Ash’s New Book Looks at the Global Financial Crisis of 2007-08

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Professor Michael Ash of the School of Public Policy and the department of economics has written a new book that looks at both the build-up to and the fallout from the global financial crisis of the late 2000s—including the surprising resilience of the systems that led to that crisis.

Ash and his coauthor, Francisco Louçã of the University of Lisbon, wrote the book, “Shadow Networks: Financial Disorder and the System that Caused Crisis” (Oxford University Press), for a general audience.

“In 2007 and 2008, we had this global economic catastrophe, this financial collapse, that I think we’re still feeling the aftershocks of in the ugly turn that politics has taken in the United States and Europe. Also in Turkey, Israel, Palestine, India, we’re seeing the after effects,” Ash said. “And yet the same voices and thinkers and decision makers who built the architecture that was so prone to collapse—you can think of it as storing oily rags in the basement of global finance—were far from being rousted from their positions.

“We found that the systems of economic governance were remarkably resilient, given the magnitude of the disaster that they created, in a way that we would not tolerant in our lives—a system that breaks that badly you get rid of, you fix, you do what’s needed,” he said.

That’s not what happened in the wake of the financial collapse, however. “In the years immediately following the crisis there were some dances with alternative ways of doing business,” Ash said. But that openness to change, from reforms to the European banking system to the Dodd-Frank Act’s attempts at financial regulation and consumer protection, was “rather quickly tamped down.”

In their book, Ash and Louçã describe “shadow networks” made up of individuals and institutions—academics, banks and financial firms, politicians and policy makers—who together shaped an economic system marked by economic liberalism, deregulation and privatization
and gave it “a coherence and resilience that can outlast its usefulness and its functionality for most of the people on the planet,” Ash said.

The scholars wrote the bulk of “Shadow Networks” prior to the U.S. election and the Brexit vote of 2016 and, in fact, note in its introduction their surprise at the election results. Still, Ash said, post-election developments underscore points made in the book about “the extraordinary political power of financial capital to shape its own environment and to shape our environment through successful lobbying, through a war of ideas, through the exercise of raw power.” Donald Trump may have used “Goldman Sachs” as a shorthand pejorative to reinforce a populist message on the campaign trail, he noted, but the major financial institutions are well represented in his Cabinet.

Such contemporary examples aside, the book also describes broader historical patterns. “We hope we’re giving some insight into the way that elites are able to build the environment they operate in,” Ash said. “They’re able to build the world of ideas and the world of intellectual reproduction and social reproduction that make the environment safe and comfortable for elites and capital.”

Nonetheless, the authors are optimistic about the future. “We really put our faith in the interplay of democracy and professional expertise,” Ash said. “We cannot depend on a system of experts to tell us what needs to be done—we also need democracy to function. We need a democracy that can ask questions like, ‘What is the right way to run a central bank? What would a central bank run for human benefit look like?’

“I hope the reader will come away with the sense that the economy can be practically managed by a democracy that mobilizes expertise for democratic ends,” he said.