The Roaring Nineties: A New History of the World's Most Prosperous Decade (review)

Joseph Stiglitz's latest work dubs the 1990s the world's most prosperous decade. This is odd given his earlier Globalization and Its Discontents (2002) because the two books seem contradictory. The previous text is much more persuasive and empirically grounded. It notes the blossoming of global social movements in the 1990s that reflected a rising inequality within and between nations in much of the world. Many analysts argue that this discontent marks the decade much more than prosperity. Even within the United States, inequality rose, with most of the gains in GDP accruing at the top income decile (as Stiglitz admits). Whether measured by the markers of the decade, the business cycle, or the Clinton years, GDP growth and GDP growth per capita were unexceptional.

As a Nobel prize-winning economist recognized for his work on asymmetric information, a chair of the Council of Economic Advisers (CEA), and Chief Economist at the World Bank, Stiglitz is in a unique position to comment on the 1990s. Other former Clinton appointees also have produced apologias for Clintonomics, including Robert Rubin, Treasury Secretary from 1995-99, and Alan Blinder, a CEA member and Vice Chairman at the Fed, with Janet Yellen, and Stiglitz's successor at the CEA. They all paint a generally positive picture of the period. Rubin and Stiglitz are decidedly more ideological in their interpretations of the influence of economic policy on the period. Blinder and Yellen are more empirical and argue from a disciplinary perspective. While Blinder and Yellen's monograph is the most compelling of these works, the best objective overview is Robert Brenner's The Boom and Bubble (2003), thanks to its international perspective, systemic argument, and statistical richness. On the domestic economy alone, The Contours of Descent (2003) by Robert Pollin also offers a persuasive summation of the period.

The Roaring Nineties is more a series of vignettes, assertions, comments, and "lessons" than a cohesive narrative or monograph. Stiglitz argues that the period's growth, stability in employment, low inflation, and high levels of investment were due primarily to strong productivity gains driven by the "New Economy" (a new technological shift) and, secondarily, deficit reduction. He is quick to note that state policy was only one of many factors in the economy's rebound and stability. The author is less convinced than other apologists that further deregulation and the increased influence of the financial sector were the agents of growth and prosperity. The Roaring Nineties posits that rewriting regulatory laws was necessary but the particular form of deregulation that took place in the 1980s and 1990s led to market failures in, most notably, savings and loans, airlines, and telecommunications that resulted in corporate accounting scandals such as Enron and WorldCom. In part, these failures flowed from too much reliance on the market to regulate itself. For Stiglitz, Wall Street has great expertise in short-term analysis but lacks a long-term commitment to the economy and society. The Street became hostage to its unitary drive for immediate profits, even if they were accounting fictions. Here, he parts company with Rubin and is particularly critical of the way that policy is shaped by special interests and politicians. The most insightful points in the text surround how these problems inflated the boom into a bubble.

Telecommunication deregulation led to an investment frenzy as corporations sought to dominate the sector through various competitive strategies. Banks were critical in financing the mania through bond and stock flotations, mergers and acquisitions, and loans. In part, banks presented rosy prognostications to investors because it was in their short-term interest. The repeal of Glass-Steagall also opened the gates for investment and commercial wings of banks to collude in propping up customers. In a further manipulation of information for shareholders and investors, accounting firms failed to report...