Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present by Jeff Madrick (New York: Knopf, 2011. 480 pp) Jeff Madrick is a regular contributor to The New York Review of Books, and former economics columnist for The New York Times. He is an adjunct professor of humanities at The Cooper Union, and senior fellow at the Roosevelt Institute and at the Schwartz Center for Economic Policy Analysis, The New School. He lives in New York City.
The Meltdown
In any situation, time, or place, an individual’s story is of utmost importance. On person can change the lives of a family, a community, and a country. We can learn more about ourselves and our present conditions when we hear these stories. Jeff Madrick's work, The Age of Greed, compiles the stories of a few influential individuals to explain our current economic crisis.
In this book, Jeff Madrick provides an educational view of how America has transformed from a prosperous nation to a democracy overwhelmed with the pursuit of monetary gain. Madrick argues that the current diminished state of America’s economy resides in the American individual’s primary goal of monetary prosperity.
Madrick argues that increasing self-interest gave rise to the highly unregulated financial system that produced the meltdown of 2008. Unlike current financial analysts who try to point fingers at Bush or Clinton (or a number of other scapegoats as the South Park clip below illustrates), Madrick traces the financial meltdown all the way back to the 1960s, and even to businesses today– a position I rather enjoyed. Instead of pointing fingers without thinking about it, Madrick traces the problem back to where it began.
Since The Age of Greed is quite expansive, it is difficult to give a full synopsis. However, in an attempt to share what I loved about this book, I will summarize a few of these personal stories.
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| Photo by Liz West |
First, I particularly appreciated tracing the root of our financial system to the ideologies of Milton Friedman. When Milton Friedman began teaching his economic theory in the Chicago School of Economics at the University of Chicago, a shift soon occurred in business to a new profit maximization viewpoint that Madrick argues was the beginning of the rise of the age of greed.
As this quote suggests, Friedman pushed a hardline capitalist agenda. He believed that allowing people to purse their creative interests without interference was key to economic stability. I’m not entirely convinced that this philosophy was his prime motive, and Madrick would agree. He states,“To Friedman, any views that promoted government spending as a way to stabilize economies and promote prosperity were not merely wrongheaded but seen as pandering to the majority by promising more social programs. Moreover, government itself had its own greedy expansionist motives he believed. ‘Ever since the New Deal,’ as Friedman put it, ‘a primary excuse for the expansion of government activity at the federal level has been supposed necessity for government spending to eliminate unemployment’” (39).
“I can only attribute so biased and simplistic a notion in an intelligent man to a strong emotional desire to service his main point: to minimize government” (51).With a sense of adventure, America desired to perform this task. But, they missed the point; instead of minimizing government to stabilize the economy via capitalism as Friedman suggested, American citizens acted selfishly to obtain more money for themselves. Oops.
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| Photo by Andres Ubierna |
Jack Welch and GE
Second, society in the 1980s complained that American business was sagging while Japanese business continued to rise due to low wages. So, GE’s CEO Jack Welch decided America’s problem was that,
“Japanese companies focused on quality and long-term grown while American business had focused for too long on maximizing the quantity of goods sold to reduce costs per unit” (180).In the 1980s, the American population revolted against the quality of American craftsmanship, which was poor due to reduced production costs that raised a company’s net income. Big business was no longer entrepreneurial, and it possessed a newfound desire to
“break down old formulas and past traditions, subverting the discipline of pyramidal bureaucracies, and resurrecting an egalitarian respect between workers and their bosses. Fully valuing workers would lead to higher quality, lower production costs, and more innovative products” (181).But, this shift never occurred; the steady increase of managerial pay as well as the lack of respect for the worker led to an increased gap between management and laborer. The age of greed, which began with Milton Friedman, actualized.
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| Photo by DonkeyHotey |
The Path that Led to Reagan
The US emerged from the Great Depression with a very tightly regulated financial system, and for a while people liked it that way. However, by the 1970s people grew tired of this boring and safe financial system. By highlighting personal profiles like Jack Welch and Milton Friedman, Madrick recounts the economic turmoil out of which financial overreaching became the norm.
Madrick then argues that at the time Reagan became president, the government had become the principal obstacle to an individual’s personal fulfillment. Reagan states,
“‘I want to help get us back to those fiercely independent Americans...those people who can do great deeds, and I’ve seen them robbed of their independence...because of these great social reforms’” (124).
Following Reagan (and I am skipping a large portion of the book here) a series of crises occurred including an enormous bank-led crisis and the savings and loan crisis after which the boring Depression-era regulation was gone, and the financial gloves were off, so to speak. The anything-goes financial world created two “bubbles” of which we all know and discuss: the technology bubble, and the recent housing bubble.
Vignettes
By looking at these personal vignettes, we see some familiar ground: the career of Alan Greenspan, Lehman Brothers, Merrill Lynch, Citibank, and many more. Through these vignettes, Madrick traces what led to the Great Recession. While I find his thesis somewhat unproven, I can see his point of view. He offers some intriguing secondary sources, and convincing rhetoric to prove his point. If Age of Greed wasn’t so dry, I think it would have been an absolutely enthralling read.
Verdict: 3 out of 5
Posted By: Andrew Jacobson
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I have to admit to not knowing much about economics, especially US economics (I'm from the UK). I do agree with the points about everything becoming about the search for monetary gain though.
ReplyDeleteSam, thanks for the comment! I think it's part of the human condition to seek personal monetary gain, and the US is especially guilty of this. I wonder how different you feel it is there in the UK?
ReplyDelete