BOOK REVIEW - May 2011
M. Atilla Öner,
A review of "After Shocks - Economic Crisis and Institutional Choice", A. Hemerijck, B. Knapen, E. van Doorne (eds.), Amsterdam University Press, Amsterdam, 2009.
This book was published at a time when the severest economic crisis since the Great Depression was still underway. It has 5 parts, 24 chapters, an introduction and an epilogue; its aim is to explore the institutional impact, dimensions, and consequences of the global economic crisis of 2007. It is the result of a series of interviews held from May to September 2009 with various academics and experts across geographic (i.e., USA and EU), occupational, and disciplinary boundaries.
In the words of its editors, it ...is the result of their intellectual engagement, insightful ideas, comments, and constructive criticism offered thoughout the entire process. They were willing to look beyond their primary interests and sub-disciplines, to reflect on the causes, conditions, and consequences of the crisis, taking a dive into the unknown.
The "Introduction" chapter written by one of the editors is the most useful one from an academic perspective because of the long list of relevant references.
Careful reading of the text reveals components of dominant ideology in the world. The authors seem to criticise capitalism, but actually do support it. None of them asks the question "Where is the money?". Where did all the money go? None of them proposes any significant solution other than irrelevant, ambigious, non-operationalizeable ideas. Some of them go as far as suggesting to reform the academic discipline of economics, although the economics literature is full with papers discussing the dynamics of crises.
All interested parties accept the fact (do not want to question it!) that the financial industry is prone to excesses. The financial industry in USA accounted for 40 % of the country's corporate profits in 2007, up from 10 % in the early 1980s. When someone attempts to interfere with the process, several opinion leaders come to the forefront claiming that the system is hardwired to run into trouble at regular intervals, so don't touch it (e.g., Black Monday, 1987; junk bond crisis, 1989 - 1990; Mexico, 1994-1995; Asia, Russia, the blow-up of Long-Term Capital Management in USA, 1997-1999; the bursting of the leveraged buy-out bubble in the early 1990s, the Nordic banking crisis and the Japanese experience in the same decade; Dotcom, Enron, 2000 - 2001; etc.).
Everybody pays lip service to preventing crises from happening, although, one would guess, they should know that financial companies are particularly susceptible to failures of governance because they are opaque and because their business is to take risks.
Careful reader of the relevant press would notice that the ideas of the authors are ideas widely discussed in the press. Nothing new. But, don't take my word for it. Read it yourself and decide...