How Do We Fix This Mess? by Robert Peston

This text is somewhat light on theory but it is useful reading for people who want to understand the credit crunch. It captures the complexity of modern banking and highlights the difficulty of trying to regulate the system. Further, it makes an important distinction between financial globalisation and other forms of globalisation.

Nonetheless, the reader may be disappointed if they want a broad understanding of modern capitalism. There is insufficient mention of the environment and this lacuna means that future prospects are not viewed with enough pessimism. In addition, those who took on loans from irresponsible financial institutions are not always discussed with adequate empathy. The imbalance in power between the two groups is sometimes neglected and those of us who were in neither category are partly ignored.

Another problem with the book is its inconsistent treatment of moral hazard. It is critical of the former governor of the Bank of England for his partial belief in the principle. However, when not attacking Sir Mervyn King, Robert Peston writes:

“But if taxpayers are at risk of picking up the tab when bank bosses mismanage their institutions, there is a question as to why they are paid on the same scale as successful entrepreneurs, who receive no protection from the state and who put their livelihoods on the line for their businesses.”

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