“Bad Money” in the title of Kevin Phillips’s timely, incisive and brilliantly written book refers to basically three things.
(1) In the historical sense, “bad money” refers to moments in the history of world economic powers (Hapsburg, Spain, the maritime Dutch Republic, imperial Britain immediately before World War I and the U.S. at the present time) when they began to pass their prime as world powers and when they let themselves “luxuriate in finance at the expense of harvesting, manufacturing or transporting things.” Phillips thinks that the abandonment of genuine production for decadent finance is both a contributing cause of decline and the unmistakable mark of the collapse of great powers. He makes this lesson of history manifestly clear and puts it in italics: “To institutionalize the dominance of minimally regulated finance at this stage of U.S. history is a bad idea.”
(2) In the systemic sense, “bad money” refers to the practice of allowing a financial elite to entrench itself as the sector of the economy that dominates profits and the GNP. The consequence of this, as we have seen, is the institutionalization of out-of-control public and private debt, unchecked innovation of financial “products,” and cycles of panic and instability. Phillips quips that there must be some financial sector equivalent of Lord Acton’s famous thesis that the greater the power, the greater the abuse and corruption.
(3) In a cultural or ethical sense, “bad money” refers to “an overbearing financialization of America’s economy and culture, lesser versions of which in both U.S. and world history have led to extremes of income and wealth polarization, a culture of money worship and overt philosophic embrace of speculation and wide-open markets. Minimally bridled finance, extraordinarily rewarding to the top 1 or 2 percent of the population possessing capital, skills and education, indulges all of these tendencies.” Phillips summarizes this in one of his wonderfully exuberant metaphors as a giant, cyberspatial King Kong prowling 21st-century Manhattan.
The first thing to say about why this is the book to read if you read nothing else about our current economic state is that Phillips understands it intimately, explains it lucidly and exposes its historical dynamics brilliantly. But the second thing to say is that this is a wonderful book that will serve you beyond this particular moment of financial crisis. It is destined to become a classic.
Phillips is a master of the trenchant aphorism: “Moving money around instead of making things is always dicey, and the U.S. transformation has been the most grandiose to date.” He is also the master of the political thrust: “There was little reason to assume that Bush family genes were the stuff of rule by inheritance — and they turned out not to be.” He is also the master of vivid metaphor: “The figurative soup into which the United States had fallen during the early 2000s was a broth of bile.”
But it is his ability to historically contextualize our present situation that provides his readers with some hope — even though I can almost hear Phillips say, “But I had no intention to make you feel good.” Just one example of this talent for historical allegory appears early in the book when he sketches six informative precedents for our current economic/cultural/moral crisis in the history of imperial Rome at the time of its decline: Then there was a “popular sense of national decay”; “religion tended to intensify in unfortunate ways”; “faith typically came into conflict with science”; “imperialism and military overreach brought a damaging mutual stimulus”; “excessive debt became crippling”; “finance rose at the expense of industry, agriculture and other earlier forms of economic activity.” To these he adds a seventh from the example of the collapse of the Dutch and British economies: “the idiosyncratic nature of fuel and energy achievements and [their] hegemony.”
-- Michael Payne can be reached at payne@bucknell.edu
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‘Bad Money’ has big consequences
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