most. My disagreement with Olsen is not about political philosophy or the wisdom of “market fundamentalism” as a guide to public policy. My disagreement is not theoretical. It is about the harmful way that populism on the political right has manifested itself—in the real world—during the past several years. Olsen writes: “Strain’s book effectively refutes the ‘left populist’ argument of general capitalist failure.” E. J. Dionne disagrees. Dionne argues that I engage in rhetorical excess in my description of the progressive left.


pages: 580 words: 168,476

The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz

"Robert Solow", affirmative action, Affordable Care Act / Obamacare, airline deregulation, Andrei Shleifer, banking crisis, barriers to entry, Basel III, battle of ideas, Berlin Wall, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collapse of Lehman Brothers, collective bargaining, colonial rule, corporate governance, Credit Default Swap, Daniel Kahneman / Amos Tversky, Dava Sobel, declining real wages, deskilling, Exxon Valdez, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, framing effect, full employment, George Akerlof, Gini coefficient, income inequality, income per capita, indoor plumbing, inflation targeting, information asymmetry, invisible hand, jobless men, John Harrison: Longitude, John Markoff, John Maynard Keynes: Economic Possibilities for our Grandchildren, Kenneth Arrow, Kenneth Rogoff, London Interbank Offered Rate, lone genius, low skilled workers, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, mass incarceration, medical bankruptcy, microcredit, moral hazard, mortgage tax deduction, negative equity, obamacare, offshore financial centre, paper trading, Pareto efficiency, patent troll, Paul Samuelson, payday loans, price stability, profit maximization, profit motive, purchasing power parity, race to the bottom, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, shareholder value, short selling, Silicon Valley, Simon Kuznets, spectrum auction, Steve Jobs, technology bubble, The Chicago School, The Fortune at the Bottom of the Pyramid, The Myth of the Rational Market, The Spirit Level, The Wealth of Nations by Adam Smith, too big to fail, trade liberalization, transaction costs, trickle-down economics, ultimatum game, uranium enrichment, very high income, We are the 99%, wealth creators, women in the workforce, zero-sum game

It seemed curious that the ECB was apparently willing to delegate authority to a private institution, operating in secret, on what was or was not an acceptable restructuring. So much for democratic accountability. 39. The term “Chicago school” has come to refer to Milton Friedman and his disciples who believed in market fundamentalism, the idea that unfettered markets are always efficient even in the absence of government regulation. Milton Friedman taught for many years at the University of Chicago. But, of course, many economists who teach there do not subscribe to market fundamentalism—and many economists at other schools do. See chapter 3 for a longer discussion. 40. See the website of the Board of Governors of the Federal Reserve for the most up-to-date balance sheet figures, http://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm. 41.

If the leaders of the Fed hadn’t been so wedded to the notion that there were no bubbles, it would have been obvious to them (as it was to economists like Robert Shiller, of Yale, one of the country’s leading experts on housing),54 that the unprecedented rise in housing prices relative to incomes almost surely represented a bubble. In addition, the Fed didn’t have to rely on interest rate changes to dampen the bubble—it could have increased down payment requirements or tightened lending standards. Congress had given the Fed authority to do so in 1994. The Fed in its allegiance to market fundamentalism had tied its own hands. Economists have, similarly, provided the Fed with reasons not to attempt to address unemployment. People in a dynamic economy have to move from job to job, and that takes time, which creates a natural rate of unemployment. To push the economy beyond that natural rate pushes the economy to ever-accelerating inflation (in this view). As the unemployment rate falls even briefly below the natural rate, inflation increases; but then market participants come to expect that rate of inflation, and so they build that into their wage and price increases.


pages: 512 words: 162,977

New Market Wizards: Conversations With America's Top Traders by Jack D. Schwager

backtesting, beat the dealer, Benoit Mandelbrot, Berlin Wall, Black-Scholes formula, butterfly effect, buy and hold, commodity trading advisor, computerized trading, Edward Thorp, Elliott wave, fixed income, full employment, implied volatility, interest rate swap, Louis Bachelier, margin call, market clearing, market fundamentalism, money market fund, paper trading, pattern recognition, placebo effect, prediction markets, Ralph Nelson Elliott, random walk, risk tolerance, risk/return, Saturday Night Live, Sharpe ratio, the map is not the territory, transaction costs, War on Poverty

I think, however, despite my having had no background in the business, I was able to ask intelligent questions and respond appropriately. However, there was one exception. [He laughs at the recollection.] I was probably one of the only candidates who knew virtually nothing about Richard Dennis. Although I didn’t know it, Richard Dennis was famous for being one of the world’s great technical traders. During the interview I asked, “Do you trade the markets fundamentally or technically?” That got a good chuckle. He answered, “We trade technically.” I responded by asking, “Is fundamental analysis dead?” Dennis answered, with a smile, “We certainly hope not.” Obviously your lack of experience didn’t hurt you. As it turned out, of the thirteen people selected, one-third had no experience, one-third had significant experience, and the remaining one-third had a little bit of experience.

However, for any individual trader, the definition can be made mathematically precise. In other words, chart traders are artists until they mathematically define their patterns—say, as part of a system structure—at which time they become scientists. Why have you chosen a purely technical approach in favor of one that also employs fundamentals? Many economists have tried to trade the commodity markets fundamentally and have usually ended up losing. The problem is that the markets operate more on psychology than on fundamentals. For example, you may determine that silver should be priced at, say, $8, and that may well be an accurate evaluation. However, under certain conditions—for example, a major inflationary environment—the price could temporarily go much higher. In the commodity inflation boom that peaked in 1980, silver reached a high of $50—a price level that was out of all proportion to any true fundamental value.

The ratio of alternate numbers in the sequence (for example, 21 and 55) converges to 0.382 as the numbers get larger. These two ratios—0.618 and 0.382—are commonly used to project retracements of prior price swings. Floor trader. A member of the exchange who trades on the floor for personal profit. Frontrunning. The unethical—and in some cases illegal—practice of a broker placing his own order in front of a customer order that he anticipates will move the market. Fundamental analysis. The use of economic data to forecast prices. For example, fundamental analysis of a currency might focus on such items as relative inflation rates, relative interest rates, relative economic growth rates, and political factors. Futures. See “Futures—Understanding the Basics.” Gann analysis. Market analysis based on a variety of technical concepts developed by William Gann, a famous stock and commodity trader during the first half of the twentieth century.


pages: 269 words: 104,430

Carjacked: The Culture of the Automobile and Its Effect on Our Lives by Catherine Lutz, Anne Lutz Fernandez

barriers to entry, car-free, carbon footprint, collateralized debt obligation, failed state, feminist movement, fudge factor, Gordon Gekko, housing crisis, illegal immigration, income inequality, inventory management, market design, market fundamentalism, mortgage tax deduction, Naomi Klein, Nate Silver, New Urbanism, oil shock, peak oil, Ralph Nader, Ralph Waldo Emerson, ride hailing / ride sharing, Thorstein Veblen, traffic fines, Unsafe at Any Speed, urban planning, white flight, women in the workforce, working poor, Zipcar

Frank and his ilk aside, many people see solving car-related problems as an engineering issue alone, not a cultural or political challenge, requiring behavioral changes or social innovations. They are the many, many “irrational futurists,” in the words of one iconoclastic GM executive, people who assume that science will solve, and the market will commercialize, technical solutions to the problems of pollution, congestion, or highway fatalities.25 After years of market fundamentalism—or the belief that the market is the mechanism that, if left alone, will produce the best outcome for the most people—as the credo of government 36 Carjacked and media, people generally assume the market will make happen the things that need to happen. Many, especially the young, are convinced that global warming, in part caused by auto emissions, will be reversed by the invention of a nonpolluting fuel or superlight materials for car manufacture.

See also Buick; Cadillac; Chevrolet; Hummer; Pontiac; Saab; Saturn ghost items, 70 Glassner, Barry, 152 global warming, xii-xiii, 36, 161, 173–4, 209, 224, 228 Gore, Al, xiii, 150 GPS systems, 34, 42, 119, 156, 194, 222 graduated licensing systems, 193, 243–4n13 greenwashing, 89 GTO, 25 Hannity, Sean, 150 Harrison, Darryll, 43 Hartmann, Paul, 58, 62–3 Harvey, Steve, 151 health issues: asthma, 161, 167, 171–4 cancer, 161, 167–70, 172, 174, 192 251 heart attack and stroke, 161, 165, 167–8, 172, 184 obesity, 136, 161–4 stress, 155–7 workers in car-related fields and, 169–71 hedge funds, 123–4 Herbie (film), 7 Heritage Foundation of Franklin and Williamson County, 129–30 high-consideration products, 40, 46 Hill, Kevin, 40–1, 43 Hoffman, Dustin, 14 Hollywood, 7, 14, 18–9, 22, 33–4, 51, 113, 185, 200 Honda, 16, 19, 39, 43–4, 48, 53, 55–6, 60, 66–8, 73–4, 88, 206, 216 Houston, Douglas, 168 Hudson, Mike, 117–8 Hughes, Cheyenne, 112–3 Hulfish, Holly, 144 Hummer, 3, 42, 51, 76, 120, 199 Hurricane Katrina, 114, 173 hybrid cars, xiii, 49, 55, 65–7, 83, 88–90, 215 Hyundai, 75, 108, 124, 166 I Am Legend (film), 34 Illich, Ivan, 125 individualism, 47, 146–7, 203 Infiniti, 77, 156–7 Iraq War, 17, 35, 96–7, 181, 189 Iron Man (film), 13–4 Isuzu, 16 Italian Job, The (film), 51 J. D. Byrider, 108 Jaguar, 74 James, Leon, 157–8 Jeep Wrangler, 16, 65 Johnson, Stephen L., 175 Joyner, Tom, 151 Katz, Jack, 153–5 Kia, 2 Klare, Michael T., 89–90 Klein, Naomi, 10 Krugman, Paul, 126 Land Rover, 16, 27 Lexus, 54, 74, 125, 165 Limbaugh, Rush, 149–50 Lincoln, 16, 75, 143 Live Free or Die Hard (film), 7 London, 134, 225 252 Carjacked Ludwig, Art, 99 luxury, 74–8 market fundamentalism, 35–6 marketing strategies: auto shows and, 48–9 car regulation and, 18 of Chevrolet, 178 children and, 50–2 credit and, 84–7 emotions and, 40–6 of Ford, 42 of Honda, 44, 48, 55 interactive, 40 luxury and, 74–8 niche, 32 of Nissan, 43–5 progress and, 34 safety and, 203 self-expression and, 56–7 Sloan’s GM, 64 status and, 57–60 SUVs and, 73, 89, 199 teenagers and, 2, 51–4, 59 of Volkswagen, 27–8 mass transit.


pages: 356 words: 103,944

The Globalization Paradox: Democracy and the Future of the World Economy by Dani Rodrik

affirmative action, Asian financial crisis, bank run, banking crisis, bilateral investment treaty, borderless world, Bretton Woods, British Empire, business cycle, capital controls, Carmen Reinhart, central bank independence, collective bargaining, colonial rule, Corn Laws, corporate governance, corporate social responsibility, credit crunch, Credit Default Swap, currency manipulation / currency intervention, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, Doha Development Round, en.wikipedia.org, endogenous growth, eurozone crisis, financial deregulation, financial innovation, floating exchange rates, frictionless, frictionless market, full employment, George Akerlof, guest worker program, Hernando de Soto, immigration reform, income inequality, income per capita, industrial cluster, information asymmetry, joint-stock company, Kenneth Rogoff, land reform, liberal capitalism, light touch regulation, Long Term Capital Management, low skilled workers, margin call, market bubble, market fundamentalism, Martin Wolf, mass immigration, Mexican peso crisis / tequila crisis, microcredit, Monroe Doctrine, moral hazard, night-watchman state, non-tariff barriers, offshore financial centre, oil shock, open borders, open economy, Paul Samuelson, price stability, profit maximization, race to the bottom, regulatory arbitrage, savings glut, Silicon Valley, special drawing rights, special economic zone, The Wealth of Nations by Adam Smith, Thomas L Friedman, Tobin tax, too big to fail, trade liberalization, trade route, transaction costs, tulip mania, Washington Consensus, World Values Survey

Economists use a variety of frameworks to analyze the world, some of which favor free markets and some of which don’t. Much of economic research is in fact devoted to understanding the types of government intervention that can improve economic performance. Non-economic motives and socially cooperative behavior are increasingly part of what economists study. The problem is not that economists are high priests of free market fundamentalism, but that they suffer from the same heuristic biases as regular people. They tend to exhibit groupthink and overconfidence, relying excessively on those pieces of evidence that support their preferred narrative of the moment, while dismissing others that don’t fit as neatly. They follow fads and fashion, promoting different sets of ideas at different times. They place too much weight on recent experience and too little weight on more distant history.

Developing nations sought to become export platforms and became increasingly willing to submit themselves to such rules in their drive to attract foreign investment. Entangled with these changes was an important ideological transformation. The 1980s were the decade of the Reagan-Thatcher revolutions. Free market economics was in the ascendancy, producing what has been variously called the Washington Consensus, market fundamentalism, or neoliberalism. Whatever the appellation, this belief system combined excessive optimism about what markets could achieve on their own with a very bleak view of the capacity of governments to act in socially desirable ways. Governments stood in the way of markets instead of being indispensable to their functioning, and accordingly had to be cut down to size. This new vision elevated the simplistic case for trade—the one that economics professors dole out to journalists—over the appropriately qualified version.


pages: 463 words: 105,197

Radical Markets: Uprooting Capitalism and Democracy for a Just Society by Eric Posner, E. Weyl

3D printing, activist fund / activist shareholder / activist investor, Affordable Care Act / Obamacare, Airbnb, Amazon Mechanical Turk, anti-communist, augmented reality, basic income, Berlin Wall, Bernie Sanders, Branko Milanovic, business process, buy and hold, carbon footprint, Cass Sunstein, Clayton Christensen, cloud computing, collective bargaining, commoditize, Corn Laws, corporate governance, crowdsourcing, cryptocurrency, Donald Trump, Elon Musk, endowment effect, Erik Brynjolfsson, Ethereum, feminist movement, financial deregulation, Francis Fukuyama: the end of history, full employment, George Akerlof, global supply chain, guest worker program, hydraulic fracturing, Hyperloop, illegal immigration, immigration reform, income inequality, income per capita, index fund, informal economy, information asymmetry, invisible hand, Jane Jacobs, Jaron Lanier, Jean Tirole, Joseph Schumpeter, Kenneth Arrow, labor-force participation, laissez-faire capitalism, Landlord’s Game, liberal capitalism, low skilled workers, Lyft, market bubble, market design, market friction, market fundamentalism, mass immigration, negative equity, Network effects, obamacare, offshore financial centre, open borders, Pareto efficiency, passive investing, patent troll, Paul Samuelson, performance metric, plutocrats, Plutocrats, pre–internet, random walk, randomized controlled trial, Ray Kurzweil, recommendation engine, rent-seeking, Richard Thaler, ride hailing / ride sharing, risk tolerance, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Rory Sutherland, Second Machine Age, second-price auction, self-driving car, shareholder value, sharing economy, Silicon Valley, Skype, special economic zone, spectrum auction, speech recognition, statistical model, stem cell, telepresence, Thales and the olive presses, Thales of Miletus, The Death and Life of Great American Cities, The Future of Employment, The Market for Lemons, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade route, transaction costs, trickle-down economics, Uber and Lyft, uber lyft, universal basic income, urban planning, Vanguard fund, women in the workforce, Zipcar

Yet we perceive a fatal flaw in the Right: it has been timid and unimaginative in its vision of the social changes necessary to make markets flourish. Many on the Right support Market Fundamentalism, an ideology they assume to have been proven in economic theory and historical experience. In reality, it is little more than a nostalgic commitment to an idealized version of markets as they existed in the Anglo-Saxon world in the nineteenth century. (We will use the term capitalism to refer to this idealized historical version of markets, in which governments focus on protecting private property and enforcing contracts.) We contrast Market Fundamentalism with Market Radicalism, which is our own commitment to understand, restructure, and improve markets at their very roots. We share with the Left the idea that existing social arrangements generate unfair inequality and undermine collective action.


pages: 367 words: 108,689

Broke: How to Survive the Middle Class Crisis by David Boyle

anti-communist, banking crisis, Berlin Wall, Big bang: deregulation of the City of London, Bonfire of the Vanities, bonus culture, call centre, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, deindustrialization, delayed gratification, Desert Island Discs, Eugene Fama: efficient market hypothesis, eurozone crisis, Fall of the Berlin Wall, financial deregulation, financial independence, financial innovation, financial intermediation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, housing crisis, income inequality, Jane Jacobs, job satisfaction, Kickstarter, knowledge economy, knowledge worker, market fundamentalism, Martin Wolf, mega-rich, mortgage debt, Neil Kinnock, Nelson Mandela, new economy, Nick Leeson, North Sea oil, Northern Rock, Occupy movement, off grid, offshore financial centre, pension reform, pensions crisis, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, positional goods, precariat, quantitative easing, school choice, Slavoj Žižek, social intelligence, too big to fail, trickle-down economics, Vanguard fund, Walter Mischel, wealth creators, Winter of Discontent, working poor

The Slovenian philosopher Slavoj Žižek has drawn parallels between the democratic reformers in the Middle East and the economic reformers in Latin America, arguing that they are both making a stand against different kinds of fundamentalism, both of which deny the importance of their humanity, and that they recognise the parallels between them. It may be religious fundamentalism which clings to a bizarre belief in the literal truth of every sentence of holy scripture. Or it may be market fundamentalism, which clings to a bizarre belief in the objective reality of market values and the bottom line. It is at heart the same thing, and accepting that is no criticism of either religion or the market. I find this idea compelling. It points to a similar crisis in economics and theology, and demands a humanistic response to both kinds of spiritual impoverishment. Neither religious nor economic fundamentalists see the world as it really is.

To make this comparison doesn’t mean rejecting genuine, complex religion, any more than it means rejecting markets. It means rejecting inhumane simplifications, single bottom lines, one-dimensional measures, and all the other nostrums that have been allowed to drive out complex and humanising middle-class values. Perhaps it also sheds some light on one of the things that has been confusing me. Where is the spark of revolt against the market fundamentalism which is impoverishing the UK, where the middle classes are cowed, the working classes are powerless, and where political debate is so staggeringly narrow and constrained? Watching the new Pope Francis developing his pro-poor mission in Latin America, I have been wondering whether the spark of change is going to come from the Church in its tolerant form. Watching the Archbishop of Canterbury taking on the usurious payday lenders, using rhetoric not heard from the Church since Jesus cleansed the Temple — ‘we will drive you out of business’ — I have wondered whether there is some parallel.


pages: 385 words: 111,807

A Pelican Introduction Economics: A User's Guide by Ha-Joon Chang

Affordable Care Act / Obamacare, Albert Einstein, Asian financial crisis, asset-backed security, bank run, banking crisis, banks create money, Berlin Wall, bilateral investment treaty, borderless world, Bretton Woods, British Empire, call centre, capital controls, central bank independence, collateralized debt obligation, colonial rule, Corn Laws, corporate governance, corporate raider, creative destruction, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, discovery of the americas, Eugene Fama: efficient market hypothesis, eurozone crisis, experimental economics, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, Francis Fukuyama: the end of history, Frederick Winslow Taylor, full employment, George Akerlof, Gini coefficient, global value chain, Goldman Sachs: Vampire Squid, Gordon Gekko, greed is good, Gunnar Myrdal, Haber-Bosch Process, happiness index / gross national happiness, high net worth, income inequality, income per capita, information asymmetry, intangible asset, interchangeable parts, interest rate swap, inventory management, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, knowledge economy, laissez-faire capitalism, land reform, liberation theology, manufacturing employment, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, means of production, Mexican peso crisis / tequila crisis, Nelson Mandela, Northern Rock, obamacare, offshore financial centre, oil shock, open borders, Pareto efficiency, Paul Samuelson, post-industrial society, precariat, principal–agent problem, profit maximization, profit motive, purchasing power parity, quantitative easing, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, Scramble for Africa, shareholder value, Silicon Valley, Simon Kuznets, sovereign wealth fund, spinning jenny, structural adjustment programs, The Great Moderation, The Market for Lemons, The Spirit Level, The Wealth of Nations by Adam Smith, Thorstein Veblen, trade liberalization, transaction costs, transfer pricing, trickle-down economics, Vilfredo Pareto, Washington Consensus, working-age population, World Values Survey

Unless we recognize this critical point, we will not be able to reap the full benefits that international economic integration can bring us. Further Reading H.-J. CHANG Bad Samaritans: Rich Nations, Poor Policies and the Threat to the Developing World (London: Random House, 2007). P. HIRST, G. THOMPSON AND S. BROMLEY Globalization in Question, 3rd edition (Cambridge: Polity, 2009). R. KOZUL-WRIGHT AND P. RAYMENT The Resistible Rise of Market Fundamentalism: Rethinking Development Policy in an Unbalanced World (London: Zed Books and Third World Network, 2007). W. MILBERG AND D. WINKLER Outsourcing Economics: Global Value Chains in Capitalist Development (Cambridge and New York: Cambridge University Press, 2013). D. RODRIK The Globalization Paradox (Oxford: Oxford University Press, 2011). J. STIGLITZ Making Globalization Work (London and New York: W.

A more detailed definition is provided by the UNCTAD (United Nations Conference on Trade and Development) at: http://unctad.org/en/Pages/DIAE/Foreign-Direct-Investment-(FDI).aspx. 12. The figures were 63 per cent for Liberia, 50 per cent for Haiti and 42 per cent for Kosovo. 13. All the FDI flow figures cited below are inflow figures. In theory, inflows and outflows of FDI on the world scale should be the same, but the actual data always show discrepancies. 14. Calculation based on World Bank data. 15. See R. Kozul-Wright and P. Rayment, The Resistible Rise of Market Fundamentalism: Rethinking Development Policy in an Unbalanced World (London: Zed Books and Third World Network, 2007), Chapter 4, for an excellent review of the evidence. 16. On tax havens, see N. Shaxson, Treasure Islands: Tax Havens and the Men Who Stole the World (London: Vintage, 2012), and the website of Tax Justice Network, www.taxjustice.net. At the time of writing (autumn 2013), there has been a lot of talk of a clamp-down on tax havens, especially through the G20, but no concrete action has been taken. 17.


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Never Let a Serious Crisis Go to Waste: How Neoliberalism Survived the Financial Meltdown by Philip Mirowski

"Robert Solow", Alvin Roth, Andrei Shleifer, asset-backed security, bank run, barriers to entry, Basel III, Berlin Wall, Bernie Madoff, Bernie Sanders, Black Swan, blue-collar work, Bretton Woods, Brownian motion, business cycle, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, constrained optimization, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, dark matter, David Brooks, David Graeber, debt deflation, deindustrialization, do-ocracy, Edward Glaeser, Eugene Fama: efficient market hypothesis, experimental economics, facts on the ground, Fall of the Berlin Wall, financial deregulation, financial innovation, Flash crash, full employment, George Akerlof, Goldman Sachs: Vampire Squid, Hernando de Soto, housing crisis, Hyman Minsky, illegal immigration, income inequality, incomplete markets, information asymmetry, invisible hand, Jean Tirole, joint-stock company, Kenneth Arrow, Kenneth Rogoff, Kickstarter, knowledge economy, l'esprit de l'escalier, labor-force participation, liberal capitalism, liquidity trap, loose coupling, manufacturing employment, market clearing, market design, market fundamentalism, Martin Wolf, money market fund, Mont Pelerin Society, moral hazard, mortgage debt, Naomi Klein, Nash equilibrium, night-watchman state, Northern Rock, Occupy movement, offshore financial centre, oil shock, Pareto efficiency, Paul Samuelson, payday loans, Philip Mirowski, Ponzi scheme, precariat, prediction markets, price mechanism, profit motive, quantitative easing, race to the bottom, random walk, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, Ronald Reagan, savings glut, school choice, sealed-bid auction, Silicon Valley, South Sea Bubble, Steven Levy, technoutopianism, The Chicago School, The Great Moderation, the map is not the territory, The Myth of the Rational Market, the scientific method, The Wisdom of Crowds, theory of mind, Thomas Kuhn: the structure of scientific revolutions, Thorstein Veblen, Tobin tax, too big to fail, transaction costs, Vilfredo Pareto, War on Poverty, Washington Consensus, We are the 99%, working poor

The point of all this: When I argue that we now live in a postneoliberal world, I do not mean that its practices or program have ceased (Ireland, Greece, and Portugal make it loud and clear that it’s alive and kicking), but that the narrative of the market’s universality is no longer unchallenged. The market is not the one and all; it has an outside, it has a limit.14 Just so it doesn’t appear that I am unfairly taking advantage of a certain class of people who might have been overly inclined to jump the gun, let’s sample some people closer to the orthodoxy in American economics like, say, Joseph Stiglitz: Neo-liberal market fundamentalism was always a political doctrine serving certain interests. It was never supported by economic theory. Nor, it should now be clear, is it supported by historical experience. Learning this lesson may be the silver lining in the cloud now hanging over the global economy.15 In an interview with the Berliner Zeitung, Stiglitz was quoted as saying, “Neoliberalism like the Washington Consensus is dead in most western countries.

Nevertheless, it was a sociological thought collective that eventually produced a relatively shared ontology concerning the world coupled with a more-or-less shared set of propositions about markets and political economy. These propositions are, of necessity, a central focus of a book on the relationship of neoliberals to the crisis. It should be very important to have some familiarity with these ideas, if only to resist simple-minded characterizations of the neoliberal approach to the crisis as some evangelical “market fundamentalism.” Although it is undeniably the case that all manner of secondhand purveyors of ideas on the right would wish to crow that “market freedom” promotes their own brand of religious righteousness, or maybe even the converse, it nonetheless debases comprehension to conflate the two by disparaging both as “fundamentalism”—a sneer unfortunately becoming commonplace on the left. It seems very neat and tidy to assert that neoliberals operate in a modus operandi on a par with religious fundamentalists: just slam The Road to Serfdom (or if you are really Low-to-No Church, Atlas Shrugged) on the table along with the King James Bible, and then profess to have unmediated personal access to the original true meaning of the only (two) book(s) you’ll ever need to read in your lifetime.

While Stiglitz has certainly earned his Nobel, he has not effectively staunched the intellectual trend of treating markets as prodigious information processors; nor has he provided a knock-down refutation of the EMH. This has led to the distressing spectacle of Stiglitz, the great hope of the “legitimate left,” openly defending the neoclassical approach to the crisis, while not really changing it all that much. Stiglitz has admitted that his mission all along was to undermine free-market fundamentalism from within: [I]t seemed to me the most effective way of attacking the paradigm was to keep within the standard framework as much as possible . . .While there is a single way in which information is perfect, there are an infinite number of ways that information can be imperfect. One of the keys to success was formulating simple models in which the set of relevant information could be fully specified . . . the use of highly simplified models to help clarify thinking about quite complicated matters.70 The way he sought to do this is to produce little stripped-down models that maximize standard utility or production functions, with a glitch or two inserted up front in the setup.


Hopes and Prospects by Noam Chomsky

"Robert Solow", Albert Einstein, banking crisis, Berlin Wall, Bretton Woods, British Empire, capital controls, colonial rule, corporate personhood, Credit Default Swap, cuban missile crisis, David Ricardo: comparative advantage, deskilling, en.wikipedia.org, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Firefox, Howard Zinn, Hyman Minsky, invisible hand, liberation theology, market fundamentalism, Martin Wolf, Mikhail Gorbachev, Monroe Doctrine, moral hazard, Nelson Mandela, new economy, nuremberg principles, one-state solution, open borders, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ralph Waldo Emerson, RAND corporation, Ronald Reagan, structural adjustment programs, The Wealth of Nations by Adam Smith, too big to fail, total factor productivity, trade liberalization, uranium enrichment, Washington Consensus

Stephen Zunes, one of the leading scholarly analysts of these matters, points out that “at a critical point in the nation’s effort to become more self-sufficient [in the early 1950s], the U.S. government forced Bolivia to use its scarce capital not for its own development, but to compensate the former mine owners and repay its foreign debts.”1 The economic policies forced on Bolivia in those years were a precursor of the structural adjustment programs imposed on the continent thirty years later, under the terms of the neoliberal “Washington consensus,” which has generally had harmful effects wherever its strictures have been observed. By now, the victims of neoliberal market fundamentalism are coming to include the rich countries, where financial liberalization is bringing about the worst financial crisis since the Great Depression of the 1930s and leading to massive state intervention in a desperate effort to rescue collapsing financial institutions. We should note that this is a regular feature of contemporary state capitalism, though the scale today is unprecedented. A study by two international economists fifteen years ago found that at least twenty companies in the Fortune 100 would not have survived if they had not been saved by their respective governments, and that many of the rest gained substantially by demanding that governments “socialize their losses.”

See security “national treatment,” right of, 31 nationalism, 25 Native Americans. See American Indians “natural growth exceptions” to policy opposing new settlements, 186 natural resources, limited access to, 167 Necessary Illusions (Chomsky), 313n15 Negbi, Moshe, 155 Negroponte, John, 264 neoliberal globalization, financialization of economy in era of, 94 neoliberal market fundamentalism, 105 neoliberal market “reforms,” 100 neoliberalism, 53, 70, 75, 79, 81–84 central doctrine of, 93 Chile and, 92 vs. democracy, 91 and development, 75–76 See also financial liberalization Neoliberalismo y Globalización, vii Netanyahu, Binyamin, 178, 180, 186, 189, 201, 234 New Deal, 38, 77 “new initiative” for Middle East peace, 182, 201, 203 New Nationalism, 25 Nicaragua, 46, 275 9/11 terrorist attacks, 26–28, 266–67 “war on drugs” and, 57 Nixon, Richard M., 37, 42, 61, 116 Noble, David, 88 Non-Aligned Movement, 135, 196 Norris, John, 287n23 North American Free Trade Agreement (NAFTA), 29, 35–36, 69, 69, 91, 215–16, 270 North Atlantic Treaty Organization (NATO), 65, 171, 238, 248, 278 East German territories and, 171, 173, 279–80 expansion, 65, 136, 173–74, 223, 279–80 Gorbachev and, 136, 171, 279 “NATO response force,” 223–24 “responsibility to protect” and, 185 North Korea, 137–40 Nuclear Non-Proliferation Treaty (NPT), 194–97 Iran and, 135, 169, 196, 197, 199, 249, 250 Israel and, 194, 195 Obama and, 165–66, 194, 196, 197, 199, 249, 250 Pakistan and, 240 Reagan and, 240 United States and, 136 nuclear weapons, 166, 174 Diego Garcia and, 168 eliminating/ending the threat of, 136, 65–67 India and, 194–95 Iran and, 135, 169, 188, 194, 196–200, 249 Iraq and, 128, 198 Israel and, 194, 196, 197, 199, 249 Lee Butler on, 165 NATO and, 171 no-first-use policy, 166, 171 North Korea and, 137–39 Obama and, 165–66, 194–96, 249 Pakistan and, 169, 194, 196, 198, 210, 240, 249 Russia and, 168, 171 Saddam and, 127–28, 139, 197, 198 See also ballistic missile defense (BMD) programs; missile defense programs; weapons of mass destruction nuclear weapons programs, U.S. allies with extensive, 249 nuclear weapons–free zones (NWFZs), 63, 135, 167–69, 171, 173, 250.


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The Ascent of Money: A Financial History of the World by Niall Ferguson

Admiral Zheng, Andrei Shleifer, Asian financial crisis, asset allocation, asset-backed security, Atahualpa, bank run, banking crisis, banks create money, Black Swan, Black-Scholes formula, Bonfire of the Vanities, Bretton Woods, BRICs, British Empire, business cycle, capital asset pricing model, capital controls, Carmen Reinhart, Cass Sunstein, central bank independence, collateralized debt obligation, colonial exploitation, commoditize, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, currency peg, Daniel Kahneman / Amos Tversky, deglobalization, diversification, diversified portfolio, double entry bookkeeping, Edmond Halley, Edward Glaeser, Edward Lloyd's coffeehouse, financial innovation, financial intermediation, fixed income, floating exchange rates, Fractional reserve banking, Francisco Pizarro, full employment, German hyperinflation, Hernando de Soto, high net worth, hindsight bias, Home mortgage interest deduction, Hyman Minsky, income inequality, information asymmetry, interest rate swap, Intergovernmental Panel on Climate Change (IPCC), Isaac Newton, iterative process, John Meriwether, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, knowledge economy, labour mobility, Landlord’s Game, liberal capitalism, London Interbank Offered Rate, Long Term Capital Management, market bubble, market fundamentalism, means of production, Mikhail Gorbachev, money market fund, money: store of value / unit of account / medium of exchange, moral hazard, mortgage debt, mortgage tax deduction, Myron Scholes, Naomi Klein, negative equity, Nelson Mandela, Nick Leeson, Northern Rock, Parag Khanna, pension reform, price anchoring, price stability, principal–agent problem, probability theory / Blaise Pascal / Pierre de Fermat, profit motive, quantitative hedge fund, RAND corporation, random walk, rent control, rent-seeking, reserve currency, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, seigniorage, short selling, Silicon Valley, South Sea Bubble, sovereign wealth fund, spice trade, stocks for the long run, structural adjustment programs, technology bubble, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, Thomas Bayes, Thomas Malthus, Thorstein Veblen, too big to fail, transaction costs, undersea cable, value at risk, Washington Consensus, Yom Kippur War

Already in 2007, Asian and Middle Eastern sovereign wealth funds had moved to invest in Western financial companies, including Barclays, Bear Stearns, Citigroup, Merrill Lynch, Morgan Stanley, UBS and the private equity firms Blackstone and Carlyle. For a time it seemed as if the sovereign wealth funds might orchestrate a global bail-out of Western finance; the ultimate role reversal in financial history. For the proponents of what George Soros has disparaged as ‘market fundamentalism’, here was a painful anomaly: among the biggest winners of the latest crisis were state-owned entities.bi And yet there are reasons why this seemingly elegant, and quintessentially Chimerican, resolution of the American crisis has failed to happen. Part of the reason is simply that the initial Chinese forays into US financial stocks have produced less than stellar results.bj There are justifiable fears in Beijing that the worst may be yet to come for Western banks, especially given the unknowable impact of a US recession on outstanding credit default swaps with a notional value of $62 trillion.

securitization 4 of debt 10 federal government and 260 perils of 261 private bond insurers and 260 segregation 250-51 Self, Beanie 268 Senegal Company 141 Serbia 2 sexual language 351 shadow banking see banks Shakespeare, William, The Merchant of Venice 33-4 Shanghai 303 shanty towns 274 shares (or stocks or equities): as collateral 132 displacement 143-4 features of 120-26 Law’s System and 143 shareholders’ meetings 120 and First World War 302 see also options; stock markets Sharpe, William 323 Shaw-Stewart, Patrick 302 shells 30 Shettleston 38-40 Shiller, Robert 281 Shining Path 276 ships/shipping 127-8. see also marine insurance short positions 316 short selling 137 Shylock 33-5 sidecars 227 Siena 69 Silicon Valley see dot.com silver 19-26 and Mississippi Bubble 149-50 Spanish and 1 Simons, James 330 Singapore 337n. SIVs see structured investment vehicles Skilling, Jeffrey K. 169 slavery: and home ownership 267 Rothschilds and 93 slave trading 25 Sloan, Alfred 160 Slovenia 2 Smith, Adam 53 socialists: and bond markets 89-90 and liberalization 312 and welfare state 200-202 Socialist Standard 17-18 Song Hongbing 86 Soros, George 314-19 income 2 on ‘market fundamentalism’ 337 Sourrouille, Juan 112 South America 18-26 gas pipelines 119 property law 274-6 see also Latin America Southern Rhodesia 295 South Korea 233 South Sea Bubble see bubbles sovereign wealth funds 9 Soviet-style economics 213 Soviet Union see Russia/USSR Spain 36 declining empire 26 and gold and silver 1 property price boom 10 royal funding 52 Spanish Succession, War of the 156 special-purpose entitities (SPEs) 172-3 speciation 53 speculators 122. see also futures contracts Spencer, Herbert 351 spices 127 spreads 241 squatters 276-7 squirrel skins 25 Sri Lanka 134 stagflation 211 Standard and Poor’s (S&P) 268 Standard and Poor’s 500: 124n.


Autonomous Driving: How the Driverless Revolution Will Change the World by Andreas Herrmann, Walter Brenner, Rupert Stadler

Airbnb, Airbus A320, augmented reality, autonomous vehicles, blockchain, call centre, carbon footprint, cleantech, computer vision, conceptual framework, connected car, crowdsourcing, cyber-physical system, DARPA: Urban Challenge, data acquisition, demand response, digital map, disruptive innovation, Elon Musk, fault tolerance, fear of failure, global supply chain, industrial cluster, intermodal, Internet of things, Jeff Bezos, Lyft, manufacturing employment, market fundamentalism, Mars Rover, Masdar, megacity, Pearl River Delta, peer-to-peer rental, precision agriculture, QWERTY keyboard, RAND corporation, ride hailing / ride sharing, self-driving car, sensor fusion, sharing economy, Silicon Valley, smart cities, smart grid, smart meter, Steve Jobs, Tesla Model S, Tim Cook: Apple, uber lyft, upwardly mobile, urban planning, Zipcar

However, with increasing market maturity, the types of autonomous vehicles can be expected to diverge. An increasing number of segments will arise with specific expectations placed on selfdriving cars. This will result in more and more vehicle variants with differing features and functions. The car manufacturers may start with just a few types of autonomous vehicles, which will then be quickly adapted to reflect the desires of different target groups in the various markets. Fundamentally, the types of vehicle already described can be identified, which are likely to play a role in the starting phase of autonomous driving (see Table 9.2 and Box 9.3 [113]). One category will be autonomous robocars, which will primarily be used in cities, to transport people from the railway station to their homes, for example. In conjunction with other modes of transportation, they will provide fast, inexpensive, smooth, resource-efficient transport, especially for the last mile.

Currently, every insurance company has at least one telematics policy to offer customers. The first telematicsbased policies were launched in the United Kingdom in the 1990s with an integrated emergency call in the case of an accident. In the United States, 10 per cent of all insurance policies are sold with pay-how-you-drive pricing. Today, numerous companies have already started transforming the motor insurance market fundamentally. Two examples to demonstrate this: (1) Short-term car insurance is not new, with policies ranging from 1 to 31 days. Meanwhile, however, Cuvva has launched an app that provides hourly insurance. All you need is the registration plate number, the required period for the insurance cover and a picture of the vehicle. (2) Metromile offers pay-as-you-drive insurance for which customers pay a monthly base rate plus a rate per mile for every mile driven.


Adam Smith: Father of Economics by Jesse Norman

"Robert Solow", active measures, Andrei Shleifer, balance sheet recession, bank run, banking crisis, Basel III, Berlin Wall, Black Swan, Branko Milanovic, Bretton Woods, British Empire, Broken windows theory, business cycle, business process, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, centre right, cognitive dissonance, collateralized debt obligation, colonial exploitation, Corn Laws, Credit Default Swap, credit default swaps / collateralized debt obligations, crony capitalism, David Brooks, David Ricardo: comparative advantage, deindustrialization, Eugene Fama: efficient market hypothesis, experimental economics, Fall of the Berlin Wall, Fellow of the Royal Society, financial intermediation, frictionless, frictionless market, future of work, George Akerlof, Hyman Minsky, income inequality, incomplete markets, information asymmetry, intangible asset, invention of the telescope, invisible hand, Isaac Newton, Jean Tirole, John Nash: game theory, joint-stock company, Joseph Schumpeter, Kenneth Arrow, Kenneth Rogoff, lateral thinking, loss aversion, market bubble, market fundamentalism, Martin Wolf, means of production, money market fund, Mont Pelerin Society, moral hazard, moral panic, Naomi Klein, negative equity, Network effects, new economy, non-tariff barriers, Northern Rock, Pareto efficiency, Paul Samuelson, Peter Thiel, Philip Mirowski, price mechanism, principal–agent problem, profit maximization, purchasing power parity, random walk, rent-seeking, Richard Thaler, Robert Shiller, Robert Shiller, Ronald Coase, scientific worldview, seigniorage, Socratic dialogue, South Sea Bubble, special economic zone, speech recognition, Steven Pinker, The Chicago School, The Myth of the Rational Market, The Nature of the Firm, The Rise and Fall of American Growth, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, theory of mind, Thomas Malthus, Thorstein Veblen, time value of money, transaction costs, transfer pricing, Veblen good, Vilfredo Pareto, Washington Consensus, working poor, zero-sum game

Especially since the 1980s, he has been at the centre of the ideological battleground for competing views of economics, markets and societies. For many on the right of politics, he is a founding figure of the modern era: the greatest of all economists, an eloquent advocate of the freedom of the individual and the staunch enemy of state intervention, in a world released from the utopian delusions of communism and socialism. For many on the left, he is something very different: the true source and origin of so-called market fundamentalism, author of ‘the textbook on contemporary capitalism’ according to the activist and writer Naomi Klein, the prime mover of a materialist ideology that is sweeping the world and corrupting real sources of human value, an apologist for wealth and inequality and human selfishness—and a misogynist to boot. One thing is certain, however: in an era in which economists and economics have become ever more influential, Adam Smith is regarded as by far the most influential economist who has ever lived.

But the idea of open markets, as with any political idea, must be challenged, revised and renewed to remain legitimate. If it is not challenged by those who believe in it, then it will be challenged by those who wish to destroy it. The financial crash of 2007–8 not only wiped out a vast amount of economic value: it wiped out much of the public credibility of economics itself, and pushed the public understanding of economics into a general critique under the heading of ‘neoliberalism’ or ‘market fundamentalism’. This conflation has been convenient. It is easy for policy-makers to understand, it creates a simple public narrative out of a far more complex underlying reality, and it gives immediate scope for often justified criticism of banks, financial markets, regulators and indeed politicians and capitalism itself. Yet the ideas that there was effective competition in the banking sector, that this made deregulation possible and that that deregulation could be economically and socially valuable formed the critical intellectual backdrop to the 2008 financial crisis.


pages: 511 words: 132,682

Competition Overdose: How Free Market Mythology Transformed Us From Citizen Kings to Market Servants by Maurice E. Stucke, Ariel Ezrachi

affirmative action, Airbnb, Albert Einstein, Andrei Shleifer, Bernie Sanders, Boeing 737 MAX, Cass Sunstein, choice architecture, cloud computing, commoditize, corporate governance, Corrections Corporation of America, Credit Default Swap, crony capitalism, delayed gratification, Donald Trump, en.wikipedia.org, George Akerlof, gig economy, Goldman Sachs: Vampire Squid, Google Chrome, greed is good, hedonic treadmill, income inequality, income per capita, information asymmetry, invisible hand, job satisfaction, labor-force participation, late fees, loss aversion, low skilled workers, Lyft, mandatory minimum, Mark Zuckerberg, market fundamentalism, mass incarceration, Menlo Park, meta analysis, meta-analysis, Milgram experiment, mortgage debt, Network effects, out of africa, payday loans, Ponzi scheme, precariat, price anchoring, price discrimination, profit maximization, profit motive, race to the bottom, Richard Thaler, ride hailing / ride sharing, Robert Bork, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, Shoshana Zuboff, Silicon Valley, Snapchat, Social Responsibility of Business Is to Increase Its Profits, Stanford prison experiment, Stephen Hawking, The Chicago School, The Market for Lemons, The Myth of the Rational Market, The Wealth of Nations by Adam Smith, Thomas Davenport, Thorstein Veblen, Tim Cook: Apple, too big to fail, transaction costs, Uber and Lyft, uber lyft, ultimatum game, Vanguard fund, winner-take-all economy

This quote is telling: It is bizarre that (President) Obama and (Secretary) Geithner are channeling President Reagan and claiming the government can’t do anything and the market is all knowing. We have learned that the market is not all knowing, especially when it is distorted by greed and avarice and government complicity. We have learned the hard way the costs of “too big to fail.” We have learned not to trust the right-wing ideologues who peddled a devil’s brew of deregulated and free market fundamentalism. We have learned a hard lesson about free market fundamentalism. Just as we have learned a hard lesson about free trade fundamentalism. This snake oil was peddled by the big banks and the big corporations. You can see the effects by walking down the main street of almost any city or town in any state, surely in the State of Ohio. We need to learn the lessons of history and apply them. We need to use the proper government instrumentalities.


The Corporation: The Pathological Pursuit of Profit and Power by Joel Bakan

Berlin Wall, Cass Sunstein, corporate governance, corporate personhood, corporate social responsibility, creative destruction, energy security, Exxon Valdez, IBM and the Holocaust, joint-stock company, laissez-faire capitalism, market fundamentalism, Naomi Klein, new economy, race to the bottom, Ralph Nader, Ronald Reagan, shareholder value, South Sea Bubble, The Wealth of Nations by Adam Smith, Triangle Shirtwaist Factory, urban sprawl

Inevitably, people will debate the extent to which such groups and interests should be immune to corporate exploitation, the kinds of measures that should be used to protect them, and what groups and interests should be protected-children's minds and imaginations , schools, universities, cultural institutions, water and power utilities, health and welfare services, police, courts, prisons, firefighters, parks, nature reserves, genes and other biological materials, and public space are all likely candidates-but these are healthy debates to have, far healthier than the increasingly prevalent presumption that no public interest exists beyond the accumulated financial interests of individual corporations, consumers, and shareholders . Page 164 ', JOEL BAKAN CHALLENGE INTERNATIONAL NEOLIBERALISM. Nations should work together to shift the ideologies and practices of international institutions, such as the WTO, IMF, and World Bank, away from market fundamentalism and its facilitation of deregulation and privatization. The current ideological biases of these institutions are not [and] develop the capacity to unite, to organize, and to recover our faith in ourselves and in others." That is what Olivera and the people of Cochabamba recently did." It all began when the Bolivian government, under pressure from the World Bank to privatize water utilities, contracted with Aguas del Tunari, the major shareholder of which is Bechtel subsidiary International Water Ltd., to run the water system of Cochabamba, a water- starved region in central Bolivia.


pages: 172 words: 54,066

The End of Loser Liberalism: Making Markets Progressive by Dean Baker

Asian financial crisis, banking crisis, Bernie Sanders, business cycle, collateralized debt obligation, collective bargaining, corporate governance, currency manipulation / currency intervention, Doha Development Round, financial innovation, full employment, Home mortgage interest deduction, income inequality, inflation targeting, invisible hand, manufacturing employment, market clearing, market fundamentalism, medical residency, patent troll, pets.com, pirate software, price stability, quantitative easing, regulatory arbitrage, rent-seeking, Robert Shiller, Robert Shiller, Silicon Valley, too big to fail, transaction costs

How could any believer in the virtue of free markets support the existence of large financial institutions that borrow at a lower cost than their competitors because of an implicit guarantee from the government? The fact that most of those claiming to be “free marketers” have overwhelmingly been on the side of the too-big-to-fail banks tells the world as clearly as possible that their motivations have nothing to do with a commitment to market fundamentalism and everything to do with a commitment to serving the interests of the rich and powerful. This is disguised as a commitment to the market for the obvious reason that doing things out of a commitment to free market principles sounds better than explicitly claiming to pursue policies that redistribute income from the vast majority of the population to the rich. Patent and copyright protection Patents and copyrights offer another example of how conservatives quietly support massive intervention by the government.


pages: 499 words: 152,156

Age of Ambition: Chasing Fortune, Truth, and Faith in the New China by Evan Osnos

conceptual framework, crony capitalism, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, East Village, financial independence, Gini coefficient, income inequality, indoor plumbing, information asymmetry, land reform, Lao Tzu, low skilled workers, market fundamentalism, Mohammed Bouazizi, plutocrats, Plutocrats, rolodex, scientific worldview, Silicon Valley, South China Sea, sovereign wealth fund, special economic zone, Steve Jobs, transcontinental railway, Washington Consensus, Xiaogang Anhui farmers, young professional

In reality, many people swept into the current of China’s transformation found they had no choice but to plunge in and swim as fast as possible, with only the vaguest sense of what might lie on the other side. On paper, China remained suspicious of the individual; even after reforms were under way, the 1980 edition of the country’s authoritative dictionary, The Sea of Words, defined individualism as “the heart of the Bourgeois worldview, behavior that benefits oneself at the expense of others.” And nothing was more abhorrent to the Communist Party than the language of Thatcherist free-market fundamentalism. But China was enacting some of its most basic ideas: the retreat of public services, hostility to trade unions, national and military pride. All over China, people were embarking on journeys, joining the largest migration in human history. China’s extraordinary growth relied on a combination of abundant cheap labor and a surge of investment in factories and infrastructure—a recipe that uncorked economic energy stored up during the years of turmoil under Mao.

Cixi, Empress Dowager class Class: A Guide Through the American Status System (Fussell) Clinton, Hillary CNN Coca-Cola Cohen, Jerome Cohen, Joan Lebold Cold War college admissions Colombia color revolution COMDEX Communist Party, Chinese; alleged virtue of; censorship by; Central Committee of; Charter 08 denounced by; class opposed by; corruption in; culture planned by; dissidents contained by; Eighteenth Party Congress of; free market fundamentalism disdained by; land reform of; membership of; as “Party in Power”; propaganda studied by; Seventeenth National Congress of; on values; and Wenzhou train crash Communist Youth League concubines Confucianism Confucius Confucius Institute Confucius Temple Congress, U.S. Congressional-Executive Commission on China, U.S. Conrad, Joseph Corak, Miles Corallo, Mark corruption; as anarchic; in art; growth and; plans for rooting out; punishment of; see also bribes Cosmopolitan Cotter, Holland Cotton Flower Alley Crazy English Crédit Mobilier CTGZ Cui Tiankai cults Cultural Revolution currency, China’s alleged manipulation of cushion hypothesis Dalai Lama Daley, Richard M.


pages: 566 words: 155,428

After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead by Alan S. Blinder

"Robert Solow", Affordable Care Act / Obamacare, asset-backed security, bank run, banking crisis, banks create money, break the buck, Carmen Reinhart, central bank independence, collapse of Lehman Brothers, collateralized debt obligation, conceptual framework, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, Detroit bankruptcy, diversification, double entry bookkeeping, eurozone crisis, facts on the ground, financial innovation, fixed income, friendly fire, full employment, hiring and firing, housing crisis, Hyman Minsky, illegal immigration, inflation targeting, interest rate swap, Isaac Newton, Kenneth Rogoff, liquidity trap, London Interbank Offered Rate, Long Term Capital Management, market bubble, market clearing, market fundamentalism, McMansion, money market fund, moral hazard, naked short selling, new economy, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, price mechanism, quantitative easing, Ralph Waldo Emerson, Robert Shiller, Robert Shiller, Ronald Reagan, shareholder value, short selling, South Sea Bubble, statistical model, the payments system, time value of money, too big to fail, working-age population, yield curve, Yogi Berra

An even stronger form of efficiency holds that market prices do not react to irrelevant news. If this were so, prices would ignore will-o’-the-wisps, unfounded rumors, the madness of crowds, and other extraneous factors—focusing at every moment on the fundamentals. In that case, prices would never deviate from fundamental values; that is, market prices would always be “right.” Under that exaggerated form of market efficiency, which critics sometimes deride as “free-market fundamentalism,” there would never be asset-price bubbles. Almost no one takes the strong form of the efficient markets hypothesis (EMH) as the literal truth, just as no physicist accepts Newtonian mechanics as 100 percent accurate. But, to extend the analogy, Newtonian physics often provides excellent approximations of reality. Similarly, economists argue over how good an approximation the EMH is in particular applications.

See Regulation; Regulatory failure Financial Services Authority (FSA), 124 Financial Stability Oversight Council (FSOC), 301, 316 First Franklin, 151 Fiscal cliff, causes of, 360 Fisher, Richard, 383–84 Fitch, 400 rating failures, 79–81 Fixed-income securities bonds, 40–41 default risk, 41–42 Fleming, Greg, 150, 152 Foreclosure mitigation, 320–42 barriers to, 322–23, 337–42 Home Affordable programs, 334–37 initial failed attempts, 327–32, 432 New Deal solutions, 324–25 Rick Santelli rant, 338–40 and TARP funds, 179, 332–33 Foreclosures ARMs, default in design of, 70–71, 321–22 bank lawsuits/settlements, 334, 432 causes of, 321–22 and subprime mortgages, 57, 70–71, 84 Fortis, decline and bailout of, 169 Frank, Barney, 140, 183, 188, 201, 225. See also Dodd-Frank Act of 2010 profile of, 304–5 Franken, Al, 286 Fraud, 354–56 Freddie Mac. See Fannie Mae/Freddie Mac Free-market fundamentalism, 65 Free-riding, 285–86 Friedman, Milton, 110 Friedman, Thomas, 440 Fromer, Kevin, 184 Frum, David, 432 Fuld, Richard “Dick,” on Lehman collapse, 120 Fundamentals, defined, 29 Fundamental value bubble as deviation from, 29–31, 39 of home, 30 of stock/dividends, 29 Geanakopolos, John, 329 Geithner, Timothy and AIG bailout, 134–35, 138, 140 and bailouts, 110 housing plan of, 334, 338 and Lehman collapse, 123–24 on stress tests, 257–59 and TARP, 191–92, 200–201 as Treasury secretary, 165, 205, 214, 216–17 on Volcker Rule, 311–12 and Wachovia/Wells merger, 158–61 on Washington Mutual decision, 156–57 General Motors (GM), 212–13 General Motors Acceptance Corporation (GMAC), 259 Germany and European crisis, 169–70, 410–11 as finance leader, 417–19 Gingrich, Newt, 439 Glass-Steagall Act (1933) Dodd-Frank on, 307 repeal of, 266–67, 294 Global financial crisis.


The Great Turning: From Empire to Earth Community by David C. Korten

Albert Einstein, banks create money, big-box store, Bretton Woods, British Empire, business cycle, clean water, colonial rule, Community Supported Agriculture, death of newspapers, declining real wages, different worldview, European colonialism, Francisco Pizarro, full employment, George Gilder, global supply chain, global village, God and Mammon, Hernando de Soto, Howard Zinn, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, joint-stock company, land reform, market bubble, market fundamentalism, Monroe Doctrine, Naomi Klein, neoliberal agenda, new economy, peak oil, planetary scale, plutocrats, Plutocrats, Project for a New American Century, Ronald Reagan, Rosa Parks, sexual politics, shared worldview, social intelligence, source of truth, South Sea Bubble, stem cell, structural adjustment programs, The Chicago School, trade route, Washington Consensus, wealth creators, World Values Survey

There was a troubling sense in the air, particularly among self-identified conservatives, that the moral and social foundations of society were disintegrating. The uncertainty and resentment created fertile ground for the demagogues of Empire. Renewing the Historic Alliance Historically, rejection of the democratic ideal in America has coalesced around one or both of two fundamentalisms. Plutocrats, heirs to the vision of Alexander Hamilton, embrace a market fundamentalism that legitimates unaccountable rule by persons of financial means. Theocrats, heirs to the Calvinist vision of John Winthrop, embrace a religious fundamentalism that legitimates unaccountable rule by those of a prescribed faith and celebrates wealth and power as a mark of God’s favor. Although plutocrats give priority to material values and theocrats to spiritual values, their shared drive for dominator power and aversion to democracy make them allies of convenience.

See also legal issues/legislation law of entropy, 271 life, 271–273 religious, 162 of thermodynamics, 273–274 Laws and Liberties of Massachusetts, 162 leaders, New Right, 336 leadership Aristotle on choice of, 154–155 dilemma of (ancient Athenian), 148–153 390 INDE X leadership (continued) feminine, 95, 99, 107, 323–324 from below, 13, 73, 87–88, 179, 315–326 social movement, 9, 55, 82, 195, 315–316, 353 strategies for, 316–318 leaders of twentieth century, 315–316 League of Nations, 81 learning, challenges of early human, 93 Left Behind series (LaHaye and Jenkins), 260 legal issues/legislation Alien Act, 189 American Indian Religious Freedom Act, 205 charters, 191 Civil Rights Act, 203 Clean Air Act, 228 Climate Protection Agreement, 320–321 Endangered Species Act, 228 labor laws, 209 Revenue Act, 175 Sedition Act, 189 share ownership by corporations, 192 Stamp Act, 175, 176 Supreme Court, 186, 207, 209, 211 Tea Act, 175 Liberator, The, 202 liberty, U.S. declaration of, 159 life as capacity to choose, 270–271 forest ecosystems, 275–278 human body, 278–280 as mutual empowerment, 274–275 as struggle, 271–273 life cycle, human, 288–289, 289–290 life satisfaction scores, 299–300 life stages, 288–289 lifestyle improvements, 297, 332 Liliuokalani, Queen, 193 limbic brain, 283–284, 285 Limits to Growth (Club of Rome), 218 living a lie, 355–356 living cultures, 349–352 living economies, 14–15, 319–320, 342–345 living indicators, 343–344 Living Planet Index (World Wildlife Fund), 59, 61 living politics, 345–349 living systems, 274 loans, 137–138, 138–139, 198 local living economies, 14–15, 343 local preference, 343 Locke, John, 153, 155 Long Emergency, The (Kunstler), 62–63 Louisiana Purchase, 190 love, tension between fear and, 34 low-income countries, 136–137, 227 Lukensmeyer, Carolyn, 346 Luoma, Jon R., 275–278 Luther, Martin, 116 Macy, Joanna, 18 Madison, James, 187 Mafia, 211 Magical Consciousness, 43, 49, 52, 56, 328 magical consequences, 49 Maguire, Daniel, 51 majoritarian political base, 317–318 Mander, Jerry, 15 manufacturing production, 208 Marcos, Ferdinand, 196 Margulis, Lynn, 270, 272–273, 291 market capitalization, 68 market economies, 15, 345 market fundamentalism, 219, 239 markets, responsive, 304, 344 Marshall, John, 189 masculine principles, 105 Maslow, Abraham, 42 Mason, George, 185 Massachusetts Bay Colony, 172 Massachusetts Supreme Court, 176 material mechanism, 14, 255, 256, 265, 280 mature citizenship, politics of, 339 mature society, creating, 48–49 May, Rollo, 43 meaning, finding, 311–312 meaning stories, 246–247, 249, 257, 308–310 Mechanics’ Union of Trade Associations, 207 mechanism, science of, 264 media, 82–83, 348 independent, 346–347 Memorandum E-B34, 194 men.


pages: 903 words: 235,753

The Stack: On Software and Sovereignty by Benjamin H. Bratton

1960s counterculture, 3D printing, 4chan, Ada Lovelace, additive manufacturing, airport security, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, algorithmic trading, Amazon Mechanical Turk, Amazon Web Services, augmented reality, autonomous vehicles, basic income, Benevolent Dictator For Life (BDFL), Berlin Wall, bioinformatics, bitcoin, blockchain, Buckminster Fuller, Burning Man, call centre, carbon footprint, carbon-based life, Cass Sunstein, Celebration, Florida, charter city, clean water, cloud computing, connected car, corporate governance, crowdsourcing, cryptocurrency, dark matter, David Graeber, deglobalization, dematerialisation, disintermediation, distributed generation, don't be evil, Douglas Engelbart, Douglas Engelbart, Edward Snowden, Elon Musk, en.wikipedia.org, Eratosthenes, Ethereum, ethereum blockchain, facts on the ground, Flash crash, Frank Gehry, Frederick Winslow Taylor, future of work, Georg Cantor, gig economy, global supply chain, Google Earth, Google Glasses, Guggenheim Bilbao, High speed trading, Hyperloop, illegal immigration, industrial robot, information retrieval, Intergovernmental Panel on Climate Change (IPCC), intermodal, Internet of things, invisible hand, Jacob Appelbaum, Jaron Lanier, Joan Didion, John Markoff, Joi Ito, Jony Ive, Julian Assange, Khan Academy, liberal capitalism, lifelogging, linked data, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, Masdar, McMansion, means of production, megacity, megastructure, Menlo Park, Minecraft, MITM: man-in-the-middle, Monroe Doctrine, Network effects, new economy, offshore financial centre, oil shale / tar sands, packet switching, PageRank, pattern recognition, peak oil, peer-to-peer, performance metric, personalized medicine, Peter Eisenman, Peter Thiel, phenotype, Philip Mirowski, Pierre-Simon Laplace, place-making, planetary scale, RAND corporation, recommendation engine, reserve currency, RFID, Robert Bork, Sand Hill Road, self-driving car, semantic web, sharing economy, Silicon Valley, Silicon Valley ideology, Slavoj Žižek, smart cities, smart grid, smart meter, social graph, software studies, South China Sea, sovereign wealth fund, special economic zone, spectrum auction, Startup school, statistical arbitrage, Steve Jobs, Steven Levy, Stewart Brand, Stuxnet, Superbowl ad, supply-chain management, supply-chain management software, TaskRabbit, the built environment, The Chicago School, the scientific method, Torches of Freedom, transaction costs, Turing complete, Turing machine, Turing test, undersea cable, universal basic income, urban planning, Vernor Vinge, Washington Consensus, web application, Westphalian system, WikiLeaks, working poor, Y Combinator

It is a state within a state, albeit one largely financed by another state, that has not seceded from its host nation but controls large swaths with last-instance sovereignty. On purely formal terms, how would organizational apparatuses such as these compare to corporations that have, at least in the United States, been granted the constitutional protections of private religious belief? (Here market fundamentalism collaborates directly in desecularization.) We can easily imagine scenarios in which theologically programmatic Cloud platforms might compose their City, Address, Interface, and User layers as something that resembles Hezbollah at least as much as a mid-twentieth-century corporation. 40.  It is clearly not the annulment of dissensus, because in the absence of real politicization of fundamental conflict and the proliferation of incompatible and often unredeemable cosmographies, the only positions of dissent end up being those of the irredentist, the humanist, and the fundamentalist.

Back in the city, people may assault other people wearing Google Glass on behalf of evicted renters, imagining their acts as those of popular refusal and resistance to the tyranny of calculative vision. Others draw embarrassing dichotomies between “poetry” and “finance” as the key to unlocking a new society. However, others provide durable critiques of how the algorithmic geopolitics is currently configured, and how its dangerous naturalization by market fundamentalism is not only legible in certain philosophical trends but naturalized by them. Others have accomplished a powerful politics of open, reprogrammable computational infrastructures that has had a direct and positive on how global systems are developed, though not nearly enough, and battles won may be reversed. Still others have articulated, from the disciplinary margins, a visionary and proactive leftist futurism that makes a native comfort with techniques of comprehensive abstraction a central tenet of post-neoliberal economics.

See also borders; grids of communication, 205 of demarcation, international law, 32 geopolitical effects, 39–40 inside and outside of, 23–28 land versus sea, 19, 26–28, 30, 113, 150 nomos of the Cloud, 28–31 reversibility, 22, 150 subdividing Earth, 21–24, 193, 195 liquefaction and solidification, 355, 379n9 liquefaction of self, 71 live-work-sleep factory cities, 130–131 living beings-subjects-apparatuses, 272, 279 Llull, Ramon, 77 localism, 104, 143 logistical aesthetics, 178, 230–235, 243 logistics, defined, 422n28 London, US embassy in, 322 Longo, Giuseppe, 389n12 loop topology, 24, 84, 373 Los Angeles, 320 Lovelace, Ada Byron, 42, 79 Lucretius, 77, 192 Luhmann, Niklas, 385n25 machine-as-state, 7–13, 34, 40, 65, 373 machine-human distinction, 164–165 machine owners, rights of, 285 machines agency of, 348 of governance, 173–174 innate capacities of, 273 intelligence of, 78, 81, 262, 362 real versus artificial, 358 subjectification of, 272–273 machine-to-machine (M2M) communication, 137 machine-to-machine (M2M) connoisseurship, 226 machine User, 279–284 machinic prostheticization theory, 273 Madison, James, 109 Mad Max, 319 Maidan Square protests, Ukraine, 347 Malle, Louis, 429n62 malware, 202, 346 Manson, Charles, 293 manufacturing electronics, ecology of, 82–83 maps cartographic function of the state, 109, 119 Europe by energy polities, 99 geolocative Apps, 236, 243 of global address space, 208 Google Maps, 9, 120, 144, 242, 265, 431n70 modern nation-state, 24 Nicaragua-Costa Rica border conflict, 9, 120, 144 personal mapping technologies, 86, 236, 243, 431n70 as precomputational interfaces, 429n61 remapping war, 17, 242, 247–248 of sovereignty, 53–54 subdividing Earth, 195, 413n5 of territorial expansion, 120 Marcus, Gary, 283–284 Marcuse, Herbert, 328 market fundamentalism, 446n39 market governance, 310, 329–330 market sovereignty, 21, 105, 285, 329 Marramao, Giacomo, 381n24 Marx, Karl, 52, 77, 212, 328 Masdar City, Abu Dhabi (Foster), 179, 181–182, 281 Massumi, Brian, 101 material cosmopolitanism, 257 materialism, 131, 212 mathematical space, 337, 352 mathematics, universal laws of, 134 Matta-Clark, Gordon, 37, 53 Matter and Memory (Bergson), 191 May Fools (Malle), 429n62 Mayne, Thom, 323 McHale, John, 435n38 McLuhan, Marshall, 219, 251, 273 mechanical images, growth in, 225–226 Mechanical Turk (Amazon), 278–279, 308 media computational, 198 digital, 55 global, 55 Media Lab, MIT, 201, 226 mediascape, 148 medicine, hyperilluminated, 267–269 megacities, 162–163, 182, 312 megastructures accidental, 5, 8–17, 54, 61, 64, 72, 303, 367 architecture of, 154, 183–187, 296, 320 atmospheric, 195 cities infolded in, 155 Cloud platform, 183–189 computational, 336 corporate campuses, 183–187, 320 feudal, 311 geoepidermal, 90 inclusion and exclusion in, 311–312 intimate pairing of international, 189 inverting, 160 mediation of humans, 188 purpose of, 154–155 Stack as, 197 synthetic, 162–163 as utopia, 176–183 Megaupload raids, 399n34 mega-utopianism, architectural, 179 Meillassoux, Quentin, 358 membranes.


The Great Derangement: Climate Change and the Unthinkable by Amitav Ghosh

Alfred Russel Wallace, Berlin Wall, Bernie Sanders, British Empire, carbon footprint, Donald Trump, double helix, Fellow of the Royal Society, Intergovernmental Panel on Climate Change (IPCC), invisible hand, James Watt: steam engine, Mahatma Gandhi, market fundamentalism, megacity, Naomi Klein, non-fiction novel, Ronald Reagan, spinning jenny, Upton Sinclair, upwardly mobile, urban planning

., Ritual and Its Consequences. 179 acted upon: As Rachel Dyer notes, ‘all the stuff about changing the light-bulbs and driving less, although it is useful for raising consciousness and gives people some sense of control over their fate, is practically irrelevant to the outcome of this crisis.’ See Rachel Dyer, Climate Wars, loc. 118. 179 ‘at the same time!’: John Maynard Keynes, The End of Laissez-Faire (London: Hogarth Press, 1926). 180 parts of a whole: In the words of Naomi Oreskes and Eric Conway, this is a ‘quasi-religious faith, hence the label market fundamentalism’ (The Collapse of Western Civilization: A View from the Future [New York: Columbia University Press, 2014], 37). 181 ‘wicked problem’: In one definition ‘wicked problems are essentially unique, have no definitive formulation, and can be considered symptoms of yet other problems’ (Mike Hulme, Why We Disagree about Climate Change: Understanding Controversy, Inaction and Opportunity [Cambridge: Cambridge University Press, 2009], 334). 182 last two centuries: This is how Tim Flannery puts it: ‘America and Australia were created on the frontier, and the citizens of both nations hold deep beliefs about the benefits of endless growth and expansion.’


pages: 258 words: 63,367

Making the Future: The Unipolar Imperial Moment by Noam Chomsky

"Robert Solow", Albert Einstein, Berlin Wall, Bretton Woods, British Empire, capital controls, collective bargaining, corporate governance, corporate personhood, creative destruction, deindustrialization, energy security, failed state, Fall of the Berlin Wall, financial deregulation, Frank Gehry, full employment, Howard Zinn, Joseph Schumpeter, kremlinology, liberation theology, Long Term Capital Management, market fundamentalism, Mikhail Gorbachev, Nelson Mandela, Occupy movement, oil shale / tar sands, precariat, RAND corporation, Ronald Reagan, structural adjustment programs, The Great Moderation, too big to fail, uranium enrichment, Washington Consensus, WikiLeaks, working poor

As international affairs scholar Stephen Zunes points out, in the early 1950s, “at a critical point in the nation’s effort to become more self-sufficient, the U.S. government forced Bolivia to use its scarce capital not for its own development, but to compensate the former mine owners and repay its foreign debts.” The economic policies forced on Bolivia at that time were a precursor of the structural-adjustment programs imposed on the continent thirty years later, under the terms of the neoliberal “Washington consensus,” which has generally had disastrous effects wherever its strictures have been observed. By now, the victims of neoliberal market fundamentalism are coming to include the rich countries, where the curse of financial liberalization has helped to bring about the worst financial crisis since the Great Depression. The traditional modalities of imperial control—violence and economic war—are weakening. Latin America has real choices. Washington well understands that these choices threaten not only its domination of the hemisphere, but also its global dominance.


pages: 225 words: 61,388

Dead Aid: Why Aid Is Not Working and How There Is a Better Way for Africa by Dambisa Moyo

affirmative action, Asian financial crisis, Bob Geldof, Bretton Woods, business cycle, buy and hold, colonial rule, correlation does not imply causation, credit crunch, diversification, diversified portfolio, en.wikipedia.org, European colonialism, failed state, financial innovation, financial intermediation, Hernando de Soto, income inequality, information asymmetry, invisible hand, Live Aid, M-Pesa, market fundamentalism, Mexican peso crisis / tequila crisis, microcredit, moral hazard, Ponzi scheme, rent-seeking, Ronald Reagan, sovereign wealth fund, The Chicago School, trade liberalization, transaction costs, trickle-down economics, Washington Consensus, Yom Kippur War

While it is true that the Asian crisis of 1997, the Russian debacle in 1998 and the Argentinian default of 2001 all led to a sudden outflow of capital from the emerging markets, these proved to be hiccups in what has been a strong and growing trend of emerging-market interest. And even in those countries where money flowed out on the back of crises, in just one decade investor money has returned. The reasons for the rapidly growing interest in emerging economies are threefold: For one thing, investors are always looking for the next, best opportunity. And emerging-market fundamentals make a strong case for being some of the best opportunities around. Countries that exhibit strong economic performance and are seen to be on a sound and credible footing will be rewarded. At a minimum, foreign investors will be willing to lend the country the cash. However, the beauty with bonds is that their very existence lends further credibility to the country seeking funds, thereby encouraging a broader range of high-quality private investment.


The Great Crash 1929 by John Kenneth Galbraith

Bernie Madoff, business cycle, Everybody Ought to Be Rich, full employment, housing crisis, invention of the wheel, joint-stock company, margin call, market fundamentalism, short selling, South Sea Bubble, the market place

There was another sickening slide. U.S. Steel opened at 181, and, by what one paper called a succession of "feverish dips," went to 165. Auburn Automobile lost 66 points; Otis Elevator lost 45. The Times industrials were off 37 points for the day, or only 6 points less than on the terrible Tuesday eight days earlier. Where would it all end? There was also disturbing news from beyond the market. Fundamentals seemed to be turning sour. The week's figures on carloadings showed a heavy drop as compared with the year before. The steel rate was significantly down from the preceding week. More serious, the slump had extended to the commodity markets. On previous days these had reacted sympathetically with the stock market. On this Wednesday they had troubles of their own. Cotton was sharply off in the heaviest trading in weeks.


pages: 218 words: 62,889

Sabotage: The Financial System's Nasty Business by Anastasia Nesvetailova, Ronen Palan

algorithmic trading, bank run, banking crisis, barriers to entry, Basel III, Bernie Sanders, big-box store, bitcoin, Black-Scholes formula, blockchain, Blythe Masters, bonus culture, Bretton Woods, business process, collateralized debt obligation, corporate raider, Credit Default Swap, credit default swaps / collateralized debt obligations, cryptocurrency, distributed ledger, diversification, Double Irish / Dutch Sandwich, en.wikipedia.org, Eugene Fama: efficient market hypothesis, financial innovation, financial intermediation, financial repression, fixed income, gig economy, Gordon Gekko, high net worth, Hyman Minsky, information asymmetry, interest rate derivative, interest rate swap, Joseph Schumpeter, Kenneth Arrow, litecoin, London Interbank Offered Rate, London Whale, Long Term Capital Management, margin call, market fundamentalism, mortgage debt, new economy, Northern Rock, offshore financial centre, Paul Samuelson, peer-to-peer lending, plutocrats, Plutocrats, Ponzi scheme, price mechanism, regulatory arbitrage, rent-seeking, reserve currency, Ross Ulbricht, shareholder value, short selling, smart contracts, sovereign wealth fund, Thorstein Veblen, too big to fail

A reintroduction of the 1930s regulations in the twenty-first century? No, at least, not in the literal sense. The financial architecture of the 1930s remains the closest analogy we have to date to an arrangement that does target sabotage. Contrary to common belief, the principal cause of and rationale for the financial regulations that Pecora proposed, including those that became the basis for the Glass–Steagall Act, were not meant to distort the markets. Fundamentally, those regulations were pro-market, but anti-business. They were meant to safeguard the financial market from attempts to control the flow of information and outcome by financial actors. It seems that this distinction – between the market and business – is the most difficult hurdle to be overcome when discussing financial regulation today. The 1930s framework of financial regulation was not based on a binary distinction between the market on the one hand and regulation on the other.


pages: 598 words: 172,137

Who Stole the American Dream? by Hedrick Smith

Affordable Care Act / Obamacare, Airbus A320, airline deregulation, anti-communist, asset allocation, banking crisis, Bonfire of the Vanities, British Empire, business cycle, business process, clean water, cloud computing, collateralized debt obligation, collective bargaining, commoditize, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Deng Xiaoping, desegregation, Double Irish / Dutch Sandwich, family office, full employment, global supply chain, Gordon Gekko, guest worker program, hiring and firing, housing crisis, Howard Zinn, income inequality, index fund, industrial cluster, informal economy, invisible hand, Joseph Schumpeter, Kenneth Rogoff, Kitchen Debate, knowledge economy, knowledge worker, laissez-faire capitalism, late fees, Long Term Capital Management, low cost airline, low cost carrier, manufacturing employment, market fundamentalism, Maui Hawaii, mega-rich, MITM: man-in-the-middle, mortgage debt, negative equity, new economy, Occupy movement, Own Your Own Home, Paul Samuelson, Peter Thiel, Plutonomy: Buying Luxury, Explaining Global Imbalances, Ponzi scheme, Powell Memorandum, Ralph Nader, RAND corporation, Renaissance Technologies, reshoring, rising living standards, Robert Bork, Robert Shiller, Robert Shiller, rolodex, Ronald Reagan, shareholder value, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Steve Jobs, The Chicago School, The Spirit Level, too big to fail, transaction costs, transcontinental railway, union organizing, Unsafe at Any Speed, Vanguard fund, We are the 99%, women in the workforce, working poor, Y2K

The political influence of the business community had become so weak, Powell contended, that the business executive had become “truly the ‘forgotten man.’ ” In a tone of exasperation, he chided America’s corporate leaders for bowing to mainstream middle-of-the-road policies and for adopting a strategy of “appeasement, ineptitude and ignoring the problem.” The time has come, he insisted, for Corporate America to adopt “a more aggressive attitude” and to change Washington’s policies through “confrontation politics.” Political mutiny had been brewing for some time. By the early 1970s, the free market fundamentalism of economist Milton Friedman, a Nobel laureate from the University of Chicago, was giving new legitimacy to pro-business laissez-faire economics in academic circles. William Buckley’s National Review and Irving Kristol’s Public Interest were challenging the long-accepted governmental activism of the welfare state, as it was then called. The “movement conservatism” spawned by the 1964 presidential candidacy of Senator Barry Goldwater, with its ardent anti-union, anti-government ideology, had growing appeal in Sun Belt business circles.

Economic revisionists like Clyde Prestowitz, the Reagan administration’s chief trade negotiator for Asia, dispute the old orthodox argument, contending that it denies reality and defies common sense. “For some time now our ‘best and brightest’ have been invoking false doctrines that are systematically undermining American prosperity,” Prestowitz wrote. “Leading among these is the economic orthodoxy of market fundamentalism, simplistic pure free trade….” Former IBM vice president Ralph Gomory contended, in testimony to Congress, that Ricardo’s nearly two-hundred-year-old theory does not match modern conditions. What America has lost to China, Gomory asserted, is not just a shift in production, but a shift in productivity, which puts the United States on the defensive. “When the U.S. trades semiconductors for Asian T-shirts, for example, that is trade in the narrow sense.


pages: 606 words: 157,120

To Save Everything, Click Here: The Folly of Technological Solutionism by Evgeny Morozov

3D printing, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, augmented reality, Automated Insights, Berlin Wall, big data - Walmart - Pop Tarts, Buckminster Fuller, call centre, carbon footprint, Cass Sunstein, choice architecture, citizen journalism, cloud computing, cognitive bias, creative destruction, crowdsourcing, data acquisition, Dava Sobel, disintermediation, East Village, en.wikipedia.org, Fall of the Berlin Wall, Filter Bubble, Firefox, Francis Fukuyama: the end of history, frictionless, future of journalism, game design, Gary Taubes, Google Glasses, illegal immigration, income inequality, invention of the printing press, Jane Jacobs, Jean Tirole, Jeff Bezos, jimmy wales, Julian Assange, Kevin Kelly, Kickstarter, license plate recognition, lifelogging, lone genius, Louis Pasteur, Mark Zuckerberg, market fundamentalism, Marshall McLuhan, moral panic, Narrative Science, Nelson Mandela, Nicholas Carr, packet switching, PageRank, Parag Khanna, Paul Graham, peer-to-peer, Peter Singer: altruism, Peter Thiel, pets.com, placebo effect, pre–internet, Ray Kurzweil, recommendation engine, Richard Thaler, Ronald Coase, Rosa Parks, self-driving car, Silicon Valley, Silicon Valley ideology, Silicon Valley startup, Skype, Slavoj Žižek, smart meter, social graph, social web, stakhanovite, Steve Jobs, Steven Levy, Stuxnet, technoutopianism, the built environment, The Chicago School, The Death and Life of Great American Cities, the medium is the message, The Nature of the Firm, the scientific method, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, Thomas L Friedman, transaction costs, urban decay, urban planning, urban sprawl, Vannevar Bush, WikiLeaks

Using games to get people to take their medications or quite smoking or go to school is not all that different from paying them to do so: in both cases, the effects go far beyond considerations of efficiency. Is it so unreasonable to assume that a kid who is paid to read books will think about reading differently than a kid who comes to enjoy reading for its own sake? As philosopher Michael Sandel points out in What Money Can’t Buy, his critique of market fundamentalism, “What begins as a market mechanism becomes a market norm,” transforming our attitudes to the good in question—whether it’s education or health—and such transformations are not always for the better. Gamification is no different; a project that enlists citizens into helping science by relying on game mechanics rather than by appealing to higher values will eventually come to transform how citizens relate to science.

Mad Men, Faded Denims, and Real Phonies All these attempts to fix the human condition—to reduce our biases by quantifying everything, to circumvent the frailties of our memory by recording everything, to rid us of our lowly, provincial interests by getting technology companies to serve us a more nutritious information diet, to get us to do the right thing by turning everything in life into a game—are indicative of Silicon Valley’s unease with imperfection as well as its glorification of the powerful tools at its disposal. Our geek kings do not realize that inefficiency is precisely what shelters us from the inhumanity of Taylorism and market fundamentalism. When inefficiency is the result of a deliberative commitment by a democratically run community, there is no need to eliminate it, even if the latest technologies can accomplish that in no time. Silicon Valley’s greatest ambition, though, is to ensure that all our social interactions—and even ourselves—exist under the yoke of authenticity. The fear of appearing inauthentic, of being a fake, has propelled nearly as much technological innovation as pornography.


pages: 558 words: 168,179

Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right by Jane Mayer

affirmative action, Affordable Care Act / Obamacare, American Legislative Exchange Council, anti-communist, Bakken shale, bank run, battle of ideas, Berlin Wall, Capital in the Twenty-First Century by Thomas Piketty, carried interest, centre right, clean water, Climategate, Climatic Research Unit, collective bargaining, corporate raider, crony capitalism, David Brooks, desegregation, diversified portfolio, Donald Trump, energy security, estate planning, Fall of the Berlin Wall, George Gilder, housing crisis, hydraulic fracturing, income inequality, Intergovernmental Panel on Climate Change (IPCC), invisible hand, job automation, low skilled workers, mandatory minimum, market fundamentalism, mass incarceration, Mont Pelerin Society, More Guns, Less Crime, Nate Silver, New Journalism, obamacare, Occupy movement, offshore financial centre, oil shale / tar sands, oil shock, plutocrats, Plutocrats, Powell Memorandum, Ralph Nader, Renaissance Technologies, road to serfdom, Robert Mercer, Ronald Reagan, school choice, school vouchers, The Bell Curve by Richard Herrnstein and Charles Murray, The Chicago School, the scientific method, University of East Anglia, Unsafe at Any Speed, War on Poverty, working poor

While the group’s title evoked the Founding Fathers, its chief executive officer was a Wisconsin investor named Eric O’Keefe who had been involved with the Kochs since his days as a young volunteer in David Koch’s Libertarian Party campaign for vice president. O’Keefe eventually became the national director of the Libertarian Party. By 1983, however, like the Kochs, he had moved on to promoting free-market fundamentalism through other means, often joining forces with the brothers through their donor seminars and other ventures. Influenced as a child by The Wall Street Journal and the Conservative Book Club, O’Keefe, as The Washington Post wrote, “had money. He grew up with some and made a lot more as an investor, allowing him to devote decades to a series of ambitious political crusades, nearly all of them failures.”

The think tanks, advocacy groups, and talking heads on the right sprang into action, shaping a political narrative that staved off the kind of course correction that might otherwise have been expected. A key skirmish in this battle was the reframing of the history of the 2008 economic crash. From an empirical standpoint, it was hard to see it as anything other than a wipeout for the proponents of free-market fundamentalism and an argument for stronger government regulations. Like the Great Depression, it might have been expected to produce a backlash against those seen as irresponsible profiteers, resulting in more government intervention and a fairer tax system. Joseph Stiglitz, the liberal economist, described the 2008 financial meltdown as the equivalent for free-market advocates to the fall of the Berlin Wall for Communists.


pages: 257 words: 13,443

Statistical Arbitrage: Algorithmic Trading Insights and Techniques by Andrew Pole

algorithmic trading, Benoit Mandelbrot, constrained optimization, Dava Sobel, George Santayana, Long Term Capital Management, Louis Pasteur, mandelbrot fractal, market clearing, market fundamentalism, merger arbitrage, pattern recognition, price discrimination, profit maximization, quantitative trading / quantitative finance, risk tolerance, Sharpe ratio, statistical arbitrage, statistical model, stochastic volatility, systematic trading, transaction costs

An important lesson from this history is that there was not a single condition or set of conditions that abruptly Preface xvii changed in 2000 and thereby eliminated forecast performance of statistical arbitrage models. What a story that would be! Far more dramatic than the prosaic reality, which is a complex mix of multiple causes and timings. All the familiar one liners, including decimalization, competition, and low volatility, had (and have) their moment, but none individually, nor the combination, can have delivered a blow to financial markets. Fundamentally altering the price dynamics of markets in ways that drastically diminish the economic potential in reversion schemes, mining value across the spectrum from the very high frequency hare of intra-day to the venerable tortoise of a month or more, requires a more profound explanation. Change upon change upon change cataloged in Chapter 9 is at the root of the dearth of return to statistical arbitrage in 2002–2004.


The Techno-Human Condition by Braden R. Allenby, Daniel R. Sarewitz

airport security, augmented reality, carbon footprint, clean water, cognitive dissonance, coherent worldview, conceptual framework, creative destruction, Credit Default Swap, decarbonisation, different worldview, facts on the ground, friendly fire, industrial cluster, Intergovernmental Panel on Climate Change (IPCC), invisible hand, Isaac Newton, Jane Jacobs, land tenure, life extension, Long Term Capital Management, market fundamentalism, mutually assured destruction, nuclear winter, Peter Singer: altruism, planetary scale, prediction markets, Ralph Waldo Emerson, Ray Kurzweil, Silicon Valley, smart grid, source of truth, stem cell, Stewart Brand, technoutopianism, the built environment, The Wealth of Nations by Adam Smith, transcontinental railway, Whole Earth Catalog

lo Participants in the transhumanism debates have interpreted particular religious traditions or worldviews to require the banning of certain kinds of research and development, as if the connection from lab bench to moral spillover in society were knowable in advance. Any moral framework is incoherent if it seeks simply to extend existing ethical systems into more complex domains by, for example, making individual engineers or scientists personally responsible for the behavior of the larger technological systems on which they work. On the other hand, market fundamentalism, which posits (impossibly) that all economic transactions should be unencumbered by government interference, has become a Level III moral framework that acts in opposition to the above examples, as if unfettered permissiveness in the pursuit of technological innovation automatically leads to morally optimal outcomes. 182 Chapter 8 Ethical frameworks that link Level I moral behavior to Level III knowledge assume not only that future technological paths can be predicted, but that single worldviews and belief systems are adequate to frame the ethical implications of complex adaptive Earth systems.


pages: 208 words: 67,582

What About Me?: The Struggle for Identity in a Market-Based Society by Paul Verhaeghe

Berlin Wall, call centre, cognitive dissonance, deskilling, epigenetics, Fall of the Berlin Wall, Francis Fukuyama: the end of history, income inequality, invisible hand, jimmy wales, job satisfaction, knowledge economy, knowledge worker, Louis Pasteur, market fundamentalism, Milgram experiment, new economy, Panopticon Jeremy Bentham, post-industrial society, Richard Feynman, Silicon Valley, Stanford prison experiment, stem cell, The Spirit Level, ultimatum game, working poor

Culture needs to be broadly interpreted here, because this narrative has meanwhile taken over all sectors of society, from science and education to health care and the media. I shall not discuss the broader historic background of neo-liberalism.* Hans Achterhuis has described this very well, and Kapitalisme zonder remmen: opkomst en ondergang van het marktfundamentalisme (Capitalism without Brakes: the rise and fall of market fundamentalism) by the historian Maarten van Rossem makes the link with the current economic crisis crystal-clear. A number of important points emerge from their analyses. Throughout history, economies have always been embedded in religious, ethical, and social structures. This no longer applies in the case of neo-liberalism. On the contrary, religion, ethics, and society are subservient to ‘the market’.


pages: 288 words: 64,771

The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality by Brink Lindsey

"Robert Solow", Airbnb, Asian financial crisis, bank run, barriers to entry, Bernie Sanders, Build a better mousetrap, Capital in the Twenty-First Century by Thomas Piketty, Carmen Reinhart, Cass Sunstein, collective bargaining, creative destruction, Credit Default Swap, crony capitalism, Daniel Kahneman / Amos Tversky, David Brooks, diversified portfolio, Donald Trump, Edward Glaeser, endogenous growth, experimental economics, experimental subject, facts on the ground, financial innovation, financial intermediation, financial repression, hiring and firing, Home mortgage interest deduction, housing crisis, income inequality, informal economy, information asymmetry, intangible asset, inventory management, invisible hand, Jones Act, Joseph Schumpeter, Kenneth Rogoff, Kevin Kelly, knowledge worker, labor-force participation, Long Term Capital Management, low skilled workers, Lyft, Mark Zuckerberg, market fundamentalism, mass immigration, mass incarceration, medical malpractice, Menlo Park, moral hazard, mortgage debt, Network effects, patent troll, plutocrats, Plutocrats, principal–agent problem, regulatory arbitrage, rent control, rent-seeking, ride hailing / ride sharing, Robert Metcalfe, Ronald Reagan, Silicon Valley, Silicon Valley ideology, smart cities, software patent, too big to fail, total factor productivity, trade liberalization, transaction costs, tulip mania, Uber and Lyft, uber lyft, Washington Consensus, white picket fence, winner-take-all economy, women in the workforce

First, financial firms may be able to rely more on debt because the assets they are borrowing against are much more stable in value than those of nonfinancial firms. As John Cochrane has pointed out, a diversified portfolio of loans and securities just isn’t very risky, certainly not in comparison to the expected future profit flows of a single company.20 Second, beyond the difference in market fundamentals, financial firms’ predilection for debt may also reflect a market failure. Specifically, in judging the trade-off between risk and reward when choosing how much debt to take on, financial firms may look only at their own individual situation and not take account of the destabilizing effects of aggregate leverage in the financial system.21 Given the fact that banks borrow from each other and also considering the risk of contagion during bad times, levels of leverage that might be fine for a single institution become problematic if more widespread.


pages: 593 words: 189,857

Stress Test: Reflections on Financial Crises by Timothy F. Geithner

Affordable Care Act / Obamacare, asset-backed security, Atul Gawande, bank run, banking crisis, Basel III, Bernie Madoff, Bernie Sanders, break the buck, Buckminster Fuller, Carmen Reinhart, central bank independence, collateralized debt obligation, correlation does not imply causation, creative destruction, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, currency manipulation / currency intervention, David Brooks, Doomsday Book, eurozone crisis, financial innovation, Flash crash, Goldman Sachs: Vampire Squid, housing crisis, Hyman Minsky, illegal immigration, implied volatility, Kickstarter, London Interbank Offered Rate, Long Term Capital Management, margin call, market fundamentalism, Martin Wolf, McMansion, Mexican peso crisis / tequila crisis, money market fund, moral hazard, mortgage debt, Nate Silver, negative equity, Northern Rock, obamacare, paradox of thrift, pets.com, price stability, profit maximization, pushing on a string, quantitative easing, race to the bottom, RAND corporation, regulatory arbitrage, reserve currency, Saturday Night Live, savings glut, selection bias, short selling, sovereign wealth fund, The Great Moderation, The Signal and the Noise by Nate Silver, Tobin tax, too big to fail, working poor

We failed to prevent the worst financial crisis and the deepest recession in generations. I had the dubious distinction of being in charge of the New York Fed when Wall Street imploded. The crisis later inspired a lot of commentary suggesting that the Fed was a reluctant regulator—and that I was too close to Wall Street, too confident in the competence and integrity of bankers, too devoted to the free-market fundamentalism I supposedly inherited from Rubin, Summers, and Greenspan. I was routinely described as a tool of the industry, bent by the banks. Even critics who didn’t suggest I was corrupt assumed I was captured by the establishment’s finance-friendly view of the world. So before I explain what we did at the New York Fed and why, as well as what we missed and why, I want to describe my attitudes toward the financial world when I started the job.

He consistently expressed concern about excessive leverage, although he was also skeptical of government’s ability to do much about it. Larry’s view of the world fell somewhere in between, probably closer to Greenspan’s at the time. I didn’t have the strength of any of their convictions, but by disposition, my view was closer to Rubin’s. My formative exposure to finance was the emerging-market crises, which were not attractive advertisements for free-market fundamentalism. My responsibilities at Treasury in the 1990s covered international issues, so I was mostly a bystander during the Clinton administration’s debates over financial regulation, and I didn’t have strong views about them at the time. I played no role in the noble but futile efforts to rein in Fannie and Freddie. I also had no involvement in the central battle of the time, the bipartisan effort to formally end the Depression-era “Glass-Steagall” legal boundaries between commercial banking and other financial activities, boundaries that had already been substantially eroded by changes in regulation and financial innovations.


pages: 272 words: 19,172

Hedge Fund Market Wizards by Jack D. Schwager

asset-backed security, backtesting, banking crisis, barriers to entry, beat the dealer, Bernie Madoff, Black-Scholes formula, British Empire, business cycle, buy and hold, Claude Shannon: information theory, cloud computing, collateralized debt obligation, commodity trading advisor, computerized trading, credit crunch, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, diversification, diversified portfolio, Edward Thorp, family office, financial independence, fixed income, Flash crash, hindsight bias, implied volatility, index fund, intangible asset, James Dyson, Jones Act, Long Term Capital Management, margin call, market bubble, market fundamentalism, merger arbitrage, money market fund, oil shock, pattern recognition, pets.com, Ponzi scheme, private sector deleveraging, quantitative easing, quantitative trading / quantitative finance, Right to Buy, risk tolerance, risk-adjusted returns, risk/return, riskless arbitrage, Rubik’s Cube, Sharpe ratio, short selling, statistical arbitrage, Steve Jobs, systematic trading, technology bubble, transaction costs, value at risk, yield curve

Contents Foreword Preface Acknowledgments Part One: Macro Men Chapter 1: Colm O’Shea Addendum: Ray Dalio’s Big Picture View Chapter 2: Ray Dalio Chapter 3: Larry Benedict Chapter 4: Scott Ramsey Chapter 5: Jaffray Woodriff Part Two: Multistrategy Players Chapter 6: Edward Thorp Chapter 7: Jamie Mai Chapter 8: Michael Platt Part Three: Equity Traders Chapter 9: Steve Clark Chapter 10: Martin Taylor Chapter 11: Tom Claugus Chapter 12: Joe Vidich Chapter 13: Kevin Daly Chapter 14: Jimmy Balodimas Chapter 15: Joel Greenblatt Conclusion Epilogue Appendix A Appendix B About the Author Index Other Books by Jack D. Schwager A Complete Guide to the Futures Markets: Fundamental Analysis, Technical Analysis, Trading, Spreads, and Options Getting Started in Technical Analysis Market Wizards: Interviews with Top Traders The New Market Wizards: Conversations with America’s Top Traders Stock Market Wizards: Interviews with America’s Top Stock Traders Schwager on Futures: Fundamental Analysis Schwager on Futures: Managed Trading Myths & Truths Schwager on Futures: Technical Analysis Study Guide to Accompany Fundamental Analysis (with Steven C.

See Taylor, Martin EBIT EBITDA Economics, teaching of Education reform Efficient market hypothesis (EMH) Electronic trading, changes brought about by Emerging markets funds Enterprise value (EV) Entry size Equal-weighted indexes Euphoria, avoiding Eurobonds Euro Disney European debt crisis of 2011 European sovereign debt Exchange Rate Mechanism (ERM) Exiting trades False breakouts Fibonacci retracements Financial bubble of 2005–2007. See also Subprime mortgages/bonds Financial crisis beginning in 2007 Colm O’Shea on determining start of Michael Platt on Steve Clark on First New York Securities. See also Balodimas, Jimmy Fiscal policy Five Corners Partners, LP Five-phase cycle Flexibility Forward conversions Forward pricing Free cash flow (FCF) Free markets Fundamental analysis. See also Taylor, Martin Fund asset size Fund capacity Futures traders. See Commodity Trading Advisors (CTAs) Gain to Pain ratio Gambling baccarat system blackjack system compared to investing roulette system Gate provision Gating Geismar, Michael Gerard, Ralph Giuliani, Rudolph Gold Goldman Sachs Goldstein, Rob Goodyear Google Gotham Capital. See also Greenblatt, Joel Graham, Ben Grantham, Jeremy Great Depression Greenblatt, Joel on education reform Magic Formula Value and Special Situation Investing course Value Investors Club Halcyon Investments Hand, Eddie Hedge funds Banyan Equity Management (see also Benedict, Larry) Baring Asset Management BlueCrest (see Platt, Michael) Bridgewater (see Dalio, Ray) Denali Asset Management (see Ramsey, Scott) Gotham Capital (see also Greenblatt, Joel) LTCM (Long Term Capital Management) Manalapan Oracle Capital Management (see also Vidich, Joe) Nevsky Fund (see also Taylor, Martin) Omni Global Fund (see Clark, Steve) Princeton Newport Partners (PNP) (see Thorp, Edward) Ridgeline Partners High-conviction trades Hockett, Ben Horizon Lines Host Marriott House, Gerry Housing bubble.


pages: 280 words: 73,420

Crapshoot Investing: How Tech-Savvy Traders and Clueless Regulators Turned the Stock Market Into a Casino by Jim McTague

algorithmic trading, automated trading system, Bernie Madoff, Bernie Sanders, Bretton Woods, buttonwood tree, buy and hold, computerized trading, corporate raider, creative destruction, credit crunch, Credit Default Swap, financial innovation, fixed income, Flash crash, High speed trading, housing crisis, index arbitrage, locking in a profit, Long Term Capital Management, margin call, market bubble, market fragmentation, market fundamentalism, Myron Scholes, naked short selling, pattern recognition, Ponzi scheme, quantitative trading / quantitative finance, Renaissance Technologies, Ronald Reagan, Sergey Aleynikov, short selling, Small Order Execution System, statistical arbitrage, technology bubble, transaction costs, Vanguard fund, Y2K

The machines looked at historic price discrepancies and bought stock on that basis. The machines didn’t care what the name of the underlying company was or what its future growth potential was. Machines did not discriminate on that basis. The machine merely tried to predict if a stock would go up or down over the next several minutes. And it wasn’t just the machines that had lost touch with market fundamentals. Those retail investors who stayed in the market were playing the momentum game, not investing. They wanted to go with the flow, to ride the trend. Thus, they were inclined to buy stock-index futures, options, and ETFs that mimicked the S&P 500 or specific sectors of the economy. As far as the small investor was concerned, the classic buy-and-hold strategy had been a big bust. The market was a lightning-fast roller coaster, and you had to sell at the top of the hill before the market took you screaming to the bottom.


pages: 268 words: 75,490

The Knowledge Economy by Roberto Mangabeira Unger

additive manufacturing, balance sheet recession, business cycle, collective bargaining, commoditize, deindustrialization, disruptive innovation, first-past-the-post, full employment, global value chain, information asymmetry, knowledge economy, market fundamentalism, means of production, Paul Samuelson, savings glut, secular stagnation, side project, total factor productivity, transaction costs, union organizing, wealth creators

The greater the room for diversity and experiment in organizing the means of decentralized economic initiative, and consequently as well in the regimes of property and contract, the less likely it becomes that the organization of the market will give an entrenched advantage to certain groups, classes, types of economic agents, and lines of productive activity. Each property regime—which is to say, each way of organizing decentralized access to productive resources and opportunities—will tend to favor a different cast of agents and interests. The best guarantee of openness is not to sanctify one version of the market as the natural and necessary one, in the manner of market fundamentalism. It is to allow many versions—many regimes of property and contract—to coexist experimentally in the same market economy and in the same body of law. The consequence of entrenching one version of the market, usually to the benefit of a few, will be to cast justified suspicion on the cultivation of common purpose—in the firm or in the economy and the nation as a whole—that is vital to strengthening the will and the ability to cooperate.


pages: 267 words: 72,552

Reinventing Capitalism in the Age of Big Data by Viktor Mayer-Schönberger, Thomas Ramge

accounting loophole / creative accounting, Air France Flight 447, Airbnb, Alvin Roth, Atul Gawande, augmented reality, banking crisis, basic income, Bayesian statistics, bitcoin, blockchain, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, Cass Sunstein, centralized clearinghouse, Checklist Manifesto, cloud computing, cognitive bias, conceptual framework, creative destruction, Daniel Kahneman / Amos Tversky, disruptive innovation, Donald Trump, double entry bookkeeping, Elon Musk, en.wikipedia.org, Erik Brynjolfsson, Ford paid five dollars a day, Frederick Winslow Taylor, fundamental attribution error, George Akerlof, gig economy, Google Glasses, information asymmetry, interchangeable parts, invention of the telegraph, inventory management, invisible hand, James Watt: steam engine, Jeff Bezos, job automation, job satisfaction, joint-stock company, Joseph Schumpeter, Kickstarter, knowledge worker, labor-force participation, land reform, lone genius, low cost airline, low cost carrier, Marc Andreessen, market bubble, market design, market fundamentalism, means of production, meta analysis, meta-analysis, Moneyball by Michael Lewis explains big data, multi-sided market, natural language processing, Network effects, Norbert Wiener, offshore financial centre, Parag Khanna, payday loans, peer-to-peer lending, Peter Thiel, Ponzi scheme, prediction markets, price anchoring, price mechanism, purchasing power parity, random walk, recommendation engine, Richard Thaler, ride hailing / ride sharing, Sam Altman, Second Machine Age, self-driving car, Silicon Valley, Silicon Valley startup, six sigma, smart grid, smart meter, Snapchat, statistical model, Steve Jobs, technoutopianism, The Future of Employment, The Market for Lemons, The Nature of the Firm, transaction costs, universal basic income, William Langewiesche, Y Combinator

It’s useful when we don’t know better, when we don’t have ample information; and when we can’t comprehend well, when our mental faculties fail us and we lack the tools to acquire a more accurate, detailed perspective. ASSUMING THE EARTH WAS FLAT WAS A SIMPLIFICATION we employed for centuries because it worked—until we needed to progress further. We replaced it with something more complex—a globe rather than a flat plain—but the complexity helped us advance. We are doing the same as we transition from money-based to data-rich markets. Fundamentally, this shift is part of a larger, broader movement that began hundreds of years ago. It drove Francis Bacon to emphasize the need for empirical evidence and René Descartes to look for reasons. It prompted Immanuel Kant to suggest that reason links to morality and Adam Smith to examine the power of market coordination. It led Hannah Arendt to look at the nature of power and John Rawls to ponder justice.


pages: 206 words: 9,776

Rebel Cities: From the Right to the City to the Urban Revolution by David Harvey

Bretton Woods, business cycle, collateralized debt obligation, commoditize, creative destruction, David Graeber, deindustrialization, financial innovation, Guggenheim Bilbao, Hernando de Soto, housing crisis, illegal immigration, indoor plumbing, invisible hand, Jane Jacobs, late capitalism, Long Term Capital Management, market bubble, market fundamentalism, means of production, moral hazard, mortgage debt, mortgage tax deduction, New Urbanism, Ponzi scheme, precariat, profit maximization, race to the bottom, Robert Shiller, Robert Shiller, special economic zone, the built environment, the High Line, The Wealth of Nations by Adam Smith, transcontinental railway, urban planning, We are the 99%, William Langewiesche, Works Progress Administration

Maximizing THE U R BAN ROOTS OF CAPITALIST CRISES 29 its yield has driven low- or even moderate-in come households out of M anhattan and central London over the last few ye ars, with catastrophic effects on class disparities and the well-b eing of underprivileged popula­ tions. This is what is putting such intense pressure on the high-value land of D haravi in Mumbai (a so- called slum that the report correctly depicts as a pro ductive human ecosystem). In short, the report advocates the kind of free-market fundamentalism that has spawned a m acroeconomic earthquake of the sort we have just passed thro ugh (together with its continuing aftershocks) alongside urban social movements of opposi­ tion to gentrification, neighborhood destruction, and the use of eminent domain (or more brutal methods) to evict residents to m ake way for higher-value land uses. Since the m id 1 9 80s, neoliberal urban policy (applied, for example, across the European Union) concluded that redistributing wealth to less advantaged neighborhoods, cities, and regions was futile, and that resources should instead be channeled to dynamic "entrepreneurial" growth poles.


pages: 243 words: 76,686

How to Do Nothing by Jenny Odell

Airbnb, augmented reality, back-to-the-land, Burning Man, collective bargaining, Donald Trump, Filter Bubble, full employment, gig economy, Google Earth, Internet Archive, Jane Jacobs, Jaron Lanier, Kickstarter, late capitalism, Mark Zuckerberg, market fundamentalism, means of production, Minecraft, peer-to-peer, Peter Thiel, Port of Oakland, Results Only Work Environment, Rosa Parks, Sand Hill Road, Silicon Valley, Silicon Valley startup, Snapchat, source of truth, Steve Jobs, strikebreaker, technoutopianism, union organizing, white flight, Works Progress Administration

Working via initiatives like Time Well Spent, an advocacy group that aims to curb the design of addictive technology, former Facebook president Sean Parker and ex-Google employees Tristan Harris and James Williams have become fervent opponents of the attention economy. But Tanner is unimpressed: They fail to attack the attention economy at its roots or challenge the basic building blocks of late capitalism: market fundamentalism, deregulation, and privatization. They reinforce neoliberal ideals, privileging the on-the-move individual whose time needs to be well spent—a neatly consumerist metaphor.62 For my part, I, too, will remain unimpressed until the social media technology we use is noncommercial. But while commercial social networks reign supreme, let’s remember that a real refusal, like Bartleby’s answer, refuses the terms of the question itself


pages: 290 words: 72,046

5 Day Weekend: Freedom to Make Your Life and Work Rich With Purpose by Nik Halik, Garrett B. Gunderson

Airbnb, bitcoin, Buckminster Fuller, business process, clean water, collaborative consumption, cryptocurrency, delayed gratification, diversified portfolio, en.wikipedia.org, estate planning, Ethereum, fear of failure, fiat currency, financial independence, glass ceiling, Grace Hopper, Home mortgage interest deduction, Isaac Newton, litecoin, Lyft, market fundamentalism, microcredit, minimum viable product, mortgage debt, mortgage tax deduction, Nelson Mandela, passive income, peer-to-peer, peer-to-peer rental, Ponzi scheme, quantitative easing, Ralph Waldo Emerson, ride hailing / ride sharing, sharing economy, side project, Skype, TaskRabbit, traveling salesman, uber lyft

Facebook did not trade over $38 until fifteen months later. Groupon is still not profitable, and its share price is down considerably since its IPO in November 2011. For investors wanting to get into IPO investing, it may be prudent to wait for the initial IPO hype to fade before acquiring the stock. This may mean buying the stock three months after it starts trading. After a few months the price of the stock moves more according to market fundamentals than the speculative hysteria preceding it. Some investors assume an IPO is an opportunity to get in on the ground floor. In reality, prior to its IPO, a company may have secured multiple rounds of investments. By the time you acquire shares of a company during the IPO, early private institutional investors are existing shareholders. Pre-IPO Funds A pre-IPO fund’s investment strategy is straightforward: Accredited investors purchase shares of a company before it is ready to issue an initial public offering.


pages: 249 words: 77,342

The Behavioral Investor by Daniel Crosby

affirmative action, Asian financial crisis, asset allocation, availability heuristic, backtesting, bank run, Black Swan, buy and hold, cognitive dissonance, colonial rule, compound rate of return, correlation coefficient, correlation does not imply causation, Daniel Kahneman / Amos Tversky, diversification, diversified portfolio, Donald Trump, endowment effect, feminist movement, Flash crash, haute cuisine, hedonic treadmill, housing crisis, IKEA effect, impulse control, index fund, Isaac Newton, job automation, longitudinal study, loss aversion, market bubble, market fundamentalism, mental accounting, meta analysis, meta-analysis, Milgram experiment, moral panic, Murray Gell-Mann, Nate Silver, neurotypical, passive investing, pattern recognition, Ponzi scheme, prediction markets, random walk, Richard Feynman, Richard Thaler, risk tolerance, Robert Shiller, Robert Shiller, science of happiness, Shai Danziger, short selling, South Sea Bubble, Stanford prison experiment, Stephen Hawking, Steve Jobs, stocks for the long run, Thales of Miletus, The Signal and the Noise by Nate Silver, tulip mania, Vanguard fund

The Japanese actually have a word for the period of post-coital lucidity – kenjataimu – which translates to “the time of the wise man.” Freed from sexual desire, we begin to evaluate our decisions on a more rational plane and may regret choices made the night before or question our choice of partner. Similarly, investors have a moment of kenjataimu when the stories that have propped up the self-reinforcing effects of a bubble give way to the dispassionate return to market fundamentals. In love and money, stories only last so long, and eventually give way to harsher realities. To torture this metaphor just a little more, a behavioral investor must learn to enjoy the benefits of flirtation while being sure not to marry someone regrettable. Trust but verify In a very real sense, it is a scary proposition to entrust your hard-earned wealth to a market insane enough to drive a laxative company into the stratosphere simply for having “tech” in its name.


pages: 287 words: 80,180

Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant by W. Chan Kim, Renée A. Mauborgne

Asian financial crisis, borderless world, call centre, cloud computing, commoditize, creative destruction, disruptive innovation, endogenous growth, haute couture, index fund, information asymmetry, interchangeable parts, job satisfaction, Joseph Schumpeter, Kickstarter, knowledge economy, market fundamentalism, NetJets, Network effects, RAND corporation, Skype, telemarketer, The Wealth of Nations by Adam Smith, There's no reason for any individual to have a computer in his home - Ken Olsen, Thomas Kuhn: the structure of scientific revolutions, Vanguard fund, zero-sum game

This book seeks to address this imbalance by laying out a methodology to support our thesis. Here we present the principles and analytical frameworks to succeed in blue oceans. Chapter 2 introduces the analytical tools and frameworks that are essential for creating and capturing blue oceans. Although supplementary tools are introduced in other chapters as needed, these basic analytics are used throughout the book. Companies can make proactive changes in industry or market fundamentals through the purposeful application of these blue ocean tools and frameworks, which are grounded in the issues of both opportunity and risk. Subsequent chapters introduce the principles that drive the successful formulation and implementation of blue ocean strategy and explain how they, along with the analytics, are applied in action. There are four guiding principles for the successful formulation of blue ocean strategy.


pages: 264 words: 76,643

The Growth Delusion: Wealth, Poverty, and the Well-Being of Nations by David Pilling

Airbnb, banking crisis, Bernie Sanders, Big bang: deregulation of the City of London, Branko Milanovic, call centre, centre right, clean water, collapse of Lehman Brothers, collateralized debt obligation, commoditize, Credit Default Swap, credit default swaps / collateralized debt obligations, dark matter, Deng Xiaoping, Diane Coyle, Donald Trump, double entry bookkeeping, Erik Brynjolfsson, falling living standards, financial deregulation, financial intermediation, financial repression, Gini coefficient, Goldman Sachs: Vampire Squid, Google Hangouts, Hans Rosling, happiness index / gross national happiness, income inequality, income per capita, informal economy, invisible hand, job satisfaction, Mahatma Gandhi, market fundamentalism, Martin Wolf, means of production, Monkeys Reject Unequal Pay, mortgage debt, off grid, old-boy network, Panopticon Jeremy Bentham, peak oil, performance metric, pez dispenser, profit motive, purchasing power parity, race to the bottom, rent-seeking, Robert Gordon, Ronald Reagan, Rory Sutherland, science of happiness, shareholder value, sharing economy, Simon Kuznets, sovereign wealth fund, The Great Moderation, The Wealth of Nations by Adam Smith, Thomas Malthus, total factor productivity, transaction costs, transfer pricing, trickle-down economics, urban sprawl, women in the workforce, World Values Survey

Instead, he told parliament, growth was “a strategy for pulling the poor out of poverty through gainful employment, not as an end in itself.” Bhagwati’s position was different from that of another prominent Indian economist, Amartya Sen, recipient of the 1998 Nobel Prize for economics and a contemporary of Bhagwati’s at Cambridge back in the 1950s. (Manmohan Singh, the architect of India’s reforms, also studied economics at Cambridge at the same time.) Sen has railed against “market fundamentalism” and stressed instead what he calls social capabilities, a term that boils down to an individual’s freedom and capacity to achieve things: from the basics, such as accessing food, education and health, to the more ambitious, such as expressing a political opinion, participating in the democratic process, or choosing how to live one’s life free from racial or gender prejudice. When he was about ten years old, the young Sen was playing in the family garden in Dhaka, now the capital of Bangladesh but then a city in India before partition.8 Suddenly a man came screaming into the garden with a knife wound in his back.


pages: 267 words: 74,296

Unhappy Union: How the Euro Crisis - and Europe - Can Be Fixed by John Peet, Anton La Guardia, The Economist

bank run, banking crisis, Berlin Wall, Bretton Woods, business cycle, capital controls, Celtic Tiger, central bank independence, centre right, collapse of Lehman Brothers, credit crunch, Credit Default Swap, debt deflation, Doha Development Round, eurozone crisis, Fall of the Berlin Wall, fixed income, Flash crash, illegal immigration, labour market flexibility, labour mobility, light touch regulation, market fundamentalism, moral hazard, Northern Rock, oil shock, open economy, pension reform, price stability, quantitative easing, special drawing rights, supply-chain management, The Great Moderation, too big to fail, transaction costs, éminence grise

As one observer of EU summits noted, everybody always stopped to listen to Merkel; nobody paid any attention when Hollande took the floor, instead fiddling with their BlackBerries and iPhones. The marginalisation of France is also denting public opinion in that country, which is increasingly turning against both the euro and the EU. The French industry minister, Arnaud Montebourg, has taken to attacking the EU for its “free-market fundamentalism”. Another striking example even among the pro-European elite was a 2013 book by François Heisbourg, from the Foundation for Strategic Research, in which he argued that the euro should be scrapped in order to preserve the European Union.7 Angela alone In effect, Europe once again has what historians have called a German problem (with plenty of reason to hope that the solution will be more peaceful than in the past).


pages: 233 words: 75,712

In Defense of Global Capitalism by Johan Norberg

anti-globalists, Asian financial crisis, capital controls, clean water, correlation does not imply causation, creative destruction, Deng Xiaoping, Edward Glaeser, Gini coefficient, half of the world's population has never made a phone call, Hernando de Soto, illegal immigration, income inequality, income per capita, informal economy, Joseph Schumpeter, Kenneth Rogoff, land reform, Lao Tzu, liberal capitalism, market fundamentalism, Mexican peso crisis / tequila crisis, Naomi Klein, new economy, open economy, prediction markets, profit motive, race to the bottom, rising living standards, Silicon Valley, Simon Kuznets, structural adjustment programs, The Wealth of Nations by Adam Smith, Tobin tax, trade liberalization, trade route, transaction costs, trickle-down economics, union organizing, zero-sum game

We find political theorist John Gray, for example, describing the spread of free-market policies as a virtual coup d’etat staged by ‘‘radical’’ ideologues who manage to ‘‘infiltrate’’ government. ‘‘The goal of this revolution,’’ according to Gray, ‘‘was to insulate neo-liberal policy irreversibly from democratic accountability in political life.’’4 Some pundits—among them Robert Kuttner, editor of The American Prospect, and economist Joseph Stiglitz—even characterize free-market advocacy as a kind of quasireligious cult, which they call ‘‘market fundamentalism.’’ Deregulation, privatization, and trade liberalization, however, were not invented by ultra-liberal ideologues. True, there were political leaders—Reagan and Thatcher, for instance—who had been inspired by economic liberalism. But the biggest reformers were communists in China and the Soviet Union, protectionists in Latin America, and nationalists in Asia. In many other European countries, the progress has been spurred by Social Democrats.


pages: 193 words: 63,618

The Fair Trade Scandal: Marketing Poverty to Benefit the Rich by Ndongo Sylla

British Empire, carbon footprint, corporate social responsibility, David Ricardo: comparative advantage, deglobalization, Doha Development Round, Food sovereignty, global value chain, illegal immigration, income inequality, income per capita, invisible hand, Joseph Schumpeter, labour mobility, land reform, market fundamentalism, mass immigration, means of production, Mont Pelerin Society, Naomi Klein, non-tariff barriers, offshore financial centre, open economy, Philip Mirowski, plutocrats, Plutocrats, price mechanism, purchasing power parity, Ronald Reagan, Scientific racism, selection bias, structural adjustment programs, The Wealth of Nations by Adam Smith, trade liberalization, transaction costs, transatlantic slave trade, trickle-down economics, Washington Consensus, zero-sum game

We should be grateful to Sushil Mohan (2010) for being one of the rare authors to have understood that Fair Trade is a logical continuation of free trade and not an alternative to it: 101 Sylla T02779 01 text 101 28/11/2013 13:04 the fair trade scandal It is wrong to consider Fair Trade as a development of a market that is different from the ‘free market’. All that is happening is that Fair Trade opens up an alternative speciality trading channel within the free market. The market fundamentals, the demand, supply and market competitiveness conditions for Fair Trade products, follow conventional trade practices. Fair Trade works not because it subsidises goods no one wants, but because some free market consumers are willing to support it. Whether they are ‘objectively’ right to do so is important but irrelevant to this particular line of argument – Fair Trade fulfils a subjective preference.


pages: 286 words: 79,305

99%: Mass Impoverishment and How We Can End It by Mark Thomas

"Robert Solow", 2013 Report for America's Infrastructure - American Society of Civil Engineers - 19 March 2013, additive manufacturing, Albert Einstein, anti-communist, autonomous vehicles, bank run, banks create money, bitcoin, business cycle, call centre, central bank independence, complexity theory, conceptual framework, creative destruction, credit crunch, declining real wages, distributed ledger, Donald Trump, Erik Brynjolfsson, eurozone crisis, fiat currency, Filter Bubble, full employment, future of work, Gini coefficient, gravity well, income inequality, inflation targeting, Internet of things, invisible hand, Jeff Bezos, jimmy wales, job automation, Kickstarter, labour market flexibility, laissez-faire capitalism, light touch regulation, Mark Zuckerberg, market clearing, market fundamentalism, Martin Wolf, money: store of value / unit of account / medium of exchange, Nelson Mandela, North Sea oil, Occupy movement, offshore financial centre, Own Your Own Home, Peter Thiel, Piper Alpha, plutocrats, Plutocrats, profit maximization, quantitative easing, rent-seeking, Ronald Reagan, Second Machine Age, self-driving car, Silicon Valley, smart cities, Steve Jobs, The Great Moderation, The Wealth of Nations by Adam Smith, wealth creators, working-age population

* Why bring subjective notions of right and wrong, good and bad into the question? Why complicate matters with systems of values and principles? Why not simply say that the market price is the moral price? As soon as this point is accepted, often as a near-religious tenet, most of morality can happily be left to the market. In the words of George Soros:3 ‘This idea was called laissez faire in the nineteenth century… I have found a better name for it: market fundamentalism.’ Is Mark Lore, the CEO of Walmart, really worth US$236 million per annum?4 Let the market decide. Should there be more low-cost housing? Let the market decide. How much should a nurse be paid? Let the market decide! This line of thinking produces results that most people find bizarre. In the US, an oncology nurse can expect to earn between US$74,000 and US$118,000.5 But each of the key executives of the tobacco company Philip Morris is paid more than US$5 million.6 If we accept that the market price truly reflects their moral value, we must conclude that each one of these executives does more good for society by producing, marketing and selling (carcinogenic) cigarettes than fifty oncology nurses do in tending those with cancer.


pages: 290 words: 76,216

What's Wrong with Economics? by Robert Skidelsky

"Robert Solow", additive manufacturing, agricultural Revolution, Black Swan, Bretton Woods, business cycle, Cass Sunstein, central bank independence, cognitive bias, conceptual framework, Corn Laws, corporate social responsibility, correlation does not imply causation, creative destruction, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, disruptive innovation, Donald Trump, full employment, George Akerlof, George Santayana, global supply chain, global village, Gunnar Myrdal, happiness index / gross national happiness, hindsight bias, Hyman Minsky, income inequality, index fund, inflation targeting, information asymmetry, Internet Archive, invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, Joseph Schumpeter, Kenneth Arrow, knowledge economy, labour market flexibility, loss aversion, Mark Zuckerberg, market clearing, market friction, market fundamentalism, Martin Wolf, means of production, moral hazard, paradox of thrift, Pareto efficiency, Paul Samuelson, Philip Mirowski, precariat, price anchoring, principal–agent problem, rent-seeking, Richard Thaler, road to serfdom, Robert Shiller, Robert Shiller, Ronald Coase, shareholder value, Silicon Valley, Simon Kuznets, survivorship bias, technoutopianism, The Chicago School, The Market for Lemons, The Nature of the Firm, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, Thorstein Veblen, transaction costs, transfer pricing, Vilfredo Pareto, Washington Consensus, Wolfgang Streeck, zero-sum game

Many economists might take issue with the claim that they have so much influence, arguing that too few politicians pay them sufficient heed. It is tempting, in the era of Trump and Brexit, to go along with this view, since the rhetoric of both of these so-called ‘populist revolts’ might cut against economists’ prescriptions of free trade. However, lurking behind both is a strain of pro-business market fundamentalism that draws its intellectual credibility almost entirely from a particular view of economics, one that bears striking resemblance to the picture of the subject offered by the standard curriculum: everything will work out just fine, so long as the government keeps its nose out. Many professional economists have substantially more nuanced views about the role of government in economies, and argued forcefully against the election of Donald Trump, and in particular against Britain’s proposed exit from the European Union.


pages: 276 words: 82,603

Birth of the Euro by Otmar Issing

"Robert Solow", accounting loophole / creative accounting, Bretton Woods, business climate, business cycle, capital controls, central bank independence, currency peg, financial innovation, floating exchange rates, full employment, inflation targeting, information asymmetry, labour market flexibility, labour mobility, market fundamentalism, money market fund, moral hazard, oil shock, open economy, price anchoring, price stability, purchasing power parity, reserve currency, Y2K, yield curve

Only with a flexible (floating) exchange rate is the central bank able to achieve a domestic objective (generally speaking, the objective of price stability).32 The choice of exchange rate regime is of central importance for monetary policy and also for the place of the central bank in the macroeconomic policy framework. If a fixed exchange rate system is chosen, this ultimately means no less than that, even if it may continue to exist de jure, the independence of the central bank exists de facto only on paper, in that its obligation to intervene in the foreign exchange market fundamentally robs the central bank of its sovereignty over monetary policy-making.33 The same considerations as for an individual country also apply to the currency and the central bank of a monetary union. Hence, as regards the position of the ECB and its monetary policy, a pivotal role is played by the arrangements governing exchange rate policy responsibility, and in particular by the exchange rate regime.


pages: 279 words: 87,910

How Much Is Enough?: Money and the Good Life by Robert Skidelsky, Edward Skidelsky

"Robert Solow", banking crisis, basic income, Bertrand Russell: In Praise of Idleness, Bonfire of the Vanities, call centre, creative destruction, David Ricardo: comparative advantage, death of newspapers, financial innovation, Francis Fukuyama: the end of history, full employment, happiness index / gross national happiness, income inequality, income per capita, informal economy, Intergovernmental Panel on Climate Change (IPCC), invisible hand, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, Joseph Schumpeter, market clearing, market fundamentalism, Paul Samuelson, profit motive, purchasing power parity, Ralph Waldo Emerson, The Wealth of Nations by Adam Smith, Thomas Malthus, Thorstein Veblen, Tobin tax, union organizing, University of East Anglia, Veblen good, wage slave, wealth creators, World Values Survey, zero-sum game

As we showed in Chapter 2, the assumption of abundance, and consequent revulsion against technology and psychological distancing from the world of work, was the imaginative backdrop of the American utopian movements of the 1960s. The question is: why did the perception of imminent Bliss of the 1960s lead to the restoration of Darwinian capitalism in the 1980s? What brought Reagan and Thatcher to power and led to the renewal of free-market fundamentalism? It is easy to see that, in the form in which the followers of Marcuse imagined it, Bliss was an illusion. For reasons analyzed in Chapter 1, richer societies are likely to become more, rather than less, acquisitive, as the power of relative wants grows. But this secular trend does not explain the sudden collapse of the system of political economy that had brought the rich part of the world to the dawn of universal abundance.


pages: 275 words: 84,980

Before Babylon, Beyond Bitcoin: From Money That We Understand to Money That Understands Us (Perspectives) by David Birch

agricultural Revolution, Airbnb, bank run, banks create money, bitcoin, blockchain, Bretton Woods, British Empire, Broken windows theory, Burning Man, business cycle, capital controls, cashless society, Clayton Christensen, clockwork universe, creative destruction, credit crunch, cross-subsidies, crowdsourcing, cryptocurrency, David Graeber, dematerialisation, Diane Coyle, disruptive innovation, distributed ledger, double entry bookkeeping, Ethereum, ethereum blockchain, facts on the ground, fault tolerance, fiat currency, financial exclusion, financial innovation, financial intermediation, floating exchange rates, Fractional reserve banking, index card, informal economy, Internet of things, invention of the printing press, invention of the telegraph, invention of the telephone, invisible hand, Irish bank strikes, Isaac Newton, Jane Jacobs, Kenneth Rogoff, knowledge economy, Kuwabatake Sanjuro: assassination market, large denomination, M-Pesa, market clearing, market fundamentalism, Marshall McLuhan, Martin Wolf, mobile money, money: store of value / unit of account / medium of exchange, new economy, Northern Rock, Pingit, prediction markets, price stability, QR code, quantitative easing, railway mania, Ralph Waldo Emerson, Real Time Gross Settlement, reserve currency, Satoshi Nakamoto, seigniorage, Silicon Valley, smart contracts, social graph, special drawing rights, technoutopianism, the payments system, The Wealth of Nations by Adam Smith, too big to fail, transaction costs, tulip mania, wage slave, Washington Consensus, wikimedia commons

Futures trading in the Amsterdam markets had its origin in the sixteenth century and futures were traded on the Amsterdam exchange just like any other commodity. Derivatives fed the tulip mania and the subsequent crash, although the reasons for the crisis and crash are not as clear as you might think. Some observers see the tulip market’s collapse as a response to financial regulation, not market fundamentals (see ‘Was tulipmania irrational?’, The Economist, 4 October 2013). Government officials, who were themselves speculating on the markets, were planning a rule change to convert futures contracts into options, which would mean that people who had undertaken to buy tulip bulbs in the future could pay a small amount to cancel the contracts if the price was not in their favour. This, of course, tipped the market in favour of the speculators and led to a rise in the price of options (which then collapsed when the government decided not to go ahead with the rule change).


pages: 320 words: 86,372

Mythology of Work: How Capitalism Persists Despite Itself by Peter Fleming

1960s counterculture, anti-work, call centre, clockwatching, commoditize, corporate social responsibility, creative destruction, David Graeber, Etonian, future of work, G4S, Goldman Sachs: Vampire Squid, illegal immigration, Kitchen Debate, late capitalism, Mark Zuckerberg, market bubble, market fundamentalism, means of production, neoliberal agenda, Parkinson's law, post-industrial society, post-work, profit maximization, profit motive, quantitative easing, Results Only Work Environment, shareholder value, social intelligence, The Chicago School, transaction costs, wealth creators, working poor

First, while companies are proclaiming the virtues of their ethicality on a scale never before seen (no large firm will omit a ‘social accounting report’ on its website), the ‘business as usual’ mentality now feels completely entrenched and immovable. The financial crisis might have opened up new ways of approaching the nature of economic activity, especially in terms of more progressive and imaginative alternative organizational forms. However, market fundamentalism has emerged from the 2008 meltdown in an almost unassailable hegemonic position, despite the growth of ‘green’ think tanks, sustainable economic practice reports, and the like. The second dimension of this contradiction at the heart of CSR pertains to the abiding legitimacy crisis of big business in much of the Western world. At the very time that the basic creditability of capitalism’s commitment to social responsibility has reached a new ebb, we see the very discourse of ‘ethics’, ‘shared value’ and ‘giving back’ burgeon in scale, scope and ambition.


pages: 365 words: 88,125

23 Things They Don't Tell You About Capitalism by Ha-Joon Chang

"Robert Solow", affirmative action, Asian financial crisis, bank run, banking crisis, basic income, Berlin Wall, Bernie Madoff, borderless world, Carmen Reinhart, central bank independence, collateralized debt obligation, colonial rule, corporate governance, Credit Default Swap, credit default swaps / collateralized debt obligations, David Ricardo: comparative advantage, deindustrialization, deskilling, ending welfare as we know it, Fall of the Berlin Wall, falling living standards, financial deregulation, financial innovation, full employment, German hyperinflation, Gini coefficient, hiring and firing, Hyman Minsky, income inequality, income per capita, invisible hand, joint-stock company, joint-stock limited liability company, Joseph Schumpeter, Kenneth Rogoff, knowledge economy, labour market flexibility, light touch regulation, Long Term Capital Management, low skilled workers, manufacturing employment, market fundamentalism, means of production, Mexican peso crisis / tequila crisis, microcredit, Myron Scholes, North Sea oil, offshore financial centre, old-boy network, post-industrial society, price stability, profit maximization, profit motive, purchasing power parity, rent control, shareholder value, short selling, Skype, structural adjustment programs, the market place, The Wealth of Nations by Adam Smith, Thomas Malthus, Tobin tax, Toyota Production System, trade liberalization, trickle-down economics, women in the workforce, working poor, zero-sum game

THING 7 1 On Lincoln’s protectionist views, see my earlier book Kicking Away the Ladder (Anthem Press, London, 2002), pp. 27–8 and the references thereof. 2 This story is told in greater detail in my earlier books: Kicking Away the Ladder is a heavily referenced and annotated academic – but by no means difficult-to-read – monograph, focused particularly on trade policy; Bad Samaritans (Random House, London, 2007, and Bloomsbury USA, New York, 2008) covers a broader range of policy areas and is written in a more user-friendly way. THING 8 1 For further evidence, see my recent book Bad Samaritans (Random House, London, 2007, and Bloomsbury USA, New York, 2008), ch. 4, ‘The Finn and the Elephant’, and R. Kozul-Wright and P. Rayment, The Resistible Rise of Market Fundamentalism (Zed Books, London, 2007), ch. 4. THING 9 1 K. Coutts, A. Glyn and B. Rowthorn, ‘Structural change under New Labour’, Cambridge Journal of Economics, 2007, vol. 31, no. 5. 2 The term is borrowed from the 2008 report by the British government’s Department for BERR (Business, Enterprise and Regulatory Reform), Globalisation and the Changing UK Economy (2008). 3 B. Alford, ‘De-industrialisation’, ReFRESH, Autumn 1997, p. 6, table 1. 4 B.


pages: 339 words: 94,769

Possible Minds: Twenty-Five Ways of Looking at AI by John Brockman

AI winter, airport security, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, artificial general intelligence, Asilomar, autonomous vehicles, basic income, Benoit Mandelbrot, Bill Joy: nanobots, Buckminster Fuller, cellular automata, Claude Shannon: information theory, Daniel Kahneman / Amos Tversky, Danny Hillis, David Graeber, easy for humans, difficult for computers, Elon Musk, Eratosthenes, Ernest Rutherford, finite state, friendly AI, future of work, Geoffrey West, Santa Fe Institute, gig economy, income inequality, industrial robot, information retrieval, invention of writing, James Watt: steam engine, Johannes Kepler, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Maynard Keynes: technological unemployment, John von Neumann, Kevin Kelly, Kickstarter, Laplace demon, Loebner Prize, market fundamentalism, Marshall McLuhan, Menlo Park, Norbert Wiener, optical character recognition, pattern recognition, personalized medicine, Picturephone, profit maximization, profit motive, RAND corporation, random walk, Ray Kurzweil, Richard Feynman, Rodney Brooks, self-driving car, sexual politics, Silicon Valley, Skype, social graph, speech recognition, statistical model, Stephen Hawking, Steven Pinker, Stewart Brand, strong AI, superintelligent machines, supervolcano, technological singularity, technoutopianism, telemarketer, telerobotics, the scientific method, theory of mind, Turing machine, Turing test, universal basic income, Upton Sinclair, Von Neumann architecture, Whole Earth Catalog, Y2K, zero-sum game

Indeed, “no amount of scientific research, carefully recorded in books and papers, and then put into our libraries with labels of secrecy, will be adequate to protect us for any length of time in a world where the effective level of information is perpetually advancing.” Any such efforts at secrecy, classification, or the containment of information would fail, Wiener argued, just as surely as hucksters’ schemes for perpetual-motion machines faltered in the face of the second law of thermodynamics. Wiener criticized the American “orthodoxy” of free-market fundamentalism in much the same way. For most Americans, “questions of information will be evaluated according to a standard American criterion: a thing is valuable as a commodity for what it will bring in the open market.” Indeed, “[T]he fate of information in the typically American world is to become something which can be bought or sold”; most people, he observed, “cannot conceive of a piece of information without an owner.”


pages: 408 words: 94,311

The Great Depression: A Diary by Benjamin Roth, James Ledbetter, Daniel B. Roth

bank run, banking crisis, business cycle, buy and hold, California gold rush, collective bargaining, currency manipulation / currency intervention, deindustrialization, financial independence, Joseph Schumpeter, market fundamentalism, moral hazard, short selling, statistical model, strikebreaker, union organizing, urban renewal, Works Progress Administration

There has as yet been no real reaction and it seems overdue. In this depression at least the stock upturn came several weeks before business indexes showed any improvement. For the past two weeks these indexes have been turning slowly up. At the time of the stock market upsurge the indexes were very slowly moving down and some were stationary. Same with stocks. Volume was low and there were many indications of a sold-out market. Fundamentally the whole business situation is weakened by the monetary policies of the New Deal and I do not see how we can have enduring recovery until this is rectified. This may not be until Roosevelt’s term of office is over. In the meanwhile the national debt approaches $40 billion. People seem to have forgotten about the danger of inflation but it is still there just the same. AUGUST 10, 1938 Business and the stock market have been stagnant for the past few weeks.


High-Frequency Trading by David Easley, Marcos López de Prado, Maureen O'Hara

algorithmic trading, asset allocation, backtesting, Brownian motion, capital asset pricing model, computer vision, continuous double auction, dark matter, discrete time, finite state, fixed income, Flash crash, High speed trading, index arbitrage, information asymmetry, interest rate swap, latency arbitrage, margin call, market design, market fragmentation, market fundamentalism, market microstructure, martingale, natural language processing, offshore financial centre, pattern recognition, price discovery process, price discrimination, price stability, quantitative trading / quantitative finance, random walk, Sharpe ratio, statistical arbitrage, statistical model, stochastic process, Tobin tax, transaction costs, two-sided market, yield curve

Apart from their revenue-raising potential, the perceived corrective function of these taxes is also often cited in their support. Proponents argue that such taxes can produce positive effects on financial markets by increasing the cost and reducing the volume of shortterm trading. Crucially, this argument is based on a view of shortterm trading as being mostly speculative (often supported by or based on trading systems) and unrelated to market fundamentals. This form of trading is thus viewed as having a negative impact on financial markets by contributing to excessive liquidity, excessive price volatility and asset bubbles. Furthermore, it is argued that the increasing ratio of financial transactions to GDP suggests considerable socially unproductive financial activity and hence a waste of resources. Financial transaction taxes are also seen as a way of compensating for the fact that many financial services are exempt from Value Added Tax (VAT).


pages: 355 words: 92,571

Capitalism: Money, Morals and Markets by John Plender

activist fund / activist shareholder / activist investor, Andrei Shleifer, asset-backed security, bank run, Berlin Wall, Big bang: deregulation of the City of London, Black Swan, bonus culture, Bretton Woods, business climate, business cycle, Capital in the Twenty-First Century by Thomas Piketty, central bank independence, collapse of Lehman Brothers, collective bargaining, computer age, Corn Laws, corporate governance, creative destruction, credit crunch, Credit Default Swap, David Ricardo: comparative advantage, deindustrialization, Deng Xiaoping, discovery of the americas, diversification, Eugene Fama: efficient market hypothesis, eurozone crisis, failed state, Fall of the Berlin Wall, fiat currency, financial innovation, financial intermediation, Fractional reserve banking, full employment, God and Mammon, Gordon Gekko, greed is good, Hyman Minsky, income inequality, inflation targeting, information asymmetry, invention of the wheel, invisible hand, Isaac Newton, James Watt: steam engine, Johann Wolfgang von Goethe, John Maynard Keynes: Economic Possibilities for our Grandchildren, John Meriwether, joint-stock company, Joseph Schumpeter, labour market flexibility, liberal capitalism, light touch regulation, London Interbank Offered Rate, London Whale, Long Term Capital Management, manufacturing employment, Mark Zuckerberg, market bubble, market fundamentalism, mass immigration, means of production, Menlo Park, money market fund, moral hazard, moveable type in China, Myron Scholes, Nick Leeson, Northern Rock, Occupy movement, offshore financial centre, paradox of thrift, Paul Samuelson, plutocrats, Plutocrats, price stability, principal–agent problem, profit motive, quantitative easing, railway mania, regulatory arbitrage, Richard Thaler, rising living standards, risk-adjusted returns, Robert Gordon, Robert Shiller, Robert Shiller, Ronald Reagan, savings glut, shareholder value, short selling, Silicon Valley, South Sea Bubble, spice trade, Steve Jobs, technology bubble, The Chicago School, The Great Moderation, the map is not the territory, The Wealth of Nations by Adam Smith, Thorstein Veblen, time value of money, too big to fail, tulip mania, Upton Sinclair, Veblen good, We are the 99%, Wolfgang Streeck, zero-sum game

There is, in fact, something curiously Manichean about the way the capitalist political economy works, as the chapters that follow will show. Things that are in themselves a benefit to society – banking, debt, speculation, animal spirits – become damaging when taken to excess. And excess seems to be a recurring feature of economic cycles and of capitalism itself. After the long period of market fundamentalism introduced by Ronald Reagan and Margaret Thatcher, and after the worst recession since the 1930s, people are understandably resentful of huge boardroom pay awards, fat bank bonuses and rising inequality. How far society’s waning tolerance of these excesses will lead to a much more heavily regulated, lower growth form of capitalism turns heavily on these difficult issues about the moral character of money.


pages: 366 words: 94,209

Throwing Rocks at the Google Bus: How Growth Became the Enemy of Prosperity by Douglas Rushkoff

activist fund / activist shareholder / activist investor, Airbnb, algorithmic trading, Amazon Mechanical Turk, Andrew Keen, bank run, banking crisis, barriers to entry, bitcoin, blockchain, Burning Man, business process, buy and hold, buy low sell high, California gold rush, Capital in the Twenty-First Century by Thomas Piketty, carbon footprint, centralized clearinghouse, citizen journalism, clean water, cloud computing, collaborative economy, collective bargaining, colonial exploitation, Community Supported Agriculture, corporate personhood, corporate raider, creative destruction, crowdsourcing, cryptocurrency, disintermediation, diversified portfolio, Elon Musk, Erik Brynjolfsson, Ethereum, ethereum blockchain, fiat currency, Firefox, Flash crash, full employment, future of work, gig economy, Gini coefficient, global supply chain, global village, Google bus, Howard Rheingold, IBM and the Holocaust, impulse control, income inequality, index fund, iterative process, Jaron Lanier, Jeff Bezos, jimmy wales, job automation, Joseph Schumpeter, Kickstarter, loss aversion, Lyft, Marc Andreessen, Mark Zuckerberg, market bubble, market fundamentalism, Marshall McLuhan, means of production, medical bankruptcy, minimum viable product, Mitch Kapor, Naomi Klein, Network effects, new economy, Norbert Wiener, Oculus Rift, passive investing, payday loans, peer-to-peer lending, Peter Thiel, post-industrial society, profit motive, quantitative easing, race to the bottom, recommendation engine, reserve currency, RFID, Richard Stallman, ride hailing / ride sharing, Ronald Reagan, Satoshi Nakamoto, Second Machine Age, shareholder value, sharing economy, Silicon Valley, Snapchat, social graph, software patent, Steve Jobs, TaskRabbit, The Future of Employment, trade route, transportation-network company, Turing test, Uber and Lyft, Uber for X, uber lyft, unpaid internship, Y Combinator, young professional, zero-sum game, Zipcar

Young professionals understand that they’re playing a game, competing against one another in the marketplace of jobs as well as that of retirement strategies. As the United States’ manufacturing base declines, fewer young workers expect old-fashioned, long-term guarantees such as pensions, anyway.12 The rise of the 401(k) and concurrent decline in pensions emerged at a propitious moment in American history, when a strain of “free market” fundamentalism had seeped from the Goldwater and Friedman fringes of the Republican Party into the technolibertarian mainstream. The long boom of the 1990s, and its accompanying corporate focus on lean management and cost cutting, only amplified that trend.13 This confluence of circumstances—the invention of individual, tax-deferred savings instruments, the decline in American manufacturing, the rise of ultrafree-market ideology, the growing power of finance as a PR and lobbying force, and the availability of online trading tools—created a feedback loop in which each element further exaggerates and entrenches the others.


Learn Algorithmic Trading by Sebastien Donadio

active measures, algorithmic trading, automated trading system, backtesting, Bayesian statistics, buy and hold, buy low sell high, cryptocurrency, DevOps, en.wikipedia.org, fixed income, Flash crash, Guido van Rossum, latency arbitrage, locking in a profit, market fundamentalism, market microstructure, martingale, natural language processing, p-value, paper trading, performance metric, prediction markets, quantitative trading / quantitative finance, random walk, risk tolerance, risk-adjusted returns, Sharpe ratio, short selling, sorting algorithm, statistical arbitrage, statistical model, stochastic process, survivorship bias, transaction costs, type inference, WebSocket, zero-sum game

Other Books You May Enjoy If you enjoyed this book, you may be interested in these other books by Packt: Mastering Python for Finance - Second Edition James Ma Weiming ISBN: 9781789346466 Solve linear and nonlinear models representing various financial problems Perform principal component analysis on the DOW index and its components Analyze, predict, and forecast stationary and non-stationary time series processes Create an event-driven backtesting tool and measure your strategies Build a high-frequency algorithmic trading platform with Python Replicate the CBOT VIX index with SPX options for studying VIX-based strategies Perform regression-based and classification-based machine learning tasks for prediction Use TensorFlow and Keras in deep learning neural network architecture Hands-On Machine Learning for Algorithmic Trading Stefan Jansen ISBN: 9781789346411 Implement machine learning techniques to solve investment and trading problems Leverage market, fundamental, and alternative data to research alpha factors Design and fine-tune supervised, unsupervised, and reinforcement learning models Optimize portfolio risk and performance using pandas, NumPy, and scikit-learn Integrate machine learning models into a live trading strategy on Quantopian Evaluate strategies using reliable backtesting methodologies for time series Design and evaluate deep neural networks using Keras, PyTorch, and TensorFlow Work with reinforcement learning for trading strategies in the OpenAI Gym Leave a review - let other readers know what you think Please share your thoughts on this book with others by leaving a review on the site that you bought it from.


pages: 351 words: 96,780

Hegemony or Survival: America's Quest for Global Dominance by Noam Chomsky

anti-communist, Berlin Wall, Bretton Woods, British Empire, capital controls, cuban missile crisis, declining real wages, Doomsday Clock, facts on the ground, failed state, Fall of the Berlin Wall, invisible hand, liberation theology, long peace, market fundamentalism, Monroe Doctrine, Nelson Mandela, RAND corporation, Ronald Reagan, Search for Extraterrestrial Intelligence, uranium enrichment

It is therefore rational to destroy the possibility for decent survival for our grandchildren, if by so doing we can maximize our own “wealth”—which means a particular perception of self-interest constructed by vast industries devoted to implanting and reinforcing it. The threats to survival are currently being enhanced by dedicated efforts not only to weaken the institutional structures that have been developed to mitigate the harsh consequences of market fundamentalism, but also to undermine the culture of sympathy and solidarity that sustains these institutions. All of this is another prescription for disaster, perhaps in the not very distant future. But again, it has a certain rationality within prevailing structures of doctrine and institutions. It would be a great error to conclude that the prospects are uniformly bleak. Far from it. One very promising development is the slow evolution of a human rights culture among the general population, a tendency that accelerated in the 1960s, when popular activism had a notable civilizing effect in many domains, extending significantly in the years that followed.


pages: 337 words: 103,273

The Great Disruption: Why the Climate Crisis Will Bring on the End of Shopping and the Birth of a New World by Paul Gilding

airport security, Albert Einstein, Bob Geldof, BRICs, carbon footprint, clean water, cleantech, Climategate, commoditize, corporate social responsibility, creative destruction, decarbonisation, energy security, Exxon Valdez, failed state, fear of failure, income inequality, Intergovernmental Panel on Climate Change (IPCC), Joseph Schumpeter, market fundamentalism, mass immigration, Naomi Klein, Nelson Mandela, new economy, nuclear winter, oil shock, peak oil, Ponzi scheme, purchasing power parity, Ronald Reagan, shareholder value, The Spirit Level, The Wealth of Nations by Adam Smith, union organizing, University of East Anglia

So growth gives us a high when it’s happening and a nasty crash when it’s not. It’s an addictive cycle that will be hard to kick. Our addiction to growth is a complex phenomenon, one that can’t be blamed on a single economic model or philosophy. It is not the fault of capitalism or Western democracy, and it is not a conspiracy of the global corporate sector or of the rich. It is not a bad idea that emerged in economics, and it is not the result of free market fundamentalism that emerged in the 1980s with globalization. While each of those factors is involved, it is too simple and convenient to blame any of them as the main driver. Growth goes to the core of the society we have built because it is the result of who we are and what we have decided to value. So the fact that it is finished, at least in its current material form and indeed in any form for some decades to come, is going to strike at the heart of modern society.


pages: 364 words: 99,613