Review: Crashed: How a Decade of Financial Crises Changed the World, by Adam Tooze

New York: Viking, 2018, pp. 720.

In Adam Tooze's Crashed the crash of 2008 was not a mere subprime crisis from which America recovered, even as general disruption and downturn helped dip Europe into a sovereign debt crisis, in respects more severe but also largely resolved--a case resting in part on a very different understanding of just how the world economy works. As Tooze takes pains to make clear at the outset, it is not the national balance sheets that get so much attention but corporate balance sheets that are the scene of the "real action"--and in this case particularly the oligarchy of twenty or thirty globally significant banks. Moreover, this oligarchy was not national but thoroughly international. Rather than Wall Street and the City of London being separate nodes, they are complexly intertwined, with the City of London long shaped by American bankers in the London offices of Wall Street firms, while the policies they helped craft there influenced America's in turn (the repeal of Glass-Stegall in 1999 foisted on the American public in the name of retaining Wall Street's competitiveness with London). In its turn the City was a key point of interconnection between the American and European financial systems more generally, which can usefully be thought of as a single trans-Atlantic system.

Indeed, 2008 was at bottom a crisis of private banks rather than nations, and a trans-Atlantic crisis rather than an American one, as Europe's bankers equally generated a continental real estate bubble while putting their money into the toxic assets American firms generated.1 Moreover, after Europe's banks got caught up America's woes, they benefited substantially from the American bail-out, as much a bail-out of the European banks as the Americans (which extended as far as "swap lines" in which the Fed provided Europe with much needed dollars in exchange for Europe's currency). Subsequently the United States played a considerable part in the management of Europe's "own" crisis--underlining the continued predominance of the U.S. in a world where there is still no substitute for the American dollar or American Treasury bills as a safe asset to hold. Beyond establishing the thoroughly private, and thoroughly transnational, trans-Atlantic nature of the crisis, Tooze emphasizes that it did not end (as he had himself thought was the case when he started writing this book back in 2012), but that its effects continue to reverberate through the world economy and political life even a decade on, connecting it with the intensified internal stresses evident around the world, and the heightening of international tensions that has followed from it.

In approaching this material the main the book provides a chronicle of the conduct of government officials and central bankers in the United States and Western Europe as a whole, with occasional glances at the unfolding of smaller or related portions of it, like the crises of Ireland and Greece, and to a lesser extent, North Africa, Russia or China--more like The Deluge than The Wages of Destruction in its accent on diplomatic history rather than economic nuts and bolts, and it is in some ways a problematic approach.

Tooze's tracing of the players' machinations is lucid, and serves his purpose of demonstrating the trans-Atlantic and ongoing character of the current financial system and its crisis admirably. However, he is less successful in relating the smaller stories associated with it. (Just how, precisely, did Greece amass its sovereign debt? The matter is treated cursorily and conventionally, and alas the conventional answer is deeply unsatisfactory.) More significantly, Tooze provides only limited insight on the deeper roots of the crisis that he acknowledges lie back in the 1970s, let alone providing a real critical standpoint. Appalled as he may be by what was done to save the financial system, the sacrifice of Main Street to save Wall Street, so to speak; and the starkly undemocratic, anti-democratic character of policy and its justifications (exemplified by German Finance Minister Wolfgang Schauble's brazen declaration that "elections cannot be allowed to change economic policy"--shades of Continuum, that); he implicitly accepts that "There Is No Alternative" to what was done. Consequently, while I do not think Tooze "misses the forest for the trees," describing the individual trees is mostly what he does, so that it is easy for a reader of this book to do so, and he may be due more credit for providing substantial raw material for the study of those issues than supplying such a study this time around. All the same, what the book does right is a considerable feat in itself, ample to justify yet another addition to the vast body of work already existing on the subject, and well worth attention from anyone seriously interested in a crisis that he is right to treat as still unfolding.