‘Crashed’ Connects the Dots From 2008 Crisis to Trump, Brexit and More

The Columbia professor Adam Tooze might be expected to have precious little in common with Stephen K. Bannon, the shambolic former chief strategist to President Donald Trump. Tooze is a self-described “left‑liberal historian whose personal loyalties are divided among England, Germany, the ‘Island of Manhattan’ and the EU”; Bannon is a brawling, right-wing connoisseur of nationalist resentment. In “Crashed: How a Decade of Financial Crises Changed the World,” Tooze, with his Oxbridge-trained ear for a withering epithet, calls Bannon “the sulfurous impresario of Breitbart.”

There is, however, a significant point on which they both agree: The financial crisis of 2008, along with the bailouts that followed, exposed the seamy underbelly of a global economic system that was supposed to be so finely calibrated that political wrangling (unseemly, inefficient) was beside the point. As Alan Greenspan, the former chairman of the Federal Reserve, told a Swiss newspaper just a year before the crisis, the world of 2007 was a central bankers’ paradise: “We are fortunate that, thanks to globalization, policy decisions in the U.S. have been largely replaced by global market forces.”

Needless to say, the nonagenarian Greenspan has spent the last decade like a wide-eyed ingénue, declaring himself flabbergasted by events, while Bannon has ridden a populist-nationalist wave to the White House and beyond.

In “Crashed,” Tooze shows how the upheaval of 2008 radiated outward, shaping not only the new economic order but the political free-for-all that stumped conventional pundits and scrambled traditional allegiances. He connects the mortgage crisis to the American banking crisis to the European debt crisis to the crisis of liberalism. Brexit, Trump, Russia’s annexation of Crimea in 2014 and China’s ever-escalating role in the financial system: Tooze covers them all and much more, in a volume that’s as lively as it is long — which is to say very, on both counts. Having published previous books on the turbulent post-World War I era and the economic policies of Nazi Germany, Tooze has made a specialty of financial collapse and historical disaster. He also understands the language of corporate balance sheets and sovereign debt deeply enough to know that he ought to use it sparingly, translating some of the most byzantine gibberish into elegant English.

“The sort of thing that you could do in London but not in New York is exemplified by ‘collateral rehypothecation,'” he writes, rather menacingly, before nimbly breaking down what that means and why it matters. Several lucid sentences later, you’ll have learned, perhaps despite yourself, how the financial wizards of New York competed with the financial wizards of London, and how a worldwide daisy chain of banks turned into a ticking bomb.

Of course, the story of “Crashed” isn’t just a panoply of transactions and statistics. Tooze regales us with character sketches while recounting the “freak show of outsize personalities” at the G-20 summit in London in 2009 — a pageant of the world’s leaders pledging to boost cratering trade and quell panicking markets.

There’s Angela Merkel of Germany, a moralizing pillar of unyielding rectitude, and a jittery, grandstanding Nicolas Sarkozy of France. A restless Silvio Berlusconi of Italy was “noisily desperate” for attention, while England’s Gordon Brown glowered over the proceedings.

Brown, a Labour Party leader who was doing his delicate best not to antagonize the trillion-dollar interests of the City of London, might have lost touch with the “humdrum reality” of a Britain gripped by recession, but as Tooze wryly puts it, the prime minister “proved that he was perfectly suited to the role of Treasury secretary to the world.”

Yes, the compliment is as backhanded as it sounds, but it’s a measure of Tooze’s nuanced and often counterintuitive narrative that the line retains a measure of praise, however faint. Part of Tooze’s argument in “Crashed” is that the technical know-how of an able treasury secretary can be useful in a crisis. He depicts Timothy Geithner, the treasury secretary during President Barack Obama’s first, hairy term in office, as a technocrat ne plus ultra, a public servant committed to upholding the financial system, which he ultimately did do.

What Geithner didn’t do was nationalize or break up the “too big to fail” banks, or pay much heed to struggling homeowners whose mortgages were underwater. Instead, he invested the regulatory bureaucracy he knew so well with greater powers of oversight. It was a solution fit for a manager — and for someone who in Tooze’s estimation revered the system as much as Geithner did.

This approach apparently satisfied Obama, whose administration is described as an embodiment of “American corporate liberalism.” Again, the characterization is doubled-edged. Obama was “by inclination a bipartisan centrist” forced to fend off “the sheer violence of the conservative hostility toward him.” He shepherded the banks through calamity with a firm but gentle hand. They got their bailout, so that even the gargantuan Citigroup, whose sheer survival was entirely dependent on government action, was able to splurge for $5 billion in bonuses a year later. Any non-bankers who lost their jobs or homes weren’t so lucky. On the apparent Democratic distaste for conflict, Tooze is quietly scathing. "Rather than seeking to mobilize the indignation simmering in American society,” the Obama administration sought to tamp it down, offering “one technocratic fix after another.” Putting it another way, Democratic centrism won the (financial) war but lost the (political) peace. To judge from Trump’s ascendancy, along with the historical evidence so scrupulously marshaled in “Crashed,” Tooze is right.

But at least Obama took seriously his responsibility to govern, whereas the same can’t be said for Republicans, portrayed here as gifted obstructionists “incapable of legislating or cooperating effectively.” “Crashed” details how Republican administrations had abandoned fiscal responsibility long ago, bloating the deficit with pumped-up military spending and protracted, expensive wars, while leaving it to their Democratic successors to clean up the mess.

—

“Crashed: How a Decade of Financial Crises Changed the World”

By Adam Tooze

706 pages. Viking. $35.