Book Review of Good Value: Reflections on Money, Morality, and an Uncertain World by Stephen Green

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Book Review of Good Value_ Reflections on Money, Morality, and an Uncertain World by Stephen Green

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Genre: Economics, Finance, Non-fiction
Author: Stephen Green
Book Title: Good Value: Reflections on Money, Morality and an Uncertain World (Buy the Book)

Summary:

Good Value: Reflections on Money, Morality, and an Uncertain World, written by Stephen

Green, is an analysis of the history of financial markets and their correlation with human nature.

Green uses the first half of his book to educate on the subject of the economy: where it finds it origins, important steps in the journey towards the economy we know today, and ultimately the future of what may come. The second half of the book dives into why history matters, and what it can mean for the future.

Financial markets find their history dating back to the early days of Homo sapiens trading grain and animals in the very first forms of credit. As transportation increased and men began to populate all corners of the earth, trade began to thrive.

With its early origins found in silk and spices from the Far East to wealthy Roman citizens, to modern day manufacturing nations exporting many goods to consuming nations, trade is the backbone of the economy.

To smooth out inefficacies, the currency was created as a uniform method of trade. Currency solved the problem of market inefficiency built on a baseless value system. As currency moved from physical commodities such as gold to mere representations of physical value – paper dollars – trade exploded.

The history of human settlement, technological innovation, and formation of thoughts and ideals can be sourced back to the progression of trade in the world’s economy.

Differing theories attempt to explain the progression of the worldwide economy, but all agree that globalization was the inevitable end game for the world’s markets. Green says, “The genie is out of the bottle,” when it comes to the overlap and reliance of differing global economies upon one another. There is no turning back from this interrelated and unstoppable growth of one mass connected world of consumers all participating in the global bazaar.

Moving on to the morality of the market, Green begins to compare the human experience to that of the economy. What he determines is that the economy has always done better when it can be completely efficient.

Humans as well perform best when they are free to make their own choices so long as they deal with the consequences, thus incentivizing humans to perform to their own standards. Capitalism is identified as the best version of the market structure we have yet discovered. That is not to say it is perfect, but merely that it has done the best job of letting humans be humans.

Human nature is a topic that can never be fully explained. The reasoning behind our decision making, the ability we have to rationally think through problems presented to us, and then the subsequent irrational responses we make are all issues that psychologists have been attempting to explain for centuries.

Human nature is then boiled down into three primary assumptions: we are imperfect, we don’t know the end of the human experience, and humanity is defined by its incessant ability to have hope no matter the odds.

Green leaves us with an explanation of his perspective on the world and what is to come. With the recent global financial meltdown of 2007, he turns introspective on what exactly went wrong. After explaining the macroeconomic factors behind the downturn, he begins explaining the human characteristics of the market failure.

We are selfish creatures, set on getting the best for ourselves first, then worrying about consequences later. And yet throughout the time we can see that the best parts of humanity have come about from people or groups deciding to act counter-culturally and defy what was expected of them.

For Green, it is all traceable back to the original sin and original grace found in his Christian faith. Humans are inevitably drawn to do what is best for them regardless of repercussions, but when we can remember that we have the ability of choice, we often rise to the occasion. In 2007, there was little that the average consumer or investor believed was within their control, but in actuality, it was all within their grasp.

Human society must regain its humanity. We cannot be profit-driven; we cannot only be consumers, or only be producers. We all share this world and live increasingly interrelated lives. This means that we must consider human nature and make decisions that benefit the world around us, not just our immediate surroundings.

In the end, we will fail, and we don’t know what the future holds, but there is the incessant spirit of hope that humans never truly lose. This is unique to our species and is what drives us to overcome the odds. In the face of uncertain times, we must remain hopeful that humanity will persevere through the challenges facing it, as we have done for millennia, and will promote global progress as we have since the dawn of time.

Exploration

We are at a moment in history when it seems as if the tectonic plates are shifting. We are living through years in which a crisis has overtaken our increasingly globalized world, such as most of us have not seen in our lifetimes. The questions strike at the root of what we have taken for granted for at least a quarter of a century.

There has been a massive breakdown of trust: trust in the financial system, trust in bankers, trust in business, trust in politicians, trust in the media, and trust in the whole process of globalization – all have been severely damaged. If trust has been broken in this way, where do we go from here?

Renewed progress depends on our willingness to learn, hope depends on a determination to gain in wisdom through it all, and wisdom will be found to depend on an honest search for the good. Good Value: Reflections on Money, Morality, and an Uncertain World is about the other kinds of issues that arise from a global crisis of historic proportions: questions about who we are, about how we have changed, about our beginnings and ends.

In My Beginning Is My End

Somewhere deep down is the question of how did we get here? It gnaws at us. If with all the technology and sophistication at our disposal, the basic structure of the world economy is built upon sand, not rock, then what is the justification for all our labors? For all of us who work directly or tangentially in the financial system, how can everything we relied on on be so uncertain?

The world is changing. We are globalizing. No longer can you expect the microcosm of your neighborhood, town, or province to define you economically. Evidence suggests that already the world is so interconnected as to make anyone financial collapse of a nation affect a multitude of others.

The long standing simple polarities of the old East/West divide are fast being replaced by a far more complex geopolitical reality. Established patterns and structures are transforming themselves. However, broad outlines may be emerging. More than half of the global GDP growth is now produced by the developing world.

The centers of power and influence henceforth will not just be the US, the EU, and Japan, but will include China, India, Russia, Brazil, and the Middle East. Trade, culture and geopolitical relations will become exponentially more intricate as money and ideas flow in an ever-increasing variety of directions between countries.

The business itself has become more complicated as time marches on. In the 1960s, Milton Friedman, an economist at the University of Chicago, published A Monetary History of the United States, 1867-1960. The book caused consternation by accusing the American Federal Reserve of being chiefly responsible for the Great Depression. What passed with somewhat less comment were Friedman’s uncompromising views on business. He was the apostle of the pure profit motive:

“There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say engages in open and free competition without deception of fraud.”

Today we live in a world where business has complex loyalties and responsibilities, and is subject to continuous pressure not only from shareholders but from government, media, special-interest groups, regulators, and litigators. Friedman’s view would now be considered dangerously simplistic.

These days a business must consider a far more subtle range of interest and needs. It must consider value from the perspective of parties other than investors. There may have been a time when business leaders were masters of all they surveyed; when “the business of America was business,” as Calvin Coolidge put it. Today they are actors on a much more crowded stage.

We live in a time with an unprecedented financial system and economy. The interconnectedness of our global markets is at an all-time high. The future will likely be driven by economic progress and cooperation rather than militaristic might. But with this progress come new challenges.

Facing us is the challenge of time: that even the richest, most sophisticated economic system in the world has ever known, is after all dangerously fragile. In our past, humanity has proven its ability to overcome challenges and rise to the occasion. Secondly, we see that times have changed and with them have come increasing levels of complexity. This is the challenge of modernity: that the old way has transformed into one of infinite confusion and complexity, leaving us feeling adrift.

Finally, we face the challenge of individual choice: that you can give up security and go to help the poor and the forgotten with your own hands. And whispered in our ear, perhaps, is the age-old question of whether our small lives and efforts add up to anything of significance anyway.

We begin to see the underlying tension in the world’s history of economic progress: that it mimics the progress of humanity. Now that the connection has been made to that of human development there are three ambiguities about humanity we can examine.

First is that of our imperfect nature. We are idealistic beings, driven to create ideas and objects and do things of great purity and beauty. And yet, the very moment we make ourselves part of them, we find they are or have become, flawed. There seems to be an unerring tendency in everything we are part of to fall short of ideals and to be imperfect. Imperfection is deeply part of us, and we are part of it. We cannot escape from this.

Second is the ambiguity of the nature of the end of human progress. The old sense of progress always being onward and upward has given way to a much more uncertain sense of where we are heading.

Where are we going? What is the outcome likely to be? As life around us improves, and standards of health care and education and recreation all steadily progress, the thought must remain: the world could be less good for our grandchildren. Will we ever get to a final destination where our job is done? Or will we arrive at a different destination: flood and fire, pandemics, conflict on a previously unknown scale?

The third ambiguity is in the human nature of hope. This is arguably the most important of all three; the central ambiguity of our existence. It boils down to this: we know that evil is widespread in the world, and yet we believe that something better is possible – we go on hoping, often in spite of the evidence. Even in our darkest times there is still the assertion that hope will endure.

The whole point of this investigation into the end and the beginning is the fundamental point that in our beginning we can find our end. Can we see why humanity exists? Can this help explain our purpose for continuing on the seemingly unending path called progress?

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The World’s Mine Oyster

Next, we must take a look at the economic environment in which we find ourselves.

Globalization has become a household term synonymous with new technology and innovation. But is this actually a new movement? Is it cultural cross-fertilization, or a global dumbing down? Above all, is it progress or not, and should it be stopped?

In the early 2000s, a book was published that immediately caught the mood of the new century. The World is Flat: – A Brief History of the Globalized World in the Twenty-first Century was written by Pulitzer Prize winner and New York Times columnist, Thomas Friedman. At its heart were ten-points of “flatteners” that had changed the world.

These included events such as the fall of the Berlin Wall, technological innovations such as the launch of the first web browser in 1995, and the new trends of open-sourcing, outsourcing, in-sourcing and supply-chaining that took place throughout the 1990s. Friedman would argue that all of this progress has brought the world to a “tipping point” at which change had become exponential and irreversible.

Friedman develops the idea of the “Dell Theory”, in which the advent of global supply chains was an even greater restraint on geopolitical aggression. It held that: “No two countries that are both part of a major global supply chain, like Dell’s, will ever fight a war against each other as long as they are both part of the same global supply chain.

Because people embedded in major global supply chains don’t want to fight old-time wars anymore. They want to make just- in-time deliveries’ of goods and services and enjoy the rising standards of living that come with that.” This idea caught the mood of the age. The idea that multinational corporations could actually help bring world peace was too good to disbelieve.

However, over time Friedman’s view of the world being a flat and competitive playing field has been slowly dissolved. It is now clear that the competitive and wealth-creating opportunities that Friedman enthuses about are still relevant to mainly small, urban, educated elites. Richard Florida, professor of public policy at George Mason University in Virginia, has shown in some detail how the international economic landscape is far from “flat”.

Florida would argue that innovation is limited to certain mountain ranges that have large valleys between them: places such as New York City, London, Paris, Tokyo, Hong Kong, or Los Angeles – clusters of economic activity that are strongly connected to each other, but only feebly connected to the rest of the world.

Another blow to Friedman’s idea of a flat world is the debunking of the Dell Theory in past geopolitical conflicts. US companies invested hugely in Germany before the First World War. Likewise, between the wars, there was an onslaught of specialized banks and law firms that focused on opening the German market to US capital, and none of this prevented the Second World War.

As time has gone by, Friedman’s thesis that the world is “flat” has come to seem simplistic and superficial. However, there is another vision of globalization that is more subtle, more perceptive, and which perhaps begins to get us closer to some kind of answer to the question from the last chapter about beginnings and endings. The Phenomenon of Man by paleontologist, philosopher and Jesuit priest, Pierre Teilhard de Chardin, was published in 1955, fifty years before The World is Flat.

Teilhard fuses scientific understanding and visionary imagery to lay out the steps of a theory of human evolution. Key to all his thinking is the image of the world as a sphere, not just literally but metaphorically. He sees the evolutionary ascent of the human being as happening in two stages. In the first stage, humanity expands around the globe, gradually covering the sphere with its presence until it meets up with itself and begins to know itself more fully. By the twentieth century, with most of the habitable earth populated, the second stage begins. A complex membrane of thought, fueled by human consciousness, envelops the globe.

He describes the process as “a gigantic psychobiological operation, a sort of mega- synthesis, the ‘super-arrangement’ to which all the thinking elements of the earth find themselves today individually and collectively subject.” Basically, he describes the next stage of evolution of man, that of the collective network of mind. His idea, first published in 1955, can be seen most clearly in the creation and exponential growth of the vast electronic web of the internet, encircling the earth and connecting humanity from its remotest corners.

As a combination of both of these ideas, the world is becoming less segmented and more open to both idea and experience. These theories are centered on the idea of the destruction of barriers between the global society and the fixation on bettering society through interconnectedness. To quote Teilhard once more,

“according to the evolutionary structure of the world we can only find our person by uniting together.”

These views of globalization thus leave the ending radically open to interpretation and speculation. The ambiguities that seem to be intrinsic to the human spirit as it evolves will only complicate the trajectory of where the world is headed.

Thus the complexities of the human spirit will continue to confound us in the future as much as they do today. The Indian Nobel Prize-winning economist Amartya Sen generalizes the human spirit in his book, Identity and Violence: The Illusion of Destiny, into seven points of meaning for the individual: nationality, location, class, occupation, social status, language, politics, among others. He argues that having deep conflict in one does not negate the similarities in the remaining six.

He calls for greater recognition of the full range of links that have woven people together across divides of religion and nationality over the centuries, including the arts, literature, sciences, mathematics, sport, and trade. This will ultimately lead to a more understanding and open dialogue on the world stage.

Where, then, is the world heading? Are we heading for a “flat” world, in which globalization slowly erases the differences between us? Green would argue that at the heart of this issue of what globalization is, and what it means for humanity, is the innate characteristics of man and how they have been and will continue to drive development until the end of our species.

Green makes a few more points about globalization, namely in its inability to be stopped. In previous ages, it was able to be stopped full force by more reclusive and set apart societies, but these examples only prove how globalization move progress forward. He uses the examples of the fifteenth century China, and the thirteenth century the Middle East.

As the world of Islam lost intellectual momentum, and China stopped its exploration of the world and potential for influence, Christian Europe surged forward and expanded its power. Its growing intellectual confidence and creative power have their enduring witness in the art, architecture, and literature of the high middle ages, the Renaissance, and world exploration and colonialism.

These examples show times when globalization could be brought to a halt by a nation or region, but it is shown that when progress is stopped a vacuum is created. Such a vacuum cannot persist on any significant scale in the twenty-first century. It’s is not possible for whole regions to remain isolated from the world’s accumulated knowledge.

Overall the trend is clear: these great changes in international relationships and in society all over the world present obvious challenges as humanity moves forward. Connectedness and individualization are increasing everywhere.

This is not just a phenomenon of commerce and economics: it is something far more profound, which reaches deep into the roots of human self- definition. Globalization is about far more than commerce, even if the impetus behind it is trade. This is all interconnected. Next, we must look at the Global Bazaar.

The Global Bazaar

To quote Friedman, the father of the argument for globalization —

“[Globalization] can heal two of the deepest human yearnings: the desire for sustenance, improvement, prosperity, and modernization, as well as everything that roots us, anchors us, identifies us, and locates us in this world.”

He is describing how we must have our desires for progress and belonging fulfilled to feel right again.

Green begins the examination of the Global Bazaar by looking at Homo sapiens first 150,000 years on the earth. This is the amount of time it took our species to cover the earth and fill it. Much of the known history of humanity is the story of migration, the urge we have to keep exploring for more. This has led to more health and prosperity, but also to competition and conflict. This impetus for movement led to the engine of globalization: trade.

Human nature has an innate propensity to “truck, barter, and exchange one thing for another”, says Adam Smith. First, we had to figure out how to move ourselves around efficiently. The advent of boats in northern Europe during the Stone Age began the rapid exchange of goods due to a way to transport them.

Commodities of different areas being sold to a foreign land were the next step in the growth of trade. By 3000 BC, Sumerian farmers were trading their grain for copper, obtained hundreds of miles west in the Sinai Desert. By 1000 BC the world had its first trading professionals. Trade routes became coveted methods of transporting goods efficiently to market. The Red Sea and the Persian Gulf were some of the first trade routes to be used. With this increase in traveling, distance came increased access to rare goods that dazzled the rulers of the ancient world.

Wealthy Romans began to have more access to silk from China, as well as spices from Middle Eastern and southeastern Asian markets. They were electrified by the exotic nature of such goods and the value of these staples began to rise. They are some of the first commodities of trade ever recorded.

Exploration in the new lands of the Americas led to the conquest for precious metals. Over the first 150 years of Europeans entering America, hundreds of millions of pieces of gold and silver were exported back to European markets. This led to a huge spike in inflation, and to the creation of a middle class gaining interest in luxury goods such as cotton of sugar. This spurred the next revolution.

The movement of people around the world was the next impact of trade. The first major movement of people was from the rural to the urban. This was the first attempt to increase the workforce in industrialized nations such as Britain to keep up with ever increasing inbound shipments of raw materials. However, this wasn’t enough.

This second stage of migration was grim. This phenomenon is known as the slave-trade. The African slave trade was old: at least a four-hundred-year story of forcible transportation under unspeakable circumstances. The climax of this trade was reached in the final one hundred years before it was abolished, nearly 7 million Africans were forcibly transported across the

Atlantic.

The third and final migration of people was that of the trans-Atlantic migration of European peasants and laborers to the New World. Nearly 55 million people moved from Europe to the Americas between 1846 and 1940 – two-thirds of them to the United States.

The eighteenth and nineteenth centuries are chiefly known for the Enlightenment, the birth of America, the French Revolution, the Industrial Revolution, and the rise of the British Empire. But lurking beneath and around these dramas was the flow of humanity across the face of the earth. Teilhard’s vision of people moving around the sphere and completely filling it could not have been more vividly illustrated.

Scientific and technical progress followed these other developments. The rising middle class began to buy land in search of a secure investment. They became more profit-driven by having an ownership stake and were open to new techniques. Due to the mass migration of rural agricultural workers to urban areas, new technology had to be developed to keep up with the change in the labor force.

This accelerated innovation and creation. The flying shuttle, water-powered manufacturing, steam engines, and the production of steel are all technological innovations that can be attributed to this change in population distribution.

Transportation is the next area of trade to get a boost. With the advent of the steam engine, railroads became the fastest and cheapest way to get goods moved across the land. Countries found that the goods themselves were now the most expensive input, not transportation. This led to defensive practices by most industrial nations: tariffs.

These taxes on imports or exports started to slow the spread of globalization. Britain was the first to see this slump and cut tariffs as a method of once again opening trade. This led to huge amounts of growth in the top economies: nearly 3.4 percent annual growth between 1870 and 1900.

All of this growth and innovation came to a screeching halt with the beginning of the First World War. The “hundred years of peace” was over. The richer industrial nations of the West plunged into a struggle from which it would take fifty years to recover.

Looking back at the history of trade in the world, we can summarize it by taking a historical perspective. From the dawn of human existence, there is evidence to support trade being an integral part of the human experience. Evidence of the trading of seeds and livestock dates back to nearly 10,000 BC. This implies that there was credit even in those times due to the natural reproduction of animals, and the yield increase of a single seed.

Both could be eventually returned with interest. The notion of animals being involved in wealth is still seen through the terminology of today’s financial markets: bull, bear, pecuniary, cattle. Capital has always been an important lubricant of the market. Thus, the currency has always been a sign of trade. Humans began by using rare metals as a form of currency; today’s currency derives value from the promise it represents, rather than physical value.

Money made buying and selling far more efficient. Credit and debit, in short, are among the essential building blocks of economic development, as vital to creating the wealth of nations as mining, manufacturing or mobile telecommunication.

This equates today’s trading environment with that of history’s. Money lending has been around for millennia, but one of the first documented cases of wide spread lending is found in the Bible: Deuteronomy 23:20-21 —

“You may charge interest to a foreigner, but to your countrymen you shall not charge interest, so that the Lord your God may bless you in all that you undertake in the land which you are about to enter to possess”.

Jews began lending to non-Jews early on in their history as a people. As time went on, Jews began to be characterized as the money-lenders of Europe. Other famous people groups who functioned as money-lenders would be the early Armenian Christians – they functioned as the bankers for the Ottoman Empire. More mobile ethnic groups with lots of capital tend to become lenders, while the static, stationary, innovative ethnic groups become the debtors.

This has led to conflict throughout the centuries. Money- lenders are never popular. This can be seen evidently through the purposeful expulsion and extermination of the Jews by Russian and German peoples. It can also be seen in how little respect or trust is placed in today’s bankers.

The final aspect of the Global Bazaar is the various market ideologies that have formed over the centuries. Today they can be seen most clearly as ranging between two poles: no government interference, and complete government control. Both of these sides have logic behind them, but only one has proven effective.

Capitalism is the idea that markets will in and of themselves be efficient. They will eliminate externalities and inefficiencies through the participants in the market exploiting the inefficiencies until the market is back in equilibrium. This whole system is representative of the idea that each of us has a chance at making it big, and so far as it depends on us, we can control our destiny. On the other end of the spectrum is a Communist model for the market.

This idea boils down to fairness. People should not be penalized for the class they were born into, the natural talents and abilities they may or may not have, and their ability to be competitive. The government oversees the market so as to keep it fair and level so that no one individual has an advantage over another. This is a great idea in theory- it creates a market where each participant can expect to have the same chance as anyone else. However, in practice, this system has not been proven to work.

Corruption, inefficiency, and inflexibility have always been results of a state run business scheme. Capitalism has proven itself to work regardless of whether each participant starts off on the same spot on the track. Human nature has been shown to support a capitalistic viewpoint.

Humans and animals alike have certain characteristics that point to free and open markets. Property rights are one of the only things a government guarantees the market participants in capitalism. In this same way, animals mark their territories for foraging, hunting, and mating.

Capitalism is a naturally occurring phenomenon, and no matter if it is supported or outlawed, it always pops up again as the natural function of the market takes over. Human beings are built to trade and exchange. The biggest question is, what impacts will open markets have on the future?

The Home Stretch to a New Jerusalem?

By looking at the effects of open markets on the current positioning of the world, it is evident that progress is being made in terms of GDP growth, increase in exports and imports, and overall reduces barriers to information and technological innovation.

Motivation is found in the mere idea that, “If I do it first, I can make something from it.” We can look at examples of communism or isolationism and see how those simply don’t produce the desired result.

After the onset of the First World War, trade barriers were quickly erected to protect each country from the rest of the world. America led in this ideology of isolationism and protectionism. However, these ideas don’t make good business practices. High tariffs within your country keep you from entering the worldwide market place.

After the Second World War, when the fifty years of recovery from World War One had been completed, country after country loosened up its regulations. The effect was a significant increase in the freedom of capital flows across borders throughout much of the world.

China and India were some of the latest adopters of the Global Bazaar model, in which domestic markets are globalized. They saw tremendous growth in the amounts of goods and services produced in the periods following the removal of trade barriers. They are both examples of how isolationism may protect you from little scars but keeps you from experiencing the largest amounts of growth.

With the shift to more urbanized societies, moving ever closer to reaching our full potential as a human society, come shifts in the elemental makeup of society. Our human psychology is changing with the times. Alienation and loneliness are rampant in today’s society. With the lack of reasoned debate and change in the individual’s connection to their own society, the rise of extremism and terror networks is not surprising. Green begins to question, “Is this progress?”

From Tulips to Subprime to…

Green begins to shift focus to the more recent financial situations of our time, primarily the economic collapse of 2007-2008. For many, it felt as though the crisis had come out of a clear blue sky.

Good Value Economic Rectangle

This economic rectangle delivered strong global growth in the decade leading up to the financial crisis, but it was inherently unstable. Financial imbalances had gone unchecked for years. The workshop nations, resource providers, and the capital-goods exporters had accumulated massive savings, the vast bulk of which had been invested in the world’s reserve currency, the US dollar.

With such available liquidity, the yield on US Treasury debt went down. Thus other sources of higher yield investments were sought out. This led to a new niche market of high yield investments, with limited risk. Mortgage-backed securities were the obvious choice: those securities were liquid and were backed by mortgages on people’s homes.

This stimulated huge growth in the issuance of these securities: in 1990, just 10 percent of mortgages in the United States were securitized, but by 2007 it had risen to over 70 percent. This combination of a tidal wave of liquidity and the search for yield meant that the ratio of risk to return began to rise. Western consumer economies became highly leveraged due to a boom in consumer borrowing. The western financial system as a whole was becoming vastly over leveraged.

At the same time, mortgage-backed securities were beginning to show signs of strain. The relatively low risk was due to the diversification of the mortgages backing the securities. This meant that lenders were tempted into over lending and that the transfer of risk could make it very difficult to see who was ultimately the bearer of the loss in the case of a credit collapse.

Gillian Tett of the Financial Times memorably described all this as “candy floss” money, akin to the way a small amount of sugar can be spun into a huge cone of candy floss. Markets were now predisposed to overconfidence. Financial models used to determine interest and borrowing rates were relying on this high consumer confidence factor.

Fear began to spread through the financial markets after Lehman Brothers failed. The realization that no one truly understood what was backing their securities, who actually was bearing the risk, and who would take the fall, generated mass hysteria. The interconnectedness of a global supply chain in manufacturing industries began to be the pipe that transmitted the ferocity of the downturn in the economy all around the world with unprecedented speed. Due to the increase in just-in-time manufacturing, there was little wiggle room in inventories or capital savings.

As the consumer nations began to lack the ability to consume, manufacturing nations lost markets to sell their goods. Supply nations lost buyers of their raw materials, and capital-goods producers lost purchasers of supplies. This idea of a globalized economy that led to centuries of growth and returns had also contained within it the seeds of its own destruction.

Such widespread reliance on each individual market, thus creating one larger living market across all economies, led to the consumer nation’s faltering and taking the rest of the world’s economies down with them.

A sharp and immediate response was needed to deal with such a crisis. The financial markets could not disappear – there would be a complete collapse of order and consistency in the way most people lived their daily lives.

Governments stepped in to prop up the failing markets with huge capital infusions and quantitative easing, in direct opposition to the ideals of an open- market capitalistic economy. This kept the small amount of stability in the market in place. This idea of a worldwide collapse necessitating a governmental response was coined as “Keynesianism”.

This sparks a discussion of what can be done to make sure a default of this magnitude never happens again. First, we must recognize that history repeats itself. Next, we must understand that the way to insure stability in the future is to take a real and honest look at what went wrong and work aggressively to change what is necessary to prevent future collapses of this size.

Questions such as, “How can consumer markets such as the US learn to borrow less and save more?” come to mind. How can nations with exceptionally high savings stimulate domestic demand and reduce their dependence on exports? This imbalance was in deep need of correction. This will not lead to a few policy changes, but a systematic change in how the participants in the economy, human beings, think and act.

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Why Should I Do Anything for Posterity?

Financial collapses are not new. The history of world finance could be told as a constant succession of crises. Financial crises can often be linked to excessive optimism about new technology. The tulip mania of 1637, the South Sea bubble of 1720, the Florida speculative- building bubble of 1926, the Nifty Fifty of the late 1960s, the Poseidon bubble of the 1970s, and the dot-com bubble of 1998 are all examples of times when optimism worked against the market. Our nature as humans to place our hope in something is the very thing that hurts us in the end. As Green says,

“History moves in a spiral, not a circle.”

What then can our response be to this assumption that we are doomed to repeat our past? First, there is no alternative to the market. At its worst, the market is unjust, abusive, destructive and crisis-prone. At best, it is a highly efficient allocator of capital, and it has delivered huge advantages to humanity.

Second, we cannot turn the block back to a time before globalization. The genie is out of the bottle now; we live in a densely populated world that is heavily reliant on one another. Thirdly, government oversight, regulation, and in times of stress, intervention is essential.

The underlying question will be whether world leaders can construct a shared vision of a global economic order that preserves the dynamism of market forces while taming their excesses (in both risk-taking and reward). Key to this is the acceptance that the global balance of economic power is shifting as the center of gravity moves from west to east.

The world is being rebalanced, and it has become increasingly broadly accepted that the framework of international institutions needs to be redrawn to reflect the new realities of globalization. Markets reflect human nature: that they are imperfect commercial animals.

In My End Is My Beginning

What should be our response then to this new understanding of how human nature and the financial markets are often shadows of the same thing: human beings? The new world order will be shaped by the underlying question: What is progress?

If it is defined as completeness then we will never fully achieve it; the journey is the all- important. Completeness in our lives involves starting with the acceptance of the ambiguities of life: that we are unavoidably imperfect, that the nature of the end of human development is not visible to us, and that to some extent we always feel hope regardless of how irrational it may be.

We need to recognize these ambiguities as we seek to interpret our history, evaluate our experience, and weigh the life choices we and others make. And if we do so honestly, with integrity, and in search of healing and learning, then we have to become aware of the biases that distort our insights.

Each of us views the world with bias due to the lens we use to interpret it. Green moves on to say that his interpretive prism is Christianity. That is not the full explanation for how he sees things but is a good starting place for understanding his views. Due to human nature being inconsistent and constantly evolving in light of new experiences, we must have some measure or standard for decision-making.

For Green, it is his Christian faith. He argues that you need to connect your moral framework with the metaphysical. His faith can trace back its prism to original sin and original grace. These are the original ambiguities of human beings – about all of us in whatever we do. It seems to be with us always, and it underlies our personal disappointment with ourselves, and our awareness of the reality of evil.

As globalization continues to unfold and challenge the human condition itself, we learn more and more about what we are capable of – for good and for ill – and what we learn is, in fact, an old truth embedded in the whole history of the human species. We face the same issues as those who lived centuries and millennia before us – the only differences are the technology of combat and the globalized scale of the risks of conflict.

In the final analysis, we confront our globalizing future, individual and collective, material and spiritual, with hope – not with despair, and not with uncritical optimism. We are then challenged to action. First, we are called to engagement – into life in the ambiguous bazaar. We are challenged to judgment, and that it will always be part of our experience. Lastly, we know for sure that we will stumble, but that remorse and renewal are always possible.

Even when something feels like the end, it can be the beginning. We will not cease from exploration even though we won’t see the end of the human experience. We will toil and work during our time on earth towards an incomplete and provisional understanding of the direction and destination we are headed. We only have the power of hope within our grasp. The power to progress towards enduring hope is the only responsible vision for life in the global bazaar.

HookedtoBooks.com would like to thank the Titans of Investing for allowing us to publish this content. Titans is a student organization founded by Britt Harris. Learn more about the organization and the man behind it by clicking either of these links.

Britt always taught us Titans that Wisdom is Cheap, and the principal can find treasure troves of the good stuff in books. We hope only will also express their thanks to the Titans if the book review brought wisdom into their lives.

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