FAULT LINES – Raghuram G. Rajan
I am yet to come across someone who hasn’t lost something in the recent financial crisis and the recession that followed it. Those affected and many others are still wondering as to what really happend and why we did not see it coming. There are several articles, theories, reports and blogs about what went wrong and how greed was the prime fuel that aggravated the crisis. Even I contributed my mite Grease is Sticky. But here is an interesting book Fault Lines, by Raghuram G. Rajan ( economic advisor to our Prime Minister). I was recently at an event in Delhi where Mr. Rajan made compelling suggestions that “This was not a crisis where only the private sector was to blame or only the government was to blame, it was a crisis caused by the faulty interface between the two”. The book certainly gives a different and persuasive viewpoint to the financial crisis of 2007 and, shows how the hidden fractures still threaten the world economy. His arguement that the root causes of the breakdown were stagnant wages and rising inequality, resonates well with his findings that the urgent demand for credit was stimulated by the lack of purchasing power of many middle-class households commensurate with the cost of living.
The chapter on Reforming Finance which says “The fault lines and fargilities will not simply go away with the passage of time. Some of them are indeed deepening” , also dwells upon the broad principles of reform.
A person of Indian origin, Rajan is from IIT- Delhi, IIM Ahmedabad and a Ph.D from MIT and hold your breadth – a Professor of Finance at the Chicago Booth. He was the Chief Economist at the International Monetary Fund. His presentation was brilliant and his book less than 250 pages gives a lucid analysis of the financial crisis and its aftershocks which he believes will still haunt us. I don’t disbelieve him.
True to his versatility, he even warned of the impending global financial crisis for which he was ridiculed. You don’t have to be an engineer or a management graduate or finance professional or an economist to comprehend his brilliant analysis. He has even a chapter – What lies ahead for India. I urge you to read this book. Published in India by Harper Collins, it is reasonably priced below five hundred rupees.