This past Friday I saw The Other Guys, the new Will Ferrell-Mark Whalberg buddy comedy. I really enjoyed it for what it was - a light-hearted send-up of the buddy cop genre. What bugged me was that the closing credits were accompanied by a bunch of "shocking" financial statistics: the growing gap between CEO pay and employee pay; the size of Bernie Madoff's ponzi scheme; the amount of TARP money that went to AIG. Fine statistics all of these, but like any numbers, they require context - none of which was provided in the closing credits. In fact, it seemed like something of a non sequitor (despite the rather loose connection to a plot point of the film).
Across town, people from all over the country were gathering to hear Glenn Beck and Sarah Palin preach one form of populist economics, certain that our nation is sliding down a path towards dirigisme or worse.
The truth is, the economy has been bad for a couple of years, and it remains in pretty fragile shape. As for whose fault that is? To quote every lawyer in history: "It's complicated."
Thankfully, Raghuram Rajan provides a grown up and serious perspective on the causes of and solutions to the present economic crisis. His latest book, Fault Lines, explores what led up to the recent economic meltdown, and identifies hard decisions that will have to be made if we're going to get through it intact.
The central theme of the book is that big economic shifts such as we saw around 2007 are much bigger than any hedge fund manager banging the close or any disaffected worker exploiting unemployment insurance. The tectonic plates of the global economy shift when the entire system gets too imbalanced - when certain nations become too reliant on domestic consumerism or exports to fuel economic growth, or when social welfare programs are misaligned with the domestic economies that they're meant to support.
These imbalances and misalignments can be corrected through a series of modest policy changes, stabilizing the economy and preparing us for the next phase of growth in the world. But the proper policy corrections require political will, and too often political will lags behind economic reality. Blaming greedy CEOs or irresponsible mortgage holders may be cathartic, but it won't get the economy back on track. It's time to stop bickering and start looking at serious solutions.
Rajan's book has been praised by pundits on the left and the right both, making it something of an anomaly in popular economics - and one that we might want to pay attention to. The Wall Street Journal's David Wessel and FT's Martin Wolf both found the book thought-provoking. I recommend you check it out as well.
Whose Fault Is It Anyway?
Bernard Knox: Classicist, Author, Badass
-New York Times, 16 August 2010After training as a parachutist, he fought with a special force organized by the O.S.S., the British and the Free French to coordinate elements of the French Resistance with advancing Allied troops after the Normandy invasion. He also instructed members of the French Maquis in the use of explosives.
The O.S.S. later sent him into northern Italy for an equally dangerous mission with the Italian underground, and it was there that he rekindled his passion for the classics. Holed up in an abandoned villa, he discovered a bound copy of Virgil and opened it to a section of the first Georgic that begins, “Here right and wrong are reversed; so many wars in the world, so many faces of evil.”
Professor Knox recalled, in “Essays Ancient and Modern,” “These lines, written some 30 years before the birth of Christ, expressed, more directly and passionately than any modern statement I knew of, the reality of the world I was living in: the shell-pocked, mine-infested fields, the shattered cities and the starving population of that Italy Virgil so loved, the misery of the whole world at war.”
He continued, “As we ran and crawled through the rubble I thought to myself: ‘If I ever get out of this, I’m going back to the classics and study them seriously.’ ”
