Last fall, when they stopped in New York on their way to vacation in Europe, Chronicles editor Chilton Williamson and his wife invited Taki and me to dinner. Before the wine started flowing and Taki’s raconteurial skills became the primary entertainment, Chilton mentioned his desire for more reviews of books of economic history in the magazine. Unknown to Chilton, one of my Ph.D. exam fields happened to be economic history. I volunteered to help him fill this void in Chronicles’ otherwise broad coverage. Between the sloshing wine and several off-color jokes by Taki, Chilton expanded my reportorial duties to include this neglected academic field.
When Adam Tooze’s latest book, Crashed: How a Decade of Financial Crises Changed the World, hit bookstores this past August, I suggested I review it to Chilton. He immediately agreed. Within days the gargantuan review copy landed with a thud like a stack of foreclosure notices on my doorstep. Tooze, the Kathryn and Shelby Cullom Davis Professor of History at Columbia University, has racked up numerous prizes for his important works on the post-World War I global order (The Deluge: The Great War, America and the Remaking of the Global Order, 1916-1931) and the Nazi economy (The Wages of Destruction: The Making and Breaking of the Nazi Economy). Unlike in those two meritorious efforts, he has vitiated much of his hard work and voluminous research in Crashed by committing the historian’s unforgivable sin of presentism. What could have been the definitive word on 2008’s financial debacle instead presents us with yet more evidence of the pandemic afflicting everyone whose political affiliation plots anywhere between the center right and extreme left, “Trump Derangement Syndrome.” Not surprisingly, I expect Tooze’s overt bias in today’s suffocating anti-Trump Zeitgeist will convince mainstream judges to bestow even more awards on Crashed than his previous two books won, proper historical methodology be damned.
Tooze flips out his left-wing membership card early. In the introduction he reminds us of the 1996 Atlanta Olympics bombing “by an alt-right fanatic.” Bomber Eric Rudolph had many faults, but retroactively ascribing today’s political labels to him tells us more about the author and his current concerns than it does about the historical villain. A few pages later, if you hadn’t already inferred as much, Tooze describes himself as a “Left liberal historian whose personal loyalties are divided among England, Germany, the ‘Island of Manhattan’ and the EU.” Though he doesn’t mention how many passports he holds—or why his identity matters in a serious historical work—residence in those four foreign lands, not to mention an Ivy League history department, possibly his most foreign habitat of all, surely determines his presentist perspective. Knowing that, readers interested primarily in the history of the 2008 crash should proceed cautiously while remembering that empathy may be lacking for Americans who don’t frequent Davos, Aspen, or CFR confabs.
So it comes as no surprise when Tooze admonishes the “tens of millions of Americans” whose house values plummeted in 2008 that in the “grand sweep of global economic imbalances,” the American housing crisis amounted to nothing more than a “parochial concern.” More important in Tooze’s estimation, how did the American housing implosion “precipitate a global crisis”? The author could have posed that key question without insulting those tens of millions of newly impoverished Americans, a tribe with which he likely has little interaction in the artisanal coffee shops of Morningside Heights, the British Airways frequent flyer lounge at JFK, or the Sun Valley ski lift. But in keeping with his presentist goals, Tooze positions Crashed to explain the worst political event since Hitler’s 1933 election—Trump’s 2016 election—by using the financial history of the early 21st century as evidentiary support.
In fairness, Tooze has written two books here. For now, leave aside his questionable argument that 2008 led inexorably to Trump, a claim that rhymes with the discredited yet popular theory that Bismarck led inexorably to Hitler. His analysis of the 2008 financial crash surpasses all other texts to date. While his 616 pages of explanation eventually become tedious, future researchers will benefit from his minutely detailed explanations of the labyrinthine interrelationships between banks—both American and foreign—and banks, between banks and governments, and, finally, between governments and governments, as well as supranational organizations like the IMF, World Bank, and U.N. Most scholarship to date has neglected to focus on the key driver of the global crisis: liquidity problems at dollar-funded European banks. As a result of such problems, when markets in the U.S. went into cardiac arrest in 2008, European and Asian banks, their governments, and their markets looked up “hospice care” in the phone book. The crisis consequently persisted for years as it later infected Greece, Italy, Ireland, and Portugal. Tooze explains each of these subsequent national crises at a level of depth likely to overwhelm the casual reader. But those looking for a detailed account of these horrific days need look no further than Crashed and its dozens of pages of citations.
Readers should also be warned: This book will both scare and annoy in equal parts. In the fall of 2008 and winter of 2009, as Lehman collapsed, AIG teetered over the financial abyss, and the media reminded us daily of the world’s impending demise, most Americans focused parochially, as Tooze might put it, on their shrinking 401k accounts and vanishing home equity. The constant end-of-the-world news flashes amounted to little more than background noise for most panicked Americans. Looking back, according to Tooze’s reconstruction of events, if ignorance wasn’t bliss, it at least kept us from rioting. With a decade of hindsight we can now focus on past events that should enrage us. According to Tooze, during those roiling moments in 2008 and 2009 as many Americans wondered what would become of their personal financial futures, the Fed supplied not just American banks, but also foreign banks and their governments, with “dollar liquidity in unprecedented abundance.” In one $737 billion commercial paper funding program run by the U.S. Federal Reserve Bank, Swiss banking behemoth UBS gobbled up 10 percent of the total funds, and Franco-Belgian Dexia hoovered up another 7.3 percent, while Belgium’s Fortis and the Royal Bank of Scotland fought over the crumbs, a measly 5 percent each. American citizens were left to suffer from the inflationary effects of the monetary antics used to finance such programs. In order to explain the importance of the passage of time in providing perspective on past events, Hegel quipped, “The owl of Minerva spreads its wings only with the falling of the dusk.” But sometimes we’d prefer not to know that the wise owl defecated on us during his flyover. Imagine the outrage if Americans could have focused on their very own Fed’s globalist, inflationary rescue efforts instead of on their own parochial personal financial predicament. You can almost imagine a political rally with the hordes chanting “America First” or “Make America Great Again” in response.
Readers might wonder, “Who’s in charge during a global crisis?” Here Tooze makes the most editorial sense. He characterizes the E.U. as a “sprawling, incoherent constitutional structure lacking in democratic accountability.” He references Alan Greenspan’s condescending 2007 remark that, “thanks to globalization, policy decisions in the US have been largely replaced by global market forces. . . . it hardly makes any difference who will be the next president.” Considering the elitist, antipopulist sentiments of the Bush clan, the Clinton coupling, and Obama, Greenspan has a point. But why then does Tooze belittle Brexit supporters as prone to authoritarianism and “with a preference for the public flogging of sex offenders,” in addition to mentioning their “low education and low income”? All dissent from the technocratic orthodoxy will be pathologized by our self-styled superiors. As Tooze highlights, Warren Buffett was happy to pump five billion dollars into the rescue of Goldman Sachs provided, of course, the federal government backstopped his investment. Heads, the multibillionaire wins; tails, you lose, Mr. and Mrs. Taxpayer.
Tooze cites Gao Xiqing, an official with China’s sovereign wealth fund, who in 2008 described the foregoing antics as “socialism with American characteristics.” A year later when the U.S. national debt totaled a piddling $14 trillion, students at Peking University openly laughed at Treasury Secretary Timothy Geithner when he assured them American government bonds were “very safe.” The data Tooze cites throughout his book point to a system that isn’t broken but rather rigged. And this rigged system has been functioning perfectly for the rent-seeking Warren Buffetts infesting the D.C. swamp who ride to the rescue to “invest” while the American taxpayer eats the losses. Should it come as any surprise that a populist backlash, otherwise known as a democratic majority the elite doesn’t like, subsequently arises? Tooze ignores other arguably more important factors, such as the last 40 years of stagnant wages for American labor, the last 15 years of useless and unjustified war in Afghanistan and Iraq, and the last five decades of demographic makeover of the country, which hurt low-income American minorities worse than any other single group. Tooze’s work attempts a monocausal explanation of Trump’s rise, while ignoring the social, political, and economic problems festering long before the Golden Golem’s arrival in the circus’s main ring. Read and study Tooze’s detailed inside-baseball analysis of the global financial system’s convoluted machinations. There is no better source. But ignore his “parochial” concerns about Trump.
[Crashed: How a Decade of Financial Crises Changed the World, by Adam Tooze (New York: Viking) 720 pp., $35.00]