5 comments about The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else.

1. The Mystery of Capital tackles one of the largest issues in development and comparative economics: non-convergence. Why is it that living standards do not converge? Is it because some nations have better technology? Is it because some nations simply have more capital? De Soto focuses on institutions rather than existing technology or capital. The reason why some nations succeed in developing a modern capital structure using modern technology is because their institutions protect the property rights of those who try to save and accumulate wealth.
   
   The discussion of American history is detailed enough to make a strong case, yet focused enough to make it easy reading. De Soto does a good job of relating American experience to modern development issues. This is what economics should be about: using valid and sensible theoretical propositions to explain real historical events. Consequently, I have found this book useful in my classes on Comparative Economic Systems, and Law and Economics. The Mystery of Capital certainly does not read like a textbook, but it should be used as one anyway.
   
   The main limitation of this book is that it tends to make observations about politics, rather than explaining it. In other words, De Soto does not get very far into Public Choice issues. This is a minor limitation, as no book can cover every angle. Read The Mystery of Capital and learn!



2. The mystery of capital? Property rights.
   
   Your reaction to this fundamental statement will probably determine your enjoyment level of this book: are you in the "Oh, really?" camp or the "Of course!" camp? Although de Soto seems to stake this out as his first "Eureka!" moment, this is far from a new insight--the role of property rights in economic development is well-known in a number of fields, including business, law, and economics. Therefore his claim that everyone has simply "forgotten" about the source of the mystery of capital requires some suspension of disbelief. To a large extent, de Soto undermines his claim to novelty by citing a number of renowned property rights scholars (such as Coase and Demsetz, and of course Marx) and noting that Latin American governments have recognized property rights as being key to economic development for the past 200 years. Somewhat shocking to me is the absence of reference to Douglass North, the Nobel Prize-winning economist who deals with virtually the same question ("why do some countries consistently outperform others?") and arrives at virtually the same conclusion: countries with institutions that foster property rights do better. De Soto rightfully concludes that culture is not to blame for everything, but North has a more developed framework that encompasses not only culture but other informal norms (such as those that allow the extralegal economy to function) as well as the formal institutions and their enforcement. What I'm trying to say is that if the "mystery of capital = property rights" part was at all surprising (or even if it wasn't), give North's 1990 book on institutional economics a read.
   
   Personally, what I found more interesting was the focus on the extralegal economy of developing & underdeveloped countries. Undoubtedly, this is a topic that does not garner much attention, and when it does it is more from a human rights standpoint than an economic standpoint. De Soto's point that these "extralegals" are often not extralegal by choice, and often productive members of society is well taken. So is his point that formal laws must be harmonious with informal customs (although it is interesting that he spends much time arguing this point, which is taken as a given--and starting point--for North and other institutional economists). As other reviewers have noted, however, a degree of skepticism is needed when de Soto treats his "legalize what is not extralegal" mantra as a panacea for all poor countries' ills. Not just because of the logistics necessary for such an endeavor (such as the simultaneous improvements in the many complementary institutions to property rights necessary in order to fully realize the economy's potential), although that is a key stumbling block. Nor is skepticism needed purely because of the fact that de Soto apparently expects a virtuous politician (or enlightened consultant) to implement in a series of fell swoops what it took the US and Europe many centuries to achieve in a gradual, organic evolution kind of way. Even the success of Japan was not as precipitous as de Soto and others claim--Japan's rise to power is best viewed as starting with the 19th century Meiji Restoration, not the post-war period. It's not even because de Soto doesn't seem to consider the situation where extralegal norms are inefficient or even run counter to capitalism (which is often a primary reason why reform is pushed by the IMF and other such actors).
   
   No, what concerns this reviewer even more is that the causality de Soto argues seems counter to what his actual US/Europe examples imply. In other words, de Soto argues that the economic potential of extralegals would be unleashed if only they were allowed into the formal economy. That is, legalization of what is extralegal leads to economic development. Yet, the example of US settlers suggests the exact opposite. Rather than the legalization of extralegal activities (like squatting) being instrumental to the release of economic potential, it was largely an irrelevant, post hoc adjustment to reality. Politics certainly figured in, but purely from an economic standpoint, the extralegal institutions trumped the outdated and inefficient legal institutions anyway. The squatters were going to squat and the gold diggers were going to dig, and the law was at worst a minor nuisance to them as they pursued their economic activities. Economic changes heralded legal changes, not the other way around. Not only that, but the decision to tolerate and even reward squatters--while an economically justified decision--actually undermined property rights in the traditional sense, ironically.
   
   In other words, it was the economic development that preceded legalization; this is not the causality for which de Soto argues. To that end, one cannot help but think that the economic potential of a Peruvian shantytown dweller--while positive, from a value-creation perspective--is dwarfed by that of a historical US frontiersman or UK suburban textile worker. In that case, the focus shifts to classic concepts like comparative advantage. The implication is that the question becomes: what sources of competitive or comparative advantage can be exploited to achieve sustainable economic development? The legality of these aspects becomes somewhat trivial. If economic development is fostered, the legal system will fall in line (case in point: China's meteoric economic rise is finally being accompanied--albeit slowly--by legal reform, but clearly it was not legal reform that drove China's economic ascent!). Don't get me wrong: improving a country's system of property rights can do nothing but good. But would legalizing what is currently extralegal propel a country like Peru into the ranks of the developed, "rich" countries? That's a little harder to believe. It also casts a shadow on de Soto's sunny optimism because it would then be possible for a country to "do all the right things" and still languish in poverty.
   
   De Soto's zeal is admirable, and he's clearly on the right path in general. And even though his examples suggest that economic change precedes legal change, while he argues that legal change precedes economic change, these are not mutually exclusive processes so he is not necessarily wrong (he just has less anecdotal support than he presumes). I just worry that even if his suggestions are implemented, 10, 50, or 100 years from now we'll still be asking the same basic question: why do the gods of economic prosperity smile on some places but not on others?



3. Life changing book, should be read by everyone. Very easy to comprehend and very easy to read in one or two settings. What is capitalism, what is a capitalist and what is capital? More importantly, why do some have the good fortune to be capitalists? And, why have so many missed the boat? DeSoto doesn't give the formula for alleviating world poverty. More importantly he provokes the reader to start looking for answers. The "Mystery of Capital" essentially becomes the source of knowledge capital in action. I've already started looking at the billions of humanity stuck at the bottom in a whole different way. Hopefully you will too after reading this book.



4. To what extent do private property rights--dividing up the earth among individuals, making everything a commodity which can be bought or sold--facilitate economic development? Are they absolutely required? Could a planned economy manage to guide development, perhaps with (nearly) as much speed, but a lot more consideration for humanity?
   
   This is an important question for Marxists as well as others. It's also a controversial one. Adherents of Trosky's theory of Permanent Revolution (Bolsheviks more generally, in fact), and of Che Guevara's theory of peasant-based rural guerrilla rebellion, insist that it is possible and desirable to make the transition directly from an underdeveloped, largely agrarian society to an advanced, industrial capitalist economy under the auspices of socialist planning. In terms of legal systems, they believe it is possible to bypass a system of private property and free enterprise, moving directly from feudalism (landlords and peasants) to socialism (collective ownership of the means of production, distribution and exchange) without capitalism (the private ownership and building up of small businesses into giant capitalists industries, aka the MoP).
   
   Classical Marxism--represented by Marx himself, most Marx scholars, and politically speaking, by (for instance) the Russian Mensheviks--holds instead that every society must pass through a long period of capitalist industrialization before it is ready for socialism. Private property rights must be granted and protected by the government, development must take place under the "guidance" of capitalists (they are really just seeking their own individual self-interest, but in the aggregate they guide things), productive capital must become ever more concentrated into fewer hands, until eventually the forces of modern production are too large and too concentrated to be held by any one person in a society that considers itself democratic, and control of them must be taken away from individuals and given to society as a whole.
   
   Like any honest Marxist, although I'm convinced of the need for a planned economy in any highly industrialized society, I'm torn on the question of third world development. On the one hand, the classical Marxist argument seems more compelling and more in tune with reality. On the other, there is a strong emotional impetus to accept the revisionists' theories about moving straight to socialism. Must all of humanity really pass through the ugly period that the West experienced while capitalism was developing here? Modern sweatshops, all over the world, are like Charles Dickens' London on a massive scale: child labor, starvation wages, dangerous conditions, 16-hour days. Is it really necessary to see all this suffering happen again? Surely it would be inexcusable to dogmatically hold to the classical Marxist view if there was indeed an alternate, more humane path to development.
   
   The Mystery of Capital takes the basically libertarian viewpoint that an extensive and rigidly enforced private property system is necessary for development to occur--roughly in line with the classical Marxist view about the capitalist development stage that must precede socialist planning. It makes the case rather well. Since 100+ reviewers have already summarized the book, I won't. Instead I'll suggest reading De Soto in conjunction with Law and the Rise of Capitalism by Michael Tigar, which documents the *actual* role that libertarian (bourgeois) law had in the *actual* development of capitalism in the West. It nicely rounds out De Soto's hypothetical argument about what is required for the *future* development of the third world.
   
   Even if the argument of De Soto/classical Marxism is correct, no one should think that legally-enforced private property is all that is necessary for development today. For we live in a different age than the one in which classical Marxism was born. Today there is an unprecedented development gap between the industrialized and undeveloped world, something that wasn't faced by the early industrializers (Britain, Western Europe, America). New and unique obstacles therefore face those who wish to industrialize in today's global economy.
   
   Even with extensive private property laws in place, no infant manufacturing industries are able to compete on the free global market with those of the advanced industrialized nations. Thus, complete free trade provides another stumbling block to development even if private property laws were extensive and thoroughly enforced. Perhaps developing nations can freely trade their agricultural products and raw materials, but if they do not protect their markets for industrial products, they won't ever develop their own industries. An Indonesian car is not going to be able to compete on the free market with Japanese and American ones. The industrially undeveloped countries must be protectionist about their manufacturing industries until they are sufficiently developed to compete against established global companies. To continue with the same example, protectionism would allow an Indonesian car maker to grow to the point where it was providing cars for the entire Indonesian domestic market. At this point, it would be robust enough to have at least a fighting chance should the Indonesian government open up the automobile market to free trade, allowing foreign companies to sell cars in Indonesia and the Indonesian company to sell cars in foreign companies. For a further development of this argument, check out books by Ha-Joon Chang (Kicking Away the Ladder) and Erik Reinert (How Rich Countries Got Rich...Why Poor Countries Stay Poor). Needless to say, this will require a political battle by common working people of the first world against the economic elites of their own countries. Overseas development can only help working people in the first world: as other countries develop, their wages rise, and Western capital stops going overseas to exploit super-cheap labor, so more jobs stay here in the West. However, Western economic elites--by which I mean to refer to that select group of people who are in a position to actually profit from lack of development overseas, the owners of the capital that is benefiting by exploiting cheap foreign labor--will continue to try and make free trade, which is an impediment to development, a condition of Western loans and aid. For them, development of industries in the undeveloped countries represents merely a loss of cheap labor and a bunch of new competitors.
   
   Finally, what about the revisionist Marxist view, that of Trotsky, Che Guevara and others? It is possible to empirically check up on that line of thinking: just examine the record of states which have attempted development under capitalist and socialist legal systems. Compare existing and formerly existing socialist states and their efforts at development against the efforts of *comparable* (you don't compare Cuba with the United States, obviously) nations who have followed the liberal capitalist model of development. Many books have been written on the Cuban case, putting it in comparative perspective against Latin American nations with similarly undeveloped economies who have followed the capitalist model, and looking at whether Cuba's policies can potentially serve as an alternative path to development. Hopefully these books also take into account the effect of the crippling American-led embargo, or else their conclusions will be flawed in favor of the libertarian/classical Marxist view. I personally haven't read any of these books on comparative development in Latin America, but I plan to do so soon. After all, the entire third world is just waiting on my answer about what it should do! :)



5. This book reveals what needs to be done to bring the third world out of poverty. The everyday American does not have a clue about what made America's economy the best in the world. Property rights are the key to advance any civilization out of poverty. Just look at china and how with their economy has exploded with the limited property rights they have granted.

5 comments about Capital: Volume 1: A Critique of Political Economy (Penguin Classics).

1. Reading the "reviews" of Capital here on Amazon.com, a person who has read the book can see that most "reviewers" have not even troubled themselves read the book! Instead of taking the time and energy to plow through this work, many would rather get on a soap box and ramble on about their own views thereby "reviewing" the work.
   I read the entire book from cover to cover. Not an easy task. It took me more than a year with persistence! But I did it.
   Socialism is not mentioned once the the actual work itself. (Of course it is mentioned in the 87 page Introduction which some of the "reviewers" might have bothered to skim through!)
   What is the name of the book? Capital! Not Communism or Socialism! One who has bothered to read this long book knows that the book has nothing to do with Communism. The book was supposed to form a scientific explanation of what the Capitalist mode of production was and how it formed and its' inner workings. Marx felt that after writing the pamphlet Manifesto of 1848, he owed it to the world tho explain what Capitalism was. It is a microscopic examination of the capitalist mode of production in mid-nineteenth century England. Granted that things have changed since 1850 England, the basic core of Capitalism hasn't changed.
   The man was brilliant, he obviously spent a lot of time formulating an understanding of what Capitalism is. It was an eye opener for me into what Capitalism really is. It was stimulating to see how Marx in the work slowly but surely synthesizes his successive points one by one thereby building a model of the Capitalist mode of production for one to examine.
   My only complaint was that it was too long. He could have said what he had to say in 200 pages rather than 800.



2. "When Volume 1 of Capital was first published, capitalist industry, though predominant in a few Western European countries, still appeared as an isolated island circled by a sea of independent farmers and handicraftsmen which covered the whole world, including the greater part even of Europe," writes Ernest Mandel in his introduction to 'Capital'.
   
   How did we advance to the present day?
   
   An *economic* text, this book is considerably distinct from much of Marx's preceding output. Capital stands a work of theoretical economics similar to the output of David Ricardo in many ways -- calls for action, the nature of the state, and philosophical concepts are given little treatment throughout the 2,500 pages. Marx *did* write about ideas like commodity production, use-values and exchange-values, theories of surplus-value, crisis theory, organic and technical compositions of capital, the transformation problem, changes in the rates of profit, and much more. It is an analysis of *capital*, and hence, *capitalism.* There is little information about the mechanics of a post-capitalist society. After investing the time to read it, readers will be baffled when critics argue "50 bujillion people DIED as a result of 'Capital!!!'" (Marx died in 1883) -- "therefore Marx is wrong!" To be objective, a thinker can imagine the absurdity of blaming World War One, slavery in America, and imperialism on 'The Wealth of Nations'.
   
   The volumes of this massive economic text were published successively in 1867, 1885, and 1894. Most economists feel marginalism has rendered it obsolete. At the end of the 19th century, Bohm-Bawerk argued since production occurs in a roundabout way, part of the product Marx attributed to workers needs to be employed to finance the roundaboutness. Workers would obtain the whole of what the produced only if production was instantaneous; as a result, interest must be paid no matter who owned the capital.
   
   This is a brilliant work. The tough part is understanding the meaning of Marx's terms, which was especially difficult for me, learning the neo-classical viewpoint first. The first chapters took a few days to understand with confidence. After that, the sheer length of the text is formidable, though rewarding and absolutely fascinating.



3. If :
   - Your mum has taught you lots of valuable things (eat your vegetables, be nice to old people and little dogs, don't be late to school, keep a clean nose) but she was never really able to explain why you had to WORK for a living - instead of, you know, just living;
   - Your teachers packed your head full with all kinds of useful knowledge (about prepositions and adverbs, mineralogy and astrophysics, the reproductive organs of plants, x+2-y=0) but they never told you how exactly PROFITS are made - and why anybody would want to make them anyway;
   - Your friends and lovers can spend hours yakking about various interesting topics (the latest music machine, videogames, designer shoes, imitation leather sofas, blockbuster movies, pink underwear and cherry flavoured bubble-gum) but they call you a bore and a nitpick whenever you wonder why you're all surrounded by so many COMMODITIES and publicity ads promising you bigger, better and faster useless things.
   - You often have the impression that some greater truth is lacking in your life (and you've tried all the legal/illegal drugs, exciting TV shows, gurus and psychoanalysts, help-yourself books and bestsellers about kid sorcerers)...
   
   ...Then the time may have come to have a long talk with good old Uncle Karl - the black sheep of the social sciences, the guy nobody likes to mention at social occasions (except in the form of a joke: "have you heard the one about Karl Marx in Las Vegas?"), the most misquoted and misinterpreted modern thinker.
   In "Capital", he kindly invites you to break on through to the other side (that's how countercultural he was) and check out what's really happening behind the glitzy appearances of everyday life. You don't even have to be a genius to understand him (it will be enough if you can count to ten without choking). And you might be surprised about how obvious some things will seem after he explains to you about the cage you're sitting in.
   
   Of course, mum will probably be broken-hearted and fear that you'll join the next anarcho-pinko-terrorist organization down the block. Your teachers might refer to a vast list of successful anti-Marx books and charity organizations. And your friends and lovers will find you an even greater bore than before.



4. I think one of the great misconceptions about Capital is that it is dry and difficult. Many people seem to think that reading it would be a chore. Not true. If you were to read it on your own or in a study group, you'd find it funny, engaging and not all that hard. It assumes perhaps a small amount of understanding of classical political economy (Malthus, Smith, Ricardo, etc) but not much. I'd say if you're going to read it, read it in a group, because some of the ideas need to be worked out, but four friends of average intelligence can understand this book with a minimal level of effort.
   
   That said, is it worth it for you to take the time? I'd say so. While I may think a number of Marx's ideas are just plain wrong and the ideas of many of those who followed in his footsteps to be even more misguided and destructive, I still think this is worth the time. Besides being a book by the man who has influenced world events more than anyone else in the last two hundred years, it is also just very well written and a goddamn good, and important, read.
   
   A friend of mine once described Capital by saying ,"this is literature". It definitely is, with all the complications that come with that classification. This book does not explain the workings of a capitalist economy. It is not a science textbook. It is a brilliant work that is part flawed history, part political theory and part a discussion of classical political economy. Everyone should read it, but no one should take it all at face value.



5. I could write 10 pages on my specific agreements and disagreements with Marx's economics analysis, but this isn't the place for that. I guess more than anything else I've got two lingering reactions. First, I wanna grab Karl Marx by the shoulders, shake him, and tell him that, however much physics envy he's got ("the rate and mass of surplus value"), he cannot make economics into a science, and that even if he could he wouldn't be able to write the authoritative foundational text for that science by just theorizing abstractly without doing any experiments. Second, I want to thank and congratulate him for his automatic, human and above all honest identification with the struggle of the working against the capitalist classes, which I found indescribably refreshing after earning an econ degree from a neoliberal department where the norm was to take the opposite orientation and then clothe it in depoliticizing claims of objectivity.
   
   I was surprised by how often the great anti-capitalist agreed completely with capitalist orthodoxy, for example on the production benefits and human costs of the division of labor or on the need for money as a medium of exchange. I thought Marx was at his best when he was most empirical: detailing the horrors of industrial wage slavery in Dickensian Britain and then tracing the contours of the debates on the Factory Acts, especially when he was righteously lacerating the apologists of the factory owners. And now, just for you, I'm gonna type out the full text of all the parts of this book that deal with Marx's vision for a post-capitalist society, all both of 'em:
   
   p. 515fn33: "The field of application for machinery would therefore be entirely different in a communist society from what it is in a bourgeois society."
   
   p. 739: "In this way he spurs on the development of society's productive forces, and the creation of those material conditions of production which alone can form the real basis of a higher form of society, a society in which the full and free development of every individual forms the ruling principle."
   
   And that's it, two sentences in 1,100 pages. So anyone who wants to blame Marx for Stalin must seek their evidence elsewhere, possibly in Bakunin.

5 comments about A Brief History of Neoliberalism.

1. The traditional left, in its attempts to run for cover once the edifice of Marxism collapsed, found succour in many ideologies that seemed to explain power imbalance in economic and social relationships. Many of these "new ideas" such as Post-Structuralism and Foucaultian-based power theory, seem to offer a dope-laced understanding of the world and make very specific economic assertions about the world.
   
   The central theme of this book, that economic power is being reconstituted in upper classes to a degree not seen since the 1930s, is a worthy and interesting idea. In fact the raw data indicates that more and more wealth, in percentage terms, is being concentrated into fewer and fewer hands -- especially since the breakdown of the postwar concensus and the demise of the welfare state. This being an economic statement should not be all that hard to prove. How this happens and why, and if the benefit is unjust, or disabling to certain notions of economic justice, Harvey offers little in terms of empirical facts.
   
   Although David Harvey writes well, his evidence is a thin gruel of a single source study by those sympathetic to his cause, and also some sources far too generally cited to actually explain how and what is happening in economic terms. As such the house that Harvey builds is not one that I would like to live in. I found that I was constantly wanting him to prove his point, but could find no economic basis in his book to either explain this drain of wealth or to support his assertions of who and what institutions were making it possible. Instead there was only the strident and oft-repeated boot-strap ideologies each one trying to pick the other off the ground, but none being supported well enough to justify the explanation - in that sense it is similar to Marxism -- and endless series of conjecture with not attempt to look at alternative beliefs and certainly violating the principle of falsifiability.
   
   In addition, there is also a deep suspicion on my part of any theory that attempts to foist a single theory to explain the actions of leaders as diverse as Deng Xiao Ping, Maggie Thatcher, Pinochet, Reagan -- indeed Swedish Socialist governments reconstituting new free market "reforms" is also seen as a direct result of Neoliberalism!!! It raises a critical question of what exactly isn't Neoliberalism?
   
   Having said that, this book is a good read and does encapsulate the current accepted academic dogma of what Neoliberalism in fact describes. Harvey writes well, and undoubtedly the concentration of capital needs to be explained. It is however within the realm of economics that such assertions are proved. Harvey has a lot more work to do to prove his assertion.



2. This is a very rich book. The subject, neoliberalism, must be understood if we are to understand current politics. Harvey's other books--those I have in mind being THE NEW IMPERALIASM, LIMITS TO CAPITAL, THE CONDITION OF POSTMODERNITY--are equally illuminating. What I write here, I admit, does not constitute a review of the book, neither summarizing its contents or approach, nor offering any criticisms; it is merely an assurance that your study of this book (which I am on my second reading of after having read the first two of the books above-mentioned along with Naomi Klein's uncannily brilliant THE SHOCK DOCTRINE) will give you a good grounding in the matter he treats of: neoliberalism, "its origins, rise, and implications," and will give you a sharper and quicker sense of current national and world politics. Harvey possesses the three qualities of an academic writer that justify, almost demand, studying his work on a subject of this importance: he masters the materially relevant data (i.e., he is a genuine scholar), he thinks well, and he writes well.



3. Harvey(H) has written an interesting book that ,unfortunately,confuses neoliberalism(libertarianism)with conservatism.This erroneous view is at center stage in the book whenever Adam Smith's name shows up in the discussions.H is badly mistaken when he claims that Smith's view was that "...the hidden hand of the market was the best device for mobilizing even the basest of human instincts..."(Harvey,p.20)such as greed.Smith's view was heavily qualified- in many cases such an approach would work but in other cases it would not work.For instance, consider the myth spread by the economics profession that Smith was opposed to tariffs.Smith was opposed to protective tariffs only.He favored revenue tariffs and retaliatory tariffs if there was any probability greater than 0 that such retaliation would result in the offending country removing the impediment to free trade.He would completely reject the neoliberal approach(IMF,WB,WTO) to the removal of protective tariffs,which was to end them as quickly as possible.Smith's policy is the exact opposite.Such tariffs are to be removed in very slow steps and in a careful manner so as not to create a problem of severe unemployment,which is exactly what has happened in practically ever country that has had to ask for the financial "help" of the Neoliberals.
   It is not true that the Adam Smith Institute(Harvey,p.57) in New York supports the approach laid out by Smith in BOTH The Theory of Moral Sentiments(TMS,6th edition,1790) or the Wealth of Nations(WN,1776).The Adam Smith Institute is a libertarian organization whose members have no idea about what Smith said,either in theory or in practice(applied policy).
   Finally,Neoliberalism is a failure by the standards of freedom contained in BOTH TMS and WN,and not just in TMS(Harvey,p.185).There is absolutely no conflict between the standards of freedom laid out in the best version of TMS, which was the sixth edition,and the WN.
   Smith was the first to realize that there was a dark side(severe externality) to the combined operation of the Invisible Hand and the division of labor process.He spent 7 pages [Modern Library(Cannan)edition,pp.734-741)]pointing out that only the government ,by providing free,universal education to all, if necessary,could remedy this undepletable externality that could destroy the capabilities of the working and middle classes.
   
   Harvey can earn 5 stars from me once he revises the coverage of Adam Smith so that it reflects what it was Smith actually said and recommended as policy and not what some economist ,who only knows how to manipulate a bivariate or multivariate version of the normal probability distribution,claims that Smith said or meant.



4. A good review of the development of neoliberal ideology in public opinion, government policies and global relationships



5. I'm going to do something here that I rarely do: attempt a short review. There are many excellent reviews of this fine book that I don't need to add much except to say that I agree with the bulk of them. I believe that neoliberal ideas have caused incalculable harm over the course of the last several decades. There are signs of increasingly wide discontent and distrust of the kinds of economic prognostications put forward by people like Milton Friedman, Ronald Reagan (admittedly not a great economic thinker, but unquestionably the great popularizer of neoliberal ideas), and their ilk, seen in part by the great commercial success (and surprisingly popular reception) of books like Naomi Klein's THE SHOCK DOCTRINE. Increasingly, people are coming to understand that what is best for General Motors just might not be the best thing for the rest of the world. But there is little doubt that neoliberal and libertarian thinking (and yes, I do not think there are important distinctions between the two -- the best thing I've read lately about libertarianism came from the superb SF novel by Kim Stanley Robinson, GREEN MARS -- one of his characters thinks to himself, "That's libertarians for you -- anarchists who want police protection from their slaves") will continue to confuse thinking about economic and political ideas. But as those ideas have increasingly resulted in nothing more nor less than a shifting of wealth into the hands of a very small number of people, that vastly larger number of people (even in the United States, where economic inequality has been increasingly dramatically since 1979 -- neoliberal ideas were actually first embraced by Jimmy Carter, though with nothing like the religious fervor of Ronald Reagan), have started to realize that all "trickle down" economic policies are a massive con job.
   
   Harvey in this book wants to present the history of neoliberal thinking. "Neoliberal" as a term is in common usage in many parts of the world, but not in the United States. "Neoliberalism" is not a left wing but is a right wing position. The two most famous neoliberal political figures were Ronald Reagan and Margaret Thatcher. Harvey's book is a marvelous recounting of that history and an accurate chronicler of the frequently devastating effects of neoliberal, free market principles. In particular, he writes of the catastrophic effects neoliberal principles have had through their forced acceptance in many non-European countries.
   
   I find very little to differ with in this book, but I would make two distinct recommendations. First, if you want to read a book by David Harvey, there are three others that I would perhaps recommend more strongly than this. If you have any interest in the postmodern debate, his THE CONDITION OF POSTMODERNITY is one of the 3 or 4 greatest works in the field. Next, if you are interested in globalization, I would recommend THE NEW IMPERIALISM, which overlaps a good deal with THE HISTORY OF NEOLIBERALISM. Also, one of Harvey's earlier works, THE LIMITS OF CAPITAL, though a bit more challenging, is one of the best contemporary works extending Marxist (not Communist -- Harvey is both anti-Communist and a Marxist) ideas into a contemporary intellectual framework. So, my first recommendation is to look at those three books. My second is to look at Naomi Klein's THE SHOCK DOCTRINE for a more popular, entertaining exploration of much of the same territory as this book. She may lack some of Harvey's sophistication, but she surpasses him as a communicator.

5 comments about America's Great Depression.

1. A remarkable application of the Austrian Business Cycle Theory to the most catastrophic (and very preventable) economic disaster in the history of the United States.
   
   It's tragic that even today, despite all the contrary evidence, it is commonly believed that the Great Depression was a product of Capitalism gone wild (Worst spring break movie ever). Moreover, the fact that Hoover is considered to be a pro-free market, do-nothing eater of babies president is frankly disgusting (Well, at least I haven't read that he ate babies). Thank you Murray Rothbard for making available a sane interpretation of this unfortunate calamity.



2. The definitive scholarly analysis of why the Great Depression happened and the policy failures which tried to allievate its tragic consequences.
   
   This is the seminal volume that launched Rothbard's reputation as the world-class expert on this issue.
   
   His subsequent work related to the history of the Federal Reserve and its destructive monetary policy which formented the Depression cemented this important assessment.



3. Murray Rothbard's book, America's Great Depression, is really two books in one. One is a very bad book. It purports to use economic tools to explain how the Great Depression came to be. The other is a potentially very good book. What is suggests is that Herbert Hoover, although well intended, engineered a bad situation into a catastrophe. Overall, I do not recommend the book to the general public as having a good explanation of why events of the 1920s led to the Great Depression, nor would I recommend it to the general public as an exemplar of good economic thinking. But I do recommend it to my fellow economists as an exemplar of how not to do economics.
   
   The bad book occupies the introductions to each of Rothbard's five editions of the book (the last published posthumously, and with an introduction by Paul Johnson), and then the first six chapters. From those introductions, it is apparent that Rothbard was a follower of Ludwig von Mises' Austrian school of economic "thinking," a school that apparently believes, economics can be a fact-free science. That can be seen in Rothbard's Introduction to the First Edition where he wrote (xxxix f.): "... I make no pretense of using the historical facts to "test" the theory. On the contrary, I contend that economic theories cannot be 'tested' by historical or statistical fact. ... The only test of a theory is the correctness of the premises and the logical chain of reasoning." If that is indeed the Misesian-school's thinking, I question what kind of theory and what kind of economics can be produced by its fact-free science. Unlike Athena and Zeus, truth cannot spring from von Mises' head unvarnished by observation, and it cannot do so from anyone else's head for that matter. After all, how did von Mises first get to the theory he proposed, and Rothbard used, without actually having observed facts on the ground. In the end, truth needs recourse to facts and observations, and to refutable hypotheses. It is the scientist's task to tease the evidence, or lack thereof, from recalcitrant facts and observations for the hypothesis or theory being proposed. Absent that, all one is left with is fact-free science, which is no science at all. It is simply assertion papered over by an ideological just-so story. In that regard, the Misesian-school appears to be no better than the Marxian school (although ideologically, the polar opposite). If Rothbard represented the Misesian-school accurately, I would dismiss that school's approach as being theory without measurement, in the same way, as in my graduate days, that we dismissed measurement without theory.
   
   To show how misleading fact-free science can be, I recall a famous story about Albert Einstein and quantum mechanics. Einstein, using a thought experiment in 1935 (the so-called EPR paradox) had proposed a seemingly irrefutable test about particles in quantum mechanics. The paradox was impossible to test with the equipment available at the time, and so stood for quite a while. Only in the 1970s and later, with the advent of high-energy cyclotrons, did the paradox become testable and indeed was refuted.
   
   Of course, Rothbard's book is not entirely fact-free. He did use some historical facts to 'test' the theory, or at a minimum, to demonstrate its validity. He did that despite his contention that economic theories cannot be "tested" by historical or statistical fact. I find the difference between what he said he would not do and what he did to be most puzzling.
   
   Rothbard's book, in its first part, contains much that was ill defined, seemingly inconsistently defined, or downright misleading. Also, there seems to have been too narrow a focus on component parts, coupled with a unwillingness to look at larger and possibly more pertinent aggregates. The book has other areas of confusion as well, but those are of less import, and I will skip them in the interest of brevity.
   
   In Chapter 1 of the book, we come across the first of Rothbard's confusing and ill-defined terms. It is in the context of the hypothesis he sets as to the economic theory behind what caused the Great Depression. According to Rothbard, the hypothesis depends on von Mises' view that bank credit expansion will lead to a series of investment errors that turn out to be "malinvestment in higher-orders of production." One can ask, what are "higher-order of production"? Rothbard definition was: investment in capital-goods "most remote from the consumer"(10). What does that mean? Can one consider investment in farmland, a form of capital, as investment in a higher-order of production, insofar as farmland can be pretty remote from the consumer? I doubt that is what Rothbard had in mind. The next question is, what is "malinvestment," and how does it lead to a downturn in the economy? As to the question's first part, what is the definition of malinvestment, frankly, it was never clear to me, being based on the already ill-defined notion of "higher-orders of production." As to the question's second part, Rothbard's reasoning there seems to fail his "logical chain of reasoning." Rothbard's reasoning was that the decline in demand for higher-orders of production is accompanied by an increase in demand for lower-orders of production (whatever that means) and that is what leads to an economic downturn. But that is not logical. When one component of demand is increasing while another is decreasing, why should demand in the aggregate decline? Only a decline in aggregate demand will lead to an overall decline in profits and employment. Otherwise, all we are talking about is a change in the composition of demand, not a change in its total. Rothbard's focus on that component of demand he called, "malinvestment," to the exclusion of other components does not logically explain why the total should decline. If the Misesian hypothesis is that a single component's decline reduces total demand, the burden of proof is on Rothbard, or members of the Misesian-school, to provide first, a tight definitions of terms and then observable evidence to support the hypothesis. Otherwise, all they have done is engage in just-so fables.
   
   Another definition Rothbard used, one that I think is highly misleading, was his definition of "inflation." When I first skimmed through the book, I thought Rothbard had used it as it has been historically used, to mean price inflation. So, I then wondered, what inflation was he talking about? That's because the 1920s was a period of mild deflation in most prices, except for farm land prices, which declined significantly, and for stock prices, which increased significantly. Only upon reading the book carefully did I discover the peculiar meaning Rothbard attached to the term, "inflation." It can be found on p. 12, n.8: " 'Inflation' is here defined as an increase in the money supply not consisting of an increase in the money metal." So, any increase in non-metallic money was for Rothbard, by definition, "inflation." (Some of the reviewers, I observed, do not seem to have noticed Rothbard's odd definition of the term.) Rothbard's terminology was and is downright confusing. The term, inflation, first came into use in the US in the late 1830s when it meant what it means today. (The precise definition is in: Online Etymology Dictionary, © 2001 Douglas Harper: "Monetary sense of, enlargement of prices - originally by an increase in the amount of money in circulation.") In contemporary terminology, it means an increase in the price of good in services. In the 1920s and 1930s, it seemed to have meant an increase in stock prices. (See Amity Shlaes' The Forgotten Man, p. 4.) No twentieth-century economist I know of has ever used the term as Rothbard did.
   
   The meaning Rothbard assigned to the term "inflation" may have in part stemmed from the Misesian thought that bank credit expansion leads to business cycles. But I think the primary reason he used the term was his animus to fractional-reserve banking in general, and to central banks in particular. Specifically, Rothbard saw fractional-reserve banking as being "fraudulent" (25). He would have had the government outlaw fractional-reserve banking by imposing 100% gold reserves on deposits. I find it odd that Rothbard, who professed to be a libertarian, saw no contradiction here between his recommending the use of the heavy-hand of the government to override the people's own decision-making and his own libertarian principles. What I have to conclude is that he viewed depositors as incapable of making decisions in their own best interests. Of course, one can ask, why stop with having government imposing its will in this area? Go the whole hog and become a true Marxist. Have government impose its will in all areas by making all the decisions for the public. I, though, take the opposite view. People have to be considered as capable of making their own decisions and as having responsibility for them. In the field of banking, depositors have to be considered as knowing what's going on, and as being willing participants in fractional-reserve banking. That's because they benefit immensely from fractional reserve banking, with the primary benefit being the reduction in the costs of holding and using money. As a contrafactual, suppose depositors don't want to use fractional-reserve banking. They could always hold cash balances in a vault in their homes or offices or factories. For transactions needing checks, they could go to the bank for cashiers' checks. All that, though, is expensive and inconvenient, which is why depositors use banks whose reserves are just a fraction of deposits. I would also have to conclude here that, not only was Rothbard apparently an ideologue, he was an elitist. Because he thought he knew better, he wanted to make people toe the line for what is good for them. Again, that is not very different from Marxism wherein the leaders supposedly know just the right kind of goods and services to produce for the people (who, though, never seem to concur).
   
   Chapter 4, titled, "The Inflationary Factors," is the heart of the bad part of the book. Rothbard opened the chapter by describing what he thought would happen in the absence of fractional-reserve banking. Specifically, he said (86): "For a hallmark of the inflationary boom is that prices are higher than they would have been in a free and unhampered market." (He of course revealed there that he misunderstood the difference between the level, and the rate of increase of prices. Interpreting a free and unhampered market to mean a market with 100 percent gold reserves for deposits, prices would indeed be higher with fractional-reserve banking, but in an inflationary boom - meaning one where the money supply increases rapidly and relative to gold reserves - prices would not only be higher, they would be increasing faster than they otherwise would have.) But even before the advent of the US current central bank, the Federal Reserve, there never was a period in US history without fractional-reserve banking and with the market being totally free and unhampered. Below I will compare the period 1899-1912, when the market was more free and less hampered, with the period of the 1920s. That is because the first period was prior to the Federal Reserve's establishment, and the second was afterwards when the market was, supposedly, less free and more hampered.
   
   The inflation (of the money supply) of the 1920s on which Rothbard dwelled can be found in Table 1 of chapter 4 (p. 92). To measure inflation of the money supply, Rothbard used a very broad definition of money that included life insurance net policy reserves. While I have seen many definitions of money, I have never seen one like that. Of course, one is free to use any definition one wants, but it has to be grounded in some observable relationship. But Rothbard's approach, that hypotheses and definitions "cannot be 'tested' by historical or statistical fact," precluded his doing so. If we stick with the usual definitions of money for that period, either M2 or M2 + S&L deposits, we find that the money supply grew respectively by 45 to 43 percent in the 1920s. (Rothbard's inclusion of life insurance net policy reserves and S&L capital rather than deposits, increases that number to about 63 percent.) Of course, one could ask, what was the increase in the period 1899-1912, prior to the Federal Reserve's establishment? The respective increases turn out to be, 149 and 132 percent. At a compound annual rate, the numbers for the 1920s are respectively, 4.5 and 4.8 percent, while for the period 1899-1912, they are, respectively, 7.3 and 6.7 percent. (For consistency, I would have compared Rothbard's definition that included life insurance but I did not have data on life insurance for the earlier period; also, again, for purposes of consistency, the data I used were from Table A-1 pp. 704-711 of Friedman and Schwartz's, A Monetary History of the United States, 1867-1960.) Clearly, there is nothing outlandishly large about the money supply growth of the 1920s to get very exercised about. Again Rothbard's narrow focus on a particular datum for a short period turns out, on the surface, not to have any explanatory power.
   
   In both periods, one contributing factor to money supply growth was that both banks and depositors chose to increase the ratio of deposits to reserve money each held (currency plus bank reserves, also called, high-powered money or the monetary base). The difference in the two periods is that reserve money grew more rapidly in the first period than in the second period. In the first period, reserve money grew at a 4.8% annual compound rate while in the second period, it grew at a compound annual rate of slightly more than 1%. Not surprisingly, prices in the first period rose faster in than in the 1920s. (Specifically, from 1899 to 1912 wholesale prices rose 32 percent while from 1921 through 1929 they fell 2.5%!) What we see here is that the 1920s, being less free and more hampered can, sometimes bring about a modest deflation compared to a period that was more free and less hampered. One can see what happens when fact-free science comes to face to face with pesky little facts.
   
   If chapter 4 is the heart of the bad book, Table 7 on p. 109 is the heart of chapter 4. It was from the data in that table, that Rothbard argued (108): "...the inflation [in money] was clearly precipitated deliberately by the Federal Reserve. The plea that the 1920s was simply a 'gold inflation' that the Federal Reserve did not counter actively is finally exploded." His reasoning was that "controlled reserves increased by $1.79 billion for the entire period and that exceeded the monetary gold stock's increase of $1 billion." The problematic aspect with the 'controlled reserves' in Table 7 is that Rothbard's never provided a definition for controlled reserves. While he did provide some computations pertinent to controlled reserves on p. 113, when those computations are applied consistently throughout Table 7, the figures do not add to the amounts he termed there, controlled reserves.
   
   Another way of looking at what Rothbard was describing can be found Chart 25 on p. 282 of Friedman and Schwartz's Monetary History. The chart demonstrates the opposite of Rothbard's claim. It makes it quite clear that what the Fed was attempting to do was to use Federal Reserve credit to offset changes in monetary gold stocks that were occurring at the time. Based on the modest growth of reserve money, we would have to say they were somewhat successful.
   
   Another problematic aspect raised by Table 7 is its narrow focus on reserves held at the Federal Reserve by banks that are members of the Federal Reserve system. He did not account for the vault cash of the members or the reserves of the non-members. By focusing just on those reserves, he gave a skewed accounting of the increase in bank reserves. By Rothbard's accounting, reserves increased by 47.5 percent from June 1921 through June 1929. (See his Table 6, 102.) When all bank reserves are taken into account, though, the increase comes to 27.5%; and when all reserve money is taken into account, the increase is just 8.4 percent. (See, respectively, Table A-2, 738f., and Table B-3, 802f., of the Monetary History.) Again Rothbard's focus on a specific component, rather than on the total, presents results that can be viewed as misleading.
   
   A slightly different explanation of what happened is that individuals had a greater preference for bank money than currency in the 1920s, and so they converted their currency into bank money. Comparably, the banks had a greater preference for reserves at the Federal Reserve then they did for vault cash, so they, in effect, transferred any new funds received from the public into reserves at the Federal Reserve. The increase, than, in reserves held at the Federal Reserve was not so much an increase engendered by the Federal Reserve, but simply the workings of banks and depositors preferring one form of money to another.
   
   After chapter 6, we enter into Rothbard's discussion of Hoover's actions. Although he did occasionally discuss actions by the Federal Reserve in those chapters, his primary focus was on Hoover. This part of the book is potentially very good. It provided me with a good deal more insight into what could have made the Great Depression, great. Unfortunately, Rothbard, in accordance with his school's thinking, did not do a full analysis of Hoover. More statistical work would have been necessary, and that is why this part remains only potentially very good.
   
   Rothbard's description of Hoover painted him as an interventionist, a Roosevelt-lite character. According to Rothbard, Hoover attempted to prevent prices and wages from falling. When demand declines, though, both attempts are futile and just stave off the day of reckoning. Hoover may have been partially successful in preventing prices from falling far enough and fast enough. From 1929 to 1933, wholesale prices fell by about 25%. By comparison, in the previous recession in 1920, wholesale prices fell by 37% in the course of one year. Hoover's success on keeping wages from declining is less clear (especially because good wage indexes do not exist for that time). From 1929 to 1933, average hourly earnings in all industries fell by 25% while in the two years from 1920 to 1922 they fell by 15%. For both periods, the compound annual decline is amazingly close, about 7% per year. Hoover's intentions may have been noble, but all he did was to engineer the economy so it could not adjust to the decline in demand
   
   What about the Smoot-Hawley tariff, which many today blame for the Great Depression? The ostensible reason for the tariff was to help farmers, but if US imports are reduced, it becomes harder for farmers to sell products overseas. (Foreign importers won't have the foreign exchange available to buy the farm products.) Rothbard thought it contributed mightily to the Depression. His evidence was the opposition of almost all the economists and the fact that the market broke after the tariff was signed into law (241f.). That though does not constitute evidence. The market's having sunk is by itself not evidence. The old saw of, correlation is not causation is at work here. The fact that many economists opposed the tariff is also not evidence. Indeed, Rothbard did not accept stable prices as being a beneficial goal of monetary policy despite many economists having recommended it as policy. Moreover, there was an earlier tariff, the Fordney-McCumber Tariff, which went into effect in 1922, and was just as onerous as Smoot-Hawley. Yet, it seems not to have caused any lasting real effects. Rothbard, without having done any of the heavy lifting with regard to analyzing the costs of the Smoot-Hawley, then stated (241)" ... it was at a precarious time of depression that the Hoover administration chose to hobble international trade, injure the American consumer, and cripple the American farmers' export markets by raising tariffs higher than their already high levels." This is economics by assertion. It proves nothing.



4. If we are talking about collectivist government privileges interfering with the sound functioning of a prosperous economy, Rothbard knows we can't start researching the Great Depression with Roosevelt's response to an economic collapse. Rather, there's not much to be said about him in this book.
   
   Rather we look to some pretty non-traditional trends in government power. We go before WWI and the ensuing debt, and the resulting advantages in the world economy. Rothbard even goes into a history of America's previous depressions, which we don't hear about, and were all treated with an increased laissez-faire attitude. So we aren't given a "The Great Depression changed everything" theory of unsound economics, just like in foreign policy "9/11 changed everything". In the 1900's, we get a slew of "progressive" government interference with markets. This is not only the FED, but the income tax (reaching 79% in the middle of the depression), union privilege, increased government spending, removing domestic links between the dollar and gold, "protectionist" tariff hikes, price controls, and eventually a mix of fascism and socialism.
   
   Part of what Democrats don't like to hear is that Roosevelt was personally complemented by Hitler and Mussolini on his fascist economic system. Eventually America would "solve" its depression the same way Italy and Germany did - nationalism for war and increased military spending.
   
   But part of what Republican's don't like to hear is that Hoover started the New Deal, which Rothbard shows is what prevents the economy from recovering as it did in all previous depressions. Hoover supported wage controls in a deflating economy, forcing unemployment, which many people believe WAS the defining characteristic of the depression. Others believe it was the stock market crash. But any quick glance at the changes of money supply shows why prices had to do what they did. In an environment of artificially loose credit created by expanding the money supply, the ability to pay loans and make profitable loans, or even any long-term fixed rate contract, depends upon prediction of the central figures who determine how loose credit will be. Even a small change at the government and FED level can cause a sizeable bust.
   
   Many hold "speculation" accountable, saying that the rampant gains of capitalism spurred this reckless speculation. Well, what could be more recklessly speculative than a small group of men trying to set a monetary policy that would simultaneously create massive credit and consumerism? To function properly, the market would have to speculate the decisions of these people, who were trying to speculate the market. There's your excess speculation, which doesn't happen with sound money.
   
   Rothbard gives a lengthy and powerful description of the Austrian Theory of the Business Cycle, which Hayek would eventually win a Nobel Prize for. Also, Higgs shows how the depression could have been considered to last until 1946, if you don't believe that military production bought with debt indicates a good economy. Keynesian and military-keynesian approaches to solving depressions took almost 20 years to fix after an inflationary boom of 8 years.
   
   I recommend this book to anyone interested in a mixture of government policy and the economics behind the Great Depression. It contains well-written arguments and factual numbers to support them. It is not hard to read, although it will read easier if you know a thing or two about economics. Rothbard shines in being able to speak in clear and simple terms while delivering powerful arguments that anyone should be able to grasp.
   
   I do not recommend this book to anyone who is dead-set upon socialism or fascism; however, if you haven't heard of the Austrian Business Cycle Theory to explain the Great Depression, you cannot be dead-set upon those principles. Take the time to read this book. Rational debate requires complete knowledge of opposition viewpoints.
   
   I would supplement this book with other literature from Mises, as well as study the financial situation of Japan in the 90's.



5. We all understand that particular industries and markets may go through hard times at one point or another. But what causes an entire economy to flourish, only to contract at a later date? What causes the entire economy to misread the economic signs? What causes the entire economy to misforecast and make bad investments? What causes a "Cluster of Errors"?
   
   It is hard to believe that anyone could casually discount Rothbard's analysis of the business cycle and the Great Depression given America's current struggle with a depressed housing market caused by the villian that Rothbard goes to great lengths to describe: Credit Expansion.
   
   The fact that this book was written 40 years ago, and that it is just as applicable to today's market as it is to the market in 1929, adds to the intellectual weight and veracity of this work.
   
   This is not a historical narrative, this is a book on economics. It first explains Ludwig Von Mises theory concerning boom-bust business cycles as they are caused by loose Federal monetary policy and loose lending by banks. It then delves into the history of the Great Depression, applying the theory to the history. In terms of readability, I found the book very easy to read and very compelling. In terms of economic analysis I found Rothbard's arguments in favor of Mise's theories regarding the business cycle to be very thorough and convincing.
   
   The Austrian School of Economics is not mainstream. Rothbard is not Friedman, and he is not Keynes. It is unfortunate that some reviewers were hoping to read an echo-chamber for Lord Keynes or Milton Friedman, and seemed to rate Rothbard based on how close Rothbard's theories and conclusions were to the theories and conclusions of their favorite economist.
   
   It is also unfortunate that some of the reviewers were not expecting an economic analysis, but their false expectations should not reflect poorly on the author or his work.

No comments about Capitalism with Chinese Characteristics: Entrepreneurship and the State.

5 comments about Supercapitalism: The Transformation of Business, Democracy, and Everyday Life (Vintage).

1. Robert Reich writes extremely well. In this book, he has some particular points to make. He sticks to the point, and develops his argument very clearly and cleanly. What he's saying is tremendously important to anyone who lives in, or wants to understand, the USA. The way we have traded off gains in our roles as consumers and shareholders, at the expense of our roles as citizens, is a huge change in our society that affects us all. Even if you are a "conservative", you'll find that you can read this book and appreciate what he's saying; it's not based on "liberal pieties", and he's not taking sides. As with many public policy books, he's much stronger on analyzing the problem than proposing solutions, but he is quite up-front about this. His goal is to persuade you to agree that the phenomenon he describes is a real one, and that we should think carefully about the degree to which we like or dislike this tradeoff. The writing style is utterly lucid, and no special knowledge is required to understand everything he says. I have not heard these points made anywhere else; this is truly something new. If you want to understand a lot about how politics works in the USA and its direct effects on you, read this book!



2. 
   This is a very good, clearly written and authoritative book. It is of particular interest to me for it explains why capitalism has developed to be instrumental in the present world crisis for civilisation. The author does not claim this but if one extrapolates supercapitalism's explosion of lobbying and influence to remove impediments to profit, which have demolished many of the social attributes of capitalism, it follows that environmental regulation and law will continue to suffer most from the attention of market forces. There are no affluent companies to lobby on behalf of the retention of ecological services, in effect the life support services of humanity, or to lobby on behalf of the urgent action to curtail greenhouse emissions which have an increasingly visible impact on the earth's physical and biological systems, or to make representations that capitalism must not extend its exploitation of natural resources to use capital as well as interest. These representations are made by dint of the small donations of concerned citizens and are rarely heard.
   
   For these reasons, I would recommend the book to all those concerned with the future health and wellbeing of humanity and therefore students of environmentalism for it explains the fundamental problem that must be solved if democracy is to survive to address the present crisis. This orientation is in contrast with the many reviewers who see the book as economically focussed.
   
   By any scientific calculation, world natural resources and damage to the planet, the accelerating economic growth conferred by supercapitalism is not sustainable. Reich does not address this and the omission reflects the reductionism that separates economics and science. His observations on the demise of democracy are however incisive. In "The Climate Change Challenge and the Failure of Democracy" by David Shearman and Joseph Wayne Smith published at the same time as "Supercapitalism", our conclusion agrees with that of Reich--that democracy must be reformed by separating government from capitalism. We describe a fusion of capitalism and liberal democracy as a root cause of our problems and state that it must be ruptured.
   
   The mechanisms whereby reform can be enacted amount to wishful thinking by Reich. This statement is not intended to be dismissive for it is difficult to visualise how to proceed. As a physician and therefore student of human nature, I recognise both the potency of unleashed human greed and the capacity for self delusion in the face of severe illness! Western democracy is wallowing in both. It would be good if the intellectual giants of public policy, such as Robert Reich and the environmental scientists applied their lateral thinking together.
   
   A final thought. The statement "Capitalism is almost certainly a precondition for democracy" can surely be contested, perhaps not in US liberal democracy but certainly in the ancient Greek origins and operation of democracy.



3. Reich was interviewed on NPR in September 2007, and some of his comments promoting this book were eye-opening and counter-intuitive. His 'driveway moment' suggestions included eliminating the corporate income tax, putting lobbyist contributions into blind trusts so politicians could not know who gave what, preventing punitive fines on corporate malfeasance, eliminating the ability of corporations to challenge business-limiting regulations, and not giving tax advantages to corporations who keep their headquarters in the United States. These were some revolutionary recommendations and I was anxious to read his preparatory research.
   
   Unfortunately this book is a good bit less convincing than his radio interview. The second through fifth chapters are devoted to a litany of scolds about multinational corporations, globalization, outsourcing, Fair Trade laws and other sins of 'supercapitalism.' On nearly every page within these four chapters he mentions Wal-Mart at least once. He rightly blames market forces for the intense competitiveness which drives such corporations to look no further ahead than their next quarterly statement. He correctly places the blame on public ownership for changing corporate focus from customer satisfaction to stock price. There is nothing noteworthy here, and it is 2/3rds of the book.
   
   The first chapter is an excellent summation of the thirty year period 1945-1975, when most of us grew up, when government stimulus and regulatory bite combined to create a hugely-successful economic engine. During this period (our formative) a vibrant Middle Class emerged; educated, financially rewarded, productive, acquisitive and procreative. The new markets thus opened up drove industry to create more and better products, which in turn created more wealth shared among the workers. It was a positive feedback loop that floated all boats.
   
   Chapters 2-5 detail, as mentioned, the change in focus from productivity to profitability but without really explaining how this change came about. It isn't until the sixth and final chapter that Reich begins to lay out his vision of what happened.
   
   The mid-'70s saw the first cracks in the American juggernaut, with the Arab Oil Embargo, the rise of Japanese electronics imports, increasing auto imports, the fall of the U.S. dollar and the strain of the Vietnam War. In response, industry began lobbying Congress for increased freedom from regulation, from union contracts, from environmental responsibilities and from restrictions on overseas outsourcing. By the time Ronald Reagan washed into office the stage was set for major re-ordering of priorities, with the stick-and-carrot of previous regulation-and-stimulus being replaced by carrots alone. Big business took off running, and an unholy alliance of politics and big business suddenly got cozier -- to the point where consumers, citizens & taxpayers are no longer Congress's main constituents.
   
   Reich's solutions to these systemic problems depend, as he admits, on a culture change inside the Washington beltway, and this is unlikely to occur without some sort of intervention to break the dependency on lobbyist dollars. His recommendations on pages 210-211 are:
   * publicly finance election campaigns for all major offices
   * require broadcasters who use the public airwaves to contribute free campaign advertising to candidates in a general election
   * prohibit lobbyists from soliciting and bundling big-check donations from their business clients
   * ban gifts to lawmakers from corporations or executives
   * prohibit privately financed junkets for legislators and aides
   * ban parties staged to "honor" politicians with corporate contributions
   * prohibit former legislators and public officials from lobbying for at least five years after they leave office
   * require lobbyists to disclose all lobbying expenditures
   * mandate that all expert witnesses in legislative and regulatory hearings disclose financial relationships with economically interested parties
   
   I might add term limits would also be helpful. Decoupling legislative elections from lobbyist contributions would help Congress begin to serve the electorate again, and weed out career politicians whose only loyalty is to their own benefit.
   
   To return to Reich's radio recommendations, they have to do with eliminating the fiction that corporations are individuals, with rights and responsibilities. He recommends essentially making all corporations S-type corporations, where all profits and losses are funneled straight through to the shareholders and taxed on the shareholders themselves, rather than waiting for capital gains taxes. This eliminates the tax advantage to corporations to make capital investments (i.e. buy competitors) rather than pay dividends to shareholders. He also recommends that corporate malfeasance, and any fines levied, be charged to corporate officers directly rather than coming out of business profits. Corporations must not be used as proxy people, especially when publicly-held corporations are using shareholder money to enrich the officers of the company without returning an appropriate portion back to the real owners.
   
   In all, I still respect Robert Reich as one of the smartest men in politics, and if he were to run for office I'd vote for him in a heartbeat. Unfortunately (for us) he's probably way too smart to do that.



4. There are really three things I think I would've wanted to know about this book before reading it.
   
   1. Reich's book treats us to a great many (quite persuasive) counterintuitve explanations. I'm a sucker for (good) explanations about phenomena that cut against intuition. For instance, when you learn in basic training that a bullet drops at the same rate as a paperclip, it's obviously true, but counter to your intuition.
   
   2. The book isn't perfect, but it is without any _serious_ flaws of reasoning. His least cogent argument is his claim that corporations cannot be responsible, unless being so happens to be good for the stakeholders of the company. First, I'm not sure that's true for privately held companies. Think of Caribou Coffee, for instance. Nevertheless, his point that the raison d'etre of a modern publicly-traded company is to make stockholders richer is hardly controversial. My view of this section is that he makes too much of some aspects of his case, without considering other non-governmental companies or the actual deeply held values and motivations of corporate executives. Furthermore, his argument would've been made stronger by some knowledge of attribution and dissonance studies.
   
   3. Reich changed my mind on some significant matters of practical import. For instance, if you think, as I did, that many large corporations seem to be failing in their civic responsibilities, this book will challenge that. (This may simply be an instance of 1 above.)
   
   All in all, I expect this book to leave a mark on future debates on the proper role of business in civic matters and government in business matters.



5. The author describes the growing disconnect between capitalism and the communities served by our economic system. Initially, he discusses the 1873-1897 Long Depression which economists still debate today. Workers migrated from farms to factories. Between 1945-1975, democracy and capitalism seemed to work side by side. The mass production economy was the foundation of the American middle class. A full 1/3 of the workforce belonged to labor unions with predictable wages and guaranteed benefits.
   
   Incrementally, the planned economy in the USA was orchestrated by big business. This phenomenon drove the prosperity of the 50s onward. Corporate governance was balanced against the plethora of stakeholders.
   
   Over time, technology empowered consumers in order to secure better deals. Herein, the roots of many problems began to surface . Chief among the problems was the creative destruction of the older industries. As jobs and income became less secure, the need for a public safety net became more evident.
   
   From the 1970s to the year 2000, the DOW grew from 1000 to 12,000 and more. Productivity grew incrementally. Executive pay outstripped workers up to a 400: 1 discrepancy between the entry level workers and executive management.
   
   Supercapitalism tends to erode democracy because national boundaries are blurred in favor of the objectives of corporate governance. Supercapitalism doesn't encourage charity that erodes the bottom line.
   
   Overall, the book documents important economic history. The author could write another book on transitioning from the supercapitalism model to a participatory model which could benefit workers and the community more significantly. Perhaps, our bureaucratic structures need less bureaucratic levels and a flatter organization to redistribute pay and power more equitably.

5 comments about Free to Choose: A Personal Statement.

1. The relationship between freedom and economics is undeniable. Also undeniable is the relationship between government and freedom. Milton Friedman brilliantly makes a clear persuasive case for the perpetuation of free markets and the elimination of big government, as a means of augmenting freedom worldwide and as a result expand prosperity. Although this book is over 27 years old, the economic principles of this book are as timeless as Adam Smith's "Wealth of Nations".
   
   The book covers topics, such as socialized medicine, which is even more popular today, due in large part to the propaganda promulgated by the sensationalist media circuits. Of course, Americans do not want socialized medicine so proponents are euphemistically calling it "universal healthcare". Mr. Friedman expressed that "in our opinion there is no use whatsoever for socialized medicine. On the contrary, government already plays too large a role in medical care. Any further expansion of its role would very much against the interest of patients, physicians, and health care personnel." This book was written almost 3 decades ago when the expenditure of healthcare was huge, however, not as appalling as it is now at close to 15% of the country's GDP. There are many factors involved in the rising healthcare costs, not the least of which is the government's inability to operate any activity cheaper and more efficiently than the private sector. There are no exceptions to this. None! Unfortunately, the tendency of government is to increase funding for programs that don't work. If it isn't working, then it must mean it needs more funding, is the philosophy of government. This clearly goes counter to the much more efficient private sector where costs are controlled in order to attain a dirty little concept called profits. It is in the self-interest of people and companies and not their benevolence, that most of the freedom and economic progress is dependent upon, according to Adam Smith and Milton Friedman.
   
   Mr. Friedman was a radical free trade crusader and the evidence espoused in this book is overwhelmingly effective at convincing most open-minded individuals. Friedman goes on to write "Wherever we find any large element of individual freedom, some measure of progress in the material comforts at the disposal of ordinary citizens, and widespread hope of further progress in the future, there we also find that market activity is organized mainly through the free market." He goes on to warn us that "Wherever the state undertakes to control in detail the economic activities of its citizens, wherever, that is, detailed central economic planning reigns, there ordinary citizens are in political fetters, have a low standard of living, and have little power to control their own destiny." He further declares that under such governments impressive monuments may be produced and a certain class may enjoy a full measure of material goods, however, ordinary citizens will become merely "instruments to be used for the state's purpose" and will receive only what is "necessary to keep them docile and reasonably productive."
   
   Friedman also covers topics on education, consumer protection, inflation, unions and what he believed, at that time, was a "turning of the tide" into a more free market based mentality by the general population. This period, however, was when Carter was still in office and Reagan was coming in with his message of small government and as a result reduction in taxes. I'm afraid that we are again seeing a turning of the tide, this time, unfortunately, we are headed into larger government and more social programs, due in large part to the short memory of the American public of what communism used to be and the continual romanticizing of socialist countries that provide its population with cradle to grave social programs, almost always at the expense of freedom and progress. We must be careful!
   
   This book is a must-read to gain a fundamental understanding of economics, and as a reminder of the basic economic principles that have made America great. Enjoy!



2. A more essential guide for those of conservative and libertarian leanings I can't think of.
   
   Friedman, in his traditionally accessible, though brilliant, way elucidates economics, politics, and freedom in a timeless classic.
   
   Would buy again and again.



3. Arguably Friedman's magnus opus, Free to Choose is a book that will radically change the reader's way of thinking. Admittedly, before reading this book I would have been proud to vilify the free market. Like so many others, I fell victim to the demagogues. Free to Choose revolutionized my ideas about the role of government, and how intervention is inherently inefficient. Frieman's ideas are undoubtedly controversial, but Friedman himself was no polemicist. He would look down upon today's radio scum, like Rush Limbaugh or Sean Hannity. In fact, Friedman would look down upon most modern conservatives. He proudly acknowledged that he was in fact liberal (in the term's classical usage).
   
   Free to Choose brilliantly reveals how over-regulation, astronomically high spending, and an ever-growing bureaucracy have impeded freedom. In the chapter "Created Equal", Friedman summarizes his entire set of ideas in a few words. He says that today many are pursuing "equality of outcome" rather than what the Founding Fathers pursued - "equality of opportunity."



4. Dr. Friedman is plainly an educated and articulate man and his arguments have a seductive veneer of logic to them. The tragedy is that his interpretations are extremely selective: he focuses exclusively on what he perceives to be the strengths of the free market, while completely disregarding its costs. In this respect, he shares the mentality of the fundamentalist. Anything that ever goes well, he attributes to the free market; anything that ever goes wrong, he dismisses as either an aberation, a reflection of inadequate adherence to his core belief system. He has thus created a logical closed loop, which admits no possibility of his starting assumptions being flawed.
   
   Which is highly unfortunate, as he makes a great many assumptions, such as costless mobility of labor, perfect information, and the eventual trickle down of wealth, which are empirically unsound. If a worker loses his or her job, Dr. Friedman assumes that, somehow, that person will be able to find a bigger and better job elsewhere. How? Where? How is that person going to find the wherewithal to pay for the additional training and/or education needed for that real or imaginary bigger and better job? How will s/he pay for rent, food, transportation, health insurance, childcare, etc., while looking for this bigger and better job? Such trifles are plainly not Dr. Friedman's problem; nevertheless, they do pose a whopper of a problem if you're the person who's lost your job.
   
   Likewise, Dr. Friedman simply takes it for granted that companies will behave honorably, will have access to perfect information, and consumers will never be misled or swindled, but will unfailingly shape the market based upon sound decisions. Wow. Must be a nice planet Dr. Friedman lives on. On this planet, companies make rash and/or unethical decisions on a daily basis which are based upon poor information and/or immediate short term gains, for which the general public bears the cost.
   
   Because Dr. Friedman ignores such inconvenient realities, he views the world through rose-colored lenses and is blind to the dismal performance of his ideas whenever they have been implemented as policies. In every instance around the globe, the inevitable result of Friedman's radical ideology has been a tiny handful of predatory capitalists becoming richer than kings while the rest of the country sinks into abject poverty. Dr. Friedman's ideas, in every instance where they have been applied, from Chile to Argentina to Russia to Poland to South Africa to SE Asia - the list goes on - have unfailingly produced huge surges in unemployment and poverty, wholesale selloffs of the country's natural resources and other assets, and, of course, the adoption of repressive measures by governent to force the unpopular policies upon the unwilling populations. How ironic that Dr. Friedman describes himself as an advocate of free choice, when he has personally advised governments around the world to coerce their citizens into accepting his disasterous economic "reform" programs. Not surprisingly, Dr. Friedman doesn't wish to discuss the victims of his ideas, or, insofar as he recognizes them at all, he condescendingly dismisses them as the tragic cost of "progress." Progress for whom? Again, Dr. Friedman doesn't concern himself with such details.
   
   The central flaw in Dr. Friedman's ideology is that he takes no account of wealth distribution. If an economy increases in efficiency, Dr. Friedman claims vindication. But if the benefits of any such increase go exclusively to a tiny minority while the vast majority of the population experiences a sharp reducation in quality of life, how has any overall increase in efficiency improved matters? Dr. Friedman seems to assume that the billionaires his policies create will reinvest their wealth into their local economies. Yet, empirically, we find once again that such is not the case. Billionaires invest their wealth where they can gain the greatest return on their investment. Why then would they want to invest in their own countries? The people who live there, thanks to them and Dr. Friedman, are unemployed and too poor to be able to afford to buy anything. The country's natural resources have already been privatized and sold off, what's left in the smoldering husk Dr. Friedman leaves behind to entice investment?
   
   In sum, what Dr. Friedman describes as freedom of choice is an attempt to legitimize and apply a palatable facade to a wild west approach to economics, in the which the strongest and most ruthless rise at the expense of the weak, a kind of economic Darwinism. It's not without logic, but the cold, cruel, heartless world Dr. Friedman has to offer is a pretty terrifying place.



5. 
   This is absolutely the best book on basic economic thinking. It is filled with sound logical arguments for free markets. This book should be the starting point for anyone interested in politics and politically economy.
   
   Milton Friedman is "way out there" for many, but his debating skills are solid. I used arguments in this book during debates in grad school and easily hammered classmates who couldn't figure out how to argue against the "green pieces of paper" statement when they were arguing on how the U.S. should eliminate our trade deficit.
   
   In this book Dr. Friedman will teach you what free market capitalism is and is not. He will demonstrate how government regulation failures lead to the Great Depression and how monetary shocks (kicked off by the government yet again) created problems in the early 70s. Dr. Friedman will make his case for school choice and discuss why regulation harms consumers.
   
   This book covers nearly all the most basic angles of economics you will hear about in your local newspaper and on tv. Reading this book should give you enough working knowledge to be prepared to debate or discuss economic topics with others.
   
   Milton offers you the tools and answers to hammer most any local socialist. His writing is clear and his arguments are easy to understand. I recommend this book to any person wanting to learn more about free market capitalism.

5 comments about Capitalism and Freedom: Fortieth Anniversary Edition.

1. A strong case for limited government and for reducing government's place in a free market economy. Even though 50 years old, it remains timely and thought-provoking.



2. Reading this book gave me a whole new perspective about life, economics and individual responsibility. It's a must for everyone, even if you are not a student of economics.



3. I literally almost vomitted reading this book for class. This father of Neoliberalism, the murderer Pinochet's pal, has caused immense suffering and destruction in the world with his proven-to-fail free market capitalism. Thank goodness he's dead. Lets pray there won't be another one as evil as him around for a while.



4. the title above says it all.
   
   something missing in his considerations.
   
   perhaps should include a chapter on human character and the greed that appears to run rampant in the higher levels of the economic ladder.



5. excellent read and should be a must for all college freshmen also should read "free to choose" by milton and rose friedman

5 comments about When Genius Failed: The Rise and Fall of Long-Term Capital Management.

1. The book is a thorough account on what happened at LTCM. Absolutely fantastic writing skills. What I liked the most though is how Goldman came on top as usual :-) Interesting, hein? Goldman is amazing.



2. Does an excellent job of recounting the events and the people involved in the rise and fall of the hedge fund. The length of the novel is short enough to make it possible to read it in one go, the pace is fast enough, with none of the detours that authors are sometimes tempted to take (describing in excruciating and needless detail minutae that seem to serve no useful purpose other than that to fatten the book and make the tome appear more scholarly than it is). The author also does describe, in non technical terms, some of the financial instruments that were used by LCTM. These descriptions are by no means technical, and there is not a single formula in the entire book. Also, unlike some other authors, Lowenstein does not fall into the trap of describing the lifestyles of the protagonists in lurid detail. We do get a glimpse into how the main actors lived, ostentatious or not, but it never gets so involved so as to distract from the main purpose of the book, which is to describe the rise and fall of LCTM.
   
   What is also clear is that the author has a soft corner for Merriwhether, the brain and the soul behind LCTM. The Nobel laureates at LCTM come off as having too much faith in the mathematical certainty of their formulae, while the experienced traders at LCTM as also having drunk the kool-aid. These people, like Hillibrand, Haghani, and others believed so much in their skills and the correctness and certitude of the formulae that they staked their personal wealth on LCTM's success. Markets and investors do not always behave with mathematical preciseness, nor can their behavior be modeled and predicted using past performance or normal distributions (bell curves). Events can cause highly improbable events to turn into self-fulfilling prophecies. Markets are interconnected, and when things go bad, the correlation turns to one. Leverage by itself is not bad, provided liquidity is not a concern. You can be illiquid, and you can be leveraged, but not at the same time. These are just some of the lessons the author draws our attention to.
   
   One drawback listed by many reviewers of this book is that the book is not technical enough. Which is fair enough. However, it would be quite difficult to write a book that did justice to the twin objectives of recounting the events and history of LCTM as well providing enough technical details and background into the various theorems and intricacies of the financial instruments used by LCTM. Such a book would either run the risk of becomg very long, thus losing much of its intended audience, or become disjointed, with the narrative struggling to juggle between the characters, the plot, and the technical details. There are other highly rated books like 'Inventing Money' that are more technical in nature, and could be read in conjunction with 'When Genius Failed'.
   
   Some other books suggested:
   Inventing Money: The Story of Long-Term Capital Management and the Legends Behind It
   The Scam: Who Won, Who Lost, Who Got Away?
   The Smartest Guys in the Room: The Amazing Rise and Scandalous Fall of Enron



3. One of the best stories about modern finance...this book must be read by everyone committing serious money into the markets. Written approximately 10 years ago, 10 years before the bankrupcy declaration by Lehman Brothers, "When Genius Failed" presents some timely lessons that should have been learned a decade ago...but weren't for some odd reason.
   
   #1 The issue of swaps: It is interesting that David Swenson of Yale is described here as inventing the first modern financial derivative--the swap. How ironic is it that Swenson makes no mention of investing in this toxic coolaid himself (in his books)? How ironic is it that losses in swaps were the #1 thing that brought down Long Term Capital...and all of Wall Street's titans were around to see it 10 years ago...and yet what are the financial derivatives bringing down companies like AIG today--the swap...You would have thought people would have learned! Avoid this crap!
   
   #2 Shame on John Reed from Citibank (he was Mr. Conservative, right?)and Alan Greenspan for opposing rules that would have required regulation and disclosure related to derivatives. In retrospect, this is absolutely nuts. Certainly, Citigroup is paying the price for its participation in these same markets now---how ironic that it would likely have really benefited by regulation it opposed.
   
   #3 It is of immense interest that Bear Sterns' Jim Cayne refused to participate with the LTCM bail out...leading other Wall Street firms to promise revenge...Well...look what happened 10 years later when Bear needed help...it was nowhere to be found.
   
   #4 It is shocking that Wall Street never learned the lesson of LTCM's failure: leverage + deritvatives equals big trouble. That is why we are experiencing this same pain today--ten years later. LTCM should have been allowed to go bankrupt 10 years ago...bringing the banks with it...nothing else would have forced upon them a good, conservative nature. Now, unfortunately, surgery is needed to cure the patient...or it may be too late....



4. An excellent read & indeed very relevant in today's' times when we see fiascos in the financial markets repeated almost every day. I expect another book from Roger Lowenstein soon on Bear Stearns, Lehman, Merrill Lynch & the state of financial markets (today). God Bless Wall Street & God Bless America! Hail Lowenstein!



5. This is a fascinating book about the collapse of one of the largest and most sophisticated hedge funds of all time. The book gives great insight to the hedge fund world, as run by Nobel prize winners and other mathematical geniuses, without being technical. Anyone with a passing interest in the world of finance is likely to enjoy this book.

5 comments about The Shock Doctrine: The Rise of Disaster Capitalism.

1. This book is an essential read considering the current economic situation. The vast majority of people including me have no idea of the details of how harmful some economic policies been. This book brings many of those details to light in a way that is both understandable and enthralling. The direct role that the American government and University of Chicago economists have played in both Chile and Russia's disastrous attempts at capitalism are shocking. In fact there are so many things that are shocking, I am somewhat surprised that the book was allowed to be published. (If more Americans read books, it probably would not have been.) Probably the most shocking to me was learning of Dr. Jeffery Sach'sThe End of Poverty: Economic Possibilities for Our Time role in Russia during its rule by Yeltsin. It seems that he has dramatically altered his views on what is a good economic system for a society to thrive.
   
   Disaster Capitalism has been experienced around the world. How much longer will it be before the US gets our shock? If people read this book, hopefully they will be informed and motivated to insist that we have a sound economic system in place.



2. I would describe myself as reasonably well informed, economically literate, a Wall Street investor and Democrat. I found this book eye-opening, although I believe Klein is pushing a point of view which is frequently incorrect; e.g. privatization is not always bad, and Great Britain under Thatcher did achieve prosperity, while the Chinese middle class is vastly expanding. It is not so clear as Klein seems to imply that if the US had done the right things, the Iraqi invasion would have resulted in a democratic country.
   
   What Klein does is draw lots of things together, and show the extent to which the extreme free market ideology of Milton Friedman and his many disciples dominated US foreign policy in so many countries, the World Bank and International Monetary Fund, and also the conduct of government under George W. Bush. Once again ideology, untempered by evidence and practicality, when given free reign, leads to disaster. Many of the practitioners of this ideology were self serving and corrupt, or at least blinded by vanity, but clearly a man like Jeffery Sachs, who is currently doing his best as he sees it for the very poor countries, was genuine in his profession of his goals.
   
   Here are a few of the things which are important and which I hadn't fully known, or known at all: the use of torture to terrorize rather than extract information, and the early CIA interest in it; what happened in Chile to the Allende regime and the Chilean people, with US participation, was not a singular event but was replicated in several other Latin American countries; the pattern of foreign aid which relies on starting from scratch instead of taking advantage of local skills and resources, and the extent to which this occurred in Iraq and also in Sri Lanka and Lebanon; the extent of the waste and corruption in Iraq; how undemocratic Yeltsin was.



3. The only thing that is true, and has been known in fact for a century, is that dramatic events cause change. On this I can agree with Ms. Klein, and only that.
   
   Where this book careens off into left field, is by blaming this all on Milton Friedman and labelling it Friedmanism - all on the basis of a quote, and completely ignoring the history of the Nazis and the Kristallnacht, or the Marxists and the July Days in Russia. Milton Friedman made an observation (why certainly - he's Jewish, the people who suffered disproportionately from the effects of such kinds of propaganda under both regimes), but he surely did not invent the method. Blame the Marxists and the Nazis for perfecting that.
   
   Do yourself a favour, and buy the The Black Swan by Nassim Nicholas Taleb, his thesis is free of partisan politics and delves far further with laser sharp understanding, into how change through improbable events can happen.



4. The Shock Doctrine is a fascinating exposé on the dark side of unrestricted capitalism when it is implemented through blackmail, extortion, military force, and the suppression of democracy. Naomi Klein provides numerous examples over the last 50 years of countries who upon falling into financial and economic crises, desperately turn to the World Bank and International Monetary Fund for financial and economic assistance to stabilize and rebuild their economies. These countries soon discover that the World Bank and IMF are staunch promoters of capitalism and free-market economics, and will only provide aid on the condition that unrestricted capitalist policies be instantaneously and shockingly adopted by these countries, using lethal force if necessary, to suppress existing socialist ideologies and organizations, and even to suppress the will of the countries people who may be democratically opposed. This is what Klein refers to as "disaster capitalism", the introduction of unrestricted free-market economics in crisis and disaster situations with the short-term goal of engaging in excessive profiteering, and the long-term goal of assuming absolute control of those economies. And when disaster capitalism is implemented with the shock therapy approach normally associated with modern torture techniques, we have what Klein refers to as the "shock doctrine".
   
   In every example cited by Klein, where countries were literally forced to adopt unrestricted free-market policies (privatization, deregulation, trade liberalization, cessation of government spending, cessation of unionization, suppression of democratic assembly, unrestricted foreign ownership, unwarranted price increases, higher taxation, and intentional mass unemployment) in order to receive financial and economic aid, these countries went into an economic death spiral as their state resources and infrastructure were sold away to foreign owners for cents on the dollar, and the foreign owners were under no obligation to re-invest back into the countries economy. The financial assistance received from the World Bank and IMF was not used to benefit the newly created masses of poor and jobless people who needed it most, but instead was used to benefit the promoters of disaster capitalism.
   
   The only drawback to Klein's book is that she tends to blame disaster capitalism on its economic architects, and not on the governments and corporations who sponsor it. Consequently, Klein's portrayal of Milton Friedman and the Chicago School of Economics as evil incarnate is unwarranted. There is nothing wrong with capitalism and free-market economics when it is implemented under the right conditions. Klein fails to recognize the fact that these economists were acting not just as economic agents of the World Bank and IMF, but also as foreign policy agents of the US government, and globalization agents of American multinational corporations. Klein also fails to acknowledge that these same governments and corporations were engaging in dishonest, unethical, undemocratic, and even criminal behavior when promoting their self-serving political, social, and economic agendas. One fact is clear from Klein's book, disaster capitalism as a means to globalization and American world dominance will not work in countries that embody true democracy.



5. Naomi Klein has exposed Milton Friedman and the "Chicago Boys" just as Ida Tarbell exposed John D. Rockefeller in an earlier time. In other words, beware of those who worship "markets"--usually such worshippers leave out the fact that the only capitalistic enterprises they worship are the ones they control. Any competing companies (or schools of thought) must be destroyed.
   
   Is it any wonder that Friedman became a god at the University of Chicago, the House that Rockefeller built? Rockefeller destroyed the lives of his competitors, and was anything but a free market man. He and men like Carngegie didn't believe in capitalism for others--they were monopolists, and used government to protect their monopolies, just as the multinationals do today.
   
   Klein does an excellent job of ripping off the "free market" mask of Friedman, just as Tarbell did of Rockefeller. You can bet that she has made herself many enemies among the monopolists of today, just as Tarbell did. I appreciate her fearlessness and point of view.
   
   I only give the book 4 stars instead of 5 because, halfway through it, I was needing to