Book Description

John Meriwether, a famously successful Wall Street trader, spent the 1980s as a partner at Salomon Brothers, establishing the best--and the brainiest--bond arbitrage group in the world. A mysterious and shy midwesterner, he knitted together a group of Ph.D.-certified arbitrageurs who rewarded him with filial devotion and fabulous profits. Then, in 1991, in the wake of a scandal involving one of his traders, Meriwether abruptly resigned. For two years, his fiercely loyal team--convinced that the chief had been unfairly victimized--plotted their boss's return. Then, in 1993, Meriwether made a historic offer. He gathered together his former disciples and a handful of supereconomists from academia and proposed that they become partners in a new hedge fund different from any Wall Street had ever seen. And so Long-Term Capital Management was born.
        In a decade that had seen the longest and most rewarding bull market in history, hedge funds were the ne plus ultra of investments: discreet, private clubs limited to those rich enough to pony up millions. They promised that the investors' money would be placed in a variety of trades simultaneously--a "hedging" strategy designed to minimize the possibility of loss. At Long-Term, Meriwether & Co. truly believed that their finely tuned computer models had tamed the genie of risk, and would allow them to bet on the future with near mathematical certainty. And thanks to their cast--which included a pair of future Nobel Prize winners--investors believed them.
        From the moment Long-Term opened their offices in posh Greenwich, Connecticut, miles from the pandemonium of Wall Street, it was clear that this would be a hedge fund apart from all others. Though they viewed the big Wall Street investment banks with disdain, so great was Long-Term's aura that these very banks lined up to provide the firm with financing, and on the very sweetest of terms. So self-certain were Long-Term's traders that they borrowed with little concern about the leverage. At first, Long-Term's models stayed on script, and this new gold standard in hedge funds boasted such incredible returns that private investors and even central banks clamored to invest more money. It seemed the geniuses in Greenwich couldn't lose.
        Four years later, when a default in Russia set off a global storm that Long-Term's models hadn't anticipated, its supposedly safe portfolios imploded. In five weeks, the professors went from mega-rich geniuses to discredited failures. With the firm about to go under, its staggering $100 billion balance sheet threatened to drag down markets around the world. At the eleventh hour, fearing that the financial system of the world was in peril, the Federal Reserve Bank hastily summoned Wall Street's leading banks to underwrite a bailout.
        Roger Lowenstein, the bestselling author of Buffett, captures Long-Term's roller-coaster ride in gripping detail. Drawing on confidential internal memos and interviews with dozens of key players, Lowenstein crafts a story that reads like a first-rate thriller from beginning to end. He explains not just how the fund made and lost its money, but what it was about the personalities of Long-Term's partners, the arrogance of their mathematical certainties, and the late-nineties culture of Wall Street that made it all possible.
        When Genius Failed is the cautionary financial tale of our time, the gripping saga of what happened when an elite group ofinvestors believed they could actually deconstruct risk and use virtually limitless leverage to create limitless wealth. In Roger Lowenstein's hands, it is a brilliant tale peppered with fast money, vivid characters, and high drama. ... Read more

Reviews (114)

Engrossing read
The author gives an engrossing read about the LTCM debacle in this book. His writing style, in my opinion, really captures my attention and almost turns the book into a Grisham-style page-turner. After reading the book, you will have a better idea of the reasons why the fund failed. Also, you will gain more qualitative knowledge about hedge funds, derivatives markets and investing in general. However, if you are looking for equations and quantitative stuff, then sorry man, you will be greatly disappointed. Don't expect to find the Black-Scholes equation here. Nor do I think it's necessary. As a finance student, I'm tired of having to know the complex equations and quantitative stuff inside-out, without the slightest idea of how they should be used and their limitations.
If you have the basic idea or training in quantitative finance, the this book is a must-read. It sheds light on the untold stories in derivatives trading. The downfall of LTCM should be a very somber and sobering reminder of the limitations of the derivatives markets. Too much credit is given to "risk management" and "quantitative finance". I think every portfolio manager and derivatives trader should keep this in mind.

BIG MEN MAKE SMALL MISTAKES!
Small traders who break the simple rules are called 'dumb' by the professionals in the industry in their magazine articles, interviews on radio & TV etc. Here we have a group of top academics including Nobel Prize winners in economics who headed a firm that made some of the most silly 'mistakes' that caused them to lose over FOUR BILLION DOLLARS1 The reason: simple over-trading and mis-management of funds - just what the little guy is always told not to do!

This book gives a brief introduction to the various players involved. It gives an indicationl of the greed involved, not only by over-leveraging but by forcing investors to take back their money so the partners could put all their money in the fund and make all the profits for themselves. Interestingly, they did these people a great favor by preventing them from going broke.

Later in the book, when the crisis is really brought forward, we are given a detail day to day account of the stress and problems that the fund managers were creating for themselves and the rest of Wall Street as many banks and other financial institutions had tied up hundreds of millions with this firm. In the end the Federal Reserve arranged a bailout with fourteen major banks to save day.

Ironically, the super-losers went and created another fund after this big crash and sure enough they raised a few hundred millions in trading capital so the 'bright' fellows can get running again!

Not enough Cream on the Coffee
1997, 30 year Treasury Bonds Fell to 5.58; traders were selling short to hedge against riskier bonds, treasuries rallied and spreads increased between bonds; Japanese bonds dropped opposite of the bet by LTCM.

Blame the Asian flu, IMF unresponsiveness, and Salomon Barney Smith abandonment of its arbitrage positions as causes for the evaporation of 4 billion dollars LTCM within months. LTCM was too big, possessing $128 billion in assets and $3.6 billion in the bank and 2/5 of money belonging to the owners. Notation derivates reaching leverage 100 to 1 preventing rapid sell off and bankruptcy out of question, for bankruptcy would have caused a world cascade economic crash and loses reaching above $1 trillion. Bankruptcy was not an option; LTCM was too big to fail and the Fed knew it. LTCM only chance was too secure money from warranties, loans, or a buy out; none of which in the end would save them. In the end, the Feds 16 banks would invest $250 million each with a total accumulation of $4 billion dollars rescuing LTCM and the partners would leave with relatively nothing in their pockets. How did smartest guys on Wall Street fail? How did the impossible happen?

1997, Indonesia, Rupiah dropped 85 percent as currency traders forced devaluation revealing a corrupt banking practices and overextension of bad credit; volatility rose to 27 percent.

1998 LTCM bet that no future recession would occur and believed the Bond margins would narrow. Instead, the world economy were experience new global forces as communism was breaking down, China's GNP was heating up, and East Germany was experiencing new economic freedoms. A U.S - 56 point margin increase on the swap, England - 45 point margin, and German - 20 point margin and LTCM was losing money on all of its markets. LTCM had previously negotiated a warrant by UBS and UBS was being seriously exposed while LTCM was claiming "Future expected returns are good" although Equity Volume was in trouble, Swap margins were increasing, and Treasuries were falling as investors fled to safer securities and as Treasuries were being bought up their rates dropping to 5.56.

With Indonesia falling - all eyes were turned to Russia. There was no rescue by the IMF for the Russian ruble. Shares in Europe and Turkey were weak and Venezuelans were buying dollars all the while swaps margins increased. Aug 21, the Dow fell 280 points and investors continued to prefer the safest bonds, the 30 year treasures, US swaps increased to 76 points, 20 points in one day, Britain swaps increased to 62 points and mortgage spreads spread to 121 points, high yield climbed to 276, and treasurers were at 13. LTCM lost $558 million in a single day, 15 percent of their capital. LTCM was certain the markets would correct rationally and the spreads converge. Losses accumulated faster because leverages increased. Additional $200 million in funding was requested from Merrill Lynch. Hedge funds were not considered a bank and so credit extension regulation was constrained. The drop in LTCM performance caused banks to tighten their credit lines to hedge funds. In fact, the hedge funds poor performance screamed default and banks demanded their entitlement to repayment. LTCM was very close to insolvency. Mattone told Meriwether, "when you're down by half, people figure you can go down all the way" and "your out". Aug 31, the DOW crashed 512 points, Hong Kong Authority stopped supporting local markets by buying local shares. For the month of Aug, LTCM had lost $1.9 billion, 45 percent of its equity capital, and still had $125 billion in derivative assets. Death was imminent, the leveraging could not be stopped, LTCM was immobilized by its size, and Bear was threatening to suspend trading. After reviewing LTCM books, Bear allowed LTCM trades and gave a harsh warning, if they dropped below $500 million all trades would halt.

Sep 10, LTCM experiences a sum lose of $500 million dollar for five days of trading. LTCM still has 7,000 derivative contracts totaling $1.4 trillion dollars.

In 1987, Alan Greenspan was appointed as chairman of the Federal Reserves. Greenspan did not totally understand hedge funds, they were fairly private, and the Fed had no authority over them. Greenspan was nervous about the credit lines extended too these funds. Some call the funds, banks. What were the hedge funds? What is a bank?

The New York Fed keeps in touch with its branches and they talk with private industry, so supposedly the Fed keeps a pulse on the private sector. The Fed has a trading desk and trades $450 billions in treasuries, buying and selling to affect the amount of available money supply. If the Fed buys treasures, this act increase money supply and gives banks more money for banks to loan, and interest rates decrease. If the Fed buys back treasures, this act decrease money supply and makes less available loanable money and interest rates rise.

The volatility of LTCM was rising because it was so vulnerable. LTCM was being pressured by Goldman as they continued buying down increasing spreads. Goldman exasperated the European bond market cutting apart LTCM.

Warren Buffet was a seemly friend but of no help to LTCM. Berkshire Hathaway made an offer: 250 million for $3.57 billion to stabilize the fund and all partners fired. Legal confusion forfeited the deal. The last thing the economy wanted was an economic meltdown, so the Fed offered a deal and the LTCM partners were out in the cold with tears in their eyes, a perfect model (Merton, Black, Scholes) and not enough liquid money to save them against the impossible.

"...in crisis, correlations go to 1"
The author of this book is a journalist - not a trader or banker - and it's helpful to remember that as you read through this moralistic account of LTCM's rise and fall.

Lowenstein has the audacity to write of Merton, a Nobel Laureate, that he held a "naive belief in perfect markets." Perfect markets may be mythical, but the author is not qualified to call this view naive. The output of the model is as important as the tenability of its' assumptions.

In the end, the fund was too big and successful, not hubristic, to remain in its' sphere of expertise (bond arbitrage) and was forced to become the 800-pound gorilla in other markets like merger arbitrage. Yes, the top two traders were arrogant (a requirement for traders) but the markets broke the fund, not Hilibrand and Haghani.

More details on the transactions would have been interesting but these may have burdened the flow of the book.

There are copious footnotes and the author does a nice job of outlining the players and their stakes in the fund.

Ideology and greed defy common sense
There should be a sinking feeling in the pit of your stomach as you read this book. Long-Term Capital Management was almost guaranteed to fail from its outset and, when the end finally did come, the fund's collapse almost took a big chunk of Wall Street with it. The scary part is that there are more LTCMs out there, operating without regulatory oversight and all subject to wrong-headed economic hypothesizing as the basis for their trading operations.

The poison pill at the center of Long-Term Capital Management's very being was the efficient market theory, an almost universal belief among economists and financiers alike that free markets always operate in the most effective, logical manner possible over the long term. They don't, of course, and that refusal to acknowledge fundamental human irrationality led LTCM over the brink.

Lowenstein does an outstanding job of untangling the fund's complicated derivatives trades and explaining how the fund eventually over-leveraged itself into a sudden collapse. We normally read business stories like this for the thrill of seeing moral hazard at work, seeing the rich fall from grace and thinking how well-deserved that fate is. I would recommend, however, that you approach this book as a template for how the next Great Depression could spring from the simultaneous self-destruction of derivatives trading firms. And thanks to Roger Lowenstein, you don't have to be a genius to see how it could happen. ... Read more

Book Description

"The hour of capitalism's greatest triumph" writes Hernando de Soto, "is, in the eyes of four-fifths of humanity, its hour of crisis." In The Mystery of Capital, the world-famous Peruvian economist takes up the question that, more than any other, is central to one of the most crucial problems the world faces today: Why do some countries succeed at capitalism while others fail?

In strong opposition to the popular view that success is determined by cultural differences, de Soto finds that it actually has everything to do with the legal structure of property and property rights. Every developed nation in the world at one time went through the transformation from predominantly informal, extralegal ownership to a formal, unified legal property system. In the West we've forgotten that creating this system is what also allowed people everywhere to leverage property into wealth. This persuasive book revolutionizes our understanding of capital and points the way to a major transformation of the world economy. ... Read more

Reviews (87)

Profound!!!
De Soto and Tom Friedman (The Lexus and the Olive Tree) are the two authors that make economics accessible. I have just graduated high school, and after basic economics, I understand what de Soto is saying. De Soto is one of the rare economists that has ditched the books and "gotten his hands dirty." He doesn't only forumlates theories, but also applies them in the real world. His research team is spread across the world - in nations such as Egypt, Haiti, Peru, and the Phillipines.

After reading this book, I have become cinvinced that the major problem in the developing and former communist world is the lack of property rights- de Soto's theory. He not only defends his theory, but explains how these thrid world countries can tap into the 9.3 trillion dollars worth of dead capital in their slums, shantys and "suburbs." The proposal is to adopt the society informal property laws into the national formal law in order to allow the poor to claim legal rights to their assets, and therefore allowing them to use their assets as collatoral for loans from banks. He is not idealistic -- he recognizes the problems and the obstacles that have to be met.

This book is fantastic. I read it in four days, and I am not a fast reader, especially econ books I HIGHLY recommend it.

-Joe

de Sota supplies one component for economic growth
The Mystery of Capital attempts to "reopen the exploration of the source of capital and thus explain how to correct the economic failures of poor countries." I believe the author makes an interesting argument within the book concerning the failure of capitalism to catch on in developing and post-communist countries. His argument deals with institutions we here in the West take for granted-property rights and other legal institutions. The connection between these legal institutions and economic growth is clear-and de Sota is clear on this point as well.

He states that an individual living outside the West faces an impenetrable wall of rules that bar them from legally established social and economic activities-such as deleterious bureaucracies that retard growth by wielding red-tape. De Sota sent teams to Peru, the Philippines, Egypt, and Haiti and they experienced firsthand how it takes several years to obtain legal verification of assets-years compared to days here in the West. Under these burdens, individuals create new laws-extralegal laws. These social contracts have created a vibrant but undercapitalized sector. This sector is known in economic layman's terms as the underground or informal economy. The author estimates that over half on the inhabitants in developing countries engage in this sector-using Dead Capital. The value of the assets in the informal markets are huge-surpassing the assets of rich countries sometimes. De Sota has brought attention to the core of the problem-he then states that the solution can be found at the heart of the countries.

He supplies the formula to fix the backwardness of the nascent capitalist nations. The first objective is to unify the many social contracts already existing in the extralegal sector into one, all encompassing social contract-by listening to the "barking dogs", or the people. Past attempts with this aim have failed because they have lacked the legitimacy and support from the current extralegal world. De Sota creates a bridge to fix this dilemma-a bridge that integrates old social property customs into a new all encompassing social contract. By working with their people, government leaders can forge a new regulatory framework. The second task is a task of a political nature because the plan outlined above requires the support of the poor, the elite, and the lawyers. The poor will gain the most because they will greatly increase their economic lifestyles with a more unified social property system that will enable them to use their assets as full functioning capital. The elite will harvest gains as well; they will benefit from an expanded market and growing capitalist economy. The lawyers must not use the current law, but instead fine-tune the law and change it to make it work for all.

De Sota's real world studies and solutions make sense in my mind. He identified a problem and supplied the solution. He may fall short though in his solution because a complex capitalist economy requires much more infrastructure than only property rights-of course I mean other forms of capital, such as human capital. By De Sota is on the right tract; a capitalist economy demands strict and discrete property laws that enable individuals to utilize their assets. His premise is right-under capitalism, the rich get richer, and the poor get poorer. In the third world, the poor don't have access to their assets, and they thus flounder in the extralegal sector.

One of the single best books on Economics I've read
Many of the other reviewers have given excellent in depth summaries of DeSoto's book, and I will not regurgitate what others have already done a good job of saying. I will just say this: if you want to know why 3rd world countries are 3rd world countries, and what Gov'ts around the world can do to create prosperity for their people, read this book. Nations are poor because of ill-guarded private property rights. It's that simple. They aren't poor because of lack of socialism (quite the opposite), they aren't poor because of lack of resources, it's because "It's the property rights, stupid!"

Books like this can give hope to the pessimist, that it is possible to end serious poverty in the world. Relative poverty will always exist, but the civilization-destabilizing poverty that exists in the Arab world, in Latin America, *can* be cured if Gov'ts would just put in place a system that allows capital (ie entreprenuers) to grow from the natural resources within the country. Replace Socialism w/ Rule of Law. I hope every member of the Iraqi CPA has read this book and heeded its lessons...

Packed With Knowledge!
Hernando de Soto's ideas cannot and should not be ignored. This book will open many eyes to the nature of capital. The author suggests a radically simple yet enormously challenging way of bringing the world's impoverished billions onto the track of capitalism and development: give them legal property rights to what they "own." The author's intriguing case is that a lack of property rights - not a lack of entrepreneurial zeal or competence - stymies development in the former East Bloc and Third World countries. This seemed to be a shockingly original notion when the author first propounded it in his bestseller The Other Patch, and it still does. If the book has a flaw, we warn, it is that the author's undisguised missionary ardor sometimes makes one wonder whether he is merely a zealot. Even if he were one, the book would merit reading.

Thoughts that come on doves' feet guide the world...
Other reviewers have commented on De Soto's originality in relation to prevailing economic tradition. They have also praised his style - very clear prose, interspersed by passages of honest elegance. Yet, for me, at least, what stands out most about De Soto is his interest in discovery, in reawakening a long forgotten question.

Who asks oneself seriously what capital is today? Is one even generally capable of understanding the question of what capital is? I doubt it - the first reaction is ridicule. Of course one knows what capital is, for one lives in a capitalistic society. One can hardly take such a question seriously.

Yet, this provocative question moves this book. De Soto has carried out first-hand research among the boiling global centres of 'marginal' economic activity. He has not looked for the 'right' theoretical answer to the question of capital, rather, he has tried to discover a way to pose, and answer, the question meaningfully. Meaningfully for whom? To those who have forgotten - those in the West - and to those who wish to learn in the developing world and the former communist nations. What is capital?

Other reviewers have criticised De Soto for redundancy, repetition. These criticisms are off the mark. De Soto has discovered the conceptual solution to the question of the potential of capital: a legitimate system of representation of property. Yet, he can not simply elaborate it in a few words, for one does not still understand the question he is answering. Because it is disturbing and fleeting, it is very difficult to grasp. Thus it requires constant reformulation. Shakespeare used parallel structure, De Soto uses masterful analogies (I particularly like his profound observation on something so seemingly apparent as barking dogs).

De Soto also tries to situate his thought within diverse traditions of Western thought, combining Continental philosophy with American analytics (it is rare to see someone who is capable of synthesizing Derrida with Wittgenstein, to say nothing of Searle!). He seems to be trying to say the same thing in many different ways - yet it is very difficult to understand what that thing (capital) is. De Soto helps the reader by offering many different pathways to the thing (capital) itself.

I feel that De Soto might have engaged more deeply with Plato's thoughts on representation and his analysis of the cave parable is somewhat superficial. A more in-depth engagement might provide the basis for a rethinking of some of the precepts behind private property and capital, which De Soto simply accepts as given. This is a personal quibble only, however, as such speculation would reduce the clarity of the book, and thereby reduce its tremendous practical value for concrete action, obviously the author's main intent.

De Soto has written a masterpiece around a a simple kernal of truth. It seems so obvious in hindsight! Yet, it is the very stillness of those words in which it is expressed which will bring on a storm. ... Read more

Book Description

Reviews (62)

Highly Recommended!
This is a new edition of Milton Friedman's classic 1962 capitalist manifesto. As such, it was ignored, spurned and hated for decades by the intellectual, post-Keynesian establishment. In the 60s, Friedman once found himself debating a liberal who attacked him by simply reciting Friedman's views of the proper role of government. This was working rather well with the audience of college students until he quoted Friedman's opposition to the military draft. Friedman suddenly found himself awash in the unexpected cheers of students. Perhaps it was a foreshadowing of his career. Friedman won the Nobel Prize in Economics in 1976, and his ideas gained some degree of mainstream acceptance in the Reagan years - although many of his thoughts remain controversial. To the extent that Friedman debunks myths about the Great Depression that are widely accepted as fact, perhaps he has a point about the semi-privatization of education. We strongly recommend this volume to those who seek a deeper understanding of government's role in a free-market economy.

Compelling and informative
Milton Friedman, far from just paraphrasing Keynes, has given a grand refutation of Keynesian economics as well as argued persuasively for the free-market.

"Capitalism and Freedom" dispels the myths about capitalism that have become so prevalent in our society: that the free-market caused the depression (it was actually a tyrannical Federal Reserve), that socialism can be democratic, and others. Milton's prose is clear and the book is good for those who haven't majored in economics. He gives an unwavering defense of personal freedom and individual autonomy from a minimalist government perspective.

This book is an important contribution to public discourse and although written about 40 years ago, still has relevance today.

Friedman discusses public education, roads, minimum wage laws (which he calls, "the most anti-black law on the statute books," and rightfully so as you'll see if you read this book), as well as the how so-called "progressive" tax system and welfare actually hurt the poor.

Friedman's other great contribution is "Free to Choose," which was written about 20 years ago and expounds on the ideas in "Capitalism and Freedom" in a bit more depth. But this is a good, short, concise book to start with that'll get you asking questions.

Important foundation text - should be studied and considered
This is a foundation text that should be widely read and studied. Whether you agree with Friedman or not is not the point. These are ideas you need to actually consider and wrestle with. If you end up disagreeing with him and can state why, you will be the stronger for it. It is not enough to rail against them emotionally or call them lies. They are not lies; they are ideas and arguments that ask for debate. Personally, I have always been a fan of Friedman and am ever grateful that he stood against the tide of the postwar political movements with these powerful arguments for freedom.

People often caricature Friedman to their own discredit. His arguments here are not simply that government is bad, but that using government is often a poor way to get at a desirable social end. He certainly does not need me to speak for him, but if you think he is for huge corporations and letting the poor without help to fend for themselves, you misunderstand him and should read this work carefully. Big corporations, he argues several places in this book, are the result of taxation schemes that encourage the retention and reinvestment of earnings that would otherwise have gone to the shareholders to reinvest as they see fit - in other enterprises, consumption, or charity (as well as in taxes). This is only one example among many of popular prejudices against Friedman that do him real injustice.

The book is only a couple of hundred pages, is not hard to read, but does pay off the most dividends if you take your time reading it and consider what he has to say rather than jumping to conclusions without wrestling with your own thoughts (whether you agree with the author or not). It was written in 1962, so some of the context of the book will require some understanding on the part of the reader. It was a very different time than today. However, the arguments remain solid and strong to the benefit of anyone who will spend time thinking about why they agree or disagree with this Nobel Laureate.

Oh, and he uses the word LIBERAL for his philosophy and explains the word in it classic sense rather than in the modern US re-definition of the word.

Capitalism and Freedom
How can we benefit from the promise of government while avoiding the threat it poses to individual freedom? Milton Friedman presents his view of the proper role of competitive capitalism as both a device for achieving economic freedom and a necessary condition for political freedom.

Clearly Pro-American
Capitalism has risen and crushed its opponents, socialism and communism, because the principals of capitalism rely on sheer power. We see the United States as a shining symbol of Capitalism and Freedom, yet the US is only one part of it. Capitalism is controlled and perpetuated by the middle class, but relies on the workforce of the lower class. In the United States, there is virtually no lower class. Instead, the United States has become THE middle class of the world, exploiting workers in foreign countries - Liberia (in the earlier 20th century), China, India, and countless other countries have become victim to the United States' corporate power.

One cannot look at the United States alone and say "Look! Here is capitalism's glory! Here are millions of rich people!" We must also look at the rest of the world, of billions who are poor, of hundreds of millions who are starving.

Then you could argue that the US's capitalism is better than other countries' capitalism. But how is this possible? Capitalism extends over the entire world, interconnected all countries. Yes, the US government has more regulations for the economy, but ultimately this is worthless because US corporations can transgress those regulations outside the country, where they truly operate.

So, what gives Americans freedom? Money. We are wealthy, and others sacrifice their freedoms, hundreds of millions of under-minimum-wage workers living in dirt-poor conditinos, so that the great United States of America can be rich and free. ... Read more

Reviews (45)

OUTSTANDING DEFENSE FOR FREEDOM IN SOCIETY
In this book, Dr Friedman makes the case why freedom, in the economic and social sense, is the best policy. Reading this book is a life changing experience for anyone who has not had much exposure to economics; Dr Friedman, alas, is arguably the top economist of our time.

The book offers not only a critique of developments in education, trade policy, workers rights, drug policy, among other economic and social issues, but he also offers solutions. He readily recognizes the difficulties of implementing his solutions (political mainly), but nonetheless he is searching for the best non-utopian alternative.

Dr Friedman will also demystify the image that economists are wholly consumed by growth and GDP. He is guided by the rule that each person knows best what they want and should be free to pursue it, within limits (of hurting others, etc.).

This is an easy to read book, a great intro to social issues or a great alternative view of the world. I hardly think it can be construed as liberal or conservative, these labels cannot encompass the true spirit of freedom as developed in the book. If I had to classify it, this book is about the rational improvement of society by letting each one pursue their own goals (again, a maxim espoused by the founding fathers and long forgotten). Overall, anyone interested in social issues should read this book; it may not convince you, but it will make you think.

A commonsense, prophetic defense of freedom and capitalism
This is a wonderful, concise, accessible, prophetic, commonsense defense of the free market for the lay person. Friedman lucidly explains how free markets operate to deliver goods and services in an efficient manner; how markets transmit information; and how well-intentioned government activity and regulation distorts market information and hampers the efficient delivery of goods and services.

Additionally, history has shown his advocacy of school vouchers and of privatizing government retirement programs, considered radical ideas in 1979, to be justified. Voucher programs have been instituted in Milwaukee and Cleveland and have been remarkably successful. Chile privatized it's "Social Security" system, among other Friedman-inspired reforms, and it's economy has grown at 7-8% over the course of the last decade.

My only criticism is fairly minor. The author assumes the premise that people should be "free to choose," that is, free to make purchasing decisions without government interference (coercion). This is the first principle of libertarian economic argument, a principle of which I am in full agreement. But what does it rest on? Why should people be free to make economic decisions free from coercion? I would argue, and I assume Frieman would agree, that we are endowed by our Creator with certain unalienable rights, among these are the rights to life, liberty and the pursuit of happiness. "Liberty" as understood by the Founding Fathers included economic freedom. At it's root, the case for a free market is a moral one. If we are to regain our economic freedom we must regain the profound, fundamental, first principles of our nation's founding.

Otherwise, a remarkable, influential book.

Highly recommended for the remaining Marxist professors leaching off the proletariat taxpayers at our government universities.

Excellent-A must read
An absolutely wonderful book. It should be required reading in all schools. If you're looking for something to upset the socialists and communists in your life, give them this book.

Economic Freedom
"Economic freedom is an essential requisite for political freedom". That quote from Milton and Rose Friedman is the essential reason why "Free To Choose" should be required reading for all Americans in high school! This book makes a powerful and persuasive argument in favor of a free market economy. Written in a very lucid style "Free To Choose" makes the usually dry subject of economics easily understandable and a pleasure to read. The "Power Of The Market" chapter shows how free markets work and why they are essential for human freedom. "Tyranny Of Control" chapter explains why trade restrictions and subsidies backfire. The "Freedom And Prosperity" chapter examines what the dramatic experience in Eastern Europe reveals about bureaucrats and markets. The "Created Equal" chapter shows how markets promote justice. Simply said, this book tackles economic issues that are as timely today as they were when the Friedman's wrote about them in 1979.

As a retired Army officer and student of political philosophy, I found "Free To Choose" a great book for anyone who wants to understand basic economic theory.

Excellent, What a Breath of Fresh Air
If only I and Trotsky had this book back in 1917, what a world of difference it could have made. I realize now after reading Adam Smith's The Wealth of Nations and Larry Elder's book The Ten Things You Can't Say In America that I was wrong. In that communistic and socialistic systems only contriubute to make the public poorer and worse off. Now if only we could convince all the Democrats and other Socialists of the their folly. ... Read more

Reviews (14)

An economic fable
Prof. Roberts, an economics professor, has created series on interesting little novels to teach his readers about libertarian economic thought.

In The Choice, Roberts borrows from Capra's "It's A Wonderful Life" to introduce his protagonist Ed Johnson to alternate worlds where free trade does and does not exist. Instead of Clarence the Angel, Ed is led around by David Ricardo, the economist who developed the Law of Comparative Advantages, which forms the foundations for supporting global free trade.

Throughout the novel, Ed raises questions based on his traditional thinking on protectionsim. Ricardo addresses each key concern in turn. The concepts debated include: loss of jobs, loss of our nation's economic status, national security needs, etc. More importantly, Ricardo convinvingly makes the point that total national economic self-sufficiency is a recipe for economic disaster/failure.

I found this to be an entertaining way to learn more about the debate on free trade and protectionism. This novel is easily more enjoyable than the typical economics text or article, and hence its message was delivered more effectively.

Economic Solace
This is a wonderful story for all in need of a little economic solace. Russ Roberts (who is wonderful in person) illustrates a world of free trade in a charismatic fictional story. Reminiscent of It's A Wonderful Life, the "angle" David Ricardo teaches an american tv manufacturer why free trade is so important even if it does destroy his business, so convincing is Roberts that I teared up on occasion and bought a copy for everyone I knew. The Choice is a book too compelling for anyone with any kind of education not to believe in the power of the Market.

Superb Book
I'll make this as brief and simple as does Mr. Roberts. This is, without question, a superb book. It is the title to which I refer almost everyone interested in the free trade debate. Thank you, Russell Roberts.

A complicated topic made simple
Roberts puts things in a language that all can understand. Simply said this book is a must read. Roberts provides in depth examples making it not only easy to follow but also easy understand. Roberts makes the basic foundation of economics simple. It's a great and easy read! A must have!

Insight without economic jargon
This book clearly states the case for free trade without falling back on dense economic theory and technical jargon. Especially with the protests and controversy surrounding globalization and trade today, it is more important than ever for people to understand that free trade makes us all better off. In fact, there is no better way to improve the lot of two countries (and their overall welfare) that to reduce trade barriers between them and allow each to concentrate more energy and resources on their comparative strengths. The Choice delivers this message clearly and articulately in the context of a fun and simple story that even the most protectionist leaning person would have difficulty refuting. ... Read more

Book Description

Praise for America Beyond Capitalism

"At a time when the national media’s been transfixed by the imperalist adventures and crony capitalism of the Bush administration, Gar Alperovitz discovers that not only have the seeds of a legitimately democratic political economy been planted, they are bearing fruit. Addressing a range of necessary changes, from urban design to health care to the distribution of wealth, Alperovitz’s Pluralist Commonwealth is the kind of careful, well-researched, and practical alternative progressives have been seeking. And it’s more–visionary, hopeful, even inspirational. I highly recommend it."
–Juliet Schor, author of The Overspent American: Why We Want What We Don’t Need, and Professor of Sociology, Boston College

"An important guidebook to the future. First, Alperovitz leads a grim tour of the deteriorated values at the core of the American experience–equality, liberty, democracy, and the wise use of our collective wealth. Then he takes us to the mountaintop with a broad and optimistic mapping vision of how Americans can remake their economy and society to restore those values. A compelling and convincing story of the future."
–William Greider, author of The Soul of Capitalism: Opening Paths to a Moral Economy

"Succeeds brilliantly in taking the Jeffersonian spirit into the last bastion of privilege in America, offering workable solutions for making the American economy one that is truly of, by, and for the people."
–Jeremy Rifkin, author of The End of Work ... Read more

Book Description

Applied Austrian economics doesn't get better than this. Murray N.Rothbard's America's Great Depression is a staple of modern economic literature and crucial for understanding a pivotal event in American and world history.

The Mises Institute edition features, along with a new introduction by historian Paul Johnson, top-quality paper and bindings, in line with the standard set by The Scholars Edition of Human Action.

Since it first appeared in 1963, it has been the definitive treatment of the causes of the depression. The book remains canonical today because the debate is still very alive.

Rothbard opens with a theoretical treatment of business cycle theory, showing how an expansive monetary policy generates imbalances between investment and consumption. He proceeds to examine the Fed's policies of the 1920s, demonstrating that it was quite inflationary even if the effects did not show up in the price of goods and services. He showed that the stock market correction was merely one symptom of the investment boom that led inevitably to a bust.

The Great Depression was not a crisis for capitalism but merely an example of the downturn part of the business cycle, which in turn was generated by government intervention in the economy. Had the book appeared in the 1940s, it might have spared the world much grief. Even so, its appearance in 1963 meant that free-market advocates had their first full-scale treatment of this crucial subject.The damage to the intellectual world inflicted by Keynesian- and socialist-style treatments would be limited from that day forward. ... Read more

Reviews (14)

Helps us understand the REAL CAUSES of the Great Depression
This book is so good that I read it twice.

Rothbard shows us clearly that the real causes of Economic Depressions is GOVERNMENT INTERVENTION in the economy. Of course this is understood widely nowadays (at least among those who think). But 40 years ago it was popular to believe in other causes like "overexpansion of productive capacity" or other fallacies. Rothbard convincingly flushes these other theories down where they belong.

I believe the most lasting contribution of this book is to clearly show the basics of economics, in language that anybody can understand (Ludwig von Mises is considered the greatest ecnomist of the Austrian School of Economics, but have YOU ever tried to read his "Theory of Money and Credit?". I couldn't wade through it even with a dictionary in hand. Trust me, Rothbard is a better spokesman for free-market economics, in my opinion).

Definitive work
In "America's Great Depression", Professor Rothbard effectively demolishes the myths surrounding this tragic event. However, semi-literate pop-historians continue to ignore the fact that the depression was caused by government intervention. Rothbard's book stands out due to his refusal to reduce this complex event to a simple story of good (New Dealers, Socialists) versus evil ("capitalism"). Upon close examination of such accounts, it becomes clear that not only do "historians" get the facts wrong, they simply fail to comprehend them. Mainstream historians who refuse to even attempt to gain a basic understanding of economics have had their interpretations rendered embarrassingly obsolete by Rothbard. ...

Popular opinion breeds free market stupidity
this is one of the most enraging books I have ever read about anything related to economics. The author seems to forget that underneath ALL of the formulas and "trends" in any field of economics lies WEALTH. REAL, SUBSTANTIAL, PRODUCTIVE, LABOR-RELATED WEALTH. This is something even Keynesian economists fail in recognizing...any book which does not recognize the intervention of FDR's fiscal policy as a return to the philosophy of our founding fathers (IE. Henry Clay, Alexander Hamilton)and the only way we could have possibly survived the depression and the mobilization to fight fascism is a POORLY written book from an author who is obviously misinformed by the popular trash of classroom and related ivory tower academia.

worth it's weight in Gold
This book destroys the left myth that the Great Depression was caused by the free market being allowed to run rampent, and "fixed" by various government programs, mandates, and laws.

To answer one reviewer's question -- a reviewer who obviously didn't even read the book -- "How can the Great Depression have been caused by government policy when ALL of the government intervention took place AFTER the GD had already come close to peaking?"...The reality is that the Great Depression was caused by inflation and various other government intervention before it started (the buildup of malinvestments during the boom), and prolonged and prolonged and gravely deepened by various government interventions after it started. The Great Depression would have ended relatively quickly, had not the government intervened in attempting to restart another round of boom, and doing such foolish things as allowing banks to renig on their contractual obligations.

The Real Story Behind the Great Depression
As a student of the boom and bust and subsequent Depression following the crash of 1929, I have read numerous books on this important subject. It is in knowing the past that we can control the future.

Most books cover the human aspect of this period in American history and that's important. And most of the books cover the events leading up to the crash and depression. But this is the only book I've read that exposes the dynamics behind the scenes that caused the crash and it's terrible crushing length and enormous suffering.

Rothbard explains in great detail how government butted in where it was not needed and created untold suffering. He explains how we allowed England to dictate to us and how in our desire to help Her, our government intentionally hurt its own citizens.

Rothbard was a great economist and a great proponent of the libertarian cause. His belief in Laissez-faire economics is behind his philosophy. It is Laissez-faire that created this country and it is the loss of it that has and is causing us grief and loss of liberty.

This is an excellent book. Published by the Ludwig von Mises Institute, it is a book you'll want to read again and again. Austrian economics are exciting and workable and the Ludwin von Mises Institute is a dynamic proponent of this very workable economic philosophy.

If you are interested in economics and the Great Depression and its real causes, you must read this powerful, well written book. ... Read more

Book Description

This award-winning book explores one of the most successful cultures and society the world has ever seen-capitalism.From its European roots more than 500 years ago to the present, the book examines the problems of capitalism's expansion, inequality, environmental destruction, and social unrest.Global Problems and the Culture of Capitalism provides the reader with the anthropological, economic, and historical framework to understand the origins of global problems, why globalization and the global expansion of the culture of capitalism has generated protest and resistance, and the steps that are necessary to solve global problems. As one reviewer said, "This is a book that will doubtless create debate and controversy, but its topic should be pondered seriously by all who consider themselves citizens of our world society today."For anyone interested in global issues and international affairs. ... Read more

Reviews (2)

Excellent book for anyone who cares about the world today!
I admit I'm a little biased. Richard Robbins was actually a professor of mine at SUNY Plattsburgh, and I had the opportunity to read this book while at the same time taking his global issues class. This book not only changed my mind about a few of the world's issues, it also gave me a broader perspective about the world in general. I now think about things such as 'where do my clothes come from?' and 'how did my fruit cup get here?'. Robbins is an extremely talented man and writer who asks the question, 'Is Disneyland for Everyone?' The answer: a resounding 'No, and here's why!' This book would benefit anyone seeking to gain an understanding about the world and his/her place in it. It truly is a global world, and Robbins' book is the first step to living in it.

Great textbook!
At last: a textbook which confronts the cultural power of capitalism. Robbins looks at how capitalism shapes cultures and how it has evolved into the most powerful cultural influence on the planet. A great resource for anthropology, geography, or history. Not your run of the mill textbook, it offers forceful critiques and compelling history. An excellent book for college students. ... Read more

Book Description

Understanding Capitalism, 3/e provides an introduction to economics with extensive attention to the global economy, inequality, the information revolution, the exercise of power and the historical evolution of economic institutions and individual preferences. Its 'three dimensional approach' focuses on competition in markets, command in firms, governments and international relations, and change as a permanent feature of a capitalist economy promoted by technical innovation and conflict over the distribution of income.Understanding Capitalism, 3/e, is designed for introductory undergraduate courses in economics and students of political economy throughout the social sciences. ... Read more

Book Description

After Capitalism is the apex of the life’s work of one of the most respected scholars of the American workplace. For nearly half a century, Seymour Melman has been an influential commentatoron capitalism, militarism and their discontents. In After Capitalism he explores a growing trend in capitalist systems worldwide: workplace democracy.

The end of the Cold War in 1991 inspired an unprecedented outburst of triumphalist rhetoricamong proponents of unfettered capitalism. Free-marketeers believed that we were witnessing “the end of history,” and proclaimed that the market economy was here to stay, that all alternatives had been proven inferior. Melman, in dissent, tracks the increasing social and economicinequities and the resulting cries for workplace reform.

He points out the ominous parallels between the Soviet Union’s planned economy and the relentless onward march of American capitalism. Just as the Soviet planned economy venerated “the State” above all else, American capitalism views the health and eternal expansion of the free market as the ultimate goal: both propagate vast and harmful income gaps, both rely on and promote militarism—and neither leaves much room for consideration of workers’ well-being. Melman analyzes the adverse economic impact of these flaws and oversights, which have led to “grave production weaknesses in the U.S. economy,” and he suggests an alternative to current economic organization that holds out the promise of both greater fairness and equity and more soundly balanced production.

“Workplace democracy,” in which workers actively participate in the management of their workplace, is gaining ground in venues as diverse as Israeli kibbutzim and Basque factories. Melman explains how workplace democracy can, and why it should, be implemented in America. After Capitalism is the new century’s first essential book about labor: thoughtful, humane, at once commonsensical and revolutionary, Melman’s prescriptions can inspire changes in the way the world works. ... Read more

Book Description

In the seven years since the publication of the first edition of Wall Street, America's financial industry has undergone a series of wrenching events that have dramatically changed the nation's economic landscape. The bull market of the 1990's came to a close, ushering in the end of the dot com boom, a record number of mergers occurred, and accounting scandals in companies like Enron and WorldCom shook the financial industry to its core. In this wide-ranging volume, financial historian Charles Geisst provides the first history of Wall Street, explaining how a small, concentrated pocket of lower Manhattan came to have such enormous influence in national and world affairs. In this updated edition, Geisst sums up the recent turbulence that has threatened America's financial industry. He shows how in 1997 thirty NASDAQ market makers paid a record $1.3 billion fine for price irregularities in stocks. He makes sense of the closing of the bull market, and explains a major change in the accounting rules for mergers that caused monumental losses for companies like AOL Time Warner. And he recounts how in the aftermath of the speculative fever that swept Wall Street in the 1990's, the scandals at Enron, Tyco, Worldcom, and Conseco represent a last gasp of mergermania and a fallout from a bubble-like market. Wall Street is at once the story of the street itself, from the days when the wall was merely a defensive barricade built by Peter Stuyvesant, to the modern billion-dollar computer-driven colossus of today. In a broader sense it is an engaging economic history of the United States, the role Wall Street played in making America the most powerful economy in the world, and the many challenges to that role it has faced in recent years. ... Read more

Amazon.com

The Rule of Three, by Jagdish Sheth and Rajendra Sisodia, offers an innovative take on corporate development that could help leaders put their own operations into a new context that improves competitive strategies and boosts market performance. Sheth and Sisodia, consultants and marketing professors, base it on their contention that just three major players ultimately emerge in all markets--such as ExxonMobil, Texaco, and Chevron in petroleum, and Gerber, Beech-Nut, and Heinz in baby foods. These giant "full-line generalists" are eventually surrounded by smaller "specialists" who successfully concentrate on niche products (such as high-end audio gear) or niche markets (like fashions for professional women), along with midsized "ditch-dwellers" who struggle to reach an audience in between (like second-tier airlines that compete with goliaths on price and regionals on service). The authors examine this pattern of market evolution and the "radical disruption" that can occur when technology or regulation changes or a new entry "succeeds in altering the rules" (as Starbucks did by sneaking up on coffee's Big Three). Appendices present helpful examples of the way this has shaken out in various industries.--Howard Rothman ... Read more

Reviews (3)

Incredible Book for Making Strategic Decisions
This book increases my ability to weigh my competitors in my industry and give me better tools to position my company against my competitors... Read it you will find it interesting or your company in a big ditch...

The best tool to predict a company's future in this economy.
The future looks very uncertain to all of us - no matter what company we are in: big or small, none of us has been spared from this mass anxiety that started in 2001. The old saying 'what goes up must come down' became true after 10 years of the best boom time in America. But will 'things have to eventually turn around' come true? Of course it will, but it would seem that in the process a lot of companies will not survive (as has already been witnessed in the last 2 years). So rather than worrying about when things will turn around, it may be more prudent to focus on figuring out which companies will survive these extremely difficult and trying times.

The book is very deep and I am still in the process of digesting all the material. But I was so moved by the very powerful and sound theory presented in the book that I wanted to share my views immediately and hence this review. So bear with me as the terms I use aren't exactly the ones used in the book. I am using them to help me communicate these ideas faster and more effectively.

This book offers some incredible insight into the fundamental way in which businesses and consumer markets interact. And in the process it provides vital clues that could be used to assess what companies will survive. There are only 8 chapters in this book and a conclusion along with 3 appendices. The first chapter gives some preliminary information on the mechanisms by which consumer markets in free market economies force efficiency increases in the businesses involved. The second chapter addresses the fundamental Rule of Three and why eventually after the dust settles, there can only be three left in an industry - no more and no less.

Chapter 3 broadly categorizes all companies into either Specialists or Generalists and futher defines them into five groups - Full-line Generalists, Portfolio Generalists, Product Specialists, Market Specialists, and Super Nichers. This chapter is especially important as it describes in great detail several of the primary chateristics of both Generalists and Specialists. This is important because it later ties into the successful strategies that must be adopted in order to survive difficult economic times. Chapter 4 shows how companies can get in serious trouble and eventually not survive the difficult times. The authors call this 'The Ditch'.

I wasn't too interested in Chapter 5 which addresses Globalization and the Rule of Three. I still forced myself to read this chapter as I didn't want to miss anything that is used in later chapters. But Chapter 6 and 7 are the ones that everyone has to read! This is where all the secrets lie - the successful strategies one must follow in order to survive this all powerful Rule of Three. Chapter 6 is relevant to the Generalist companies and Chapter 7 is for Specialist companies.

Finally, Chapter 8 introduces the subject of market disruptions - simply speaking how some discontinuous changes in the marketplace (new technologies that can do the same things faster, better, and cheaper - like the Internet) can put someone at immediate risk of failing due to the enormous investment they may already have in terms of time and money in the old technologies.

The authors' conclusion follows these 8 chapters. This is again extremely important as it contains 22 general rules (just a few lines each) that you can't ignore if you are trying to predict where your company future lies. The appendices contain some very good research. For example - the three survivors in all the major industries across the world. As can be expected of a book written by two Ph.D's, there is a very complete reference section at the end of the book where you can check and verify the source data.

There are so many aspects to making a business successful and there are so many books out there on the subject that it is easy to overlook such a critical book as this one. I was fortunate enough to run into this book as a result of my frenzied After Christmas bargain shopping at Amazon where I RANDOMLY selected 30-40 books that were all priced at just a few dollars thinking I can't go wrong even if I find one good book out of three (since the bargain price was a third of the original price). After that it sat on my bookshelf till I recently decided to skim through a few pages of the book. That's when it struck me that this is a landmark book and absolutely essential in predicting the future. I immediately put this book at the top of my reading list and have been devouring it ever since. I consider myself very lucky to find this treasure map of a book. Well, it would be a treasure map only if you are trying to figure out which company is going to survive. Otherwise, you can conveniently skip this book.

Strategic Hypotheses from an Industry Structure Perspective
This book deserves more than five stars.

The Rule of Three is well-documented, easy to read and understand, is filled with practical advice that can be used for many strategic purposes. Regardless of your industry, the size of your business, and your ambitions, you will be well rewarded by the time you spend with this book. It will provide a useful perspective of the sort that you probably have gained from books like The Innovator's Dilemma, The Discipline of Market Leaders, and The New Market Leaders.

For a quick overview of the book, I suggest you begin by reading the clear summary of key points on pages 200-202.

The idea that most industries will eventually be dominated by three broad-scale suppliers with a few profitable specialists was one I first heard from Bruce Henderson, CEO of The Boston Consulting Group, about 1972. My quick look around at the time showed that this pattern did frequently occur (domestic autos, breakfast cereal, and beer came to mind then). This industry structure is more often present now than it was then due to the massive consolidations through acquisitions and business failures that have happened in the United States and world wide. Since learning about the empirical observation, I have usually seen the point applied to the questions of how a market leader could most effectively put pressure on the third largest company in the industry and vice versa. The Rule of Three goes well beyond that scope.

As a result, I was delighted to see that the authors of this fine book have provided extensive empirical documentation of their observations by listing many different industries where this structure occurred, case examples from dozens of old and new industries, and definitions of what can trigger this development. Of particular value to readers will be the detailed descriptions of the strategies that are most likely to succeed and fail, and the most frequent causes of those outcomes.

The detailed observations were usually spot on. I only detected a few places where I disagreed with points that were made. For example, EMC was listed in an appendix as being in the computer peripheral industry along with companies that mostly make PC peripherals. I see EMC as mainly competing instead with the likes of IBM, Hewlett-Packard, Fujitsu, Dell and Storage Networks. The authors also argue that the large general competitors usually enjoy a stock-price multiple over the specialist, niche players who have high returns. I would argue that it is usually just the opposite.

I thought that the problem of the #4, #5, #6 and so forth general suppliers was well described as falling into "the ditch" where the lowest returns on assets are earned. These companies lack the benefits of being a specialist and the scale of being a leader. Often, they succumb. If they can merge to become or join a top company, then the situation may change.

I was pleased to see that the authors described how a company may "change the rules" citing how Starbucks has made progress against the traditional coffee suppliers (Maxwell House, Folger's, and Nestle) by providing more accessible, better quality coffee at a higher price. The main opportunity to strengthen the book would have been to discuss this point with more examples and in more detail.

I also enjoyed the discussion of how specialist companies can be lured into chasing unprofitable market share, and falling by the wayside as a result.

Many authors with an empirical theory like this one would try to avoid talking about situations where one company has almost all the market share (such as occurs in personal computer software), or two companies get almost all the business (as in commercial airframe manufacturers), or even four (as often occurs in Europe and Japan). The authors actually strengthened their main point by examining those exceptions to their rule, and showing the influences that made these results occur.

As someone who is interested in uncontrollable forces that can influence industry structure, I thought that the focus here was good although much simpler than the detailed lists that Professor Michael Porter provides.

Having understood these points, I encourage you to think through how you could use these forces against the current market leaders. As the book suggests, the leaders' efficiencies and size make them vulnerable to nimble competitors offering new business models that serve customers and stakeholders in more ways than by lowering costs. Like the cataclysmic event that killed off the dinosaurs, new business models can doom the existing leaders to being poorly fit for the new environment.

Look for the ultimate competitive advantage!

... Read more

Book Description

From Seattle to Genoa to Johannesburg, people march in the streets protesting global capitalism. They denounce Nike and McDonald’s, the World Bank and the World Trade Organization.

Who would defend global capitalism?

A young writer from Sweden, who started on the anarchist left and then came to understand the world better. Johan Norberg has traveled to Vietnam, Africa, and other hot spots in the battle over globalization. And he has become a passionate defender of the globalization that is lifting poor countries out of poverty.

In Defense of Global Capitalism is the first book to rebut, systematically and thoroughly, the claims of the anti-globalization movement. With facts, statistics, and graphs, Norberg shows why capitalism is in the process of creating a better world. The book is written in a conversational style with an emphasis on liberal values and the opportunities and freedom that globalization brings to the world’s poor.

Norberg shows that the diffusion of capitalism in the past few decades has lowered poverty rates and created opportunities for individuals all over the world. Living standards and life expectancy have risen substantially. There is more food, more education, and more democratization, less inequality and less oppression of women.

Norberg takes on the tough issues-economic growth, freedom vs. equality, free trade and fair trade, international debt, child labor, cultural imperialism--and concludes that free-market capitalism is the best route out of global poverty. ... Read more

Reviews (9)

Steam for Global Capitalism
"When I say that I mean to defend capitalism," proclaims Norberg, "what I have in mind is the capitalistic freedom to proceed by trial and error, without having to ask rulers and border officials for permission first."

He erects a barrage of facts and figures to make the case that trade is good. For example, real incomes among the top quintile of income earners have risen 75% over the past three decades and real incomes among the bottom quintile have increased 106%. Life expectancy in developing economies has increased, infant fatalities have fallen, and people living in developing economies are eating better and obtaining more education. Read the book to learn why the widening "gap" between rich and poor is a falsehood. Although most of the world is still poor compared to the West, their hardship is not because of the West. According to Norberg, "The uneven distribution of wealth in the world is due to the uneven distribution of capitalism."

Protectionists predict that capitalists will locate plants in countries where wages or environmental standards are lowest. Capitalists are not only intent on paying lower wages. "If they were," points out Norberg, "the world's aggregate production would be concentrated in Nigeria." Multinational corporations also seek "social and political stability, the rule of law, secure property rights, free markets, good infrastructure, and skilled manpower." There is evidence that the quality of the environment worsens in the early stages of development. However prosperous people can afford cleaner air and water. Norberg reports that "the turning point generally comes before a country's per capita GDP has reached $8,000." When people earn more than that, their governments adopt environmental regulations. The point is that trade and growth are the means to a cleaner environment.

In addition to trade issues and capitalism, one may also learn a lot about developmental economics and international finance. Norberg observes that people fail to appreciate global capitalism during the good times and then blame the process when the going gets tough. "Globalization will not keep moving under its own steam if no one stands up for it," he asserts. In Defense of Global Capitalism is perhaps worth a ton of coal in the engine of global capitalism.

The Good News
In this illuminating and accessible book, Norberg offers a systematic, detailed and complete rebuttal of the claims of the enemies of capitalism and globalization. Backed up by verifiable facts from a huge variety of reputable sources, he demolishes every lie of the leftists and environmentalists. He also investigates the other side of certain half-truths and gives an optimistic assessment of how capitalism, freedom and globalization are improving human lives around the globe.

Norberg looks at certain deceptive ideas, for example the one that claims the rich are getting richer and the poor poorer, giving us the good news of rapidly diminishing poverty and pointing out that the measure should be how well one is doing, not how well situated one is in relation to others. He explores the facts concerning issues like hunger, education, freedom and equality. Improvements have been particularly spectacular in China and India since these countries started reforming their economic systems.

He shows how the walls against ideas, people and goods are collapsing with dictatorships and how women benefit from the spread of capitalism. The best cure for poverty is growth; prices and profits serve as a signalling system in the market economy whereby the worker, the entrepreneur and the investor all benefit. The importance of property rights are pointed out, with reference to the work of De Soto, and the author compares the success of the Asian Tigers with the sorry state of Africa, although even here the open societies like South Africa, Mauritius and Botswana are doing well.

Norberg dismisses the hoary old argument that western countries are rich because they stole the resources of Third World countries in colonial times. The affluent world has grown faster since shedding its colonies, many rich countries (like Sweden and Switzerland) never had any colonies, whilst some of the world's least developed countries (Nepal, Liberia) have never been colonies. Nor have countries with natural resources as a rule grown as fast as those without, for example Singapore. A brilliant example of free trade success is Estonia, which soon after independence in 1992 abolished all tariffs.

The 20 economically most liberal countries have a per capita GDP of approximately 29 times that of the economically least liberal. The uneven distribution of wealth in the world is due to the uneven distribution of capitalism and the losers of the world are those that have been left out of globalisation.

Norberg attacks agricultural subsidies in the affluent countries, showing that this ridiculous practice harms those countries themselves and the developing world. He demonstrates the absurdity of Europe's Common Agricultural Policy, a bureaucratic nightmare that channels nearly 40% of the entire EU budget to less than 1% of the population. Latin America still suffers from decades of privilege and protectionism, but Chile is a good example of how quickly a country can transform itself with the right policies, to create a high standard of living.

Norberg investigates a vast range of issues, from development assistance (It is wasteful in that it normally involves the transfer of money from poor people in rich countries to rich people in poor countries), child labour and working conditions. He argues convincingly that free trade and capitalism alleviate social problems. He also proves that prosperity is beneficial for the environment, refuting the spurious claims of environmentalists and quoting from Bjorn Lomborg's remarkable book, The Skeptical Environmentalist.

Norberg considers every angle, including issues like "cultural imperialism" and the risible notion of the "dictatorship of the market", showing how capitalism and democracy go hand in hand in creating a better world. The book includes an index and 14 pages of notes. The text is enhanced by graphs demonstrating the facts and arguments. He concludes the book on an optimistic note, i.e. that people are beginning to wake up to the fact that they aren't just the tools of society but ends in themselves and that freedom and democracy will spread and continue to improve the lives of everyone on the planet.

Economics from a firehose
When a guest of my wife's saw this book on a table in our living room, he sneered "who needs to defend capitalism? It's *everywhere*!"

I start this review with that anecdote because apparently the title of this tome mustn't be terribly successful. Mr. Norberg spends 300 pages telling us in crushing detail why it isn't 'everywhere'--and more importantly, why not.

And a solid defense it is. The book is well researched and simply relentless. Page after page buries us with statistics telling us why capitalism is (in Churchhill's paraphrased words) "the worst system of government, except for all the others." Mr. Norberg tackles globalization late in the book to fill out the picture but never strays far from his main thes