Money for Nothing
Real Wealth, Financial Fantasies and The Economy of The Future
Business Bestseller, Winner of the Independent Book Publishers’ Award, and translated into Japanese, German, Italian and Korean, now available in paperback.
In this fascinating and far-reaching book, thoroughly revised and updated and now including a new concluding chapter, Roger Bootle shows how the perils of slump, deflation and protectionism can be negotiated to enable us to transform our lives in the economy of the future. The world is at a critical juncture, poised between a surge in wealth and a descent into outright recession. At the heart of this crisis is the gap between real and illusory wealth.
In the late 1990s and early noughties, we were caught up in a gigantic illusion of wealth, generated by soaring share and house prices as investors sought to condense the productive potential of the infinite future into instant capital value – money for nothing.
The bursting of the equity bubble left wreckage strewn across the financial system, and there is now a real danger of the housing market collapsing, pension schemes failing – and whole economies deflating, as Japan already demonstrates. It is now widely believed that the deflationary threat has passed and that central banks are bound to raise interest rates. But in today’s world the deflationary danger is ever-present and central banks must be prepared to cut interest rates vigorously to head it off. Meanwhile, there is a continuing danger that more and more countries resort to shutting out foreign goods and services from their markets. Such a lurch into protectionism would cause falling wealth and unemployment, just as it did in the 1930s.
Yet we face the threat of a deflationary slump at just the time that we stand on the brink of the greatest increase in prosperity in our history. In the bubble years the markets got ahead of the economics. Now the economics are about to get ahead of the markets.
The new importance of the human factor in the global economy will mean the acceleration of knowledge – and hence technological progress; the opening of the road to good governance which underpins prosperity for all countries, including those in the Middle East and Africa currently written off by the world; and an enriching explosion of trade with developing countries, like China and India. The interaction between these forces opens up an era of true globalisation – with developed countries enjoying a rise in the rate of economic growth to historically unprecedented levels as well as poorer countries coming within prosperity’s embrace. This is “The Wealth Spiral”. While it may not be so quick or spectacular as stockmarket booms, it is real wealth rather than financial fantasy.
In the economy of the future, things will diminish in importance, and the products of the human mind, ranging from scientific discoveries and new designs to human relationships, will increase. This will be an age not just of mass affluence, but also of human values and choices, dominated by intangibles – money for nothing.