The world's best-selling economist's brief, incisive essays on subjects ranging from austerity to inequality, Steve Jobs to climate change, documenting the global financial crisis in real time through the eyes of one of its keenest observers.
Incisive commentary on the financial meltdown and its aftermath, from the author of the bestselling global phenomenon Capital in the Twenty-First Century
Thomas Piketty's work has proved that unfettered markets lead to increasing inequality. Without meaningful regulation, capitalist economies will concentrate wealth in an ever smaller number of hands. Armed with this knowledge, democratic societies face a defining challenge: fending off a new aristocracy.
For years, Piketty has wrestled with this problem in his monthly newspaper column, which pierces the surface of current events to reveal the economic forces underneath. Why Save the Bankers? brings together selected columns, now translated and annotated, from the period book-ended by the September 2008 collapse of Lehman Brothers and the Paris attacks of November 2015. In between, writing from the vantage point of his native France, Piketty brilliantly decodes the European sovereign debt crisis, an urgent struggle against the tyranny of markets that bears lessons for the world at large. And along the way, he weighs in on oligarchy in the United States, wonders whether debts actually need to be paid back, and discovers surprising lessons about inequality by examining the career of Steve Jobs.
Coursing with insight and flashes of wit, these brief essays offer a view of recent history through the eyes of one of the most influential economic thinkers of our time.
After more than a year of rising financial turmoil beginning in 2007, the crisis reached a climax on September 15, 2008, when Lehman Brothers filed for bankruptcy. This period witnessed a series of unprecedented government interventions aimed at restoring stability to the markets, including the Troubled Asset Relief Program (or TARP, a proposed $700 billion bailout) and billions of dollars in below-market loans and credit guarantees extended by the U.S. Treasury and Federal Reserve to a wide range of nonbank financial institutions that had never benefited from such assistance before. Many asked whether these moves marked the beginning of a new era of interventionist economic policy.
Why Save the Bankers?
September 30, 2008
Will the financial crisis lead to the return of the state on the economic and social scene? It’s too early to say. But it’s useful to dispel a few misunderstandings and to clarify the terms of debate. The bank rescues and regulatory reforms undertaken by the American government don’t in themselves constitute a historic turning point. The speed and pragmatism with which the U.S. Treasury and Federal Reserve adjusted their thinking and launched temporary nationalizations of whole swaths of the financial system are certainly impressive. And though it will take some time before we’ll know the final net cost to the taxpayer, it’s possible that the scale of the interventions underway will surpass levels reached in the past. Sums between $700 billion and $1.4 trillion are now being discussed ?— ?between 5 and 10 percent of U.S. GDP ?— ?whereas the savings and loan debacle of the 1980s cost around 2.5 percent.
Still, to a certain extent these kinds of interventions in the financial sector represent a continuation of doctrines and policies already practiced in the past. Since the 1930s, American elites have been convinced that the 1929 crisis reached such great proportions and brought capitalism to the edge of the abyss because the Federal Reserve and the public authorities let the banks collapse by refusing to inject the liquidity needed to restore confidence and growth to the productive sector. For some Americans on the free market right, faith in Fed intervention goes hand in hand with a skepticism toward state intervention outside the financial sphere: to save capitalism, we need a good Fed, flexible and responsive ?— ?and certainly not a Rooseveltian welfare state, which would only make Americans go soft. If we forget this historical context, we might be surprised by the U.S. financial authorities’ swift intervention.
Will things stop there? That depends on the American presidential election: a President Obama could seize this opportunity to strengthen the role of the state in other areas beyond finance, for example in health insurance and reducing inequality. But given the budgetary chasm left by the George W. Bush administration (military spending, bank rescues), the room for maneuver on health care might be limited ?— ?Americans’ willingness to pay more taxes is not infinite. Moreover, the current debate in Congress on limiting finance sector pay illustrates the ambiguities of today’s ideological context. One certainly senses mounting public exasperation with the explosion of supersalaries for executives and traders over the past thirty years. But the solution being envisaged, setting a salary cap of $400,000 (the salary of the U.S. president) in financial institutions bailed out by taxpayers, is a partial response that’s easily evaded ?— ?higher salary payments just need to be transferred to other companies.
After the stock market crash of 1929, Franklin Roosevelt’s response to the enrichment of the very economic and financial elites who had led the country into the crisis was far more brutal. The federal tax rate on the highest incomes was lifted from 25 to 63 percent in 1932, then to 79 percent in 1936, 91 percent in 1941, then lowered to 77 percent in 1964, and finally 30–35 percent over the course of the 1980s and 1990s by the Reagan and George H. W. Bush administrations. For almost fifty years, from the 1930s until 1980, not only did the top rate never fall below 70 percent, but it averaged more than 80 percent. In the current ideological context, where the right to collect bonuses and golden parachutes in the tens of millions without paying more than 50 percent in taxes has been elevated to the status of a human right, many will judge those policies primitive and confiscatory. But for more than half a century they were in effect in the world’s largest democracy ?— ?clearly without preventing the American economy from functioning. They had the particular virtue of drastically reducing corporate executives’ incentive to dip their hands into the till, beyond a certain threshold. With the globalization of finance, such policies could probably be enacted only with a complete reworking of accounting disclosure rules, and relentless efforts against tax havens. Unfortunately, it will probably take many more crises to get there.
"Coming on the heels of his masterwork, Capital in the Twenty-First Century, one might expect this to be the lesser contribution. In fact, Piketty unleashed on real-time economics is a revelation: he is lucid and persuasive — all the more so for being proved right about most of the events he is responding to, even though the full facts only came out later ... Piketty draws on a vast and unusual store of honesty and emotional intelligence." — PAUL MASON, GUARDIAN
"How one economist tried to make sense of a rapidly changing world ... These columns are informed by Piketty's academic work, but the language he uses is both more accessible and more direct ... Universally applicable ... Delicious." — NEW STATESMAN
"The perfect accoutrement for a Bernie Sanders rally." — BLOOMBERG BUSINESSWEEK
"Piketty fans will be fascinated ... He explains economic concepts to the lay reader with the kind of clarity that comes from a deep understanding of the topic." — INDEPENDENT
"Piketty is back ... As with Capital, Piketty remains quietly optimistic." — EVENING STANDARD
"Piketty is known for his lucid, effective writing, and delivers more of it in Why Save the Bankers? ... Anyone with an interest in politics, monetary policy or international diplomacy will get a kick out of [it]... A series of short, sometimes very funny, calls to common sense." — SHELF AWARENESS
"Part of Piketty's charm lies in the fact that he doesn't mince words ... But his blunt statements are tempered with smart, analytical arguments ... Lessons and warnings [that] the entire world needs to hear." — POPMATTERS
"Impressive ... These excellent essays presuppose little knowledge of economics and provide an overview in nontechnical language of events in the news in Europe, which have relevance to the United States ... Should appeal to lay readers and subject specialists alike." — LIBRARY JOURNAL (starred review)
"Easy to follow for readers without much knowledge of economics, especially when [Piketty] picks apart topics that defy classical economic logic; in this he resembles Paul Krugman, who similarly writes clearly on complex topics ... Helps make sense of recent financial history." — KIRKUS REVIEWS
"Piketty, the French Paul Krugman, has an extraordinary knack for translating the complexities of central bank finance, tax policy, regulation, and macroeconomics into lucid, down-to-earth language enriched by shrewd historical and cultural insights. This is a compelling challenge to economic orthodoxy." — PUBLISHERS WEEKLY
"Remember when everyone was obliged to pretend to have read Piketty's 700-page tome Capital in the Twenty-First Century? Now [comes] a Piketty for the proletariat, compiling eight years of the economist’s columns written for the French magazine Libération. The book begins in September 2008 just after the collapse of Lehman Brothers and takes readers through the aftermath of the crisis that followed, offering Pikettian analysis of the Obama presidency and the European Union’s debt woes." — THE MILLIONS, 2016 Most Anticipated Nonfiction
"The questions explored in these brilliant essays cut to the heart of our failing economic and democratic systems. If you have been influenced by Piketty's landmark work on inequality, make sure to read this next." — NAOMI KLEIN, author of The Shock Doctrine and This Changes Everything
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