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Satyajit Das: The Past, The Present and an “Unusually Uncertain” Future

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By Satyajit Das, an international expert on financial derivatives and author of Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives.

Nicholas Phillipson (2010) Adam Smith: An Enlightened Life; Allen Lane

Matt Taibbi (2010) Griftopia: Bubble Machines, Vampire and the Long Con That Is Breaking America; Random House

Joe Nocera and Bethany McLean (2010) All the Devils Are Here: The Hidden History of the Financial Crisis; Portfolio

Hamish MacDonald (2010) Mahabharata in Polyester: The Making of the World’s Richest Brothers and Their Feud: New South

Jeff Kingston (2011) Contemporary Japan: History, Politics and Social Change Since the 1980s; John Wiley

The present is where the future crumbles into the past.

The “past” in this case is Adam Smith, the doyen of economic liberals. Nicholas Phillipson’s “An Enlightened Life” is an “intellectual biography”, forced by the paucity of factual details about Smith’s life. In a pre-FacebookTM and TwitterTM age, Smith jealously guarded his privacy and instructed his unpublished papers be destroyed upon his death. Little information of his private life survives.

The absence of the personal is, in part, the book’s strength, allowing exploration of the influences and cultural milieu, especially the commercial and academic life of Scotland, which shaped Adam Smith’s work. A key element of the book is the discussion of the interplay between Smith and David Hume as well as that between Smith and Quesnay and the French school of economistes.

The man that emerges from the book is somewhat different from the traditional portrait of the founder of modern economics. Smith saw himself as a moral philosopher. He saw his famed “Wealth of Nations” and his earlier “Theory of Moral Sentiments” as attempts to integrate history, jurisprudence, ethics, aesthetics and (incidentally) economics in a GUT (grand unifying theory) of “scientific man”.

In some respects, Smith was unmistakably modern. Mr. Phillipson’s description of Smith’s lecturing style reveals a streak of cunning vanity and recognition of the power of rhetoric in getting across his ideas. After unsuccessfully experimenting with extemporized unscripted lectures, Smith used written speeches with tangential flourishes and asides. The iconic reference to the “invisible hand” and the idea of “regard to their own interest” may have developed as a rhetorical flourish, that today would have been instantly transmitted around the world in a “tweet”.

While Adam Smith’s ideas about economic issues – the dynamics of economic activity, the role of government, taxation and regulation – are interesting, they are firmly embedded in the culture of Glasgow and Edinburgh at the time of the Scottish Enlightenment.

Smith’s influence over time may be because the ideas he articulated are so general that subsequent intellectuals have been able to read into them layers of unintended meaning and significance. For example, the invisible hand guided by self interest is capable of being turned into a variety of rhetorical ideas, including the efficient market hypothesis. Smith, hesitant about precision and the application of mathematics to human behavior, would have found that curious.

This opacity and ambiguity allows Smith to remain relevant for each subsequent generation, which can shape Smith to fit the times and their particular agendas. As the Argentinean writer Jorge Luis Borges insisted every writer creates his own precursor. Each economic movement has shaped Smith in their image.

Restrained in tone, “An Enlightened Life” is a sound and fine introduction to Adam Smith. It will hopefully inspire readers to delve into Smith’s frequently unread but oft quoted writings.

The “present” is Rolling Stone journalist Matt Taibbi’s “Griftopia“. If “restraint” is a word that Mr. Taibbi is familiar with, it is not evident in this book. “Griftopia” extends the author’s Rolling Stone article justly famed for the notable description of Goldman Sachs – “the vampire squid wrapped around the face of humanity”. In modern celebrity culture, 45 characters can explain just about everything, at least, to the satisfaction of the majority.

The writing is the “gonzo style” journalism, made famous by the former Rolling Stone contributor Hunter S. Thompson. Alan Greenspan is “The Biggest Asshole in the Universe”. Insult and high dudgeon is the preferred form of dialectic. Interest in one orifice in the alimentary canal is prominent throughout the text.

Mr. Taibbi marries Thomas More’s “Utopia” and the idea of the “Grift” (deception) into a phrase that is meant to describe all that is wrong with America. Mt. Taibbi sees a vast conspiracy by bankers, especially by Goldman Sachs, to take over the running of the state, enslaving and robbing its citizens. Mr. Taibbi clearly does not share philosopher Alasdair MacIntyre’s view: “One key reason why the presidents of large corporations do not, as some radical critics believe, control the US is that they do not even succeed controlling their own corporations.”

The argument has some validity, but the truth is far subtler than “Griftopia” would like to make out. The argument has also been made far more subtly with better supporting documentation in Simon Johnson and James Kwak’s “13 Bankers“.

Mr. Taibbi confesses to not knowing much about economics. The admission on a reading of the book seems largely correct. The use of numbers owes much to Mark Twain’s advice: “Get your facts first, and then you can distort them as much as you please.” It is difficult to know whether the first part of the injunction was complied with, as there is little detail or evidence of the basis of the numbers cited.

The book asserts that the American government’s total commitment to rescue the economy, estimated at US$ [insert a number a number of your choice] trillion, sufficient to pay off all US mortgages. The author misunderstands, at least, the support offered and its rationale. If the government had not guaranteed financial institutions then bank collapses would have destroyed the savings of the millions of Americans for whom Mr. Taibbi is the self appointed champion.

The guarantees and capital injections were backed by assets, some even had some value. Many of the loans or capital commitment have to and have been repaid. Many programs, like extended unemployment benefits, staved off penury for the people affected. All these facts are inconvenient to the narrative and therefore ignored.

In his analysis of infrastructure, Mr. Taibbi argues that American states sold their infrastructure to private investors too cheaply. They did. But American ideological reluctance to raise taxes to finance essential public services and assets forced governments to resort to these forms of financing. Investors were frequently pension funds who reaped the benefit of the reduced prices and high resulting returns on behalf of their investors – often teachers and other citizens.

Griftopia” begins with the story of the rise of the Republican Tea Party movement. Mr. Taibbi sees the rise as a diversionary tactic, focusing the attention of the populace away from the real issues – the grifters, bankers and people that the author dislikes – towards tangential issues – immigration, foreigners and the role of government. But the book itself is diversionary. In resorting to crude “blaming” and “flaming” even the correct targets without a thorough and accurate understanding of the true issues, “Griftopia” cheapens its case and ultimately allows the hated “system” to continue unhindered.

Griftopia” may fall into its own trap. Its rage and blame perpetuates a lack of understanding of the real causes of the problem. The Roman Caesars understood that the crowd needed bread and games. They also knew that when things went wrong, an occasional sacrifice and crucifixion was the key to maintaining power. The clever vampire squid may have suborned Mr. Taibbi into its service.

The present is also “All the Devils Are Here“, written by acclaimed journalists Joe Nocera and Bethany McLean (co-author of the definitive history of Enron “The Smartest Guys in the Room“). “All the Devils Are Here” is a well written, solid history of the crisis. Its strength is that it tries to cover several aspects of the crisis, which in part makes the history and theory superficial. As its central focus is the crisis, the book does not examine deeper social aspects of the events and essential drivers of the age of capital. The text is character driven making for a narrative, focusing firmly on the “devils”, which turns out to be the “usual suspects”.

The subtitle “The Hidden History of the Financial Crisis” is misleading as there is little new here. The root causes identified are unsurprising – political pressure to increase homeownership, the GSE’s, political and business failures, the process of securitisation, mathematical models and the familiar evil of “greed”.

Griftopia” and “All the Devils Are Here” do not acknowledge the complicity of everyone in the body politic in the essential financialisation of modern life and the reliance on economic growth. They do not acknowledge the fact that while the grift worked and everyone got richer, everyone remained sanguine about the “system”. No one cared as long as his or her stock portfolios and houses rose in value. No one cared as his or her living standards improved or there was the possibility of improvement

Griftopia” and “All the Devils Are Here” also never recognise that normal people abnegated all responsibility, both political and economic, to the financial superclass. The low voter turnout in American elections is ample testament to that problem. The book does not recognise the lack of financial literacy and the naïve belief in the ability of policymaker’s to control and engineer the economy. In this regard, neither title matches Joe Baegeant’s poignant portrait of American life and its problems in “Deer Hunting for Jesus“.

Both books are also silent on the role of the media which has fervently embraces a message that financialisation of economic life is an unqualified good. It is also silent on how the media itself fosters ignorance, through its treatment of issues in narrow and simplistic political terms. Laudatory biographies of business leaders helped create the all-knowing financial elite. The message of “stocks for the long run” and “increasing wealth” bears some responsibility for the global financial crisis.

Mr. Nocera and Ms. McLean draw the title of their book from the line in Shakespeare’s “The Tempest”: “Hell is empty, and all the devils are here.” The implication is that all would be well if the devils were rounded up and consigned back to the nether regions. Unfortunately, reality is more complex. Other observations from the Bard might be apposite. In “Julius Caesar”, Cassius tells Brutus: “The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings.” In “Othello”, the real “devil” Iago tells Roderigo: “Tis in ourselves that we are this and thus.”

If we live presently in “Griftopia” and amongst “All the Devils“, then the future, we are told, belongs to the emerging markets. Australian journalist Hamish MacDonald’s wonderfully titled “Mahabarata in Polyester” provides a tantalising insight into this future through the recent history of the Ambani business family and its rise in India.

The book details the progress of entrepreneur Dhirubhai Ambani, as he rises to dominate the market in polyester in India, eventually evolved into the Reliance empire, which has more facets than many Indian Gods have limbs. Rather than a hagiographic Bollywood narrative of a gifted and determined individual battling the odds and emerging triumphant, Mr. MacDonald undertakes a forensic and critical analysis of the growth of the Ambani business interests. In the process, he provides clinical and compelling insights into the nature of Indian economic and business life.

“Mahabarata in Polyester” documents rampant corruption, stock market manipulation, trading of political influence as well as the exploitation of the media to further business ends. It provides perhaps the most compelling documentation of the evolution of India’s business environment from the era of the “license raj” where favoured Marwari and the Parsi businessmen dominated to the current regime of entrepreneurial oligarchs.

Recent revelations of “anomalies” in the auction of mobile phone spectrum and construction projects associated with the New Delhi Commonwealth Games highlights the deeply embedded corruption of the system. As Mr. McDonald concludes: “One legacy of Dhirubhai Ambani is a dangerously suborned state.” However, in a world with “a shrinking moral universe” where business is concerned, India is the future. If Mr. Taibbi’s thesis is correct, then American business, especially Goldman Sachs, should be well placed to succeed in India.

An earlier edition of the “Mahabarata in Polyester” was not released in India after the Ambanis stopped its publication. Indian businessmen and leaders are generally delusional as to their methods and standing, with anything less than veneration, adulation and comparison to Mahatma Ghandi being unacceptable.

This new edition, which was released uneventfully in India, continues the story describing the split between the two scions, Mukesh and Anil, after the death of their father. It documents their continued accumulation of wealth, which embraces most aspects of the Indian economy. It also documents the continuation of their father’s business practices.

Mahabarata in Polyester” provides readers with a glimpse of the “real” India and Indian business, in the unlikely event that they want to know the truth.

Japanese scholar Jeff Kingston’s “Contemporary Japan” provides an alternative view of the future, at least for the beleaguered developed economies of the world. Documenting the history of Japan from 1989 when the “bubble” economy collapsed, Mr. Kingston provides an insightful portrait of the evolution of society during the lost decades. Along the way, it challenges many conceptions about Japan, especially its

industrial acumen, labor relations and social cohesion.

“Contemporary Japan” does not focus on the economic history, although it is the essential backdrop against which the changes that are explored take place. During the last decade, Japan lost approximately 3 times its annual GDP, equivalent to around $16 trillion. The economic collapse affected Japan’s middle class profoundly, destroying its egalitarian society ushering in the “kakusa shakai” (society of disparities).

Its once copied labour system of lifetime employment became unsustainable. Today, temporary and part-time workers total up to one-third of the labour force. Lacking training, career prospects and with low, uncertain income, the “preca-tariat” (a combination of “precarious” and “proletariat”) are disaffected and also disengaged from the political and economic system.

Mr. Kingston argues convincingly that the crisis exposed and exacerbated hidden social problem, such as high rates of suicides and domestic violence. It also exposed bureaucratic incompetence and dishonesty that the years of strong growth and prosperity had disguised. The resulting loss of faith in authority has created near paralysis.

Mr. Kingston argues that Japan’s problems cannot be addressed by resorting to the past and existing systems. Puzzlingly, in the light of his own analysis and the facts he musters in support of his thesis, the author remains optimistic that Japan will overcome its problems, eventually.

Throughout the global financial crisis, politicians, business and economic leaders have steadfastly refused to contemplate a Japanese future for the global economy, at least for the developed economies. As the problems remain unresolved and policy options dwindle, the prospect of “turning Japanese” is now openly debated. “Contemporary Japan” provides a detailed and important perspective on what the future may look like and prospects that await the underclass that “Griftopia” portrays.

Human history is the stuff of myth. Adam Smith, Goldman Sachs, Alan Greenspan, the Ambanis and Japan are icons that mask elusive truths. As with any myth, the real importance is in what it reveals about those who hold them important and self evident.

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51 comments

    1. Paul Repstock

      Certainty/Security are the wares of ‘snake oil salesmen’. They have never existed and never will. Nor should they!

      The only “certainty” is death. Not a thing to worry about unduly, but also not to be embraced. Who with any integrity really wants to be dead, where they have no ability to affect outcomes or create solutions. Death is the ultimate release from accountability, but to what benifit?

      1. Paul Repstock

        The only reason people prize security above everything else is because the perceive that government is not doing a good job.

        If government is seen as fullfilling their mandate, then security is quickly relegated to lower importance.

        1. Matt

          If only the public and non profit organizations had your wisdom perhaps they would not have traded so many interest rate swaps or lent so many securities to be hedged into investments in grade A securities of the investment bankers choice.
          Since they have proven they cant control themselves, there should be a law that derivatives violate the fiduciary duty.

          1. Paul Repstock

            Matt; You twigg something in my dusty attic, there probably is a law. We have all just overlooked it in our embrace of modernity (trading electrons).

            My gut feeling is that buying CDS is like taking out insurance on you Mother just before introducing her to base jumping.

  1. roger spalding

    “normal people abnegated all responsibility, both political and economic, to the financial superclass…… … lack of financial literacy and the naïve belief in the ability of policymaker’s to control and engineer the economy.” excellent- wish the Australian electorate and politicians recognise their somewhat similar behaviour.

    A Japanese future is something that has already slipped from the grasp of the UK (riots) and the USA (Hoovervilles). Japan has a current account surplus and has control over its borders in terms of immigration, and is a creditor nation. It is losing competitive advantage to Korea and China and has no oil and little food- however it has at least not aggravated these factors largely beyond its control by boosting population.

    1. aka_ces

      The broad generality of “The fault, dear Brutus, is not in our stars, But in ourselves, that we are underlings” is qualified by the fact that this observations is shared among prime movers of a crisis. The many contemporary pairings appropriate for this exchange include Bill Clinton and Allen Greenspan. How many foot soldiers in opposing Roman armies could have credibly described their civil crisis by saying the same thing among themselves? The vast majority of the American population has the influences of those soldiers. Their political and financial ignorance, and lack of participation, outside the petty Facebook democracy, is in part due the influence of concentrated power in media/advertising, and indirectly in public education, which it has so successfully defunded.

  2. attempter

    Mt. Taibbi sees a vast conspiracy by bankers, especially by Goldman Sachs, to take over the running of the state, enslaving and robbing its citizens…..The argument has some validity, but the truth is far subtler than “Griftopia” would like to make out. The argument has also been made far more subtly with better supporting documentation in Simon Johnson and James Kwak’s “13 Bankers“.

    Why is it that nobody calls commentary on Al Capone or the Columbian cartels “conspiracy” writing, but where it comes to corporate organized crime that’s suddenly the buzzword?

    Just because this organized crime was legalized doesn’t change its obvious character. (Although, to be fair, it’s also less common to see even the Nazis referred to as a typical organized crime syndicate, as opposed to anomalously, metaphysically “evil” or whatever. The notion that once a government legalizes crime it becomes morally improved is all too common.)

    Mr. Taibbi confesses to not knowing much about economics.

    I suppose Taibbi means the lack of formal “education” is in itself a credential, not a demerit, and he’s right. This review is only the latest pebble to go on the Everest of evidence for that.

    The book asserts that the American government’s total commitment to rescue the economy, estimated at US$ [insert a number a number of your choice] trillion, sufficient to pay off all US mortgages. The author misunderstands, at least, the support offered and its rationale.

    Taibbi understands the Bailout, including its lying rationales, perfectly well. As does anyone who looks at the unemployment figures, the hoarding figures, the lending figures (this was indeed the promised rationale: “get the banks lending again to Main Street”; an unworthy goal, since the government should do that directly, but still better than what has actually happened, what the Bailout really intended, which was nothing more or less than histiry’s worst robbery), the “bonus” figures.

    If the government had not guaranteed financial institutions then bank collapses would have destroyed the savings of the millions of Americans for whom Mr. Taibbi is the self appointed champion.

    That’s a flat out lie. Ever heard of a thing called FDIC insurance? The pro-Bailout author hopes we haven’t.

    The guarantees and capital injections were backed by assets, some even had some value. Many of the loans or capital commitment have to and have been repaid. Many programs, like extended unemployment benefits, staved off penury for the people affected. All these facts are inconvenient to the narrative and therefore ignored.

    That’s because these “facts” are all lies. Even before Foreclosuregate we knew these “assets” had no value. That’s why prior to the Bailout they couldn’t be used as collateral. That’s why ever since summer of 07 Wall Street has been desperate to stave off the apocalypse (for them) which would transpire if the market were ever allowed to discover the real price of these things.

    The loans which were “repaid” were repaid with our own money. And WTF do these grossly inadequate unemployment benefits (also our own money; under assault by the bank-owned government; unnecessary if the banksters themselves hadn’t destroyed our jobs) have to do with these crimes or this Depression? We are sinking into penury. It’s simply astounding how out of touch these ivory tower and Wall Street functionaries are. To paraphrase Homer Simpson: “Matt, you think too much. We heard there was a problem with some unemployment, and we fixed it.”

    1. Foppe

      Does indeed spends a lot of words denouncing Taibbi, especially for “not denouncing the complicity of the media”. What a shame it is that this just about is Taibbi’s favorite pastime on his blog, as it would seem to somewhat invalidate his ‘argument’. I wonder how much else he slants in order to get his message across.
      Anyway, I’m not really sure why it is relevant to the premise of griftopia that “the public” “accepted” the prosperity brought by the boom during the boom, as it was Greenspan’s duty to ensure no bubbles happened (who is discussed in this book). What should “the public” have done to force Greenspan to raise interest rates? Implicit in Das’s argument seems to be the thought that democracy cannot work because politicians will never try to protect the public interest.
      So rather than to acknowledge that a book such as Griftopia might wake up some of the public to the idea that policy makers are indeed hacks, as he seems to think is so important, Das decides to conclude that “blaming and flaming” are just not the done thing. It seems inconsistent somehow.

    2. DownSouth

      Das’ unfavorable assessment of Taibbi reminds one of the quote from Eric Hoffer:

      To know a person’s religion we need not listen to his profession of faith but must find his brand of intolerance.

      If we turn the clock back 80 years, I put Das in the same category with FDR and Keynes: They came to save (reform) capitalism, not to destroy it.

      If we turn the clock back 500 years, I put them in the same category with Erasmus: He came to save (reform) Medieval Christianity, not destroy it.

      And while I find Das’ posts intellectually satisfying, they are certainly not emotionally satisfying.

      Das closes by saying “Human history is the stuff of myth.” That is certainly true. But I think Das fails to recognize how captive he is to his own myth. Like Erasmus, his “brand of intolerance” is exposed when confronted with the visceral appeals of a Luther or Torquemada, Taibbi or Palin, and the fact that these emotional appeals-to-the-gut resonate infinitely more with the public than the highly intellectual and reasoned appeals of a Das, Auerback or Erasmus. To put it in Hoffer’s words again: “Far more crucial than what we know or do not know is what we do not want to know.”

      1. michael m

        I find this particular commentary puzzling. In my reading of the history of the religious wars, for example, Erasmus looks very good: a sensible and decent man who could not get an audience. Actually FDR and Keynes look very good to a lot of people including me. So far this is pretty odd stuff with which to tar Das. I suppose the idea is that these people were all wrong, and revolution was the only reasonable route and remains the only reasonable route.

        Anyway, given the history of the religious wars, and of nazi communist states (the alternatives to Erasmus, FDR, and Keynes at the respective times), this seems like an odd bunch of people to use to be snide to Das. At least to me.

      2. Siggy

        And you, dear Down South: What is it that you do not wish to know? Do you know what it is that you do not wish to know?

        For me I wish to know when it will be that the Justice Department will begin prosecuting the massive fraud that has been, and continues to be, perpetrated.

        For those who favor democracy I suggest they give pause and carefully consider just what a democarcy might mean. For me, the Federal Republic specified in the Constitution is a much better solution. But then that contract has been subverted with all manner of statutes that promote socialism.

        In the current babble of blog and main stream media there is much in the air that employs labels, appropriate or not, to conditions that are nothing more than chicanery and snake oil.

        Take QE2, or any iteration thereof; The Fed and The Ben Bernank are engaging in actions intended to support insolvent primary dealer banks. As to whether any benefit will accrue to the production sectors of the economy is irrelevant.

        What no one seems to want to know about is the fact that our financial duress is the product of a fiat currency wedded to a fractional reserve system and a well established pattern of throwing money, real or otherwise, at any problem that comes to be; all accomplished with the benefit of abrogated regulatory and prosecutorial responsibility.

        Now it is more than curious and passing strange that we see a vigorous market and price increase for gold. And the price increases are occuring not only in dollars but other currencies as well.

        I do not need a parsing of the latest publication sensationlistic or not. I need, and the world needs, a discussion as to what the new non-fiat currency shall be and how it shall be distributed. Therein is the new religion to be discovered.

        As for you, Dear Down South, and all those others who come here with some seriousness and honest dialogue, do want to know about a redeemable currency? Do you want to know about such mechanisms as free banking?

          1. Paul Repstock

            Siggy Siggy… that is way outside of everyone’s ‘comfort zone’. We are all now so conditioned to being protected from ourselves and under the umbrella of Mother Government. To allow Free Banking, you would need to go back and put your Consitution as the law of the land. All the vested interests and special privaliges would disappear…

            Nah! It ain’t gonna happen.

    3. Doug Terpstra

      Way to go!

      You exposed Das’ brazen dishonesty quite starkly. “Flat out lie” is right. A claim of ignorance regarding the elementary chartered role of the FDIC in resolving banks and protecting savers is just not credible. It’s a whopper of an omission for an economist to insist that piss-down bailouts were the only way to protect savers. It’s insulting too.

      And yes, how can he equate temporary, demoralizing, and pitiful unemployment as a “solution” for penury when it can’t possibly cover the mortgage? And in fact the foreclosure scandal is only degenerating as far as anyone can see.

      In fact very little has been solved; the fraud continues. I’m quite surprised and disappointed … in Das for such amateurish hypocrisy. These overpaid toady courtiers of the aristocracy got a lot of ‘splainin’ to do come judgment day.

      (Oh, and I see Hugh nails him too, below…hadn’t got that far yet.)

      1. attempter

        It’s clear that:

        1. The Bailout did none of the constructive things it was supposed to do.

        2. It has done and continues to do massive damage. By now we know that was in fact its intended effect, while the purported reasons for it were all lies.

        3. There were several alternatives, any of which would have been vastly better. This was truly the worst policy imaginable, from the point of view of anyone but the criminals.

        1. GB

          Your first reply above was excellent. While Mr. Das’ expertise on derivatives makes for interesting reading on certain technical financial issues, his appoligist views on the thieves that are robbing our country are repulsive. As the vast majority of Americans are clueless about the looting that continues to go on, we need more Matt Taibbi’s out there (won’t find them in the MSM owned by the Oligopolists though).

  3. Foppe

    Given his treatment of “contemporary japan” I have to say I am somewhat puzzled to see that Das is now suddenly talking about how “eternal growth might not be possible”, when he said almost nothing (that went beyond his very general “the early chapters are insightful”) about Harvey’s work in his review of The Enigma of Capital.
    However, I am not really convinced that Das actually believes what he is attacking here, considering how strongly he links the belief in the eternal growth model to his (rather bland/broad) criticism of “the media”. Das’s criticism seems to mostly be leveled at the belief that ‘growth is possible in the USA’ rather than the belief that ‘we should organize society in such a way that we are always trying to create economic growth’, which is the bigger problem.
    That aside, while I agree the the US is headed for stagnation (especially when you stop counting “US” companies who don’t have US workers), I’m not sure that the comparison of Japan to the US works, as pretty much everything that Das mentions as “having disappeared” has already disappeared in the US as well, or never existed in the US in the first place. Also, the Japanese have savings, and a much larger industrial sector, while the US don’t, and I doubt its political class will be willing to squander their savings on saving the country.

  4. kiseki

    When people bring up the name of Adam Smith, Ricard, or Marx as economics theorists, I think people forgot mentioning that their thesis were synching with the age of East Indian Company.

  5. Jim the Skeptic

    From Post: “ “Griftopia” and “All the Devils Are Here” do not acknowledge the complicity of everyone in the body politic in the essential financialisation of modern life and the reliance on economic growth. They do not acknowledge the fact that while the grift worked and everyone got richer, everyone remained sanguine about the “system”. No one cared as long as his or her stock portfolios and houses rose in value. No one cared as his or her living standards improved or there was the possibility of improvement.”

    In the paragraph above and the one after it he attempts to spread the blame to every citizen of the country. People cared but they were powerless at their mortgage closings, they didn’t understand why they couldn’t get a fixed rate mortgage but beggars can’t be choosers.

    And the idea that low voter turnout contributed to the problem is preposterous. We do not have government by referendum and our elected representatives do as they please once elected. Look at the furor over Obama’s latest deal with the Republicans. The noise level during elections is deafening and leaves large numbers of potential voters confused so they stay home on election day.

    If a lawyer dealing in finance like Brooksley Born could not get the steamrollers stopped, exactly what chance did the average citizen have? NONE.

    The only way to stop this is to start executing the worst. I nominate Greenspan, a man whose education should have made him aware of the dangers. Without him the Republicans would have been much more careful in the implementation of their dogma.

    1. Alex

      Jim, he’s right. I saw the crash coming, and I am neither particularly connected nor smart. All it took to do so was a critical mind and a preparedness to actually look at what was going on, rather than just accept what I was being told about it.

    2. Paul Repstock

      Jim; you wrote..”If a lawyer dealing in finance like Brooksley Born could not get the steamrollers stopped, exactly what chance did the average citizen have? NONE.”

      I understand what you mean. But, why are we all clamouring continuously that we want Democracy while at the same time demanding that we be protected from our own foolishness.

      The two concepts are mutually exclusive. One is either responsible for their own actions, or they deligate authority to someone else.

      1. Paul Repstock

        It is like all those “intellegent??” people handing their money to Bernie Madoff, because he promised ‘abnormal gains’.

        Doh! Hello!!!
        I feel bad for them. Not because they were cheated, but because they were foolish.

        1. Jim the Skeptic

          Yeah, it makes you wonder why muggings are illegal doesn’t it. I mean after all who is foolish enough to walk through most downtowns anyway?

          I would favor a change in the law that says all Citigroup employees have surrendered their right to file charges against muggers.

          That works for me! :^)

      2. Jim the Skeptic

        “I understand what you mean. But, why are we all clamouring continuously that we want Democracy while at the same time demanding that we be protected from our own foolishness.”

        I do not agree that the two concepts are mutually exclusive. Our Democracy allows us some say about who makes the rules. That does not mean that there shouldn’t be rules or that we shouldn’t have a right to justice when we are abused by those not obeying the rules.

        Having said that, we are adults and we should all know that freedom is always paired with responsibilities.

        I empathize with those who have been abused by the financial industry. But I should not have to be responsible for their losses nor should the government.

  6. Dave Erickson

    In all these reviews, Das has plenty of blame to spread around about the financial crisis, yet he never even mentions the pivotal role of the deregulation of financial markets. Greenspan, Rubin, Gramm, et al, told us that free markets weren’t really free unless they were also deregulated. This, based on the experience of the last decade, has turned out to be (ahem) untrue.

    1. Doug Terpstra

      Das jumps all the way out of the closet here as propagandist for the MOTU and the PTB. I smell a fat, juicy book advance coming or a cushy sinecure at a top tier stink tank.

  7. Wild Bill

    Come on, Satjajit, nobody who reads this site believes the Ultimate Lie: “If the government had not guaranteed financial institutions then bank collapses would have destroyed the savings of the millions of Americans…”

    We’ve all read William Black’s description of how the breakups could have occurred. Only the over-leveraged banks, like your benefactor Citigroup, would have been destroyed. There was, and still is, plenty of money around the world to start new banks. It would have taken, and still could take, just a few months.

    Go peddle that tripe to the NY Times or Drudge. We are way past it here. You are one of them. We believe Tiabbi.

  8. scraping_by

    …normal people abnegated all responsibility, both political and economic, to the financial superclass.

    Christopher Lasch in The Revolt of the Elites noted that the elite speak only to themselves. This is justified by the circular argument that, no one else has anything worth saying, so they don’t listen. And they don’t listen because no one else is saying anything worthwhile.

    Lasch also notes that the elite are big on educational achievements. Especially a high prestige education (Ivy League) is supposed to confer unquestionable obedience. So his snark about Mr. Tiabbi isn’t a drive by, it’s a deeply held defense.

    Outside of sorcery, knowledge has not been kept secret since the middle ages; indeed, it’s growing more public every year. The only thing success in an institution guarantees is attitude. Demonstrate the wrong one and you’re gone. So the financial superclass speaks only to each other, listen only to each other, and somehow reach conclusions that favor each other. Right.

  9. Jessica

    I too have found Matt Taibbi much more useful than Das seems to. I probably can find the details elsewhere and more accurate elsewhere, but Taibbi writes it with a flair and a sense of moral outrage that I enjoy for myself and am happy that others are being exposed to.
    And it may just be me reading it in to what he says, but I sense at the bottom of Taibbi’s outrage the belief that we can do much better. Economics seems to contain such a strongly ingrained belief that we can not that I suspect it holds back even critics of the current system if their perspective is too much that of economics.

  10. Hugh

    I figure Taibbi can defend himself if he wants to. What I find fascinating is what Das’ critique of Taibbi says about Das. I don’t remember him ever exposing so much of his own thinking, or its limitations.

    I agree with the comments beginning with attempter’s. Das begins by serving up the false dichotomy between the bailouts and doing nothing. That has been debunked here many, many times. I would agree too that not being trained in classical economics is a plus, given the horrendously bad record of modern economics and the complicity of its practitioners in establishing the intellectual and political rationales for the looting we have seen. There is a reason that Das seems far more comfortable discussing Adam Smith than Matt Taibbi. Smith presents a rational, nuanced system that coheres and in which Das believes or would like to believe. Taibbi’s whole approach trashes this concept.

    This brings me around to a point that I have tried to make in the past. Griftopia is a wordplay on utopia, or rather dystopia, but it is really just a synonym for kleptocracy. This is my primary criticism of virtually all current economists. None of them write on, or try to construct an economic theory for, kleptocracy either because they are still in denial or because the sheer notion undercuts almost everything they believe and were taught. In any case, they continue to act as if we have a well performing system that is currently experiencing some problems, that is it is not currently well performing. This is really where the fault line is. To use a medical analogy, the difference is whether the patient has pneumonia or an aggressive poorly differentiated stage four carcinoma. As DeepSouth notes, if you see it as the first, then you think the system is reformable. If you think it is the second, then you start talking about vampire squids.

    I have also said that the three keys to understanding our current situation are kleptocracy, class warfare, and wealth inequality. We have already seen how Das dances around the first of these. As for the second, the primary weapon in class warfare is diversion. In class warfare as practised by the rich, it is all about setting one group in society against another. If you are non-union, then hate those unions, even if they raised the baseline for pay and benefits for everyone. If you are private sector, then hate those public employees who get paid more (even if they don’t). It is all about turning natural allies into unnatural enemies. It is about convincing you that your best course of action is work against your own best interests. Thus we get Das writing

    “But American ideological reluctance to raise taxes to finance essential public services and assets forced governments to resort to these forms of financing.[privatization]”

    This is where all 3 elements come together. Note how 30 years of no growth in wages, the resultant massive transfers upward in wealth, leaving most Americans cash strapped and in debt gets generalized into the “America ideological reluctance to raise taxes.” The rich have taken so much wealth from the rest of us that they now turn around and sell the line that raising taxes would be too much for us. Diversion. What they are really talking about is raising taxes on them. They also preach to us how austerity is necessary, we must live within our means, but when they preach austerity to us, it never means austerity for them. When they want to spend money on bailouts, wars, and tax cuts for themselves, the money is always there. Because it would get in the way of his argument, Das just ignores that “government” is seldom responsive to voters but nearly always is to the wealthy who buy the politicians and use the levers, laws, and rules of government to make themselves far wealthier, at our expense.

    Three years into our serial economic crises, I am tired of the excuses and rationales. Das may take Taibbi’s rigor and style to task, but Taibbi is on the right side of that fault line. Das is not. There is often a period of flux in great historical events where people of good faith can hold opposing views. But for us that period has come and gone. Das cannot espouse the views he does without making himself complicit in, and part and parcel of, the kleptocratic structures they represent. He can’t stand above, apart, or outside of them. What he has shown us of his own positions shows us that he has not.

    1. Foppe

      You put it rather more cogently than I tried to earlier today :) Much appreciated.
      But yes, Das seems quite like Thomas Friedman as described in Taibbi’s review of Flatland here: http://www.nypress.com/article-11419-flathead.html
      Or, to quote Taibbi a second time when he responds to a charge by David Brooks that “‘the public’ was complicit in allowing the banks to do their fraud thing” (from http://trueslant.com/matttaibbi/2010/01/27/populism-just-like-racism/ ): “Stuff like this makes me want to scream. If I’m writing about a bank that took a half-billion worth of mortgages where the average amount of equity in the home was less than 1%, and where 58% of the mortgages had no documentation, and then sold those mortgage-backed securities as investment-grade opportunities to pensions and other suckers — and then bet against the same kind of stuff they were enthusiastically selling to other people — is Brooks seriously suggesting that I also have to point out that the Chinese economy was doing well at the time?
      Yeah, okay, the rise of China is a factor in the overall decline of the American economy, but it has nothing to do with the Goldman story, which is a specific crime story about a specific bank. If I’m writing about a gang of car thieves, what, we’re supposed to also mention that the endive crop was weak in that part of the country that year? What the fuck? And this whole business about how criticizing Goldman absolves voters — Jesus, how primitive can you get? Using that logic, criticizing anyone for anything is invalid.”

      1. Paul Repstock

        I agree. Theft is theft and fraud is fraud; by any name you put on them.
        @Foppe–”and then sold those mortgage-backed securities as investment-grade opportunities to pensions and other suckers”

        However, don’t forget, there are more layers to the onion. The ratings agencies, the analysts, the fund managers, the pension managers and even to a lesser degree private investors, have some degree of responsibility for decisions. Many other than Goldman profited from all this.

        Where the heck was the government and the Sec. which claim ownership of this game?

    2. Doug Terpstra

      Excellent, Hugh.

      —”There is often a period of flux in great historical events where people of good faith can hold opposing views. But for us that period has come and gone. Das cannot espouse the views he does without making himself complicit in, and part and parcel of, the kleptocratic structures they represent. He can’t stand above, apart, or outside of them. What he has shown us of his own positions shows us that he has not.”

      On a lighter note, your description of the layman’s view of the economy versus the professional economist’s is actually Monty Python’s “Dead Parrot Sketch”:

      [...] Mr. Praline [customer, John Cleese]: …I wish to complain about this parrot what I purchased not half an hour ago from this very boutique.

      [pet shop] Owner [Michael Palin]: Oh yes, the, uh, the Norwegian Blue … What’s, uh… What’s wrong with it?

      Mr. Praline: I’ll tell you what’s wrong with it, my lad. ‘E’s dead, that’s what’s wrong with it!

      Owner: No, no, ‘e’s uh,… ‘e’s restin’.

      Mr. Praline: Look, matey, I know a dead parrot when I see one, and I’m looking at one right now.

      Owner: No no ‘e’s not dead, he’s, ‘e’s restin’! Remarkable bird, the Norwegian Blue, idn’it, ay? Beautiful plumage!

      Mr. Praline: The plumage don’t enter into it. It’s stone dead.

      Owner: Nononono, no, no! ‘E’s resting!

      [...]

      Mr. Praline: Um…now look…now look, mate, I’ve definitely ‘ad enough of this. That parrot is definitely deceased, and when I purchased it not ‘alf an hour ago, you assured me that its total lack of movement was due to it bein’ tired and shagged out following a prolonged squawk.

      Owner: Well, he’s…he’s, ah…probably pining for the fjords.

      Mr. Praline: PININ’ for the FJORDS?!?!?!? What kind of talk is that?, look, why did he fall flat on his back the moment I got ‘im home?

      Owner: The Norwegian Blue prefers keepin’ on it’s back! Remarkable bird, id’nit, squire? Lovely plumage!

      Mr. Praline: Look, I took the liberty of examining that parrot when I got it home, and I discovered the only reason that it had been sitting on its perch in the first place was that it had been NAILED there.

      [...]

      Owner: No no! ‘E’s pining!

      Mr. Praline: ‘E’s not pinin’! ‘E’s passed on! This parrot is no more! He has ceased to be! ‘E’s expired and gone to meet ‘is maker! ‘E’s a stiff! Bereft of life, ‘e rests in peace! If you hadn’t nailed ‘im to the perch ‘e’d be pushing up the daisies! ‘Is metabolic processes are now ‘istory! ‘E’s off the twig! ‘E’s kicked the bucket, ‘e’s shuffled off ‘is mortal coil, run down the curtain and joined the bleedin’ choir invisibile!! THIS IS AN EX-PARROT!!

      [...]

      http://www.youtube.com/watch?v=npjOSLCR2hE

  11. Frank

    I started the article by Satyajit Das, but had to stop when I came to the following sentence:

    “If the government had not guaranteed financial institutions then bank collapses would have destroyed the savings of the millions of Americans for whom Mr. Taibbi is the self appointed champion.”

    That of course is exactly what the government and its shills in the corporate media would like us to believe. And so I looked up Satyajit Das and found this:

    “Satyajit Das works in the area of financial derivatives and risk management. He is the author of a number of key reference works on derivatives and risk management. His works include Swaps/ Financial Derivatives Library – Third Edition (2005, John Wiley & Sons) (a 4 volume 4,200 page reference work for practitioners on derivatives) and Credit Derivatives, CDOs and Structured Credit Products –Third Edition (2005, John Wiley & Sons)

    So he wrote a 4 volume, 4,200 page book on derivatives!

    Life is short, and this tells me all I need to know about Satyajit Das.

    It looks like we have yet another financial professional defending the Wall Street bailout, but of course, what else would you expect from someone who spends a large part of his life writing a 4,200 page book on derivatives?

  12. Psychoanalystus

    It sounds like Satyajit Das is very happy with his new bonus from Goldman Sachs… I am looking forward to his upcoming show on Fox News…

    Psychoanalystus

  13. Glenn Condell

    ‘“Griftopia” and “All the Devils Are Here” do not acknowledge the complicity of everyone in the body politic in the essential financialisation of modern life and the reliance on economic growth. They do not acknowledge the fact that while the grift worked and everyone got richer, everyone remained sanguine about the “system”.’

    ‘everyone got richer’ eh? Dear me. Wages have been stagnant since 1974 haven’t they? Which is about the time the vampire squid began wrapping it’s tentacles around the economy to take it’s share from what, 5 to 10 percent up to the current 40 plus. All that increased productivity went to the big end of town and the workers didn’t get richer, they simply got more indebted.

    ‘ No one cared as long as his or her stock portfolios and houses rose in value.’

    It’s not so much that they didn’t care – they didn’t KNOW. Whereas the vampires, or squids, did. In any case, what percentage of Americans even have a stock portfolio? ‘Everyone in the body politic’?

    ‘No one cared as his or her living standards improved or there was the possibility of improvement’

    What percentage of Americans have seen their standard of living improve in the last 40 years? Surely this is ass-backwards. Ah but there was always the ‘possibility of improvement’ wasn’t there. That meme has a heavy workload in the US, far more than it is equipped to take.

    Taibbi’s book may or may not be OTT but this attempt to spread the blame ecumenically is a bit lame.

    ‘“Griftopia” and “All the Devils Are Here” also never recognise that normal people abnegated all responsibility, both political and economic, to the financial superclass.’

    ‘Normal people’? Is that ‘everyone’ again? This makes it sound as if true volition was involved, when surely most people (like their mothers and fathers before them) simply accepted that what their newspaper and TV told them was true. They just went with the flow, the vampires directed it.

    Most Americans are victims of all this, not co-accused perpetrators.

    ‘The low voter turnout in American elections is ample testament to that problem.’

    Err, no. While low voter turnout might indicate a goodly proportion of low people, it might also indicate a depressing lack of genuine choice. People get sick of changing deckchairs, especially on a sinking ship.

    ‘The book does not recognise the lack of financial literacy and the naïve belief in the ability of policymaker’s to control and engineer the economy’

    There you go, blaming the victim again. You might as well blame the Germans c1935 for not having sufficient political and historical nous to understand where Mr H was taking them. If the populace is naive and under-informed (which I agree it is), are they deserving of the lion’s share of the blame?

  14. YankeeFrank

    I have to agree with mostly everyone here responding to Das. Really Yves, can we not get a review of Griftopia here that is not by a Wall St insider who acts as if he is the nobleman sniffing down his nose at the plebs trying to scale the castle walls? We get enough of his kind of “thinking” all over the media, we don’t need it here.

  15. Glenn Condell

    Sorry if that all sounds like piling on after you guys did such a good job shall we say illuminating Mr Das’s blind spots, but I tried posting it twice last night without success (duplicate comment detected)

    I looked at it again this morning and made the change to Mr H from you know who, and voila! Rather crude method of ensuring no Godwin’s Law, but effective!

  16. scraping_by

    Bye the bye, in the “learn nothing and forget nothing” category, the TINA lie (There is No Alternative) was the abiding non-explanation for the looter’s orgy under Thatcher in the early 80′s. The fog of unreality is always the same color gray.

  17. sidelarge

    Playing down the works of people like Matt Taibbi and playing up the woes of Japan. Great combo, really.

    As someone else said, it’s quite telling that the author makes some sense only when he reviews the book about Adam Smith.

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