three-and-half-stars
Bookmarks Issue: 
40-May-June-2009
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The Bankers Who Broke the World

A-Lords of FinanceInvestment manager and scholar Liaquat Ahamed produces a knowing and well-wrought piece of economic history that focuses on the period during and between the two world wars.

The Topic: World War I fundamentally remade the world’s financial landscape, and the fraught response of the world’s central bankers to these new conditions led to the global economic depression of the 1930s. So argues Liaquat Ahamed, who frames his story around the lives of four powerful and idiosyncratic men, each the head of the central bank in their respective countries—Benjamin Strong in the United States, Montagu Norman in England, Émile Moreau in France, and Hjalmar Schact in Germany. These four men, often hailed as brilliant in their time, failed to understand the limitations of the gold standard in a new world of interconnected finance. While they tried to forestall the economic crisis that loomed after World War I, their actions, Ahamed contends, had the unwitting effect of hastening it.
Penguin. 564 pages. $32.95. ISBN: 159420182X

Houston Chronicle 4 of 5 Stars
"[E]ven without its contemporary relevance, Lords of Finance would qualify as an outstanding book. … Ahamed, with economics degrees from Harvard and Cambridge universities plus 25 years as a professional investment manager, found a fascinating frame for relating global economic history from the beginning of World War I until the dying days of World War II." Steve Weinberg

New York Times 4 of 5 Stars
"Mr. Ahamed, an investment manager who proves to be a writer of great verve and erudition, easily connects the dots between the economic crises that rocked the world during the years his book covers and the fiscal emergencies that beset us today. … The reader who might not expect to be enthralled by the dangerous mutability of the gold standard, for example, will find it a subject of real fascination." Janet Maslin

New Yorker  4 of 5 Stars
"It’s easy to be reminded, by all this, of more recent events. It’s also easy to see history through the eyes of the present, and make people look stupid for not knowing what we know. Liaquat Ahamed has the imagination not to do that." John Lanchester

Seattle Times 3.5 of 5 Stars
"[Ahamed] knows economics and he can write. By recounting the lives and decisions of these four men, he imbues humanity into a story of debt and money." Bruce Ramsey

Washington Post 3 of 5 Stars
"The risk in writing about forgotten men, however, is that they might not have been interesting enough to be remembered. … These four bankers are about as compelling to us as, say, Treasury Secretary Henry Paulson may be to readers a century from now. My guess is that readers in 2109 will instead remember Warren Buffett and Bill Gates, just as we still know J. P. Morgan and John D. Rockefeller." Frank Ahrens

Wall Street Journal 2.5 of 5 Stars
"The disservice that Mr. Ahamed does to history is to fail to distinguish between the flaws of the classical gold standard, on the one hand, and the far deeper imperfections of the gold-exchange standard (so similar to the evils of today’s dollar standard), on the other." James Grant

Critical Summary

Almost all critics praised Lords of Finance for its command of economic history and engaging, lucid prose. Ahamed, noted the New York Times, illuminates wise parallels between the misplaced confidence that spawned the global depression in the 1930s and the illusory calculations of risk that led to the current financial crisis. His compelling biographies also personalize economic history. While critics disagreed about whether lay readers will, in a century’s time, care about Norman, Moreau, and Schact, the only negative words came from the Wall Street Journal, which criticized Lords of Finance for an imprecise understanding of the gold standard: "Harrumphing about the ‘gold standard,’ Mr. Ahamed reminds me of the fellow who condemned ‘painting’ because he had no use for Andy Warhol."