Between Debt and the Devil: Money, Credit, and Fixing Global Finance.

• Author: Bagus, Philipp
• Position: Book review

Between Debt and the Devil: Money, Credit, and Fixing Global Finance

By Adair Turner

Princeton, N.J.: Princeton University Press, 2015.

Pp. xiv, 302. $29.95 hardcover.

Between Debt and the Devil analyzes the problems of our financial system and offers advice to "fix" the system. It is one of many books published since the onset of the Great Recession that recognize that there is something rotten in the current state of finance. Adair Turner's account of the crisis is fascinating for several reasons.

First, as a director of a major bank and after the fall of Lehman Brothers as chairman of the U.K. Financial Services Authority, Turner was on the front line during the past boom. He contributed to the global financial reform in platforms such as Basel III.

Second, he is highly critical of the precrisis orthodoxy.

Third, he is eclectic. In response to the failure of the orthodoxy in foreseeing and explaining the crisis, he mixes ideas from John M. Keynes, Friedrich A. Hayek, Thomas Piketty, Richard Koo, and others.

Fourth, in spite of Turner's criticism of the precrisis orthodoxy, the book itself presents the postcrisis orthodoxy. The first two people the author thanks in his acknowledgments are George Soros, founder of the Institute for New Economic Thinking, which supported Turner, and Martin Wolf, famous columnist of the Financial Times. Unfortunately, Turner's eclectic potpourri of incoherent theories and especially his adherence to crude Keynesian thinking impedes him from advancing to the heart of the problem and drives him to embrace detrimental policies.

His description of the problems of our financial system and its symptoms is mostly illustrative. He describes the growth of the financial sector from 1970 on, when it started to expand faster than the rest of the economy. He also draws a link between the financialization of the economy--that is, the rising share of the financial industry in gross domestic product and overall trading--and an increase in economic inequality. This link is quite relevant because Thomas Piketty in his famous study on inequality does not look at financialization or the role of the financial system as a cause for an increase in inequality (see Capital in the Twenty-First Century, trans. Arthur Goldhammer [Cambridge, Mass.: Harvard University Press, 2014]). Rather, Piketty has another explanation for the increase in inequality--namely, that the return on capital, r, tends to be higher than the economic growth...