The Trouble with Markets: Saving Capitalism from Itself

The Trouble with Markets is now fully updated and expanded to include a major new chapter on The Trouble with the Euro based on the winning entry in the Wolfson Economics Prize .

On Thursday the 5th of July 2012, Roger Bootle was awarded the first ever Wolfson Prize for Economics; the second largest in Economics after the Nobel . In the Wolfson essay, Bootle looks at a hypothetical break-up of the Eurozone, and the potential ramifications thereof not only would the EU benefit from an orderly break-up in the long term, he argues, but it may be the only thing capable of lifting us out of the current economic crisis.

In this completely updated edition of this prescient and widely acclaimed book, Roger Bootle extends his analysis to include the current sovereign debt crisis, the plight of the euro, the intensity of the squeeze on public spending and consumer incomes, and the boom in commodity prices and gold. Bootle lays out a plan for reform of the financial system and a strategy to get us out of the current mess. And he highlights a course for investors to steer us through these choppy waters.

Society has always had to grapple with the market s imperfections and to tame them. In order to save capitalism from itself we now have to do this with the financial sector. Such a thought will offend those who tend the flame of the pure free market ideal. But the market was made for man, not man for the market. The Trouble With Markets is a trenchant, topical and thought-provoking exploration of both our economic future and the future of the market system itself. The crisis did not have one cause but many greedy bankers and naïve borrowers, mistaken central banks and inept regulators, insatiable Western consumers and over-thrifty Chinese savers. But underlying all these there was a single super-cause the idea that the markets are always right and consequently that they can be left alone. Belief in this idea not only explains the extreme risks that both banks and borrowers took, but also the passivity and insouciance of central banks and regulators in letting them get on with it. Indeed, the Great Implosion has revealed not only the markets excessive risk-taking and how fragile the financial system is, but also how bloated the financial sector has become. It has demonstrated a failure of the market with regard to the setting of executive compensation in general, and pay in the financial sector in particular. The result has been the revelation of a financial sector hell-bent on pursuing its own profit, while imperilling not promoting the public good, and a system of corporate governance where managers have been pursuing either their own interests, or the short-term performance of the share price which often came to the same thing. Bootle, one of the City s best-known economists, not only offers a serious critique of the free-market mindset, but also a plan for radical reform of the system and a way out of the economic mess. Despite some signs of recovery, the economic outlook in the real economy is for an extended period of weakness amounting to a depression. And while so many people worry about a resurgence of inflation, the greatest threat is the emergence of sustained deflation. It will only be possible to get back to full employment and stability if China leads the super-saving countries by changing course to a policy of increased domestic demand. In order to persuade her to do this, China needs to be offered both a seat at the top table and a change in the international position of the dollar. Ironically, the excesses of cowboy capitalism could lead to the evolution of a global money and to the beginnings of global governance. With his trademark clarity and acerbic wit, Roger Bootle s new book lays out the pathway for saving capitalism from itself.

Roger Bootle is one the City s top economists, and has worked in or around the financial markets since 1978. He is a regular columnist for The Daily Telegraph and also appears frequently on national television and radio. His now classic bestseller The Death of Inflation, originally regarded as extreme is now widely recognized as prophetic. As well as being the founder and Managing Director of Capital Economics, he is also Economic Adviser to Deloitte, a Specialist Adviser to the House of Commons Treasury Committee and an Honorary Fellow of the Institute of Actuaries. He was formerly Group Chief Economist at HSBC, and under the previous Conservative government he was appointed one of the Chancellor s panel of economic forecasters, the so-called Wise Men . He studied Economics at Oxford, and began his career in the academic world as a lecturer in Economics at St Anne s College, Oxford. www.capitaleconomics.com