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The Creation and Destruction of Value: The Globalization Cycle
Harold James examines the vulnerability and fragility of processes of globalization, both historically and in the present. This book applies lessons from past breakdowns of globalization—above all in the Great Depression—to show how financial crises provoke backlashes against global against the mobility of capital or goods, but also against flows of migration. By a parallel examination of the financial panics of 1929 and 1931 as well as that of 2008, he shows how banking and monetary collapses suddenly and radically alter the rules of engagement for every other type of economic activity. Increased calls for state action in countercyclical fiscal policy bring demands for trade protection. In the open economy of the twenty-first century, such calls are only viable in very large states—probably only in the United States and China. By contrast, in smaller countries demand trickles out of the national container, creating jobs in other countries. The international community is thus paralyzed, and international institutions are challenged by conflicts of interest. The book shows the looming psychological and material consequences of an interconnected world for people and the institutions they create.
336 pages, Hardcover
First published January 1, 2009
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About the author
Harold James
84 books26 followersHarold James is Claude and Lore Kelly Professor in European Studies and Professor of History and International Affairs at Princeton University.
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Displaying 1 - 6 of 6 reviews
February 9, 2010
The first two chapters of this book were a bit disappointing. Evidently, James wrote a book ten years ago (The End of Globalization) in which he theorized that globalization is cyclical, rather than the ever-growing phenomenon of common opinion. Unfortunately, globalization showed no sign of slowing down over the past decade.
Not one to let the facts get in the way of a good theory, James seems to have resurrected this theory in wake of the current financial crisis. In the first chapter, James warns of the fears of globalization that have been awakened over the past decade: “the gigantic Western middle class—the great winner of the twentieth century—is now extremely alarmed by the prospect that it might be overtaken by an even larger (and harder working) middle class in emerging market
This quote shows a strikingly Eurocentric bias. Support for globalization may have declined in the US and Europe over the past decade, but it remains remarkably strong. In developing countries, support for globalization is even stronger and it has grown over the past decade. This is natural. Globalization has benefited many more people than it has harmed. This past decade has seen the fastest economic growth in recorded history.
James writes that “rising levels of employment are leading to a demand for trade protectionism (pg 125).” But protectionism isn’t a new phenomenon, nor an occurrence that arises only during periods of anti-globalization fervor. Protectionism will exist wherever entrenched interests can use political clout to throw up roadblocks to keep new entrants out of the market.
James writes of the “contagion fears.” Countries fear that crises in one region will infect other regions due to our increased interconnectedness. This is true, but his narrative is more pessimistic than is warranted by the facts. Yes, there were widespread fears that the US-made financial crisis would affect the rest of the world; and yes, the most of the world has experienced a dip in GDP at some point over the past year. But by most accounts, developing economies have been remarkably resilient over the past year. For the most part, developing economies were the “last in and first out” of the global recession. And, having recovered faster than developed countries, they are taking market share from developed economies.
Despite these criticisms, I enjoyed James’ account of the financial crisis. I thought it was lucid and succinct and I appreciate that he kept such a neutral tone. I particularly enjoyed the final section of chapter 3, in which he discusses the role of international institutions in the market. While this discussion is again a bit Eurocentric (James explains the positions of Nicolas Sarkozy, Angela Merkel, Godron Brown, and former Luxembourg Prime Minister Jean-Claude Junker, but not a word on the positions of the Chinese, Indian or Brazilian governments), I think it is the most interesting part of the book.
What role will international institutions play in the future of financial regulation? Will international standards for regulation emerge from informal coalitions such as the G-8 or G-20? Or from semi-formal groups such as the Basel Committee on Banking Supervision? Or could new standards come from more authoritative sources such as a UN Economic Council that would mirror the UN Security Council?
I would like to learn about what standards have been proposed and have broad international support. Would these new standards have the intended effect of increasing stability? Or would they merely drag down growth with little effect on stability? And what would be the best forum for creating such new regulations?
I imagine that an international advisory board of finance experts would be the most plausible solution to this problem. Such a board could provide guidance and expertise in suggesting standards, but would lack the authority to compel commitments, thus leaving countries free to implement their own preferred regulations.
(As a final note, it is perhaps worth wondering why this book is entitled “The Creation and Destruction of Value.” I didn’t finish the book, but nothing in the first 2/3 of it led me to believe that there would be any discussion of how value is created or destroyed.)
Not one to let the facts get in the way of a good theory, James seems to have resurrected this theory in wake of the current financial crisis. In the first chapter, James warns of the fears of globalization that have been awakened over the past decade: “the gigantic Western middle class—the great winner of the twentieth century—is now extremely alarmed by the prospect that it might be overtaken by an even larger (and harder working) middle class in emerging market
This quote shows a strikingly Eurocentric bias. Support for globalization may have declined in the US and Europe over the past decade, but it remains remarkably strong. In developing countries, support for globalization is even stronger and it has grown over the past decade. This is natural. Globalization has benefited many more people than it has harmed. This past decade has seen the fastest economic growth in recorded history.
James writes that “rising levels of employment are leading to a demand for trade protectionism (pg 125).” But protectionism isn’t a new phenomenon, nor an occurrence that arises only during periods of anti-globalization fervor. Protectionism will exist wherever entrenched interests can use political clout to throw up roadblocks to keep new entrants out of the market.
James writes of the “contagion fears.” Countries fear that crises in one region will infect other regions due to our increased interconnectedness. This is true, but his narrative is more pessimistic than is warranted by the facts. Yes, there were widespread fears that the US-made financial crisis would affect the rest of the world; and yes, the most of the world has experienced a dip in GDP at some point over the past year. But by most accounts, developing economies have been remarkably resilient over the past year. For the most part, developing economies were the “last in and first out” of the global recession. And, having recovered faster than developed countries, they are taking market share from developed economies.
Despite these criticisms, I enjoyed James’ account of the financial crisis. I thought it was lucid and succinct and I appreciate that he kept such a neutral tone. I particularly enjoyed the final section of chapter 3, in which he discusses the role of international institutions in the market. While this discussion is again a bit Eurocentric (James explains the positions of Nicolas Sarkozy, Angela Merkel, Godron Brown, and former Luxembourg Prime Minister Jean-Claude Junker, but not a word on the positions of the Chinese, Indian or Brazilian governments), I think it is the most interesting part of the book.
What role will international institutions play in the future of financial regulation? Will international standards for regulation emerge from informal coalitions such as the G-8 or G-20? Or from semi-formal groups such as the Basel Committee on Banking Supervision? Or could new standards come from more authoritative sources such as a UN Economic Council that would mirror the UN Security Council?
I would like to learn about what standards have been proposed and have broad international support. Would these new standards have the intended effect of increasing stability? Or would they merely drag down growth with little effect on stability? And what would be the best forum for creating such new regulations?
I imagine that an international advisory board of finance experts would be the most plausible solution to this problem. Such a board could provide guidance and expertise in suggesting standards, but would lack the authority to compel commitments, thus leaving countries free to implement their own preferred regulations.
(As a final note, it is perhaps worth wondering why this book is entitled “The Creation and Destruction of Value.” I didn’t finish the book, but nothing in the first 2/3 of it led me to believe that there would be any discussion of how value is created or destroyed.)
July 12, 2022
It took me a long time to read this book, but I'm glad that I persisted with it. It was published in 2009, and very much focuses on comparing the Global Financial Crisis of that era with what happened in the Great Depression. Ironic that reading it now, in 2022, we are going through another financial crisis, also brought about, we could argue, by globalisation. It seems that humanity learns nothing from history, and we are doomed to repeat the same mistakes of the past.
December 17, 2009
This may be the most boring book I've read...well, ever. And it's not Professor James' fault. Oh no, you can see immediately by the author's photo on the book jacket that you're going to be in for a numb discussion of economics that will prove beyond any lingering doubt you might have entertained that this study has absolutely no connection with peoples' lives somewhere. What's truly bullshit is the way these books are marketed.
'The Creation and Destruction of Value' led me to believe that I was in for some kind of econo-philosophical dissection of what it means to value things., historically and economically. Not the case. The book is really a highly specialized lecture about how globalization goes through hiccups in those times when the rationale for it's most awful abuses shows through and produces the predictable results: depression, famine, mass unemployment, etc. Of course, James has nothing to say about these things good or bad. He just accepts them in that wonderful way that well-behaved academics tend to. On wonders if he might be so objective if Princeton announced tomorrow that his position was being outsourced to Bangladesh for 10% of his current salary, but that's another story.
The real villain here is the publisher. If this book was called what it is, no one would read it. As it is, I did. And it sucked.
'The Creation and Destruction of Value' led me to believe that I was in for some kind of econo-philosophical dissection of what it means to value things., historically and economically. Not the case. The book is really a highly specialized lecture about how globalization goes through hiccups in those times when the rationale for it's most awful abuses shows through and produces the predictable results: depression, famine, mass unemployment, etc. Of course, James has nothing to say about these things good or bad. He just accepts them in that wonderful way that well-behaved academics tend to. On wonders if he might be so objective if Princeton announced tomorrow that his position was being outsourced to Bangladesh for 10% of his current salary, but that's another story.
The real villain here is the publisher. If this book was called what it is, no one would read it. As it is, I did. And it sucked.
July 3, 2020
Criticism of The Creation and Destruction of Value tends to conclude that Harold James doesn't actually clarify anything one way or the other regarding the creation or destruction of value, nor provides any particular insight. Harold James is a professor of history and international affairs and policy at Princeton, which are not the credentials of a trained economist. At the close of the book, he weighs in with the opinion that the financial sector of our economy is in need of more regulation (valid, in my opinion), but that hardly justifies the previous 250 pages. The book is more of a collection of articles on topics that include the financial crisis of 1929/1931, the financial crisis of 2000/2008, important features of our contemporary financial system, and the influence of politics in current economic events. However! The cogency with which he writes on these topics can be very helpful for the amateur (of which I include myself) and to the initiate to economic history and theory. If you are proficient in economics, this is not going to be helpful. For those of us just trying to wrap our heads around modern economic ideas and perspectives, this book is well worth the read.
March 25, 2025
Lesson being that the cyclical financial upheavals that characterize modern capitalism will only be brought to an end when men learn to talk to each other (i.e. buy out rival investment houses with fucked up balance sheets when they start to topple rather than letting them burn to settle petty grievances from Yale).
August 22, 2016
Good read, comprehensive.
Still, didn't satisfied with the ending sub-chapter.
Will reread, perhaps new learnt knowledge will correct my misunderstanding
Still, didn't satisfied with the ending sub-chapter.
Will reread, perhaps new learnt knowledge will correct my misunderstanding
Displaying 1 - 6 of 6 reviews