This collection of Krugman's columns for the New York Times from 1999 to 2003 explains why economic policy at that time favored those with political connections.
Publisher: W. W. Norton & Company
Publication Date: 2003
ISBN: 9780393058505
Economic Policy of the Early Bush Administration as it Happened
This collection of Paul Krugman’s New York Times columns from roughly 1999 to 2003 is categorized not chronologically, but by subject. Themes include “Irrational Exuberance,” a phrase used by former Federal Reserve Chairman Alan Greenspan, “Crony Capitalism U.S.A,” and “Exploiting September 11.”
This book, published in 2003, proves to be an “as it happens” documentation of the implementation of many economic policy decisions that have led to consumer crises in 2007 and 2008 in the housing and energy trades. If the post-September 11 patriotic duty to consume turned into a half a decade of an economic sugar binge, this book explains why that strategy was dangerous. It predicts many of the consequences, such as recent bursting of the housing bubble that have followed.
What little is known about Vice President Dick Cheney’s Energy Task Force is mined, and can be seen to influence such events as the 2000 electricity deregulation crisis in California and the collapse of energy behemoth Enron. Kenneth Lay, the late CEO of Enron, is shown to have undue influence in the Bush administration, despite Bush’s distancing himself from the debacle after the company collapsed.
Lessons to be Learned from Asia
One frightening parallel Krugman writes about is the late 1990’s economic crisis in Asia, which many blamed on crony capitalism, when investors were misled and wealthy Asian businessmen’s political connections gave them a sense of invincibility. And now some American economists fear that a decade-long economic slump like the one in Japan could happen here, for much the same reason.
Krugman also discusses the actions and results of the 1980s iconic corporate raiders: high level executives who would replace much of a company’s stock with debt, then force the management into a sink or swim paradigm. The executives, with huge stakes in the company’s stock price, did what they had to in order to drive that stock price up.
Driving up stock prices can be positive when the numbers behind the rise are solid. But a system that so generously rewards top level management based on stock price, also begets top management that may hide the truth in order to control the flow of information to the public and generate the appearance of success.
For example, creative accounting, as practiced by companies such as accounting firm Arthur Andersen, kept hundreds of millions of dollars of debt off Enron’s books. Arthur Andersen was eventually convicted of illegally destroying documents and records relating to Enron and its December 2001 collapse.
The economic policies of the early 21st century have had long reach. When Krugman’s book was published, the invasion of Iraq was new and untested, and the housing bubble had yet to inflate at its staggering 2005 rate. Now, with the housing bubble deflated, Wall Street investment banks collapsing, and the stock market as volatile as ever, Americans are coming down from that consumption induced “sugar high” and realizing they don’t feel so well after all. The Great Unraveling explains how and why this happened.
Paul Krugman is a professor of economics and international affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for the New York Times.
