The Road from Ruin: How to Revive Capitalism and Put America Back on Top

by Matthew Bishop, Michael Green

We Have a World-Class Mess . . . Now What?
 
 Amid the carnage of bankruptcies, soaring unemployment, and millions of families losing their homes during the financial crisis of 2007–2009 lay the bloody corpse of a set of ideas that had underpinned the economics of the previous thirty years. A system that had been delivering unprecedented prosperity on a global scale suddenly teetered on the verge of collapse. Capitalism was seemingly exposed as a house of cards. The blame game became a new national pastime as doomsayers predicted the end of America’s leadership of the world economy .
 
We’re at a crossroads, and decisions about how to reshape a discredited capitalism will profoundly affect whether the coming years will be ones of depression, stagnation, or renewed prosperity.

Instant analysis since the collapse of the financial system in the fall of 2008 has produced no end of ideas about what to do—ranging from those of free market ideologues (let the market do its work and damn the consequences) to extreme government interventionists determined to keep the animal spirits of capitalism penned up.

But if there is anything worse than toxic financial assets it is toxic ideas. We need to reject the old orthodoxies and conventional wisdoms. Matthew Bishop and Michael Green take a step back and analyze what can be learned from financial crises of the past—from the Tulip Craze of the seventeenth century through the Great Depression of the 1930s, Japan’s Great Deflation, and the Long-Term Capital debacle of the 1990s to the unprecedented interventions of the government during the past year—to set the agenda for a reformed twenty-first-century capitalism. The result is an enlightening perspective on what set us on the road to ruin, as well as road signs to guide us back to prosperity.
 
--Why bubbles are the consequence of financial innovations that generate economic breakthroughs, but why it would be wrong to abandon these inventions of the financial engineers. The Road from Ruin explains how stifling innovation and risk-taking comes at a huge cost to future prosperity.

--Why the economy needed a fiscal stimulus to recover from the crisis. Bishop and Green show how economic dogmatists of the Right, who opposed the stimulus, got it wrong, but warn that those on the Left who want the stimulus to run and run could usher in a new era of high inflation.

--Why company bosses became too focused on short-term results and did not see the crisis coming. The Road from Ruin shows how we can get business leaders to put the interests of society ahead of their own pay-packets.

--The danger of focusing on the financial symptoms of the crisis without tackling the underlying economic causes, such as the world operating on the dollar standard. Bishop and Green show why the role of the dollar as the world’s reserve currency is not just a problem for the rest of the world but for the United States as well.

--Why many of capitalism’s champions—especially the advocates of the efficient market hypothesis—lost touch with reality. The Road from Ruin provides insights into new ideas in economics that recognize how the complexity and irrationality of the human beings who make up the economy can be harnessed to build a better capitalism.
 
Remarkably, the issues we face today have presented themselves in one form or another over the past three centuries. Matthew Bishop and Michael Green skillfully draw both the lessons learned and prescriptions for reform to prevent another catastrophic meltdown and put America back on top.

Genres: Economics, Nonfiction

384 pages, Hardcover

First published January 1, 2010

About the author

MATTHEW BISHOP is the US Business Editor and New York Bureau Chief of The Economist, and the co-author, with Michael Green, of several acclaimed books, including "Philanthrocapitalism: How Giving Can Save the World" and "The Road From Ruin". His first e-book, again written with Mr Green, is "In Gold We Trust? The Future of Money in an Age of Uncertainty", which will be published by Amazon and The Economist in March 2012.

"The Road from Ruin" set out a bold agenda for improving capitalism following the crash of 2008 and subsequent economic downturn. It was described as "provocative and refreshing" by the New York Times. According to Professor Robert Shiller of Yale, "The Road from Ruin" will be "remembered as a serious, highly readable book of the broadest intellectual scope. Its insights will help all of us reshape the future and enable both citizen and policy maker alike to separate real reform from the grandstanding bluster so prevalent today."

"Philanthrocapitalism: How Giving Can Save the World" described the new movement that brings together the business and social sectors to solve some of the world's most pressing problems. With lots of original interviews with the leaders of this movement, including Bill Gates, George Soros, Pierre Omidyar, Bono and Angelina Jolie, "Philanthrocapitalism" has been described as "terrific" by The New York Times columnist Nicholas Kristof and as "the definitive guide to a new generation of philanthropists who understand innovation and risk-taking, and who will play a crucial part in solving the biggest problems facing the world," by New York's Mayor and leading philanthropist Michael Bloomberg. According to former U.S President Bill Clinton, "This is an important book. Our interdependent world is too unequal, unstable, and, because of climate change, unsustainable. We have to transform it into one of shared responsibilities, shared opportunities, and a shared sense of community. Bishop and Green show us how to do it."

"In Gold We Trust? The Future of Money in an Age of Uncertainty" is a lively look at the history and future of money, taking in the rise, fall and rise of gold, the crisis of the Euro, the seeming inability of America's politicians to tackle the country's ballooning deficit, the rising risk of inflation, the contrasting ideas about money of famous economists such as Keynes and Hayek, and the attempt by some of the world's leading innovators to invent the best ever technology of money using algorithms and sophisticated online games.

Mr Bishop is also the author of "Essential Economics", the official Economist guide to economics. He has also written several of The Economist's special report supplements, including most recently The Great Mismatch, about the future of jobs; A Bigger World, which examines the opportunities and challenges of the rise of emerging economies and firms; The Business of Giving, which looks at the industrial revolution taking place in philanthropy; Kings of Capitalism, which anticipated and analyzed the boom in private equity; and Capitalism and its Troubles, an examination of the impact of problems such as the collapse of Enron.

A regular participant in events such as the World Economic Forum and the Clinton Global Initiative, Mr Bishop is in demand around the world as a speaker, and has a growing following on Twitter, where he tweets as @mattbish

Reviews

[Robert LoCicero · Rating 4 out of 5]

A masterful analysis of the recent global economic crisis which continues in a less intensive manner at the present time. The authors present historical economic events in an easy to understand prose which is both entertaining and highly informative. Economic principles in finance, currency, trade and monetary techniques are fully explored and broken down for the reader as to how they interacted and developed in this current crisis. The authors present interesting vignettes concerning famous economists, swindlers and power brokers around the world. They tie everything together in readable chapters forming their arguments for a rational approach to prevent future crises from reaching the height most recently seen and from ever reaching the disaster that was the Great Depression of the 1930's. Some will say that their ideas of reform and needed institutional and consumer change are utopian and unattainable. They would argue that to avoid future calamity we MUST institute these reforms. How fitting that after the United States government has tried some of the reform ideas pushed by these authors and took a Keynesian view of pumping cash into the system to avert a depression, many political and some economic theorists are reawakening the previously underplayed economic theory that government intervention is the problem. That the Wall Street Journal recently wrote of an economist at George Mason University who is pushing for the revival of the so-called Austrian School of Economics, it is surely necessary for more of the American citzenry to educate themselves in the subject of economics. More knowledge will lead to better decision-making in this highly charged political environment. This enjoyable and instructive work will help to educate us in this mysterious, soft science called economics. We live it everyday and we must master our part in its operations.

[Syed Ashrafulla · Rating 1 out of 5]

This book is almost a walking contradiction. Every position put forth is a change on everyone who is not a banker, while every example in the book is about a change in banking that resulted in social, environmental and financial long-term gain. While I understand that I may be biased by my political beliefs, I do not consider those to be the cause of my disdain for the authors of this book. They want citizens to know what options are, governments to have omniscient knowledge of private affairs, and every economy to be subservient to the financial economy. For the bankers? Nothing. Let the geniuses do their work, let them make the mistakes. In bankers we trust, right?

I don't understand how they thought this book would convince anyone of their policy recommendations. The recommendations are essentially to turn everyone into a financial person, which is realistically stupid. I wouldn't read this book; just read a few articles from pro-banking lobbyists, you'll get the same information in less time.

[Catherine · Rating 5 out of 5]

A history of bubbles, depressions, economic philosophy, the morality of capitalism, and everything anybody is wondering about right now in terms of the economy and how to recover from it. I can't say how helpful this book was in understanding our current economic debacle. I'm very impressed with this guy. Very worth reading.

[Arithmomaniac · Rating 2 out of 5]

A comprehensive, if simple, book, It reads too much like an article from the economist - regulars won't find much new here.