No ones perfect. We are a part of a greater macrocosm – our world, our societies; which is built upon human microcosm, therefore are not perfect. We, as humans, have internal fault lines that sometimes causes great rift in our mind, body, life, and relationships. Given the fact that we, humans, who are full of faults and weaknesses; assimilate and built great societies. How could we assume that the societies that we built will be perfect? In summary, any social structure formed by humans are not perfect; far from it!!
Thinkers such as Adam Smith and Karl Marx tried putting frameworks together for the financial structures that may be applicable for any given societies. These philosophies were based of basic human nature of greed and sacrifice. The United States and the western Europeans adopted the lesser of the two evils – “Capitalism” meanwhile the USSR and the Eastern European blocks forced the communism upon the public. Some of the countries tried to mix the two philosophies that the leaders thought was perfect for the masses – forming another philosophy called Socialism. Aftermath of World War II forced Western European countries to adopt some mallow version of Socialism. US, on the other hand, empowered by the victory in WWII and the by the subsequent fall of the Soviet empire, took the most ruthless form of Capitalism – Complete deregulation – and unleashed the power of the greed upon the general populous.
Back to my assessment of human fault lines and its reflections upon the society. We, the people, the citizens of this great country, let George W. Bush, Alan Greenspan, and Henry Paulson sell their souls to the greed and cause immense harm not just to the US but also connected societies in the flat world. These leaders, instead of nipping this cancer in the bud, let the cancer lose from the Wall Street to the Main Street. These guys, with their ideological blinders on, and with eyes towards their own pocket, kept ignoring the problem they pushed the people towards the cliff – and then, worst of all, profited heavily from the social free fall by awarding their kin trillions of dollars. Meanwhile, the rest of us, whose financial health perished, were left holding the empty bag.
Now onto the book review – Fault Lines by RaghuRam Rajan ... A MUST MUST MUST READ for anyone who wishes to understand deeper reasons for why we are in such as financial mess that we are!!! The concepts outlined in the book are as profound and eye opening as the ones I found in the book BLACK SWAN – both have significantly altered my perspective on life.
- According to the author, a brilliant narrator, the root causes for the current financial market are way deeper that what meets the eye. As a chief economist at the World Bank, on leave from his primary profession of teaching, he was one of the first to the blow the whistle on Alan Greenspan’s policies. Some of the assertions presented by the author are as follows –
- The income discrepancy betweens the have’s and have-nevers has grown sufficiently larger to label US as another one of the Banana Republics. This lack of increase in average salary compounded with the easy credit has given rise to overleveraging of the average person to the point of bankruptcy.
- The globalization has only caused the disparity to increase. Since the disparity has compounded with increasing wealth of the rich without job creation in the US.
- Arms-length economies such as ours (you have to read the book to understand this one) interacting with the relationship-based economies elsewhere has cause the chaos without any empathy.
- How two political ideologies in the US has only heightened the boom-to-boom economy!!!
- The reward structure on the Wall Street – who handle other people’s money – is flawed and must be changed immediately. This has caused individuals to put their short-term benefit ahead of the long-term benefits of the population.
I would recommend Mr. Rajan for a Nobel in Economics if it were upto me. It is surprising that a professor from the University of Chicago – the mecca for the Greenspan like ideologues (remember Milton Freedman!!!) have stepped out of the line to blow the whistle.
If you are really pressed for time, just read the first chapter and you would get a great executive summary of the entire book.