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NY Times, Aug. 9, 2018
‘Crashed’ Connects the Dots From 2008 Crisis to Trump, Brexit and More
By Jennifer Szalai
Crashed: How a Decade of Financial Crises Changed the World
By Adam Tooze
706 pages. Viking. $35.
The Columbia professor Adam Tooze might be expected to have precious
little in common with Stephen K. Bannon, the shambolic former chief
strategist to President Donald J. Trump. Tooze is a self-described
“left‑liberal historian whose personal loyalties are divided among
England, Germany, the ‘Island of Manhattan’ and the E.U.”; Bannon is a
brawling, right-wing connoisseur of nationalist resentment. In “Crashed:
How a Decade of Financial Crises Changed the World,” Tooze, with his
Oxbridge-trained ear for a withering epithet, calls Bannon “the
sulfurous impresario of Breitbart.”
There is, however, a significant point on which they both agree: The
financial crisis of 2008, along with the bailouts that followed, exposed
the seamy underbelly of a global economic system that was supposed to be
so finely calibrated that political wrangling (unseemly, inefficient)
was beside the point. As Alan Greenspan, the former chairman of the
Federal Reserve, told a Swiss newspaper just a year before the crisis,
the world of 2007 was a central bankers’ paradise: “We are fortunate
that, thanks to globalization, policy decisions in the U.S. have been
largely replaced by global market forces.”
Needless to say, the nonagenarian Greenspan has spent the last decade
like a wide-eyed ingénue, declaring himself flabbergasted by events,
while Bannon has ridden a populist-nationalist wave to the White House
and beyond.
In “Crashed,” Tooze shows how the upheaval of 2008 radiated outward,
shaping not only the new economic order but the political free-for-all
that stumped conventional pundits and scrambled traditional allegiances.
He connects the mortgage crisis to the American banking crisis to the
European debt crisis to the crisis of liberalism. Brexit, Trump,
Russia’s annexation of Crimea in 2014 and China’s ever-escalating role
in the financial system: Tooze covers them all and much more, in a
volume that’s as lively as it is long — which is to say very, on both
counts.
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Having published previous books on the turbulent post-World War I era
and the economic policies of Nazi Germany, Tooze has made a specialty of
financial collapse and historical disaster. He also understands the
language of corporate balance sheets and sovereign debt deeply enough to
know that he ought to use it sparingly, translating some of the most
byzantine gibberish into elegant English.
“The sort of thing that you could do in London but not in New York is
exemplified by ‘collateral rehypothecation,’” he writes, rather
menacingly, before nimbly breaking down what that means and why it
matters. Several lucid sentences later, you’ll have learned, perhaps
despite yourself, how the financial wizards of New York competed with
the financial wizards of London, and how a worldwide daisy chain of
banks turned into a ticking bomb.
Of course, the story of “Crashed” isn’t just a panoply of transactions
and statistics. Tooze regales us with character sketches while
recounting the “freak show of outsize personalities” at the G-20 summit
in London in 2009 — a pageant of the world’s leaders pledging to boost
cratering trade and quell panicking markets.
Image
Adam Tooze
There’s Angela Merkel of Germany, a moralizing pillar of unyielding
rectitude, and a jittery, grandstanding Nicolas Sarkozy of France. A
restless Silvio Berlusconi of Italy was “noisily desperate” for
attention, while England’s Gordon Brown glowered over the proceedings.
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Brown, a Labour Party leader who was doing his delicate best not to
antagonize the trillion-dollar interests of the City of London, might
have lost touch with the “humdrum reality” of a Britain gripped by
recession, but as Tooze wryly puts it, the prime minister “proved that
he was perfectly suited to the role of Treasury secretary to the world.”
Yes, the compliment is as backhanded as it sounds, but it’s a measure of
Tooze’s nuanced and often counterintuitive narrative that the line
retains a measure of praise, however faint. Part of Tooze’s argument in
“Crashed” is that the technical know-how of an able treasury secretary
can be useful in a crisis. He depicts Timothy Geithner, the treasury
secretary during President Barack Obama’s first, hairy term in office,
as a technocrat ne plus ultra, a public servant committed to upholding
the financial system, which he ultimately did do.
What Geithner didn’t do was nationalize or break up the “too big to
fail” banks, or pay much heed to struggling homeowners whose mortgages
were underwater. Instead, he invested the regulatory bureaucracy he knew
so well with greater powers of oversight. It was a solution fit for a
manager — and for someone who in Tooze’s estimation revered the system
as much as Geithner did.
This approach apparently satisfied Obama, whose administration is
described as an embodiment of “American corporate liberalism.” Again,
the characterization is doubled-edged. Obama was “by inclination a
bipartisan centrist” forced to fend off “the sheer violence of the
conservative hostility toward him.” He shepherded the banks through
calamity with a firm but gentle hand. They got their bailout, so that
even the gargantuan Citigroup, whose sheer survival was entirely
dependent on government action, was able to splurge for $5 billion in
bonuses a year later.
Any non-bankers who lost their jobs or homes weren’t so lucky. On the
apparent Democratic distaste for conflict, Tooze is quietly scathing.
“Rather than seeking to mobilize the indignation simmering in American
society,” the Obama administration sought to tamp it down, offering “one
technocratic fix after another.” Putting it another way, Democratic
centrism won the (financial) war but lost the (political) peace. To
judge from Trump’s ascendancy, along with the historical evidence so
scrupulously marshaled in “Crash,” Tooze is right.
But at least Obama took seriously his responsibility to govern, whereas
the same can’t be said for Republicans, portrayed here as gifted
obstructionists “incapable of legislating or cooperating effectively.”
“Crashed” details how Republican administrations had abandoned fiscal
responsibility long ago, bloating the deficit with pumped-up military
spending and protracted, expensive wars, while leaving it to their
Democratic successors to clean up the mess.
One of the great virtues of this bravura work of economic history is how
much attention it devotes to issues of power. “Who was being hurt?”
Tooze writes of the 2008 crisis. “Who was included in the circle of
those who needed to be protected? And who was not?” He reckons that in
their bid to paper over such fundamental political questions with
technical solutions, neoliberal centrists inadvertently answered them.
Incremental tweaking did little to address the grief and suffering
caused by the crisis, making political power more visible. By laying
bare who would be sacrificed when the tide went out, they left a ragged
hole for the likes of Trump and Bannon to walk through.
Follow Jennifer Szalai on Twitter: @jenszalai.
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