The Roaring Nineties: Seeds of Destruction By Joseph Stiglitz<br></br>The Great Unravelling: From Boom to Bust in Three Scandalous Years By Paul Krugman

Why is the US economy giving us all such grief? Jason Nissé looks for an explanation from two economists, one of whom must surely take some blame...
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In case you haven't noticed, it's booming out there. Those among us who don't live and die by the FTSE 100 might not have been paying close attention, but there has been a recovery both in the City and on Wall Street. The only problem for anyone with exposure to the stock market - and that's anyone with a pension, an endowment mortgage or one of those ISAs advertised all around the place (ie almost everyone) - is that the markets fell nearly 50 per cent in three years before this upturn.

If the US-led raging bull market of the late 1990s left us bewildered, the aggressive bear market that started in March 2000 has left us bedraggled. We want to know what has happened to us and who is to blame. And just when we thought no one could do this, here come two explanations in layman's language from award-winning American economists, both with a slight left-wing bias.

Joseph Stiglitz is a phenomenon. A Nobel prize-winning economist with an astounding track record - chairman of President Clinton's council of economic advisors, chief economist at the World Bank and now professor of finance and economics at Colombia University - he has escaped the ivory tower and arrived on the bestsellers list. Stiglitz has set himself up to be the John Kenneth Galbraith of our time but with his previous work, Globalisation and its Discontents, he came over like a more thoughtful, less glamorous Naomi Klein. Overnight, Stiglitz became the new hero of the anti-globalisation movement, an astonishing piece of gymnastics for someone who only a couple of years before had been advising the World Bank as it uprooted indigenous people and flooded areas of astounding natural beauty with its controversial dam-building policy.

With The Roaring Nineties, Stiglitz tries the same trick by slinging buckets of blame at the Clinton administration. He is critical of the way Clinton's third way (which morphed into Tony Blair's third way) embraced the right-wing agenda of deregulation and small government without understanding their consequences. He attacks the sleepy watchdogs and financiers on the make, who had the ear of the administration. Before you can say: "But Joe, you not only supported Clinton, you advised him," Stiglitz is out there with his "I told them not to do it, but would they listen?" excuse.

If you swallow that line, and switch off most of your critical faculties, this is an enjoyable book. It sticks it to American capitalism just the way that any pro-European liberal (and I include myself in this category) might want it to. Stiglitz's fact-light, high-octane writing style fair zips along. There are hardly any pesky footnotes and an almost total absence of figures. What's more, this all comes from an American economist who won the Nobel Prize, so take that, you Republicans.

But therein lies the danger. This book can lead you into all sorts of trouble if you try to rely upon it. Stiglitz's selective use of facts leaves his arguments all full of holes. I'm sure he has the research backing for every word he writes, but it does not come through in the text. Anyone fresh from The Roaring Nineties and hoping to deploy Stiglitz's arguments to shut up that pesky neighbour who works in the City, will suddenly find themselves in an intellectual version of the final scene from Butch Cassidy and the Sundance Kid. Heck. I can shoot Stiglitz's arguments out of the skies. And I largely agree with him.

If you want an American liberal economist who will knock the right-wingers down so they stay down, then turn to Paul Krugman. Krugman may not have Stiglitz's profile, but his pedigree is almost as good. A lecturer at Princeton University, he was signed up as a columnist by The New York Times after writing a series of hard-hitting articles in Forbes (where presumably he was the token commentator to the left of Ghengis Khan).

The Great Unravelling is a collection of those columns, with a smattering of Forbes articles and a bit of commentary. It has three major differences from Stiglitz. Firstly, because it was written contemporaneously, Krugman can prove that he is not merely wise after the event, he was wise before and during them as well (something Stiglitz acknowledges by namechecking Krugman in his chapter about the California energy crisis). Secondly, while Stiglitz largely blames Clinton for building up expectations that couldn't be maintained, Krugman concentrates his ire on George W Bush and his coterie of right-wing cronies, who are in the pockets of the business people that either helped enrich them in the past or helped them get into power this time, or both. And thirdly, Krugman manages to be "fact light" enough for the economics to be understandable, yet avoids the Stiglitz trap of needing a blinkered and trusting audience who won't look too closely for the holes.

This is not to say Krugman is perfect. It may be the timeframe of this collection of columns, almost all coming after Clinton left power, but his distaste for Bush, Dick Cheney, Donald Rumsfeld, Lawrence Lindsay (Bush's chief economics advisor) and even the great Alan Greenspan comes over as a bit obsessional. There is a little too much politics in the economic arguments at times and, for a British audience, there is too much on domestic US obsessions, such as social security reform.

But in the end it is a far more satisfying read than the Stiglitz. Ideally you should read them both, if you really want to wow them at that next dinner party with your analysis of why the US economy is giving us so much gyp. However, if the economic constraints of the last three years mean you can ill afford to pay out £18.99 twice, then I'd just buy the Krugman.

Jason Nissé is Business Editor of 'The Independent on Sunday'

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