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The System Worked: How the World Stopped Another Great Depression Hardcover – 26 Jun 2014


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The System Worked is a smart, thoughtful, and important book that I largely disagree withDrezner has put forward an argument to be reckoned with, and it is more important that the book find an audience among those who disagree with its conclusions. (Jonathan Kirshner, Boston Review)

Drezner offers a thoughtful and contemporary analysis of global governing systems and their underlying politics. (Nancy Cook, National Journal)

About the Author

Daniel W. Drezner is Professor of International Politics at the Fletcher School of Law and Diplomacy at Tufts University, a nonresident senior fellow at the Brookings Institution, and a contributing editor at Foreign Policy. He has previously held positions with Civic Education Project, the RAND Corporation, and the U.S. Department of the Treasury. He is the author of four previous books, most recently Theories of International Politics and Zombies.

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3 of 3 people found the following review helpful
How the world stopped another great depression (2008), or did it? 8 Dec. 2014
By Gderf - Published on Amazon.com
Format: Hardcover
It's a revelation to find a positive take on world governance action in the 2008 recession. This is very informative and well argued, albeit not quit convincing. I take small comfort in the author's faith in the future performance of these institutions. Regarding perceptions, the public doesn't think actions were well designed. Denzer makes a convincing case that TARP was actually a bargain, What he calls interest misses egalitarian motive of cheapening money to spread the wealth. His ideas section is largely the application and misapplication of Keynes' theories.

In comparison to 1929 economic improvement is largely due to what we didn't do.
Drezner's concept of “working” apparently means anything short of the Great Depression. The 2008 downturn is compared to 1939 with three measures: industrial output, global trade flow, and global stock market capitalization. Data shows that each dropped more sharply than in 1929 and recovered more slowly. The book is a well organized discussion as to why mitigation worked better in 2008 than 1939: intersection of material interests, enduring American power, European and Chinese support, and adherence to market friendly ideas.

Drezner's conclusion may still be premature. Remember that the Great Depression deepened in the years after 1933. It wasn't over until the lend lease spending program prior to WWII. Let's hope history doesn't repeat. Now in 2014 the recovery is limited to Wall Street, bypassing middle class Americans. Also, his claim to a unique viewpoint may not be valid. It seems to me that there are as many economists that agree with him as not.

He claims that pessimism is wrong and explains some concepts that are counter intuitive. In (“counter factual reasoning”) TARP was a bargain. Eventually TARP cost “only” about 250 billion. The rest of the $800 billion came back to the Treasury to be spent by the next administration. Drezner thinks that TARP restored faith in the banking system. I think that raising the FDIC insurance level to $250,000 per account had more to do with that. Faith of the public in the FDIC may not be permanent.

The history presentation shows that stagflation starting in the early 1970's. He measures power in terms of: share of global economic output, per capita GDP,
share of global imports, share of global capital markets, share of global exports, plus an aside aside for military power. China comes out ahead on most measures although the US role is still important. National interests generally take presidence over global. He's not so complementary on the QE programs that have devalued our currency and loaded the US with debt with no social advantage. He doesn't say why it continues into the recovery. Many countries, thankful for TARP, expressed anger over QE2.

The ideas section focuses on the rise and fall of Keynesian involved in what he calls an ideological depth of neoliberalism. EU advocating austerity is working in Spain and Italy. He quotes Keynes's biographer, Skidelsky, on the moral failure of debt national governments responsible for egregious errors.

The book is very good on the roles of the G20, WTO, IMF, WB, and BIS. It's more optimistic than most about the performance in the EU. The conclusion may be a bit premature. It is certainly changing, but as long as the US has credit, reserve currency and military power the world still needs American consumerism. Every country, large and small still applies national interests ahead of globalism. The massive ineffectual debt the US has accumulated since 2008 will render the next crisis much harder to manage. It's hard to accommodate the positive attitude in the face of the US resuming its long slow drift towards third world status.
A well-argued thesis. in a somewhat wonky package. 26 Mar. 2015
By MT57 - Published on Amazon.com
Format: Hardcover
This book is reasonably short - under 200 pages, yet it will not be an easy book for the lay reader. It is akin to a political seminar at the graduate level in international economic politics during the period 2007-2012. While iit is not terribly jargon-filled, his analysis is couched in terms of concepts that are apparently standard ways of teaching and talking about political science in the academy = interest analysis; the role of power; etc. The words "paradigm" and "hegemon" come up a lot. Each chapter has at least 100 footnotes.

Really, it is a brief, reasonably well argued, for the proposition stated in the title: "The System Worked", meaning that the governments of the major economic powers (US, EU and China), their central banks (really just the Fed) and the principal multilateral economic organizations - IMF,e.g., and , forums-- G20, Basel, etc. -- managed to work together over this period well enough to stop the financial crisis of 2007-09 from metastasizing into another Great Depression globally. There really is no "system" in any designed sense; the term overstates what was on hand. And "worked", as one of the other reviewers astutely notes, really means "avoided global disaster" (not a small achievement). But one needs a pithy attention-grabbing title, I understand. Principally, they adhered to open economies and avoided protectionism; China and the US provided enough Keynesian stimulus; and they all bailed out their financial sectors to keep money and credit moving decently enough. He does not claim great heights were scaled; rather, the response was "good enough", there was no plausible alternative that offered anywhere near the same results; and "the perfect is the enemy of the good".

The author definitely deserves to be applauded for taking the trouble to document his unconventional thesis, it being much easier, as he notes, to find things that went wrong (without ever rigorously proving a particular counter-factual would have gone better). And the size of the book is also user-friendly. It is however all exposition and recitation of facts and quotes, with little narrative that many readers may prefer.
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Of the reviews that precede mine, the one by Gderf is fairly accurate, as long as you separate out his own views from his description of the author's argument (that part is accurate).
2 of 5 people found the following review helpful
good ideas, poor execution 16 Oct. 2014
By David Wilder - Published on Amazon.com
Format: Kindle Edition Verified Purchase
Well researched, but clumsily written. It could have used some pruning. We know the author's thesis from the opening. It doesn't need re-iteration throughout.
2 of 9 people found the following review helpful
Smart, insightful 14 Oct. 2014
By welcome back - Published on Amazon.com
Format: Hardcover
Great book. Deserves a wide audience.
6 of 19 people found the following review helpful
Standard boilerplate 'governments saved us all from crazy markets' mantra 3 Dec. 2014
By Luca Celati - Published on Amazon.com
Format: Hardcover
Given the author's background, it is hardly surprising to see praise for the central planning efforts of central bankers, governments and supranational institutions. Sadly, two key points are omitted:

1) The "System" that has supposedly worked not only this time but arguably for the last 15 years is to "cure" a bust by engineering an even larger financial bubble. The Fed has been the longa manus to implement this policy. Epiosed worth recalling are the easy money strategy to offset the New Economy Bust in 2000-2002, the following real estate bubble and the subsequent ZIRP and TARP policies following the subprime bust in 2007. At present, another bubble of unprecedented size has been created in sovereign bond markets all the world over, with key central banks filling their balance sheets with assets of at least questionable quality. No one knows what will happen when the next bust comes. The "solution" has been - for a change - to try to buy time and postpone the inevitable adjustment process, ideally after the current generation of policymakers has concluded their term in office and has recycled in cozy, safe jobs in university or think tanks.
2) For all the markets'shortcomings, governments and regulators are at least equally responsible for engineering this awkward state of things. Lax regulation - courtesy of the powerful wall street and banking lobbies has been a major culprit. To date, cutting off small enterprises from bank funding has been the key outcome of the Basel III "solution", hardly a desirable ingredient for healthy economic growth.

Last, since neo-keynesian style thinking is the rage at present, it would be helpful if somebody reminded readers of the poor track record of government intervention. No such reminder appears in the book. The Great Depression of the 1930s was not "solved" by the much advertised New Deal of the Roosevelt Administration but, rather, by WW2.
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