The monograph under review is one of many attempts to demystify the recent crisis. The author offers an explanation of the incipient causes of the financial crisis and outlines the sequence of events that flicked the first domino so to speak. The stated purpose of the book is to generate an informed ‘working class’ opinion on the crisis, the response of the US government and other national governments. The series, edited by Pratyush Chandra, Pothik Ghosh, Ravi Kumar and Saswat Pattnaik, claims to be a collection of voices with a special focus on South Asia. Nor for that matter does the author mention the other crises that have afflicted many countries in the region since the Great Depression. In fact the author limits his entire analysis strictly to the US financial market. One can’t help but wonder if it is possible to understand this crisis while blind patching the global economy.
Would theworking class in the rest of the world not want to know why they got caught in this imbroglio before they could form an opinion? Also, since the author urges the readers to throw their weight behind fiscal measures taken by governments in the region it would have helped to have an analysis of the acts of commission and omission of government bodies in past crises.
The book sorts out the causes of the present crisis into the short term, medium term and long term. The book uses facts and figures judiciously to support the arguments, not bombarding the reader but bolstering his claims all the same. However, the chapter outlining the medium term causes has some discrepancies. For example it fails to establish why the sub prime mortgage crisis took place when it did. The author seems to be pointing a finger at securitization without acknowledging that it had in fact been around since 1970. Why then did it lead to the asset price bubble, what the author calls ‘The Minsky Moment’, in the early years of the 21st century?
The long run story which is the main offering of the essay to both the series and the reader is somewhat hazy and incomplete. First of all the author defines the victims and the oppressors in his story at the outset but does not explain this power imbalance or how it came to be which detracts from the construction of his argument. The book constructs a class struggle based explanation for the crisis but uses the New Keynesian framework toforward the author’s theory about the long run causes of the crisis as well as his espousal of ‘aggressive fiscal intervention’ by governments. There are some irreconcilable differences between the two approaches. It is for example unclear how it came to pass that all the regulatory systems put into place after the Great Depression were furtively dismantled or why the ‘working class’ did not adjust their consumption expenditure to match their stagnant wages or what incentives the system offered to them to participate in the speculative build up in real estate. Another really surprising feature of the long run story is the conspicuous absence of the major check posts in the history of the dismantling of the regulatory framework of the US financial markets. There isn’t so much as a mention of the Glass-Steagall Act 1933 or its repeal in 1999.
All in all, the book has many loose ends. For my part I’m wondering whether I missed the link between the author’s support of aggressive intervention by the government to revive the economy and implicating the same government for playing into the hands of the major lobbies which created the financial environment that acted as breeding ground for this crisis.