Hyman does a better job of presenting his chronology of debt than of developing a single big idea, which may limit this book’s appeal in the executive suite. Still, Borrow should interest policymakers, not only in the U.S. but also in Europe, because so many of the problems it highlights would never have arisen if regulators had been protecting the public against an over-leveraged system. Borrow should also appeal to those executives who believe that the U.S. won’t recover its past prosperity unless it resurrects its manufacturing base. In Hyman’s view, indigenously manufactured products create good middle-class jobs and a stable economy, whereas financial innovation creates fortunes for only a few at the top and increases the risk of speculative bubbles. (See “Manufacturing’s Wake-Up Call,” by Arvind Kaushal, Thomas Mayor, and Patricia Riedl, s+b, Autumn 2011.)
Hyman hits this idea hard in the book’s final chapter, an epilogue of sorts in which he argues that “the underlying financial practices enabling the crisis remain unfixed,” and offers a blueprint for institutional reform. Because the system doesn’t do a good job of getting loans to job-creating smaller businesses, he recommends the creation of two federal agencies, one to evaluate small and midsized businesses and another to facilitate the flow of money to them through securitization. “Waiting and hoping that financiers will sort themselves out is the most serious form of delusion,” Hyman writes, asserting that the weakness of the U.S. economy will become evident once the Federal Reserve raises interest rates — which are now near zero. “We are only in the eye of the storm.”
It would be easy to poke holes in Hyman’s prescription. But his characterization of the risks we still face feels frighteningly right.
- Robert Hertzberg is a freelance writer and editor. He was the lead editor of The CFO as Dealmaker: Thought Leaders on M&A Success (s+b Books, 2008) and is a frequent contributor to strategy+business.