"Crashed," Adam Tooze, Viking, 720 pages, $35.
When asked how he went bankrupt, one of Ernest Hemingway’s characters replies: “Two ways. Gradually and then suddenly.” That’s rather how the crash was for the world a decade ago.
There was an extended buildup, with cracks in the system emerging during the course of 2007. Then there was the sudden shock, when Lehman Brothers collapsed in September 2008. Adam Tooze, a historian noted for his works on the interwar period, is aiming to be less entertaining than authoritative in “Crashed: How a Decade of Financial Crises Changed the World.” Yet with the events it covers so recent and so dramatic, the book is as much reportage as historical analysis.
Coverage ranges from the immediate post-crisis bailouts to the eurozone crisis and austerity moves and the rise of populist politics. Tooze sides with most economists in taking the view that the immediate post-crisis response was necessary, but unfortunate in that executives in the banking industry paid too low a price for their folly; that Europe was slow and narrow-minded in dealing with the peripheral countries; and that the switch to austerity was a mistake.
Taken together, the backlash against bankers, frustration with E.U. governments led to the rise of populism, the election of Donald Trump and the Brexit vote.
Now with the shift away from free-market instincts, the souring change of mood raises fears about what will happen when another storm hits the world economy. The level of cooperation that occurred in 2008 and 2009 may not be easy to achieve next time around.