Fixing Global Finance by Martin Wolf; 2008; 248 pages; Yale University Press
Book Review written by Rich Marino
In his usual uncanny way, Martin Wolf of the Financial Times takes very complicated subjects found under the global economic umbrella and he presents them so that the general public readily understands their importance from a practical perspective. In his most recent work entitled Fixing Global Finance, Wolf explains very methodically why global imbalances cause financial crises, and in so doing, he underscores the current crisis, but in order for him to make his point he highlights the financial turmoil taking place at this time in the United States.
More importantly, he very carefully illustrates the necessary measures that need to be put in place so that this ongoing devastation is put to an end. Historically, he analyzes each financial crisis since the early 1980s. Wolf sets in motion the connection between the “microeconomics of finance and the macroeconomics of the balance of payments”.
In his thesis, he draws attention to the financial shockwaves that took place in Latin America, Russia and Asia in the years 1997, 1998 and early 1999 and from that point forward, he shows how the subprime loan crisis in the United States became part of a “pattern” that basically fed on itself due to the underlying position that the “United States is the borrower and spender of last resort”.
Moreover, he very decisively describes this as an unmanageable situation, and his solution is centered around the notion that each developing nation must develop a financial system based on their respective currencies. He makes the case that each emerging market must not allow its finacial institutions to borrow cheaply in dollars when their incomes are generated in their home currencies.
I definitely recommend Fixing Global Finance to anyone who wishes to understand today’s global financial crisis within the context of modern day economic history.
“Martin Wolf is the world’s preeminent financial journalist. This book should be read by anyone who cares about the future of the international system, which, given recent events, is anyone who cares about the global economy or their economic future.”—Lawrence H. Summers, former U.S. Secretary of the Treasury
“An extraordinarily cogent and thoughtful look at the contemporary United States borrowing binge, which stands as the leading macroeconomic and financial puzzle of our time. Wolf rigorously critiques the cutting-edge academic debate with depth, thoroughness, and readability that one will not find anywhere else.”—Kenneth Rogoff, Harvard University
“The global financial imbalances of the twenty-first century will have a profound impact on international politics and American foreign policy. In this brilliant, compelling and readable book, Martin Wolf explains what has happened to the global financial order and what can be done to avoid the shocks of international finance.”—Michael Mandelbaum, author of Democracy’s Good Name: The Rise and Risks of the World’s Most Popular Form of Government
“No one understands and explains international economics and exchange rates better than Martin Wolf. This short book comes at a time when everyone can benefit from a deeper understanding of these issues.”—Martin Feldstein, Harvard University
“Wolf is adamant: global trade and global finance ride in harness, and global finance requires controls — controls that cover all nations. Agree or not, get the book and expand your understanding of precisely what has brought the United States to its current flirtation with disaster.”—Arthur Jones, The Desk
“In the diligent Fixing Global Finance, the Financial Times editor and columnist takes on the imbalances that have made the world economy lopsided.”—Andrew Bast, Newsweek
“An extremely helpful guide to the origins of today’s problems and to possible solutions . . . Written before the crisis, it is unhindered by minutiae about the credscendo of ad hoc measures that several governments took throughout the fall.”—Harold James, Foreign Affairs
About the Author
Martin Wolf is the chief economics commentator for Financial Times and a professor of economics at the University of Nottingham. He is a graduate of Nuffield College of Oxford University and he holds an Honorary Doctorate in Economics from the London School of Economics.