Book Review: The Age of Inequality

By October 24, 2017featured
Book Review: The Age of Inequality

The Age of Inequality: Corporate America’s War on Working People, is a collection of essays from economic, sociological and political perspectives that isn’t going to directly improve your trading strategy, but will help you break out of your bubble of thinking and see the bigger picture of American economic health and stock market risk.

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According to its publishers, The Age of Inequality charts “a staggering rise in inequality and the fall of the American middle class,” with essays by everyone from Bernie Sanders and Arundhati Roy to Naomi Klein, Ralph Nader and Noam Chomsky, among many others.  It is a selection of “four decades of articles by investigative reporters and progressive thinkers”; or more poignantly, it is described as “the story of our age” and the “tale of shockingly successful corporate takeovers stretching from Reagan to Trump, but also of brave attempts to turn the tide, from the Seattle global justice protests to Occupy to the Fight for 15.”

So, why should you—as a new or experienced trader–read this book, if it’s not going to offer up any new strategies for trading or investing? Well, because it offers something that is just as important to trading strategy as anything else you’ve been told: wider perspective on the market. If you can get past the “socialist” leaning and focus on the economics, you will benefit from what this book has to offer.

The book’s essays on the development of the financial sector will round out your perspective on the strength of the free market and give you insight into how the dirty dances of the industry’s biggest players have jeopardized the livelihoods of millions of Americans—and all of this should affect how function as a trader.

The anthology’s introduction by editor Jeremy Gantz may put you off the book, if you aren’t into leftist or rightist politics. The intro sets the stage for the essays to come, noting: “U.S. incomes began growing more unequal in 1979 and money has been flowing upward ever since. Fast-forward nearly 4o years and:

  • The richest 1 percent of Americans now own more wealth than the bottom 90 percent
  • The richest .01 percent of Americans control 22 percent of the wealth, up from 7 percent in the late 1970s
  • The country’s median household income (adjusted for inflation) is less today than it was in 1989”

But, don’t be fooled by the introduction: The essays that follow are great lessons in economics.

A few pieces in particular stand out, for those of you looking for brain candy during slow trading days.

In Blowing Bubbles: The Rise of Finance, Dean Baker – credited as one of the first economists to have discovered the 2008 housing bubble – laments the status of the financial industry as the sector of choice for job-seeking Ivy League graduates. He credits Wall Street for creating a participative economy, where a middle class family can invest in large companies and use the earnings to buy a home and secure a comfortable retirement. Baker follows this reverence with a sharp, but fair, critique of the industry that represents 2.4 percent of the national gross domestic product, but offers little in the form of human services or social value, compared to the healthcare or education sector.

 

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Another 2003 essay by Baker, later in the book, predicts the housing bubble of 2007, which was “just [then] reaching its peak.” The claim comes as part of a revelation of three massive market bubbles that allowed President Bill Clinton to claim he stewarded a strong economy. Pick up the book to find out about the other two!

An old-timey essay by David M. Kotz called Bank Deregulation Threatens Stability, follows Baker’s reflective piece. Kotz, a University of Massachusetts economist, discusses the rise of banking speculation and the lenders’ adoption of practices that used to be reserved for separate financial institutions. The collapse of post-Great Depression banking regulations has its roots in the 1980s, according to this clairvoyant 1986 essay.

David Moberg’s 2002 essay Enronomics 101 predicts the rise of “fake news,” the first perpetrator of which was Enron, according to the University of Chicago-educated In These Times magazine editor.

Enron played into the “disinformation economy” by employing a systematic effort to hide, distort and lie as a way of gaining wealth and power,” Moberg argues. The piece offers a perspective on the speed and virility of the financial sector in the digital age, as a new generation begins a crash course on distilling nuance from noise.

And, of course, let’s not forget Noam Chomsky—the MIT professor who is arguably one of the most important public thinkers of our time. As he would say, he has a “Socratic-style willingness to ask whether conventional doctrines are justified.” Chomsky will tell you—as he noted in a separate interview with the Nation recently–that our economy changed dramatically beginning in the early 1970s, when financial institutions “exploded in scale. By 2007, they actually had 40 percent of corporate profits. Furthermore, they weren’t connected to the real economy anymore.”

The Age of Inequality is a welcome reflection on decades of struggle between business freedom and consumer safety. None of the rollbacks we face today are novel. The digital world may have created new beasts to slay, but the threat they pose is proportional to the implications of a globalized world. We can rise to meet this challenge, as we have for countless others in the past.

If it’s economics you’re interested in, this is one of the most important books you will ever read and it will also serve as a guide to further reading by the long list of essay authors. Trading isn’t just about the immediate, small picture in front of it—the real strategists—and the real success stories—see a much bigger picture, both past and future. This books gives you the first glimpse into how the past unfolded from an economic standpoint, and what might be in store for the future. These essays might also give you a better idea of what to expect with the rise of Artificial Intelligence, the ‘Age of the Quants’, and how all of this might further contribute to inequality.

Grab a glass of wine, read this book, break out of your bubble and think big picture with this somewhat depressing but extremely crucial read.

 

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