This clutch of books offers an excellent retrospective on the recent stock-market crash, which wiped out $8.5 trillion in market value. The value of individual retirement accounts dropped by one-third, and in just twelve months, 2 million Americans lost their jobs.
But the lessons from the crash will probably soon be shrugged off. Memory will be softened by a market that is beginning to recover at an impressive pace. The NASDAQ index, a swamp where tech alligators lurk, is double its value of eighteen months ago. That’s a pity. Politicians never work up the nerve to really reform Wall Street until, as after the 1929 collapse, half the population in some cities is unemployed and ex-millionaires start jumping out of windows.
Many of the exploiters and attitudes and wobbly rules that launched the crash are still with us. A sign of the unchanging times could be found in the February 25 Wall Street Journal, which reported that Goldman Sachs is once again suspected of violating securities rules, this time by charging excessive bond-trading price markups. The accompanying report also sounds normal: Goldman’s chief executive took home $21 million last year, a 75 percent increase over 2002.
Still, we can try to read the future in these analyses of the past. Paul Krugman’s essays have the snappy smartness his followers have come to expect, but for me the best interpretations of the marketplace and the so-called New Economy come from Robert Pollin, a University of Massachusetts professor of economics, who for one thing helps strip the populist mask from Bill Clinton; Doug Henwood, whose tart humor keeps one awake even when he discusses Wagnerian topics, as in the chapter on globalization, where he calls Ralph Nader “a special case, a man who seems proud of his (locally produced) hair shirt”; Joseph Stiglitz, a Nobel Prize-winning economist who writes with admirable candor about the sellouts of some of his colleagues in the Clinton years; and Roger Lowenstein, a master (as I first learned from his book When Genius Failed) at making our financial pirates as interesting as those who sailed with Long John Silver. David Denby’s American Sucker is not so much a critique of the era as it is a tragicomic, introspective tale of how much it can cost an ignorant investor to learn the true character of Wall Street. Denby, a film critic for The New Yorker, lost nearly a million.
Most of these writers properly feel that the crash was caused by a combination of all or most of these influences: deregulation to the point of anarchy; a towering secrecy that conceals the financial world from ordinary investors; greed that distorts capitalism and the character of those who administer it; a justice system that Wall Street malefactors know they need not fear; and, to personalize the problem, we are offered Alan Greenspan and his fellow conspirators, chief of whom were Clinton and his Treasury Secretary, Robert Rubin, who was a top exec at Goldman Sachs before joining Clinton’s Cabinet and a top exec at Citigroup after leaving it. In Lowenstein’s opinion, Clinton was, except for Ronald Reagan, “the most market-oriented president since the Roaring Twenties.”