This is another book I decided to read after seeing a TED talk by the author. The Chicago School of economists, led by Milton Freidman, basically redefined what "freedom" means. The word used to refer to individual freedom to do what you want to do. Friedman et al changed it by equating "freedom" with economic freedom to buy what you want to buy. Friedman did a whole series on this called "Free to Choose." While maybe this made sense during the Cold War, today it has led to the neoliberal philosophy of free trade and unregulated capitalism. Basically, Western civilization is based on the idea that the more choices you have as to what to buy the "freer" you are and the happier you will be. This book analyzes this theory and finds it greatly lacking.

One thing I noticed when moving from the USA to Switzerland is that there aren't as many different brands of everything. In the grocery store you might have 5 or so different brands of toothpaste instead of the 100 brands, each with 20 different varietes you would find in the US. At first this was a bit shocking and hard to get used to, but I did get used to it and I have started to appreciate it. I believe the reason for this has to do largely with advertising. There isn't as much of it here, and it's nice to not constantly be bombarded by ads trying to get you to buy stuff you don't need. 

Since the major difference between the brands of toothpaste is the brand, rather than the ingredients or the effects or any characteristics of the actual product, less advertising means there is less to differentiate between the brands, and thus fewer brands and fewer products to choose from at the grocery store. Advertising is not really about the product at all - it's about trying to create an image or a feeling in your mind that you associate with the product. Like "chew this gum and you will be rich and famous and attractive to the opposite sex." When you buy the gum and chew it and none of that happens you will likely be disappointed. 

The book explains why having more choices is not necessarily a good thing. An example is expectations - in our society we expect that with 200 choices for sneakers we should be able to find the perfect sneaker that will meet our every desire in a sneaker. When the shoe inevitably fails to meet those expectations, we will be disappointed. If we only had 3 choices for sneakers we would know that we had picked the one we like the best and won't be so upset when the sneaker doesn't make us a basketball star. Of course this is a great simplification of the arguments which Schwartz lays out in very well thought through detail. 

This was a very interesting book, and I highly recommend it. It was especially interesting to me fromy my vantage point in Switzerland, where I have gained some clarity on how things are in the United States. My brother came here recently and his first complaint was there are too few brands of everything to choose from. When I first got here I was frustrated by the fact that if I wanted to buy any random thing I couldn't go on Amazon and have it delivered the next day, I would have to try to find a bricks and mortar store that might have it and then go there and hope they do, or try to order it from Amazon France or Germany and wait a couple weeks for it to arrive. The thing is - it wasn't that I needed whatever thing it was that I wanted to order, I was just used to having every single thing I ever could want at my immediate disposal. What changed was my expectations, and now, before I go online to try to order something I actually think about whether I really need it and if it is worth ordering. 

It never even occurred to my brother that not having 175 options for salad dressing at the grocery store might be a good thing, but Mr Schwartz lays out clearly and with factual backing the reasons why, past a certain point, adding more choices becomes counterproductive.

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Who Stole the American Dream, by Hedrick Smith, is about exactly what you would expect. It explains how and why the wealth in the United States has become so concentrated in the hands of the few. Back in the 1950s and 60s, in what is considered by many to be the height of American prosperity, corporations would act for the benefit of all their stakeholders - their employees, their consumers, society in general. At some point the focus shifted to be on maximizing shareholder value - which means trying to maximize stock price at the expense of everything else. 

The idea of maximizing shareholder value was promoted by Milton Friedman and the Chicago School of Economics, and like most of their ideas, is a lot better in theory than in practice. The stock market today focuses only on the most recent news and earnings and will punish a small drop in earnings dramatically. This leads corporations to try to maximize their quarterly earnings and ignore any long term considerations. The fact that CEOs get a large portion of their compensation as stock options only increases the incentive for management to focus exclusively on the short term. In the past corporations would regard their employees as long-term assets, and would provide pensions and job security. Today they are more likely to hire the least expensive employees they can find, often in third world countries, and they will offer 401(k)s which require the employees to fund their own retirements. So the working class loses their jobs to offshoring and who benefits? The CEOs who receive massive compensation packages - and the stockholders, who tend to be wealthy individuals.

The book covers a lot of different issues, far too many for me to recount here. The rise of the 401(k) is just one example of how the government has been corrupted by the corporations and the super-rich. Starting in the 1970s, corporations started to take more of an interest in politics, and that influence has grown steadily since. First loopholes in campaign finance laws were used for the wealthy to buy influence with politicians, and then Citizens United basically blew the doors wide open for the wealthy to control the government. 

Thomas Picketty, a French economist, wrote a book about why wealth inequality keeps growing, and it basically boils down to one simple equation: r > g, which means that the return on capital is greater than economic growth. What this means is that those who have money and invest it will make more return on their income (r) than those who works for a living and are dependent on rising wages for greater income. This depends on economic growth (g). This will inevitably lead to wealth concentration, as those who have money can invest it and make more money, while the incomes of those who work for a living are tied to economic growth. 

The book was very comprehensive in addressing the numerous economic and political aspects of this issue. It covers so many different topics one could almost say it was a bit rambling at times. However it was well written enough that the flood of information was never overwhelming. I highly recommend it.

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Mervyn King was the governor of the Bank of England during the 2008 financial crisis. Unlike other books about the crisis, this one does not set out to describe Mr. King as the hero who single-handedly saved the world from economic doom, and does not seek to find someone to blamde for the crisis, but instead points out inherent flaws in the banking system which led to the crisis. While Mr. King goes far beyond what one would expect from someone who held his position, for me, the conclusions he did not reach were far more telling.

Mr. King blames the financial crisis on the banking sector, which he sees as the weakest link in capitalism. Specifically, he lays the blame on what he calls "alchemy" - how banks transform long-term stable assets into short-term risky assets. After the bank runs at the onset of the Great Depression, the US Federal Reserve started the FDIC to guarantee bank deposits. The thinking was that by reassuring people that they could get their money out of the bank, the government could forestall future bank runs. In practice, however, this ended up giving the banks leeway to use the deposits of their customers for high-risk, high-yield investments or loans - as they know that the government will bail out their customers should the investments or loans go bad. What this leads to is the banks making riskier and riskier investments in search of high yields, with the knowledge that they aren't really risking anything. As one bank starts to make higher and higher risk investments, others must do the same to remain competitive. This directly led to the sub-prime mortgage crisis.

Mr. King points out many flaws in the banking system, but doesn't suggest many solutions. One solution he does make is to force banks to have assets to back their liabilities. The Reserve Rate, set by the Federal Reserve, says how much money banks must keep on their books to back their liabilities. Currently it is a very small percentage, between 3% and 10% based on the size of the bank. This means that if I deposit $100 in the bank, the bank only needs to keep between $3 and $10 of that, the rest they can lend out. If I go to the bank and ask for my money, and the bank doesn't have it, the FDIC will guarantee the rest. Lending out deposits is how banks create money - if I put $100 in the bank, theoretically I still have the $100 dollars, but so does the person the bank lent the money to. A 100% reserve rate would mean that the bank would be gambling with its own money, instead of with the tax payers money as the tax payers are currently guaranteeing the bank. Mr. King admits that this is very unlikely to ever happen.

Mr. King says that one of the flaws with economic theory is that it does not account for "radical uncertainty." The Chicago School of economics basically says that a completely free market is completely efficient - meaning that all available information is factored into all prices and the economy will tend towards equilibrium. However this model leaves no room for "radical uncertainty," which refers to how no one can ever know what the future holds. This is the reason we need money at all - to store purchasing power for an unknown future. Mr. King is clearly no fan of this school of economic theory, which advocates that the government should not be involved in the economy at all, and should let the market sort itself out.

When I was in business school we were taught economics as if it was a hard science. Reading this book made me aware of how much what we accept as axioms influence our thinking. While Mr. King goes far beyond what one would expect of a government official as far as the flaws he identifies in the political and economic system, he never questions some basic assumptions of economics which probably should be questioned.

In the United States, in my opinion, one of the government's top priorities is protecting the financial interests of large corporations. This is something that very few elected officials would ever question as doing so would result in them losing millions of dollars in campaign contributions from said corporations. Mr. King does question this, and for that I give him a lot of credit. However, Mr. King is still under the assumption that capitalism as an economic system can and does work, and that the flaws in it can be corrected. While I disagree with this, reading this book almost convinced me otherwise. Not because he argued that point, but because his arguments are based on assumptions which he sees no need to question, and his arguments are well reasoned enough that it almost makes one forget that the bases on which they rest are far from as sure as they are assumed to be. 

While a myriad of other books have been written about the crisis, I have not read one that goes beyond the superficial causes to try to analyze the deeper root causes. It was also very refreshing to read a book written by someone intimately involved in the response to the meltdown who does not set himself as a hero fighting to save the world economy from certain disaster. When I started reading this book I was not expecting Mr. King to offer as deep an evaluation and critique of the world economic and banking system as the book does. While the book was at times rather technical, I still highly recommend it.

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Hearing about how Donald Trump wants to "make America great again" for the last year and a half made me think when was America great? Since the 80s, conservatives have loved to talk about the decline in "family values" and how all social and economic problems stem from the lack of "traditional" families, usually referencing the 1950s Leave it to Beaver sitcom-style family as their model of what a good, decent traditional family should be. I suspected that such a family never really existed other than on TV, and I decided to read this book, "The Way We Never Were: American Families and the Nostalgia Trap" by Stephanie Coontz to get another opinion on this issue.

The book basically concludes that the "traditional nuclear family" consisting of a working father and a stay at home mother was a relatively recent invention, only really existing in the years after WWII, and that contrary to popular nostalgia of the 1950s as a period of good, decent, family values the rates of poverty, alcoholism, child abuse, domestic violence and marital dissatisfaction were significantly higher than they were in the early 1990s, when the book was written. In the 1950s wife beating was not even considering a "real" crime and battered wives who saw psychiatrists were often counseled to stop provoking their husbands. 

During the Reagan era you would often hear that social and economic problems were due to the end of the traditional family - as seen in rising divorce rates, lower marriage rates, and the rise of out-of-wedlock births. In fact the rates of teenager girls having children was higher in the 1950s than in the 1990s, although back then many teenage girls who got pregnant would either be forced to marry or live with their parents, in which case their children would not be counted as being raised in a single parent home.

Ms. Coontz makes a case that the social and economic issues of the 1980s were in fact directly related to rising income inequality and poverty caused by the deregulation and privatization of the Reagan years, which tie in to the idea of a nuclear family as the basic unit of society. In the past extended familes were much more common and communities and social ties were stronger. It was really only in the post-war years that the self-contained nuclear family which only cares about itself became prevalent, and the idea was really promulgated, largely by advertisers, who wanted to sell goods to housewives, and mass media, which wanted to have the least objectionable programming to appeal to the widest possible audience and thus appeal to advertisers. She argues that the privatization of the family was just part of a wider trend of the economic privatization of everything which is still ongoing. Divorcing families from their communities and their wider social ties was just a manifestation of the emerging neoliberal economic agenda where profit is the driving force behind and measure of everything. 

In this analysis "traditional" family values were just another piece of the commodification of everything and the shift of priorities from concern for wider social issues to everyone being obsessed with making as much money as possible for themselves. Ironically, this implies that the "traditional" family, by shifting the focus from the community to the individual, was involved in the destruction of the "traditional" family values which are often tied to the family. In fact, neither the "traditional" family nor the "traditional" values associated with that family ever really existed in reality, so the whole issue becomes largely moot.

One story I found very interesting in the book was about how different cultures have different approaches to things like family. When the Europeans arrived in America many of them were aghast as the way the Native Americans viewed family and marriage and women. The Native American women were free to do as they wanted whereas the Europeans were the property of their husbands or fathers and were very tightly controlled. The Europeans were taken aback by the fact that the women could make their own decisions and sleep with whomever they wanted. They asked the Native American men how they could know if their children were biologically theirs if they didn't enforce monogamy. The Native Americans replied that while the Europeans only loved their biological children the Native Americans loved all the children of their tribe. I would argue that, as Hillary Clinton said in the 1990s, "it takes a village" to raise a child, and Ms. Coontz provides evidence that this is in fact true, and that children who are part of a wider family than just their parents often turn out better than those raised in isolation with only their biological family.

The bottom line of the book is that the yearning for the "traditional" family of the 1950s is a trap, and distracts people from thinking about real problems and solutions, by imposing an unthinking nostalgia for a past that never really existed while ignoring the numerous problems that existed in that past. To answer my original question, the America that some people so desperately want to go back to only existed on TV and in their imaginations. 

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Fareed Zakaria wrote an article in the Washington Post a few days ago about globalization. The article argues against Trump-style protectionism, saying that globalization and free trade are not the problem, but national policies are the problem. As an example he asks what if instead of the US spending $14.2 trillion on multiple wars over the last three decades that money had been invested in American industry and infrastructure. He also mentions that most of the profits from globalization have ended up on Wall Street (or in the pockets of a small number of billionaires) as opposed to benefiting the general population. 

After having read several books recently about the problems with globalization I was struggling to reconcile the very valid points made in those books with my personal sense that removing borders and barriers can't possibly be bad. After having read an article by Nick Hanauer called The Pitchforks Are Coming... For Us Plutocrats I was finally able to reconcile the confusion in my head.

Mr. Hanauer says that the growing income inequality is destroying the capitalist system. As an example he uses himself - he says he makes about 1,000 times the average American income, but he doesn't buy 1,000 times as many products. I imagine it would be very difficult to spend that much money. When the corporations move their production offshore they reduce their costs, but they keep the profit and distribute it to their officers and investors instead of distributing it to their labor force. While Henry Ford used to believe that each of his workers should earn enough to buy one of his cars, today the offshore laborers producing goods are lucky to earn enough to be able to feed their families. So where does the extra money go? It goes into the hands of the CEOs who pay themselves outrageous salaries (331 times the average worker's salary), and into the hands of investors and into Wall Street banks.

Mr. Hanauer says that this model is unsustainable because if this trend continues soon the only people who will be able to afford to buy products are the very wealthy, and they don't need to buy enough products to sustain the whole economy. He believes that if it continues soon the people will have no choice but to rise against the plutocrats with pitchforks.

In 2015 the wealthiest 62 people on the planet had the same amount of wealth as the poorest 3.5 billion. This year that number has gone down to the wealthiest 8 people, meaning that those 8 people have as much money as the poorest 3.5 billion combined. If you give one of the poorest 3.5 billion people an extra couple dollars each they would likely spend it on essentials like food, clothing, housing, healthcare, so that money gets recirculated back into the economy. The wealthiest 8 people probably don't really need anything that they can't already afford, so if you give them a couple million dollars each (as Trump plans to do with tax cuts) are they going to spend that money back into the economy or are they going to put it in the bank with the billions they already have there?

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