Adair Turner's critique of free-market economics is coherent and compelling, says David Willettsby David Willetts / December 10, 2015 / Leave a comment
Published in January 2016 issue of Prospect Magazine
Adair Turner caused a stir in 2009 when he described much financial activity as “socially useless.” It was part of an interview with this magazine—which he fails to name in his book, instead referring to “a worthy but small circulation intellectual magazine.” Ouch!
Now Turner, Chairman of the Financial Services Authority from 2008 to 2013, has gone much further in this important and ambitious book. The shocking results of that 2008 failure meant that subsequently the authorities, quite rightly, did what they had to do to avoid complete meltdown in the markets. But this book is not a memoir of his role in steering us through the financial crisis. Instead he addresses deeper questions about what got us into such a mess in the first place, and demolishes much of the conventional wisdom about the functioning of financial markets and monetary policy.
Back in the 1980s, free-market economics became the dominant model. Many of its insights remain valid: the obituaries of Geoffrey Howe reminded us how in his first year as Chancellor he removed controls over pay, price and dividends, and then exchange controls. It is hard to see us going back to the world from which he liberated us.
“Virtuous bankers complying with the regulations could nevertheless lead to high levels of debt”
Nevertheless, theories can ossify into a doctrine that loses conta…