We recently named Andrew Ross Sorkin’s Too Big Too Fail the best business book of 2009. It is an engrossing narrative account of the lead up to, and actors involved in, the creation and handling of the recent economic upheaval. It is a great work of journalistic reportage, and an important documentation of the events. Joseph E. Stiglitz has now weighed in on the crisis, which he and many others are calling the Great Recession, from another perspective—an economist’s—in his new book, Freefall.
There are a lot of strong opinions in Freefall, and though you may not agree with all of them, Stiglitz’s sober and concise evaluation of the forces that brought upon the Great Recession and the current situation is hard to argue with. It is also hard to stomach at times, as you come to realize how unnecessary the crisis was. Not only was it a decidedly man-made disaster, many educated and experienced persons—including the author—foresaw and warned against its likelihood for years before it hit. It was not something that “just happened.”
There are bad outcomes that are the fault of no single individual. But this crisis was the result of actions, decisions, and argument by those in the financial sector. The system that failed us so miserably didn’t just happen. It was created. Indeed, many worked hard—and spent good money—to ensure it took the shape that it did.
Working in government and as the chief economist at the World Bank, Stiglitz saw that system take shape and uses much of the book to explain how it came to be, how it fell and the response to its failure in great detail. It is not only about addressing the past and what went wrong, though; it is about finding a way forward. As Stiglitz writes:
It is said that a near-death experience forces one to reevaluate priorities and values. The global economy has just had a near-death experience.
He later sums up:
We have seen the danger. The question is … Will we seize the opportunity to create a new financial system that will create meaningful jobs, decent work for all those that want it … in which each individual is able to fulfill his aspirations and live up to his potential? … These are the opportunities. The real danger now is that we will not seize them.
Freefall is a great addition to a building canon of work on the Great Recession that will surely be studied by economists and historians for a long time to come. We can only hope that the contemporary leadership on Wall Street and Capitol Hill takes notice of these great books as well.
