No one can say they weren’t warned. A decade ago, newly sacked from his job as chief economist at the World Bank, Joseph Stiglitz laid bare. An incisive look at the global economic crisis, our flawed response, and the implications for the world’s future Great Recession. In this forthright and incisive book, Nobel Laureate Joseph E. Stiglitz explains how America exported bad economics, bad policies, and bad behavior to the rest .
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Stiglitzfirst published in by W. While focusing on the roots of the financial crisis of and the subsequent global economic slowdownwhich he claims to find mainly in fiscal policy as conducted during the Bush presidency and decisions made by the Federal ReserveStiglitz also talks about the failure to cope with the recession during the months succeeding the Wall Street Crash of Finally, xtiglitz sketches various schemes as to the possible future of the American economyvigorously proposing a profound policy shift.
In compliance with Stiglitz’s general attitude towards economic policyFreefall contains “proposals to tame the banking sector and to foster joselh more humanistic style of capitalism in the United States and abroad.
The title of the book points at the sharp decline in stock prices following the bankruptcy of the investment bank Lehman Brothers in September, Meanwhile, its subtitle reveals Stiglitz’s conviction that free markets are at the bottom of the crisis, as he makes deregulation responsible for the rise of the shadow banking systemover- leveraged banks and subprime mortgages.
Accordingly, in Freefall Stiglitz criticizes advocates of deregulation and free markets, most notoriously Larry Summers  and Ben Bernanke. The book which is “rife with Still others look ahead and serve the purpose of explaining Stiglitz’s proposal for “a reassessment of the sort of economy in which financiers enriched themselves by selling over-priced and risky products to some of the most vulnerable citizens in America.
Stiglitz grants a large share of the blame for the Great Recession to George W. Bush and his far-reaching tax cuts for wealthy Americans. He also attacks Bush’s successor Barack Obama for practically continuing with that fiscal policy.
Moreover, he mentions the danger of economic interconnectedness and globalizationstating that by “purchasing enormous amounts of U.
Freefall: Free Markets and the Sinking of the Global Economy by Joseph Stiglitz
Common thread of Freefall is Stiglitz’s conviction that deregulation and the subsequent lack of transparency in the financial sector are responsible for the severity of the Great Recession. He consequently jsoeph regulation a requirement for solid recovery and expressed concern regarding economic policy as performed during Barack Obama’s first months as president in an interview with The New York Times:.
Thus Freefall also promotes to undo the repeal of the regulative Glass-Steagall Actwith Stiglitz depicting stigligz as necessary in order to eradicate the contamination of the banking sector:. A central theme of Freefall is the notion of incentives and the distorted incentive structures that allowed the financial crisis to happen.
In the first chapter, Stiglitz mentions that on one hand: With the securitization process, banks had incentives to stkglitz as much bad mortgages as possible.
Freefall: America, Free Markets, and the Sinking of the World Economy
Those bad mortgages were “repackaged and. An other key element in this system was the credit rating agencies. In fact, “to buy the [bad mortgages], managers of pension funds had to be sure Thus, “like everyone else in the sector, [rating agencies’s] incentives were distorted.
They were being paid by the banks that originated the securities they were asked to rate”. Freefall was generally well received by critics, although some expressed doubts as to the feasibility of Stiglitz’s proposals for change.
Freefall: America, Free Markets, and the Sinking of the World Economy – Wikipedia
The New York Timesfor instance, stated that the contents of Freefall “may all be worthy ideas. But [that] at times, Mr. In a review run by The Observereconomist Will Hutton expressed more optimism, claiming that “[i]t requires bravery to take on the vested interests — along with good ideas and a strong sense of the right trajectory.
At present we have too little of any of them. Stiglitz’s book successfully redresses the balance. It is very welcome — and important.
The New Statesman rather focused on shortcomings of Freefall: But his own economics seem shorn of a social and political dimension: Wright Freecallif you are a critic of the capitalist system you must have some explanation of why it goes on producing power elites who stand in the way of attempts to control it. This is the crucial element missing from Stiglitz’s analytical framework.
The French economist Guy Sormanauthor of the libertarian book Economics Does Not Lieshowed himself sceptical josfph Freefallstating that its author “feels compelled to remind the reader that he is not a socialist: His utopia would replace the failed market fundamentalism by striking the right balance between market and state.
His opinions on everything else are just opinions and deserve to be treated as such. The Economist juxtaposed Freefall in opposition to 13 Bankersa slightly later published book with similar contents by Simon Johnson and James Kwak.
Neither of the books was given a positive assessment, with Freefall being criticized for argumentative inconsistency: That dissonance is a glaring weakness stjglitz Mr Stiglitz’s book.
From Wikipedia, the free encyclopedia. This section needs expansion with: Stiglitz frwefall of economic theory Chapter 9. You can help by adding to it.
The New York Times. Joseph Stiglitz on deregulation’s ongoing threat to the economy Seattle Times Newspaper”. Why we have to change capitalism”.
Free Markets and the Sinking of the Global Economy”. Sorman on Stiglitz’s Work of Fiction”.