The End of Normal served as a refresher of my Economics study in Groningen University (1989-1993). Keynes theories of balance between investments and savings, risks of inflation, the trade-off between raising taxes and international competitive advantages, all are challenged in this book by James K. Galbraith, son of Kenneth Galbraith, one of the established economists I had to study then. When the financial crises of 2008-2013 hit, both the United States and Europe faced huge problems.
Would it be possible to return to normal, re-establish economic growth like we were used to? Could austerity, like promoted in the Eurozone help? Or would stimulus work better, like the employment or medical aid programs in the US have better results? To what extend can greed and low morale of individuals cause the entire financial industry to be shaken, and countries get to the point of becoming technically bankrupt (Greece, Iceland)? Can you trust the way economics are explained in newspapers?
Galbraith argues that the 1970s already ended the age of easy growth. Changed energy supply chains and pricing mechanisms, an evolving role of the United States facing China becoming more powerful. Inequality between countries grew in the past decades. The technological progress, wars not being a driver for economic growth anymore, and the conclusion that the economy as a whole isn’t stimulated by New Deal-like programs. While in the US stimulus and automatic stabilization had their role in putting a break on the shrinking economy, these weren’t instruments to bring us back to high growth and full employment. Unstable economic conditions are the new normal. Efficiency and fragility are two aspects of the same system. Governments and corporations have their instruments, ranging from the money press to refound ethics. No silver bullets or light reading here. Galbraith provides a clear analysis of the role politicians, Fed chairmen, international institutions, and economic systems play in the economies.
About the author
James K. Galbraith is an American economist who writes frequently for the popular press on economic topics. He is currently a professor at the Lyndon B. Johnson School of Public Affairs and at the Department of Government, University of Texas at Austin. He is also a Senior Scholar with the Levy Economics Institute of Bard College. He is also part of the executive committee of the World Economics Association, created in 2011.