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Crashed: How a Decade of Financial Crises Changed the World by Adam Tooze, Viking, US $35, Pp 720, August 2018, ISBN 978-0670024933

In September 2008, as President George Bush described the financial crisis as an incident local to the Wall Street, it had already turned into an economic caesura of world significance. The global money markets were seized up. The Fed Reserve Board in Washington DC started the day on September 16 with urgent plans to sluice billions of dollars into the world’s central banks. In Crashed, Adam Tooze shows that a shock wave was rippling outward. Within weeks its impact would be felt on factory floors and in dockyards, financial markets and commodity exchanges around the world. Meanwhile, in Midtown Manhattan, September 16, 2008, was the opening day of the sixty-third meeting of the UN General Assembly where the speakers raised the question of global governance and America’s role in it. Columbia University Professor Adam Tooze is the author of Wages of Destruction and winner of the Wolfson and Longman Longman History Today Prize.

Tooze argues that the financial crisis of 2008 appeared as one more sign of America’s fading dominance and that perspective is all too easily confirmed, when we return to the crisis from a distance of a decade, in the wake of the election of Donald Trump as president. In 2008, it was very tempting to view the crisis as basically an American event because that is where it had begun. It also pleased people around the world to imagine that the hyperpower was getting its comeuppance. The fact that the City of London was imploding too at that time added to the deliciousness of the moment. It was convenient for the Europeans to shift responsibility across the channel and then across the Atlantic. Economists inside and outside America were critical of the Bush Administration. Their arguments revolved around America’s twin deficits — its budget deficit and its trade deficit — and their implications for America’s dependence on foreign borrowing. The debts run up by the Bush Administration were the bomb that was expected to go off.

The idea of 2008 as a distinctively Anglo — American crisis received a backhanded confirmation eighteen months later when Europe experienced its own crisis, which appeared to follow a rather different script, centered on the politics and the constitution of the Eurozone. Thus the historical narrative seemed to neatly arrange itself with a European crisis following an American crisis, each with its own distinct economic and political logic. Tooze argues that to view the 2008 crisis and its aftermath chiefly through its impact on America is to fundamentally misunderstand and underestimate its economic and historical significance.

In 2015-16, the world economy dodged a third installment of the global crisis. Tooze argues that the emerging market recessions remained confined to individual economies — Russia, Brazil, South Africa — and particular commodities — notably oil. The downturn did not become generalized. It did not spread to the advanced economies. The slow recovery of the Eurozone, Britain and the United States continued. Too easily forgotten, this fact should frame our understanding of the extraordinary political and geopolitical turmoil of the years since 2013. Though the crisis was avoided in 2015-2016, the stakes were going up. If we go back to the period before 2008, a “China-crisis” had seemed in the cards then. But what worried observers was the possibility of a mass sell-off of dollar-denominated assets by China’s reserve managers.

As the storm clouds gathered, holding China in place was the first priority of Paulson’s Treasury. Tooze argues that Paulson was willing to pay a high political price for doing so. Nationalizing Fannie Mae and Freddie Mac helped to prevent a simultaneous Atlantic and Chinese crisis with consequences too awful to contemplate. But Paulson’s financial diplomacy also highlights the fact that in 2008, managing Sino-American financial relations was still very much a matter of inter-governmental relations. By contrast, in 2015-2016 not only were the risks on the Chinese side but people moving the money were private businesses and investors. In less than ten years, Chinese commercial and financial integration had come a staggeringly long way. Tooze examines the struggle to contain the crisis in three interlocking zones of deep private financial integration: the transatlantic dollar-based financial system, the Eurozone, and the post-Soviet sphere of Eastern Europe.

Crashed is a necessary addition to the debate on the genesis of the 2008 economic crisis and the factors that produced the crisis. Crashed provides fresh perspectives on 2008 and other global economic crises. Adam Tooze is one of the few economists who have argued that the 2008 economic crisis was global in its nature. Crashed is virtually an epic economic history of the modern globalized world. Brexit, Eurozone, Crimea, Ukraine, China and Trump, Adam Tooze has covered all of them, showing the links between them. It is a must-read to understand the modern global economic system.

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