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Why the World Economy Needs a Financial Crash and Other Critical Essays on Finance and Financial Economics
By Jan Toporowski
These essays explain why financial crisis breaks out, its social, economic and cultural consequences, and the limitations of policy in the face of economic stagnation induced by financial inflation.
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About This Book
The essays in this volume explain how financial inflation shifts banking and financial markets towards more speculative activity, changing the financial structure of the economy and corroding the social and political values that underlie welfare state capitalism. The essays begin with an article that was published in the Financial Times that highlights the problems of excess debt, which emerges when financial inflation exceeds the rate at which prices and incomes are rising.
Subsequent essays examine the consequences of this for money and international financial, and for financial and accounting techniques such as financial innovation, goodwill and leverage. Among them are critical essays on the role that finance theory has played in covering up the problems caused by finance. These include a portrait of the pioneer of modern finance theorist Fischer Black. Further essays discuss the role of finance in economic inequality, fostering a new political, social and economic divide between the asset-rich and the asset-poor as the housing market (and asset markets in general) become the new 'welfare state of the middle classes'.
A final group of essays looks at how financial inflation finally broke down and financial crisis broke out. A previously unpublished essay examines the limitations of central banks in securing financial stability, while two concluding essays discuss the role of international business in transmitting the crisis around the world, and how developing countries become affected by the crisis.
Reviews
'Jan Toporowski is the best-kept secret in British economics. His insightful essays combine insight into current market mechanisms and macroeconomic dynamics with a keen appreciation of the historical sources of the ideas being debated in today’s financial pages. This book explains Toporowski’s ground-breaking theory of financial inflation, which is the key to understanding why financial-market forces ultimately exploded. In sum, this book answers questions readers didn’t know they had about the 2007-08 financial crisis and about all the financial crises in the neoliberal era.' —Gary Dymski, Professor of Economics, University of California, Riverside
'Jan Toporowski offers a lively and engaging critical assessment of national and international financial problems. He writes clearly, in non-technical language, and explores the economic, historical, political, cultural and symbolic significance of finance. Anyone with a serious interest in the “great recession” that began in 2007 will benefit from reading this book.' —John King, Professor of Economics, La Trobe University
'In these essays Jan Toporowski demonstrates his characteristic ability to combine analytical insights with policy relevant commentary on a range of topics associated with financial inflation and with banking and financial crises. Directed at a non-technical audience, the discussions offer a lesson in rigor, clarity and conciseness. The breadth of knowledge is impressive and the resulting analyses always telling and thought provoking. A book to be highly recommended.' —Grahame F. Thompson, Professor of Political Economy, The Open University and Visiting Professor at the Copenhagen Business School
'Offers a uniquely systemic and historically aware insight into the structural, institutional, socio-political and cultural origins of financial instability associated with the rise of global finance... A sharp and comprehensive critique of the financial orthodoxy that is behind many myths of contemporary economics and political economy.' —Anastasia Nesvetailova, Department of International Politics, School of Social Sciences, City University London
Author Information
Jan Toporowski is Reader in Economics and Chair of the Economics Department at the School of Oriental and African Studies, University of London. He studied Economics at Birkbeck College, University of London and at the University of Birmingham. Jan Toporowski has worked in fund management, international banking and central banking.
Series
Anthem Finance
Table of Contents
Introduction; 1. Why the World Economy Needs a Financial Crash; Part I. The Economics of Financial Inflation; 2. Money in Globalised Times; 3. Neo-liberalism and International Finance; 4. Financial Innovation: Better Machines for Financial Inflation?; 5. The Inflation of Goodwill; 6. Leverage and Balance Sheet Inflation; 7. Inflation in Financial Markets; 8. Asset Inflation and Deflation; Part II. The Culture of Financial Inflation; 9. Twentieth-Century Finance Theory: The Frauds of Economic Innocence (in memoriam J. K. Galbraith); 10. Fischer Black’s ‘Revolution’; 11. Economic Inequality and Asset Inflation; 12. The Wisdom of Property and the Culture of the Middle Classes; Part III. Financial Crisis; 13. Everything You Need to Know about the Financial Crisis but Couldn’t Find Out Because the Experts were Explaining It; 14. The Limitations of Financial Stabilisation by Central Banks; 15. International Business and the Crisis; 16. Developing Countries in the Crisis Transmission Mechanism; Epilogue; Notes; Index
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