The Leaderless Economy

The Leaderless Economy: Why the World Economic System Fell Apart and How to Fix It

Copyright Date: 2013
Pages: 320
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  • Book Info
    The Leaderless Economy
    Book Description:

    The Leaderless Economyreveals why international financial cooperation is the only solution to today's global economic crisis. In this timely and important book, Peter Temin and David Vines argue that our current predicament is a catastrophe rivaled only by the Great Depression. Taking an in-depth look at the history of both, they explain what went wrong and why, and demonstrate why international leadership is needed to restore prosperity and prevent future crises.

    Temin and Vines argue that the financial collapse of the 1930s was an "end-of-regime crisis" in which the economic leader of the nineteenth century, Great Britain, found itself unable to stem international panic as countries abandoned the gold standard. They trace how John Maynard Keynes struggled for years to identify the causes of the Great Depression, and draw valuable lessons from his intellectual journey. Today we are in the midst of a similar crisis, one in which the regime that led the world economy in the twentieth century--that of the United States--is ending. Temin and Vines show how America emerged from World War II as an economic and military powerhouse, but how deregulation and a lax attitude toward international monetary flows left the nation incapable of reining in an overleveraged financial sector and powerless to contain the 2008 financial panic. Fixed exchange rates in Europe and Asia have exacerbated the problem.

    The Leaderless Economyprovides a blueprint for how renewed international leadership can bring today's industrial nations back into financial balance--domestically and between each other.

    eISBN: 978-1-4008-4664-1
    Subjects: Economics, Political Science

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
    (pp. ix-xii)
  4. ONE The World Economy Is Broken
    (pp. 1-20)

    It is clear that the world economy is in a mess. Since its collapse in the autumn of 2008, the world economy has gone through three distinct phases. It contracted by 6 percent between 2007 and 2009. A bounceback took place in 2009–10, which did not amount to a full recovery because output rose by only 4 percent. Then the recovery paused, and some countries have experienced another downturn, albeit one much shallower than that in 2008–9.

    The resulting damage over the past four years has been immense. The world economy is 10 percent poorer than it would...

  5. TWO The British Century and the Great Depression
    (pp. 21-58)

    We begin the process of understanding how to rebalance the world economy after the recent end-of-regime crisis and work toward solving the problems described in the last chapter by analyzing the previous end-of-regime crisis. The Great Depression marked the end of the British century, just as the recent crisis signals the end of the American century. Expanding our number of observations from one to two provides an enormous gain of information. We might wish for more observations, but we also must be grateful that history does not provide more examples of these rare and severe events.

    Preparation for the...

  6. THREE Keynes from the Macmillan Committee to Bretton Woods
    (pp. 59-106)

    By 1930, Keynes was a huge figure on the world stage. He had created an enormous stir in 1919 when he published hisEconomic Consequences of the Peace.It was unimaginable that a senior Treasury official should resign from the peace negotiations in Versailles and then publish a devastating critique of what had happened. It was even worse that this book should foretell the European tragedy of the 1920s and 1930s that we described in Chapter 2. Keynes’ actions turned him into a worldwide public intellectual, a status that he never lost. Some years later Lionel Robbins wrote:

    I often...

  7. FOUR The American Century and the Global Financial Crisis
    (pp. 107-150)

    The United States had taken over from Great Britain as the world’s leading economic power by the time of the Bretton Woods meetings in 1944. America was in position to play a key role in managing global economic developments, and it maintained its economic hegemony until the end of the twentieth century. This chapter tells how the United States achieved its leading position in the world economy, surveying the roles of both internal factors and external pressures on the nation’s rapidly expanding wealth. It assesses America’s role in putting the world back together again after the Second World War, especially...

  8. FIVE Restoring International Balance in Europe
    (pp. 151-204)

    The American story in Chapter 4 reveals how the Global Financial Crisis started. The data in Chapter 1 showed imbalances endemic in Europe as well as in the United States. To understand how structured finance in the United States destabilized both continents, we need to expand the account of European cooperation stimulated by the Marshall Plan to reveal how vulnerable Europe has become. This exploration looks back to the discussion of the gold standard in Chapter 3 and forward to the analysis of world disequilibria in Chapter 6. We look back because the European Monetary System has fixed exchange rates...

  9. SIX Restoring International Balance in the World
    (pp. 205-242)

    We extend our story from the problems of Europe to those of the world in this chapter. This is a complex endeavor, the culmination of our intellectual journey. It will take three demanding steps to understand the complexity of world economic relations.

    Our first step concerns the relations between China and the United States. These relations resemble those within Europe to an alarming degree. In the case of Europe, our concern for internal and external balance pointed to two possible solutions: a cooperative solution sends us on a path to internal and external balance for all countries, whereas a noncooperative...

  10. SEVEN Using Theory to Learn from History
    (pp. 243-256)

    Economic history and economic theory have been combined in the previous pages to create a picture of how the world economy is broken and sketch some ideas for fixing it. Economic theory provides a framework for understanding the relations between internal and external balances, and economic history shows the context in which these relations assume importance. These two subfields of economics normally are seen as being at opposite ends of the economics spectrum, but they are intimately related—as are the internal and external balances of nations. Only by combining the insights from both history and theory can we learn...

    (pp. 257-274)
  12. NOTES
    (pp. 275-282)
    (pp. 283-298)
  14. INDEX
    (pp. 299-316)