Lanchester does as good a job as any of navigating the financial crisis, and does so without the rather self-aggrandising style of Naseem Taleb. While it's a bit difficult to know who Lanchester's target audience is, I think I might fit into it, having a basic grasp of economics and some tolerance of the rather abstract ideas (derivatives, bonds markets, ratings, etc.) that have to be explained.
Nobody involved in the deeply shameful events covered by this book (save a few fellow journalists and passing whistle-blowers) emerges looking good. Most, like Nick Fuld and Fred Goodwin, end up looking downright evil. And readers should not escape the conclusion that Ayn Rand stands as one of the most evil figures of all, if not one of the most evil of the entire 20th century - being as she is the patron saint of the cult of laissez faire capitalism that Lanchester demonstrates so unequivocally lay behind the whole disaster. So there is perhaps some schadenfreude to be had in his observation that the almost total deregulation of the financial sector has produced banks and other institutions that are "too big to fail". The result of this being that we now have "a 100 percent pure form of socialism for the rich". Lanchester leaves this most towering of ironies for the reader (and any unreconstructed fans of Rand) to ponder when considering the future of finance. As for Rand's good friend and protégé Alan Greenspan, this book leaves you earnestly hoping he is not left to tend so much as a whelk stall.
But after Rand, Greenspan et.al., the list of the complicit trails off into the distance. And in this Lanchester leaves some unanswered questions. Why, for instance, is there a free market in ratings agencies? Their particular (and of course unpunished) venality is perhaps the single largest catalyst of the crisis, but Lanchester never elucidates this beyond a mention of a SEC review of the way they worked in the 1970's.
However, a far bigger problem with the book is that Lanchester (in common with all other writers on the subject, it has to be said), does a poor job of explaining in layman's terms just why the financial industry is so important in modern economics. Why should it visit upon so many people such immense hardship in the event of it malfunctioning? We can understand why coal, shipping or motor manufacturing is important, so when those industries collapse, the social consequences are that much easier to understand. But why do banks have to exist? Lanchester says they should merely be "money making machines" - like shoe factories? Like bus companies? Why too is the shadow banking industry so critical to preserve? What would have happened to us all had the derivatives markets, the stocks and bonds markets, the mortgage lenders, hedge funds and myriad other largely unknowable and (even to themselves) unknown industries simply been allowed to go the way of, say, British shipbuilding or Detroit motors?
Perhaps this is just too hard to explain. But it's worth asking because Lanchester uses some of the consequences of the crash to illustrate the enormity of it all - yet declines to follow through with anything that really satisfies as to *why* it had to be like that. So we have to take it on faith that the "abyss" (which Lanchester and others so like to say we were staring at were it not have been for the efforts of governments to spend all our money stopping us falling over the edge) would have been A Very Bad Place.
A comprehensive review of the credit crunch and the systematic removal of any effective regulation of the financial industry should also include some examination of the rise of political lobbying, "revolving doors" and the open corruption on display in the US Congress in particular. All of which is still on the rise and in parallel with the events dealt with in the book. Lanchester skates over this a bit too lightly.
Similarly, he comes up rather empty handed in his ending remarks about people learning to know when they have "enough". He seems to forget that 99% of everyone in the world has almost nothing. We are not all in this together, by any means.
However, unlike Taleb, who tends to get carried away with largely useless classical or quasi-psychological allusions in dealing with the wider human context of the crisis, Lanchester provides some good historical background to the creation of what he identifies as the "climate" that eventually allowed it all to happen. While others mention Thatcher and the Big Bang, he also identifies the fall of Communism as one of the crucial factors in how Western economics lost its moral compass (His example of the rehabilitation of torture under the Bush administration is a good one). In this it appears unclear whether he would also see the credit crunch as the beginnings of something which has even greater consequence, but you get the impression he might.
I knew something of the crisis before I started the book, and now feel more solidly informed. I only wish I knew what to do about that because it's all still a lot of sound and fury without any real understanding underneath. Perhaps I'll vote for the Pirate Party in the next election, just as they are in Iceland.
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