The Roaring Nineties: A New History of the World's Most Prosperous Decade

Rating:
Summary: Another fine mess we've gotten ourselves into...
Review: I profited just as much as the next person from the booming business in the 90's. I also was one of its victims. We all were and, as usual, there we're federal policies, greedy individuals and corporations and dishonesty that when mixed in with the prosperity helped undermine it. Certainly there are always periods of booms and busts--it's how we deal with aftermath and the excesses that matter.

Stiglitz's well written book examines the process of creation and the decay and corruption that can help undo these bursts of economic activity. Stiglitz doesn't point the finger at any one group of individuals more than another--he feels comfortable doling out the blame where it belongs and Washington is just as much a target as corporate America. Without the political stilts to support economic circus we all participate in, it would never happen. As a reflection on what's wrong (and occasionally right) with America's political and economic system, The Roaring Nineties is unstinting look at the harshness and ugliness underneath the system. It's also a book that argues for reform in a way to keep the economy moving without allowing criminal profiteering.

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Summary: Enjoyable but flawed analysis
Review: I read and very much enjoyed Stiglitz's book on Globalization, however many of the arguments presented in this offering are somewhat less convincing when applied to the World's greatest Superpower.

The analysis is flawed mainly because there is no excuse for poorly managed (inflationary) fiscal and monetary policy in a well developed economy. I find it impossible to see how the fed acted in an overly restrictive way, as claimed by the author, when under Greenspan the Fed has facilitated more liquidity and created over 1 trillion dollars of "new money" . Unfortunately he fails ,along with many economists (even Noble winners!), to understand the meaning and cause of inflation. Before you dimiss me as a prat please read on.:-)

Inflation is an increase in the supply of money nothing more. Everything else is largely irrelevant, there is no need to complicate the issue with discussions about NAIRU etc. By facilitating easy credit through the lowering of the reserve requirements to practically zero coupled with the technique of overnight "sweeping". The fed have emnbarked in the most gross inflation of the US dollar in its history. He is right that we have sown the seeds of destruction but fails to truly address why this is so. If you do not believe me when I say that the fed has conciously decided to embark on inflation, please read our good friend Mr Greenspan's essay that he wrote about Gold, moreover check out Bernake (is that how you spell it? ) and the "dollars from helicopters" comment.

I still enjoyed much of the analysis though and the book is especially useful in pointing out the fact that economic policy does not operate in a vacum. If nothing else is gained from these pages this book students of the markets can obsereve how closely entwined economics and politics are at the heart of most nations governance structures. Decisions are taken with political goals often when the best economic policy is diametrically opposed to the course of action pursued.

in conclusion

Enjoyable but flawed analysis

Rating:
Summary: Understanding Fiduciary Responsibility
Review: I take issue with the analysis Mr. Stiglitz offers in the section titled "How pension 'reform' increased economic vulnerability" (pp. 185-8). Accept for the moment Mr. Stiglitz' premise: the reason why corporate pension trusts are underfunded is because unrealistic, overly optimistic assumptions were made about future returns on investment; namely, it was assumed that investments would return 9-10% instead of 4-5%. The question presents itself: Who made these unrealistic assumptions? Well, corporate financial officers, to start with. And yet, corporate officers are not the only interested parties when it comes to pension trust funds. These trusts are negotiated on behalf of pension beneficiaries (union workers) by their union officers.

When union leaders are negotiating a collective bargaining agreement with management, they are in the same position a loan officer is in when trying to decide whether to grant a loan to an applicant. The loan officer has a fiduciary responsibility to depositors to make sure that the applicant will be able to pay off the loan. In like manner, union leaders have a fiduciary responsibility to union members to make sure that management will be able to pay promised pension and healthcare benefits. If the loan officers don't follow this discipline, the bank will make lots of bad loans. If the union leaders don't follow this discipline, the unions will accept promises in collective bargaining agreements that management will not be able to keep. In the case of massive bad loans, the bank becomes insolvent and the FSLIC steps in to guarantee deposits (as happened in the S&L debacle). In the case of unions accepting promises that management can't keep, the pension fund becomes insolvent and the PBGC steps in to guarantee the pension benefits of the members.

So, either BOTH corporate executives AND union officials should be faulted for making overly optimistic assumptions about pension funding, or NEITHER should be faulted. It is quite possible that no moral fault is to be assigned to either side in this case. A plausible explanation is that executives and union leaders were acting in good faith and with best knowledge at the time the obligations were agreed on, but that the situation has changed so dramatically that the actuarial assumptions originally used to calculate funding adequacy are simply no longer valid. Instead, Mr. Stiglitz chooses to transform the pension crisis into another morality tale from the "Roaring Nineties." Unfortunate.

Even so, "The Roaring Nineties," like so many other of Mr. Stiglitz' writings, is not to be missed. We must appreciate a passionate and brilliant author who thinks seriously about so wide a range of issues.

Rating:
Summary: Essential reading now...
Review: if you want to know what's happening in the economy. Excellent, non-partisan job of showing what went right and what went wrong in the '90's, and what we need to think about as we move into the 21st century. In particular it is helpful for thinking about how economics and politics interconnect. There are many value judgements that need to be made, politically, that cannot be determined purely economically.

Rating:
Summary: Well written warning about the perils of voodoo economics
Review: Joseph Stiglitz's "The Roaring Nineties: A New History of the World's Most Prosperous Decade" is a thoughtful and compelling examination of the greed and corruption that ensues when markets are allowed to "regulate" themselves.

Stiglitz's, a neo-Keynesian economist, argues that the "roaring nineties" was the consequence of the forced retreat of the state from any direct involvement in the market. Without the moderating effect of state oversight, he argues, unscrupulous "self-regulating" individuals, companies and interest groups created a "boom" by manipulating the market to their advantage. Their methods included hype, hucksterism, flimflammery, illegal accounting practices and stock fraud, and ultimately caused the collapse of Enron, WorldCom, Nortel and scores of other companies. The bust eliminated over 8 trillion of stock value and profoundly affected the lives of millions of people worldwide.

Stiglitz traces the beginning of the state's retreat from market regulation to the Reagan presidency. Operating on the idealistic assumption that markets always allocate resources efficiently, free market ideologues gained an inordinate influence in the White House. They convinced successive presidents of both parties to withdraw the state from the market and to allow financial and other industries to regulate themselves.

According to Stiglitz this lapse of reason occurred because market fundamentalists were so blinded by their ideology they forgot the lessons of history. Time and again governments have been forced to play a regulatory role in the economy because markets do not always allocate resources efficiently or even rationally. From the tulip craze of fifteenth-century century to the high-tech bubble of the twentieth-century, markets often act with what Stiglitz calls "irrational exuberance". Ideologues like to forget that market bubbles burst, and that when they do, it is governments and taxpayers that are called upon to assist victims.

Stiglitz calls attention to the fact that the "roaring nineties" was financed through debt. Americans, Britons, Canadians and others, could have reduced their consumption of goods and services to increase savings for investment in the market. Rather than acting conservatively, we raised investment capital by borrowing heavily. (The United States, for example, borrowed nearly one billion dollars a day during the height of the boom.) By doing so, we not only made ourselves and the global economy vulnerable to collapse, we also diverted investment away areas necessary for sustainable growth, namely education and research and development.

My one complaint with "The Roaring Nineties" is that Stiglitz occasionally forgets his readership is international, and adopts a jingoistic and morally superior tone that will annoy many readers from outside the United States. For example, when he writes "...we had the opportunity to create a new international order based on American values..." he sounds more like an American imperialist of the nineteenth century than a Bank of Sweden prize-winning economist of the twenty-first century. It may surprise some Americans to learn that liberty is a universal value.

Nonetheless, Joseph Stiglitz's "The Roaring Nineties: A New History of the World's Most Prosperous Decade" is a well-written and thought provoking account of the boom and bust of the 1990s. A background in economics is most certainly not required to appreciate this book. Stiglitz's prose style is clear and accessible so anyone with a basic knowledge of current events and recent business history will understand, if not agree with, his argument.

Rating:
Summary: Somewhat Disappointing
Review: Joseph Stiglitz, winner of the Bank of Sweden's prize in economics in honor of Alfred Nobel (Nobel did not set up a prize in economics), has written a history of the 1990's bubble economy. As a close advisor to the President, he helped formulate economic policy during the Clinton years. He explains why Clinton Administration raised taxes during a recession, and why it worked. Raising taxes during a recession goes against the standard economic theory you find in macroeconomic textbooks (including his own book). But according to Stiglitz, reducing the federal budget deficit inadvertently helped recapitalize the banking system, which was suffering an overhang from the banking crisis of the late 1980s. To his credit he is honest about doing the right thing, but mostly by accident. I was also happy to see him criticize the Fed for not increasing the margin rate for buying stocks. This might have tempered the stock market bubble.

On the whole, his treatment of the bubble years is a little thin. You get a much more detailed (and technical) treatment in the book "Infectious Greed" by Partnoy. He also repeats the standard liberal canards about not funding education enough. For example he says US students do not score as well on science and math tests and students in other countries. But he fails to give the real reason: survivor bias. These tests are given to a much more selected and elite group of students in foreign countries. He also seems to believe US students aren't as good as foreign students because you find a lot for foreigners in US graduate schools, so we have to beef up our educational system by spending more money. Again he fails to identify what's really going on. Foreign students are after the green card and see graduate school as a means to that end. The reason so few Americans want to pursue graduate studies in science and engineering is the tremendous surplus of people in these fields. It's a natural and rational reaction to a surplus. Stigliz seems to accept the shortage myth.

There are also some errors and omissions in the book. For example the author says you can't buy an inflation-indexed annuity in the US. But you can, at least until about March 2003. See the book "Worry Free Investing" for where to go to buy an indexed annuity. His discussion of inflation indexed Treasury Bonds is incomplete. He fails to tell the reader about the yearly imputed income tax on the increased principal, which really cuts into the yield. Perhaps this is why they were so unpopular. These bonds are only good in a tax-free account.

Stiglitz is a brilliant economist and a terrific textbook author. He has made many important contributions to the field of economics. I opened the book expecting a lot, I'm sorry to say I was somewhat disappointed.

Rating:
Summary: Informative and Brilliant
Review: Of all the work I've read on current economic events, this is the best. Buy it.

It's hard to think of a man more qualified to write such a book as this one. Joseph Stiglitz is perhaps America's leading economist. For the last few decades he has made enormous contributions to numerous fields (hence his Nobel Prize), and he was on the front lines of economic policymaking in the Clinton administration and the World Bank. For people who are used to getting economic 'wisdom' from non-economists, Stiglitz's book is a refreshing splash in the face of rigorous economic thinking.

This book has numerous merits. Most prominent, perhaps, is Stiglitz's encyclopedic command of the issues: deficit reduction, telecom deregulation, the California energy crisis, the 1997 tax cuts, Enron, creative accounting, the IMF, Fed interest rates, stock options, banking regulation - you name it. More important, though, is the analytical sophistication with which Stiglitz approaches these issues. There's no graphs or differential equations (this isn't a technical work) but you can feel Stiglitz's genius at work cutting through all of the BS.

Stiglitz sees the 1990s as a brilliant economic success, but also a period in which faulty accounting, conflicts of interest, and botched deregulation schemes inflated a bubble that, when it burst, gave rise to the 2001 recession. This is not a partisan tract ("More regulation! Punish big business!"), but Stiglitz has vast disagreements with the free market camp in the GOP and the New Democrats who see lower taxes and less regulation as the solution to every problem. His disagreements with them are not ideological, but economic.

Where ideology does come in is his commitment to social justice - he clearly wants to tax the rich to help out the people on the bottom. But Stiglitz doesn't disguise these views as economic analysis: he sets aside a chapter to describe his vision for the world economy. Also, while he feels that Greenspan pays too much attention to inflation and not enough to growth, he doesn't impose his views as the right ones - he simply suggests that the Fed's priorities be open to political debate rather than left up to the Fed. It's clear that Stiglitz is a liberal, but he's very self-conscious. He writes in a humble, delicate tone that expresses his views, seeks to back them up, and admits that his values are different from those of the GOP.

You won't agree with everything he says (I certainly didn't), but it's still a really fantastic contribution to the debate over the bubble and the recession. Nobody writing about recent economic history has more credibility than Stiglitz does, and it's a great read.

I must say I am annoyed by the other reviewers who try to pass themselves off as economists and point out the supposed "flaws" with Stiglitz's book. True, there's a lot in Stiglitz's book to disagree with, but you're not going to find objective economic analysis on Amazon.com customer reviews. It's also totally false that Stiglitz dismisses the significance of the economic boom of the 1990s or that he denies the important role that deficit reduction played in fueling the boom.

For me, Stiglitz's book was a courageous intervention into really critical and contentious issues by one of the century's leading economic geniuses. Since the corporate governance scandals died down, there's been an unfortunate lull in the discussion of issues like stock options and financial accounting, but the debates that Stiglitz contributes to are debates that we need to have. I'm buying a copy of this book for a number of my friends. It's timely and brilliant.

Rating:
Summary: Flawed and self-aggrandizing
Review: Readers expecting a lively,left of center interpretation of a prosperity decade in the manner of J.K. Galbraith's The Great Crash had better look elsewhere. Economist Joseph Stiglitz is a Clinton era "New Democrat", and the Roaring Nineties is appalling evidence of it. The book is more a history of Clinton's perfidious economic policies which Stiglitz admits were wrong, Republican even, policies which created greater eonomic inequality here and abroad and which allowed the predatory CEOs of major companies to plunder unsuspecting investors, individual and institutional. Stiglitz says that the policies were shaped by fear of Robert Rubin at the Treasury Department, Alan Greenspans's Federal Reserve, conservatives in Congress, and, revealingly, heavyweight campaign contributors. The book is a weasel's mea culpa. It's too little and too late. I'm embarrassed that I spent $29.95 on it.

Rating:
Summary: The Roaring Nineties: A New History of the World's Most Pros
Review: So why is the economy tanking? A Nobel prize-winning economist points to the Nineties' fanatical commitment to free markets and deregulation.

Rating:
Summary: He Actually Won A Nobel in Economics?
Review: Stiglitz does not believe in free markets or that free markets are efficient. His cure for many of the market ills is to expand governments role in business. Stiglitz explains why deregulation caused so many problems in the areas of communications and banking and uses examples today to attempt to prove his points.

The problem with Stiglitz's examples of why deregulation is bad, is that the markets were already bad prior to deregulation. The markets were deregulated because they were doing poorly. He describes the economic choices of Reagan as damaging the economic gains of Carter. Not in those words exactly, but real close. His reality is that we were recovering from bad decisions of the Reagan administration, not of previous administration. To be fair of course, all financial decisions and budgets during that period were solely up to the president, congress and the senate were not allowed to vote on those matters at all.(hint: they were democrat controlled and he is a democrat and they did pass the rules and budgets with Reagan)

He argues that the bubble of the 1990's was due to irrational exuberance. That the prices of stocks were driven up for no reason and Alan Greenspan spoke and the investors didn't listen. In all of his explanations he fails to mention that during this era of the internet, millions of people began investing in the stock market who had never done so before and wouldn't listen to Greenspan's speechs or react to them. They drove the market, Stiglitz missed the boat. You can't describe today's economy in relation to yesterday's economy, they are barely related by the same currency.

Stiglitz does manage to point to a characteristic of capitalism. However he does so with the resolve of a die hard socialist. In a free market, people compete for market share and it drives profits down. Some businesses actually fail and others survive. We knew that. His disdain of freemarkets is just exemplified by his discription of this phenomenon as a failure and an inefficiency. If competition drives profit down, isn't the consumer the winner?

The book argues for government control of markets. His view is that several really smart fellows such as himself are infinitely better equiped to dictate business and markets than the thousands of businessman who do it daily. He argues that the government made rules that allowed business to do bad things, so more control by this same government could fix those wrongs. He does understand that government helped companies like World Com steal money, he just argues that this same government group could now help them be honest. If a table spoon is bad, a gallon will cure?

It is another socialist view of economics. If you want another guy who says capitalism is bad, socialism is the fix, read this book. If you want a good review of real economics during the 1990's, don't bother.