Cowardly Capitalism: The Myth of The Global Financial Casino

Rating:
Summary: Insightful!
Review: Let's start out this review by stating up front that we disagree with Daniel Ben-Ami's assertion that a preoccupation with risk measurement and management is a detriment to the global economy. With that out of the way, we can say that Ben-Ami presents a unique analysis of the modern global economy that is not at all without merit. His contention that lagging growth is a greater peril to the world's economy than financial instability is reasonable and backed up by ample evidence and illustration. And his position that increased regulation could be doing more harm than good will be embraced by all free traders. On the basis of these discussions alone, we [...] recommend this book to anyone thinking seriously about international financial systems. But this book is perhaps most useful as a starting point for debate, which it will certainly generate in the mind of any informed reader. While you might quibble with Ben-Ami's conclusions ' as we do with his assertion that the threat of the 1990s financial crises was overblown ' you will not be bored.


Rating:
Summary: Fascinating, Contrarian and Long Overdue
Review: The author performs a complete and delicate post-mortem of modern capitalist beliefs and misconceptions. I read Ayn Rand's "Capitalism: The Unknown Ideal" some time ago. Daniel Ben-Ami constructs a compelling argument in favour of unregulated markets, healthy competition and good old fashioned risk taking. Unlike Raynd he steers away from abstruse philosophical theories and sticks with what really matters to the reader: Real life examples, cataloging the myriad failiures of faux-capitalism. If like me you whince every time you hear about another ill-thought out but well intended goverment safeguard, you'll enjoy this book for the intellectual ammunition it delivers.

Rating:
Summary: Extraordinarily clear analysis of global finance
Review: Usually, books on the dry subject of modern finance are a difficult read but this one is a welcome and worthy exception. The text is so fascinating that I managed to "make it" in three rather short sessions - and without the slightest trace of boredom in the process. I found no superfluous or pseudo-profound sentences and even the footnotes of this carefully researched study fully deserve the reader's attention.

Ben-Ami manages to explain in a few dozen pages the basics of apparently difficult concepts (as he rightly tells us, "even the most complex strategies tend to be built from simple components") such as derivatives, mutual funds, pension funds, hedging, etc. In the process, he shatters a lot of mistaken myths and conventional wisdom.

It is simply not true, he explains, that the instruments of modern finance are essentially speculative; on the contrary, they are usually a means for corporations and investors in general to better manage risk. Modern capitalists, unlike their predecessors of a more dynamic era, have an exaggerated aversion to risk and they try to build their portfolio in a way that minimises it. Thus a corporation dedicated to making cars, for instance, might prefer to invest part of its earnings in derivatives or hedge funds instead of innovating its production processes. The result would of course be a less dynamic form of capitalism, where more resources are spent on the financial markets - as opposed to the real, productive side of the economy. This, insists Ben-Ami, is in short what has been happening since the end of the post-war (1945-73) economic boom.

He offers powerful examples to illustrate his thesis. Yes, he says, it's true that George Soros made a billion dollars out of speculating against the British Pound in the early nineties - but that was only because the fundamentals of the British economy were really incompatible with the high value of its currency. A few years later Soros was betting on a fall of the Rouble and eventually lost two billion dollars. This time he had made a wrong analysis of the fundamentals of the Russian economy and got his fingers burned. The conclusion? Well, speculators really don't have the power to dominate events. So much for the idea that modern economies are but passive instruments at the hands of unscrupulous capitalistic sharks!

Ben-Ami regrets the general climate of fear for the future and horror of risk-taking that he thinks has taken hold of Western Europe and even more the USA in the last few decades - and has been, BTW, amply demonstrated in the recent near-hysteria caused by the appearance of a few cases of Anthrax in the US. He sees in this tendency a sign that the "animal spirits" that Keynes considered essential for the proper working of a dynamic capitalist economy are faltering.

The author doesn't present us a "solution" for this problem, probably because he's well aware of the fact that cultural attitudes are very hard to change. But he does warn that the climate of fear that currently permeates western society constitutes a clear impediment to stronger economic growth, both in the First and Third worlds. And he writes in such a clear, unpretentious style that one might just hope his analysis will eventually find a sympathetic hearing in the decision-making centers of Europe and the United States.