Global markets. Instantaneous cash transactions. Sophisticated modelling tools. Huge capital flows. Massive hedge funds unregulated. LTCM. Barings. Asian crisis. Collapse of the rouble. All these phrases and events are now commonplace “facts” in discussions, articles and books which deal with the international money markets. And they all seem to lead to the same inevitable conclusion – that the markets are spiralling out of control, huge risk are being taken everyday and the lives of whole communities, if not countries, are in the hands of feckless, greedy bankers. The only answer to save the world is more regulation. Daniel Ben-Ami disagrees, and in Cowardly Capitalism he sets out some very strong arguments to debunk these seemingly set in stone ideas and beliefs. In fact, according to the author the threatening problem in global finance is not one of wanton risk taking – rather the core of the problem lies in the fact of risk aversion which in itself has distorted the perception of the financial sector to make it appear as a reckless destabilising force in society. This philosophy of risk aversion has in turn led to a shift in the main role of financial institutions from raising capital to risk management. Cowardly Capitalism is not, however, anti risk-management. The author recognises that risk management performs an essential role. But the new climate has meant that the need to offset your risk has resulted in the focus moving entirely away from the rewards side of doing business, thereby curtailing the possibility of growth. According to the author, this “financial correctness” which is meant to bring stability will in fact achieve quite the opposite result. Rather than reduce the likelihood of financial crises, he believes that this risk-aversion approach will in fact foster further panics. More regulation of the markets is not the key to success and the author argues that in fact greater interventionism will bring greater problems. The text is written in a highly accessible manner with no complex mathematical equations. It is peppered with boxed items which condense vital issues for the reader (such as a survey of key regulationist thinkers – Soros, Krugman etc.; growth of capital flows, an explanation of derivatives) in order to maintain the flow of the text. The author also refers to many sources in the media (films, fiction, business books) to illustrate his arguments. Cowardly Capitalism will draw instant reaction from the market place for its controversial ideas, which is exactly what the author hopes to achieve. He does not profess to put forward an alternative plan. The aim of the book is firmly set at highlighting the potential problems that continuing down this path will lead to. However, as the author develops his arguments and establishes his clear position, certain general principles do emerge which he pulls together in his final chapter. Cowardly Capitalism is therefore set to buck the market and perhaps begin the ball rolling towards a new view on global finance in the next century.
Book Details:
- Author: Daniel Ben-Ami
- ISBN: 9780470491836
- Year Published: 2001
- Pages: 206
- BISAC: BUS027000, BUSINESS & ECONOMICS/Finance
About the Book and Topic:
Global markets. Instantaneous cash transactions. Sophisticated modelling tools. Huge capital flows. Massive hedge funds unregulated. LTCM. Barings. Asian crisis. Collapse of the rouble. All these phrases and events are now commonplace “facts” in discussions, articles and books which deal with the international money markets. And they all seem to lead to the same inevitable conclusion – that the markets are spiralling out of control, huge risk are being taken everyday and the lives of whole communities, if not countries, are in the hands of feckless, greedy bankers. The only answer to save the world is more regulation. Daniel Ben-Ami disagrees, and in Cowardly Capitalism he sets out some very strong arguments to debunk these seemingly set in stone ideas and beliefs. In fact, according to the author the threatening problem in global finance is not one of wanton risk taking – rather the core of the problem lies in the fact of risk aversion which in itself has distorted the perception of the financial sector to make it appear as a reckless destabilising force in society. This philosophy of risk aversion has in turn led to a shift in the main role of financial institutions from raising capital to risk management. Cowardly Capitalism is not, however, anti risk-management. The author recognises that risk management performs an essential role. But the new climate has meant that the need to offset your risk has resulted in the focus moving entirely away from the rewards side of doing business, thereby curtailing the possibility of growth. According to the author, this “financial correctness” which is meant to bring stability will in fact achieve quite the opposite result. Rather than reduce the likelihood of financial crises, he believes that this risk-aversion approach will in fact foster further panics. More regulation of the markets is not the key to success and the author argues that in fact greater interventionism will bring greater problems. The text is written in a highly accessible manner with no complex mathematical equations. It is peppered with boxed items which condense vital issues for the reader (such as a survey of key regulationist thinkers – Soros, Krugman etc.; growth of capital flows, an explanation of derivatives) in order to maintain the flow of the text. The author also refers to many sources in the media (films, fiction, business books) to illustrate his arguments. Cowardly Capitalism will draw instant reaction from the market place for its controversial ideas, which is exactly what the author hopes to achieve. He does not profess to put forward an alternative plan. The aim of the book is firmly set at highlighting the potential problems that continuing down this path will lead to. However, as the author develops his arguments and establishes his clear position, certain general principles do emerge which he pulls together in his final chapter. Cowardly Capitalism is therefore set to buck the market and perhaps begin the ball rolling towards a new view on global finance in the next century.
Although not a well known “name” in general financial writing, the author is clearly well regarded in the narrower field of investment writing. Andrew Freeman: “Mr Ben-Ami is editor of a well-respected, but niche, publication for investment advisers”. He therefore certainly has the ability and knowledge to write a clearly argued book on this topic. His original proposal has been revised three times following extensive review feedback from prominent people in the world of finance and the author has gladly accepted these comments and has honed the structure of the book accordingly. What he has ultimately produced is a very focused and strongly argued polemic on the emerging trend of financial thinking. The books is likely to attract considerable attention on publication – with strong supporters and opponents in equal measure.
Written in a highly accessible style, without complex mathematics, Cowardly Capitalism is a radical and controversial analysis of the current economic scene. Presenting an overview of key issues in the form of boxed items, the book is a convenient primer to important in current economic thought. Cowardly Capitalism builds its case clearly and persuasively, with such illustrative works as Liar’s Poker, Fiasco, Barbarians at the Gate, and American Psycho. * Provides a survey of key regulationist thinkers, including Soros and Krugman. * Examines such subjects as the growth of capital flows and derivatives. * The author refers to many sources in the media–including films, fiction, business books–to illustrate his arguments.
About the Author
DANIEL BEN-AMI has worked as a financial journalist in London for 15 years. He has written for several national publications in the UK – including the Financial Times, Guardian, Independent, Sunday Times and Prospect magazine – and numerous specialist journals. In addition he has written on the Middle East for the Economist Intelligence Unit and contributed to Cultural Difference, Media Memories (Cassell 1997) on media images of Japan. He was the editor of Investment Adviser, a specialist weekly newspaper on mutual funds from the Financial Times group, for four years. He is now a senior editor for Morningstar in London. His website can be found at www.cowardlycapitalism.com.