This topical book offers a wide-ranging description of recent events in the world economy. The particular focus is upon financial markets and the implications of their volatility for countries, companies and individuals. But this is woven into a general discussion of factors as diverse as the speed of technological innovation, the problems of poor indebted nations and the link between global finance and the laundering of the proceeds of crime.
Susan Strange's book is in essence a polemic in political economy. Her thesis is that financial markets have behaved in wildly foolish ways, damaging many in the process, and are in urgent need of more regulation. Many will approve of her diatribe against what she sees as the excesses of capitalism. But her arguments are at the same time serious, with lots of empirical evidence and more than 200 academic references given to support them.
Mad Money is not so much for economists as for the general reader interested in economics and the world situation. Strange covers a large amount of material and manages to compress it into a comprehensible form. For example, the arcane but enormously important world of derivatives, leveraged buyouts and junk bonds is illuminated in just eight pages. The mysteries of this acronym-laden universe - the IMF, BIS, GAB and so on - are explained clearly.
One of the most interesting chapters discusses the greatly increased use of the international financial system by organised crime. Strange's views here are typically pungent, arguing that the damage caused by the laundering of criminal money is much less serious than that brought about by either tax evasion, private fraud or public embezzlement.
The one issue that she does not confront clearly enough is the performance of the world economy in recent years. From the end of the second world war to the early 1970s, financial markets were heavily regulated and strict controls exercised over the international movement of capital. Economic growth was much faster than it has been in the 25 years since then.
Even some eminent economists who should know better assume that the correlation between a less regulated financial environment and lower economic growth automatically implies a causal link from one to the other. But there are many possible reasons for the slow-down in growth, and it has not been established that financial deregulation is one of them. Indeed, since the early 1970s world income per head, after allowing for inflation, has actually grown slightly faster than its long-term average over the two centuries or so of industrial capitalism. Equally, large fluctuations in growth from year to year are not new, and neither are the closures of industries and the consequent loss of jobs due to new technology. It is this much wider perspective that is really missing from the book.
But, overall, the book is well argued and well presented, and it deserves to be read by a wide audience.
Paul Ormerod is chairman, Post-Orthodox Economics.
Author - Susan Strange
ISBN - 0 7190 5236 X and 5237 8
Publisher - Manchester University Press
Price - £40.00 and £13.99
Pages - 212