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

Rating:
Summary: Nuanced and thoughtful
Review: It's easy to see why this book might be difficult for those from the conservative school of economics. Stiglitz - a Nobel Prize winner - is not a simple man, and neither are his ideas and theories; like economics itself, this book covers complex issues and problems that cannot be solved by a mere sweeping ideology of "taxes are bad" and "deregulation is good."

While the ideas Stiglitz explores are complex, the book is nothing near an impossible or dry read - to the contrary. Stiglitz's premise is clear: While there will probably always be cycles of boom and bust, and bubbles like those of the 90s will burst, policies still matter and are important. It is policies that can help lengthen expansions and shorten recessions, and help us through cycles of boom and bust.

This book is a fascinating read. It's especially terrific if you're looking for a book that links economics and policies in a cohesive, understandable way, and doesn't just speak about one at a time. Stiglitz does an excellent job of showing how the two are intimately intertwined.

Rating:
Summary: Gingrich/Greenspan prosperity only a "lucky mistake"?
Review: Joseph Stiglitz certainly cannot be faulted for ignorance of the intellectual underpinnings of free-market capitalism and limited government, but much of this book is shockingly mediocre. It's often hard to see precisely what he is arguing for, and much of this book is little more than a partisan rant. Apparently, deficits are bad if formed by Republicans, good if under the management of Democrats. Republicans are the party that is blindly driven by ideology, but they're also the party that is locked up to special interests. Stiglitz admits that he was originally going to write another book, but decided that he needed to explain what happens in the 1990s. Apparently the longest economic boom in US peacetime history was a "lucky mistake" -- apart from the policies personally crafted by Joe Stiglitz at the Council of Economic Advisors. Stiglitz is a very sophisticated economist, but much of this book reads like an apology for his own Old Keynesian position in turf battles in the Clinton administration. Very disappointing, and hardly the critique of neo-classical economics that it pretends to be.

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: Highly Recommended !
Review: Only a Nobel Prize-winning economist could disguise a political broadside against conservatives and the George W. Bush administration inside a Trojan horse mea culpa of the Bill Clinton White House. No one could argue with Joseph Stiglitz's assertion that an effective modern economy must strike a reasonable balance between free markets and government oversight - but what is reasonable? Stiglitz regrets what is arguably the shining achievement of the Clinton Administration, namely, its success in balancing the U.S. budget. Credit him for consistency: he opposed Clinton's tax cut, just as he opposed George W. Bush's. Stiglitz's academic and professional chops are beyond question, and his insights into corporate welfare and inefficient markets are quite valuable if somewhat short of profound. We find that this volume provides strong insights into the inner workings of the American economic juggernaut. Your reaction will depend whether you agree or disagree with the author's contentions that the Clinton Administration was not liberal enough and that the present Bush Administration believes in small government.

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: Dissapointed
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: Strong words, but weak economic argument.
Review: Stiglitz attacks Wall Street, big business, and free-market economists. They didn't just screw up globalization, he says. They also messed up on electricity deregulation, stock options, pension reform, accounting scandals, the merger of commercial and investment banking, and the budget deficit. He dismisses the '90s boom as "hyperactivity" that was based mainly on regulatory and accounting manipulations. As you will see, his case is often flawed.

Stiglitz argues the liberal Clintonites were steamrolled by Republicans and by Democrats with a Wall Street agenda. His nemesis is Robert Rubin, Treasury Secretary. Stiglitz says that there's no evidence that deficit reduction was the cause of the '90s boom. And he argues that a fetish for surpluses caused the Clinton team to abandon important goals, such as strengthening schools.

Here, Stiglitz is way off. Clinton regained the political center thanks to the conservative fiscal policies of Robert Rubin, and became one of the more successful Democrat President since WWII. Clinton and Rubin left the U.S. economy in a superb fiscal position with surpluses as far as the eye can see. This is what was needed to get ready for the large fiscal costs of the upcoming Baby Boomers retirement.

On deregulation, Stiglitz argues that liberal Democrats conceded without putting up a fight. He decries Rubin's support for the successful campaign to repeal the Glass-Steagall Act, which separated commercial from investment banking. "I worried about the conflicts of interest, about the effect on competition," he writes.

Stiglitz misses the point that U.S. banking regulation was becoming obsolete within an international framework. The U.S. banking system was the only one that had such strict separation between investment and commercial banking. Also, none of the Wall Street scandals were due to conflicts of interest between commercial and investment banking. They were due to conflict of interest between different groups within investment banking (business development and security analysis). Thus, on all counts, the Glass Steagall Act was an obsolete regulation.

Not that Stiglitz reserves all his criticism for fellow Democrats. He's even harder on the Bush family. "Looking at what preceded the Clinton Administration, and especially what followed it, the [Clinton] grades become almost glowing," he writes. The title of his epilogue on President George W. Bush says it all: "Further Lessons on How to Mismanage the Economy." On this count, Stiglitz is right on the money.

But, he should quit while he is ahead. Instead, Stiglitz also takes on Federal Reserve Chairman Alan Greenspan to task for inflating a bubble in the stock market. He says Greenspan should have raised margin requirements on loans to buy stocks. This is a petty criticism that is inconsequential when looking at Greenspan overall record. He has managed monetary policy proficiently, resulting in the U.S. economy experiencing a virtuous mix of low inflation, low unemployment, and strong economic growth. This is a record no other Western country matched. Greenspan job is to manage the economy, not to smooth out the ups and down of the stock market. Given his mission, Greenspan record is impeccable.

'The Roaring Nineties' doesn't live up to its subtitle as "a new history of the world's most prosperous decade." There is no analysis about the cause of prosperity. He states: "Towards the end of the decade, what seemed to be the dawn of a new era began to look more like one of those short bursts of economic activity, or hyperactivity, inevitably followed by a bust, which had marked capitalism for two hundred years." This quote would have made Karl Marx proud. Capitalism entails some risk (boom and bust cycles) by definition. But, it also generates greater wealth creation and individual opportunities than any other alternative. Stiglitz has a problem with that.

Stiglitz' cynical assessment of the 1990s doesn't square with the record. Around 1995, the U.S. economy made an abrupt change for the better, propelled by the effective use of information technology. After two decades of weakness, productivity began to surge way above its level in previous decades, and way past most of the U.S. international competitors.

Productivity continued to rise despite the bust, the 2001 recession, and the slow recovery that followed. Thus, the productivity boom was real, rather than just a side effect of a 1990s bubble. Stiglitz devotes only one paragraph (on page 321) to the role of technology in lifting productivity and the economy's sustainable growth rate. Because he devotes little attention to the sources of growth, this book winds up being little more than a catalog of Washington screwups. While Stiglitz argues that "the Roaring Nineties may not have been the fabulous decade that it appeared at the time," he fails to support his argument.