In 1921 Austria became the first interwar European country to experience hyperinflation. The League of Nations, among other actors, stepped in to help reconstruct the economy, but a decade later Austria’s largest bank, Credit-Anstalt, collapsed. Historians have correlated these events with the banking and currency crisis that destabilized interwar Europe—a narrative that relies on the claim that Austria and the global monetary system were the victims of financial interlopers. In this corrective history, Nathan Marcus deemphasizes the destructive role of external players in Austria’s reconstruction and points to the greater impact of domestic malfeasance and predatory speculation on the nation’s financial and political decline.

Consulting sources ranging from diplomatic dossiers to bank statements and financial analyses, Marcus shows how the League of Nations’ efforts to curb Austrian hyperinflation in 1922 were politically constrained. The League left Austria in 1926 but foreign interests intervened in 1931 to contain the fallout from the Credit-Anstalt collapse. Not until later, when problems in the German and British economies became acute, did Austrians and speculators exploit the country’s currency and compromise its value. Although some statesmen and historians have pinned Austria’s—and the world’s—economic implosion on financial colonialism, Marcus’s research offers a more accurate appraisal of early multilateral financial supervision and intervention.

Illuminating new facets of the interwar political economy, Austrian Reconstruction and the Collapse of Global Finance reckons with the true consequences of international involvement in the Austrian economy during a key decade of renewal and crisis.

A comprehensive account of the rise and fall of the mortgage-securitization industry, which explains the complex roots of the 2008 financial crisis.

More than a decade after the 2008 financial crisis plunged the world economy into recession, we still lack an adequate explanation for why it happened. Existing accounts identify a number of culprits—financial instruments, traders, regulators, capital flows—yet fail to grasp how the various puzzle pieces came together. The key, Neil Fligstein argues, is the convergence of major US banks on an identical business model: extracting money from the securitization of mortgages. But how, and why, did this convergence come about?

The Banks Did It carefully takes the reader through the development of a banking industry dependent on mortgage securitization. Fligstein documents how banks, with help from the government, created the market for mortgage securities. The largest banks—Countrywide Financial, Bear Stearns, Citibank, and Washington Mutual—soon came to participate in every aspect of this market. Each firm originated mortgages, issued mortgage-backed securities, sold those securities, and, in many cases, acted as their own best customers by purchasing the same securities. Entirely reliant on the throughput of mortgages, these firms were unable to alter course even when it became clear that the market had turned on them in the mid-2000s.

With the structural features of the banking industry in view, the rest of the story falls into place. Fligstein explains how the crisis was produced, where it spread, why regulators missed the warning signs, and how banks’ dependence on mortgage securitization resulted in predatory lending and securities fraud. An illuminating account of the transformation of the American financial system, The Banks Did It offers important lessons for anyone with a stake in avoiding the next crisis.

The advent of economic neoliberalism in the 1980s triggered a shift in the world economy. In the three decades following World War II, now considered a golden age of capitalism, economic growth was high and income inequality decreasing. But in the mid-1970s this social compact was broken as the world economy entered the stagflation crisis, following a decline in the profitability of capital. This crisis opened a new phase of stagnating growth and wages, and unemployment. Interest rates as well as dividend flows rose, and income inequality widened.

Economists Gérard Duménil and Dominique Lévy show that, despite free market platitudes, neoliberalism was a planned effort by financial interests against the postwar Keynesian compromise. The cluster of neoliberal policies--including privatization, liberalization of world trade, and reduction in state welfare benefits--is an expression of the power of finance in the world economy.

The sequence of events initiated by neoliberalism was not unprecedented. In the late nineteenth century, when economic conditions were similar to those of the 1970s, a structural crisis led to the first financial hegemony culminating in the speculative boom of the late 1920s. The authors argue persuasively for stabilizing the world economy before we run headlong into another economic disaster.

The Great Depression was a global phenomenon: every economy linked to international financial and commodity markets suffered. The aim of this book is not merely to show that China could not escape the consequences of drastic declines in financial flows and trade but also to offer a new perspective for understanding modern Chinese history. The Great Depression was a watershed in modern China. China was the only country on the silver standard in an international monetary system dominated by the gold standard.

Fluctuations in international silver prices undermined China’s monetary system and destabilized its economy. In response to severe deflation, the state shifted its position toward the market from laissez faire to committed intervention. Establishing a new monetary system, with a different foreign-exchange standard, required deliberate government management; ultimately the process of economic recovery and monetary change politicized the entire Chinese economy. By analyzing the impact of the slump and the process of recovery, this book examines the transformation of state-market relations in light of the linkages between the Chinese and the world economy.

Harold James examines the vulnerability and fragility of processes of globalization, both historically and in the present. This book applies lessons from past breakdowns of globalization—above all in the Great Depression—to show how financial crises provoke backlashes against global integration: against the mobility of capital or goods, but also against flows of migration. By a parallel examination of the financial panics of 1929 and 1931 as well as that of 2008, he shows how banking and monetary collapses suddenly and radically alter the rules of engagement for every other type of economic activity.

Increased calls for state action in countercyclical fiscal policy bring demands for trade protection. In the open economy of the twenty-first century, such calls are only viable in very large states—probably only in the United States and China. By contrast, in smaller countries demand trickles out of the national container, creating jobs in other countries. The international community is thus paralyzed, and international institutions are challenged by conflicts of interest. The book shows the looming psychological and material consequences of an interconnected world for people and the institutions they create.

This book argues that the current financial turmoil signals a crisis in globalisation that will directly challenge the free market economic model.

Graham Turner shows that the housing bubbles in the West were deliberately created to mask the damage inflicted by companies shifting production abroad in an attempt to boost profits. As these bubbles burst, economic growth in many developed countries will inevitably tumble. The Japanese crisis of the 1990s shows that banks and governments may struggle to contain the fallout. The problem has not been limited to the US, UK and Europe: housing bubbles have become endemic across wide swathes of emerging market economies. As the West slides, these countries will see an implosion of their credit bubbles too, shaking their faith in the free market.

Turner is an experienced and successful economic forecaster, whose opinions are sought by large international banks and top financial journalists. Drawing from his first hand experience of the Japanese property crash of the 1990s, he presents his analysis in a clear and persuasive style, showing that the end of housing market growth spells disaster for neoliberal globalisation.

Following his timely and well-received A Failure of Capitalism, Richard Posner steps back to take a longer view of the continuing crisis of democratic capitalism as the American and world economies crawl gradually back from the depths to which they had fallen in the autumn of 2008 and the winter of 2009.

By means of a lucid narrative of the crisis and a series of analytical chapters pinpointing critical issues of economic collapse and gradual recovery, Posner helps non-technical readers understand business-cycle and financial economics, and financial and governmental institutions, practices, and transactions, while maintaining a neutrality impossible for persons professionally committed to one theory or another. He calls for fresh thinking about the business cycle that would build on the original ideas of Keynes. Central to these ideas is that of uncertainty as opposed to risk. Risk can be quantified and measured. Uncertainty cannot, and in this lies the inherent instability of a capitalist economy.

As we emerge from the financial earthquake, a deficit aftershock rumbles. It is in reference to that potential aftershock, as well as to the government’s stumbling efforts at financial regulatory reform, that Posner raises the question of the adequacy of our democratic institutions to the economic challenges heightened by the greatest economic crisis since the Great Depression. The crisis and the government’s energetic response to it have enormously increased the national debt at the same time that structural defects in the American political system may make it impossible to pay down the debt by any means other than inflation or devaluation.

"Globalization" is here. Signified by an increasingly close economic interconnection that has led to profound political and social change around the world, the process seems irreversible. In this book, however, Harold James provides a sobering historical perspective, exploring the circumstances in which the globally integrated world of an earlier era broke down under the pressure of unexpected events.

James examines one of the great historical nightmares of the twentieth century: the collapse of globalism in the Great Depression. Analyzing this collapse in terms of three main components of global economics--capital flows, trade, and international migration--James argues that it was not simply a consequence of the strains of World War I but resulted from the interplay of resentments against all these elements of mobility, as well as from the policies and institutions designed to assuage the threats of globalism. Could it happen again? There are significant parallels today: highly integrated systems are inherently vulnerable to collapse, and world financial markets are vulnerable and unstable. While James does not foresee another Great Depression, his book provides a cautionary tale in which institutions meant to save the world from the consequences of globalization--think WTO and IMF, in our own time--ended by destroying both prosperity and peace.

The financial and economic crisis that began in 2008 is the most alarming of our lifetime because of the warp-speed at which it is occurring. How could it have happened, especially after all that we’ve learned from the Great Depression? Why wasn’t it anticipated so that remedial steps could be taken to avoid or mitigate it? What can be done to reverse a slide into a full-blown depression? Why have the responses to date of the government and the economics profession been so lackluster? Richard Posner presents a concise and non-technical examination of this mother of all financial disasters and of the, as yet, stumbling efforts to cope with it. No previous acquaintance on the part of the reader with macroeconomics or the theory of finance is presupposed. This is a book for intelligent generalists that will interest specialists as well.

Among the facts and causes Posner identifies are: excess savings flowing in from Asia and the reckless lowering of interest rates by the Federal Reserve Board; the relation between executive compensation, short-term profit goals, and risky lending; the housing bubble fuelled by low interest rates, aggressive mortgage marketing, and loose regulations; the low savings rate of American people; and the highly leveraged balance sheets of large financial institutions.

Posner analyzes the two basic remedial approaches to the crisis, which correspond to the two theories of the cause of the Great Depression: the monetarist—that the Federal Reserve Board allowed the money supply to shrink, thus failing to prevent a disastrous deflation—and the Keynesian—that the depression was the product of a credit binge in the 1920s, a stock-market crash, and the ensuing downward spiral in economic activity. Posner concludes that the pendulum swung too far and that our financial markets need to be more heavily regulated.

In an age when pundits constantly decry overt political bias in the media, we have naturally become skeptical of the news. But the bluntness of such critiques masks the highly sophisticated ways in which the media frame important stories. In Front Page Economics, Gerald Suttles delves deep into the archives to examine coverage of two major economic crashes—in 1929 and 1987—in order to systematically break down the way newspapers normalize crises.

Poring over the articles generated by the crashes—as well as the people in them, the writers who wrote them, and the cartoons that ran alongside them—Suttles uncovers dramatic changes between the ways the first and second crashes were reported. In the intervening half-century, an entire new economic language had arisen and the practice of business journalism had been completely altered. Both of these transformations, Suttles demonstrates, allowed journalists to describe the 1987 crash in a vocabulary that was normal and familiar to readers, rendering it routine.

A subtle and probing look at how ideologies are packaged and transmitted to the casual newspaper reader, Front Page Economics brims with important insights that shed light on our own economically tumultuous times.

Inequality, per se, has been with us for millennia. With the creation, growth and deepening of Capitalism across the globe, inequalities take on new dimensions, unknown in previous eras. As Capitalism has spread its wings across the globe over the last 200 or so years, so inequalities have deepened and widened, both inside Nation Sates, between nation States. These inequalities are of income, wealth and of power.

This book, written by the widely respected economic historian Douglas Dowd at the age of 90, is notable for his own experience and vivid memory, of the 1929-31 recession. Since the 1980s, and the predominance of the present neo-liberal ideology, all of the inequalities that the book presents have grown rapidly. Written as a critique of the counter-productivity of growing economic inequality and vindicated by the present world banking crisis, Dowd presents a strong argument against capitalist expansion, exploitation and oligarchic rule.

Dowd's conclusions, that the globalization and growth of the financial sector will impact painfully upon hundreds of millions of people, unknown to most of us in our lifetime, Dowd's book deals with these issues from the unique perspective of inequality. Presenting both a history of the current crisis and an overview of it's, Inequality will appeal to both a broad general readership, and provides an extremely useful reference point for students of political economy, economic history, contemporary economics and global politics.

From 1716 to 1845, Scotland’s banks were among the most dynamic and resilient in Europe, effectively absorbing a series of adverse economic shocks that rocked financial markets in London and on the continent. Legislating Instability explains the seeming paradox that the Scottish banking system achieved this success without the government controls usually considered necessary for economic stability.

Eighteenth-century Scottish banks operated in a regulatory vacuum: no central bank to act as lender of last resort, no monopoly on issuing currency, no legal requirements for maintaining capital reserves, and no formal limits on bank size. These conditions produced a remarkably robust banking system, one that was intensely competitive and served as a prime engine of Scottish economic growth. Despite indicators that might have seemed red flags—large speculative capital flows, a fixed exchange rate, and substantial external debt—Scotland successfully navigated two severe financial crises during the Seven Years’ War.

The exception was a severe financial crisis in 1772, seven years after the imposition of the first regulations on Scottish banking—the result of aggressive lobbying by large banks seeking to weed out competition. While these restrictions did not cause the 1772 crisis, Tyler Beck Goodspeed argues, they critically undermined the flexibility and resilience previously exhibited by Scottish finance, thereby elevating the risk that another adverse economic shock, such as occurred in 1772, might threaten financial stability more broadly. Far from revealing the shortcomings of unregulated banking, as Adam Smith claimed, the 1772 crisis exposed the risks of ill-conceived bank regulation.

This account of the financial crisis of 2008–2009 compares banking systems in the United States and the United Kingdom to those of Canada and Australia and explains why the system imploded in the former but not the latter. Central to this analysis are differences in bankers’ beliefs and incentives in different banking markets.

A boom mentality and fear of being left behind by competitors drove many U.S. and British bank executives to take extraordinary risks in creating new financial products. Intense market competition, poorly understood trading instruments, and escalating system complexity both drove and misled bankers. Formerly illiquid assets such as mortgages and other forms of debt were repackaged into complex securities, including collateralized debt obligations (CDOs). These were then traded on an industrial scale, and in 2007 and 2008, when their value collapsed, economic activity fell into a deep freeze. The financial crisis threatened not just investment banks and their insurers but also individual homeowners and workers at every level. In contrast, because banks in Canada and Australia could make good profits through traditional lending practices, they did not confront the same pressures to reinvent themselves as did banks in the United States and the United Kingdom, thus allowing them to avoid the fate of their overseas counterparts.

Stephen Bell and Andrew Hindmoor argue that trading and systemic risk in the banking system need to be reined in. However, prospects for this are not promising given the commitment of governments in the crisis-hit economies to protect the “international competitiveness” of the London and New York financial markets.

It is now widely agreed that mainstream macroeconomics is irrelevant and that there is need for a more useful and realistic economic analysis that can provide a better understanding of the ongoing global financial and economic crisis. Lance Taylor’s book exposes the unrealistic assumptions of the rational expectations and real business cycle approaches and of mainstream finance theory. It argues that in separating monetary and financial behavior from real behavior, they do not address the ways that consumption, accumulation, and the government play in the workings of the economy.

Taylor argues that the ideas of J. M. Keynes and others provide a more useful framework both for understanding the crisis and for dealing with it effectively. Keynes’s basic points were fundamental uncertainty and the absence of Say’s Law. He set up machinery to analyze the macro economy under such circumstances, including the principle of effective demand, liquidity preference, different rules for determining commodity and asset prices, distinct behavioral patterns of different collective actors, and the importance of thinking in terms of complete macro accounting schemes. Economists working in this tradition also worked out growth and cycle models.

Employing these ideas throughout Maynard’s Revenge, Taylor provides an analytical narrative about the causes of the crisis, and suggestions for dealing with it.

A bold history of the rise of central banks, showing how institutions designed to steady the ship of global finance have instead become as destabilizing as they are dominant.

While central banks have gained remarkable influence over the past fifty years, promising more stability, global finance has gone from crisis to crisis. How do we explain this development? Drawing on original sources ignored in previous research, The Rise of Central Banks offers a groundbreaking account of the origins and consequences of central banks’ increasing clout over economic policy.

Many commentators argue that ideas drove change, indicating a shift in the 1970s from Keynesianism to monetarism, concerned with controlling inflation. Others point to the stagflation crises, which put capitalists and workers at loggerheads. Capitalists won, the story goes, then pushed deregulation and disinflation by redistributing power from elected governments to markets and central banks. Both approaches are helpful, but they share a weakness. Abstracting from the evolving practices of central banking, they provide inaccurate accounts of recent policy changes and fail to explain how we arrived at the current era of easy money and excessive finance.

By comparing developments in the United States, the United Kingdom, Germany, and Switzerland, Leon Wansleben finds that central bankers’ own policy innovations were an important ingredient of change. These innovations allowed central bankers to use privileged relationships with expanding financial markets to govern the economy. But by relying on markets, central banks fostered excessive credit growth and cultivated an unsustainable version of capitalism. Through extensive archival work and numerous interviews, Wansleben sheds new light on the agency of bureaucrats and calls upon society and elected leaders to direct these actors’ efforts to more progressive goals.

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Financial disasters often have long-range institutional consequences. When financial institutions--banks, insurance companies, brokerage firms, stock exchanges--collapse, new ones take their place, and these changes shape markets for decades or even generations. Surviving Large Losses explains why such financial crises occur, why their effects last so long, and what political and economic conditions can help countries both rich and poor survive--and even prosper--in the aftermath.Looking at past and more recent financial disasters through the lens of political economy, the authors identify three factors critical to the development of financial institutions: the level of government debt, the size of the middle class, and the quality of information that is available to participants in financial transactions. They seek to find out when these factors promote financial development and mitigate the effects of financial crises and when they exacerbate them.Although there is no panacea for crises--no one set of institutions that will resolve them--it is possible, the authors argue, to strengthen existing financial institutions, to encourage economic growth, and to limit the harm that future catastrophes can do.

A powerful case that the economic shocks of the 1970s hastened both the end of the Cold War and the rise of neoliberalism by forcing governments to impose austerity on their own people.

Why did the Cold War come to a peaceful end? And why did neoliberal economics sweep across the world in the late twentieth century? In this pathbreaking study, Fritz Bartel argues that the answer to these questions is one and the same. The Cold War began as a competition between capitalist and communist governments to expand their social contracts as they raced to deliver their people a better life. But the economic shocks of the 1970s made promises of better living untenable on both sides of the Iron Curtain. Energy and financial markets placed immense pressure on governments to discipline their social contracts. Rather than make promises, political leaders were forced to break them.

In a sweeping narrative, The Triumph of Broken Promises tells the story of how the pressure to break promises spurred the end of the Cold War. In the West, neoliberalism provided Western leaders like Ronald Reagan and Margaret Thatcher with the political and ideological tools to shut down industries, impose austerity, and favor the interests of capital over labor. But in Eastern Europe, revolutionaries like Lech Walesa in Poland resisted any attempt at imposing market discipline. Mikhail Gorbachev tried in vain to reform the Soviet system, but the necessary changes ultimately presented too great a challenge.

Faced with imposing economic discipline antithetical to communist ideals, Soviet-style governments found their legitimacy irreparably damaged. But in the West, politicians could promote austerity as an antidote to the excesses of ideological opponents, setting the stage for the rise of the neoliberal global economy.