Question

In "The Shifts and the Shocks" by Martin Wolf, what are some strengths and weaknesses of this book? Why are they considered strengths and weaknesses?

Answer 1

Strengths In The Shifts and the Shocks" by Martin Wolf

1) In his book he rightly points out that, in a fundamental sense, the advanced industrial economies were not performing well before the crisis. In the US as well as many European countries, weaknesses in aggregate demand were disguised by the bubble that weak regulation and low interest rates helped create. Among the underlying problems are persistent global economic imbalances and growing inequality, the latter exacerbated by a financial sector that has become ever more dysfunctional since the mindless liberalisation that began in the 1980s.

2)This book not only explains the malaise in which we have been mired since 2008 but also – depressingly – provides a convincing analysis of why we are likely to remain so. Already, the crisis has spawned a plethora of titles examining what went wrong.

3) This book is written with all the intellectual command and trenchant judgment  that have made Martin Wolf one of the world’s most influential economic com­mentators.

4) Wolf does a good job of covering the recent historical background, he emphasises that this was not the focus of the book. He needs to provide context for the solutions that he discusses in the third part of the book.

5)Despite the sub-title, the book is just not a description of the financial crisis, it also covers the post-crisis policy of austerity. Therefore, it is not just a re-hash of the "mainstream economics did not foresee the financial crisis" story.

Weaknesses In The Shifts and the Shocks" by Martin Wolf

1) it is that he does not push his arguments as far as he could.In discussing global imbalances, he is insufficiently critical of the “savings glut” hypothesis advanced by former Federal Reserve chairman Ben Bernanke, among others, which presents what used to be a virtue (savings) as a vice, shifting blame to China and (less vocally) to Germany.

2) One of the things that distinguishes Wolf’s analysis from so many others is that he sees the crisis as more than a financial crisis – an insight that is essential if we are to understand the failure to achieve a robust recovery.

3) Wolf doesn’t dwell much on some of the more antisocial aspects evidenced in the aftermath of the crisis: the market manipulation the anti-competitive practices, the predatory and discriminatory lending, the lack of transparency, the fraudulent behaviour.

4) Wolf leaves out the structural transformation of the advanced countries

5) The book is not an easy read since it deals with heavy subject matter and a lot of inter-related economic concepts.