Aftershock: Next Economy and America's Future by Robert B. Reich

Table of Contents

Introduction1

Discussion1

Aftershock Dangers and Profits5

The New Economy: Overcome the Crisis8

Jobs, Skills and Knowledge in the New Economy8

The Empowerment of Women9

Global Development9

Conclusion12

References13

Aftershock: Next Economy and America's Future by Robert B. Reich

Introduction

The book, Aftershock: The Next Economy and America's Future, is written by Robert Reich in 2010. Robert Reich has provided his services by writing thirteen books that include the Work of Nations, and his most recent work Aftershock that we will be disusing in this book report.

Robert has discussed about economic crisis and a plan that deals with the challenge of its aftermath. He has made attempts to simplify the systemic causes of the financial crisis and the subsequent recession with a focus on the increasing income and wealth inequality in the US. His approach, which emphasizes clarity over complexity, certainly provides one with enough material and analysis to contemplate the state of the U.S. economy.

Discussion

Economists and business leaders alike are still trying to understand the forces that led to the United States' current economic woes. Some believe it is a down financial cycle or a recession, but in Aftershock, Robert detailed why he believes that neither explanation is correct. More alarming is that the economy is not going back to the way it was before because there are still more economic bubbles waiting to burst (Reich 2010).

Contrary to popular belief, current economic issues cannot be explained by attributing them to a down financial cycle. Rather, the U.S. is experiencing a series of popping financial bubbles. A bubble is defined to be the value of an asset, which temporarily booms and eventually declines on the bases of psychology changes of investors, and not on the underlying, fundamental economic drivers, which are sustainable over time (Taylor 2009).

The asset value or bubble that popped first was the housing price bubble, and unlike a down cycle that is naturally followed by an up cycle, a bubble pop is not followed by an up cycle. The bubble simply pops, and any profit and momentum stops. Even if, the economic decline slows or is stopped, and even if there is a small uptick, the recession is not over for the long term. According to Robert, saying the recession is over more like saying 'Mission Accomplished' before the real Iraq War even began (Reich 2010)."

The difference between the current state of the economy and a typical downward financial cycle is the multi-bubble economy (Maddison 2007). With so many linked financial bubbles on the descent, the impact of their combined collapse will be far more dangerous than any downturn or recession experienced before. The real danger is that a multi-bubble economy cannot be easily re-inflated.

Beginning with decisions in the early 1980s to allow larger government deficits, six co-linked bubbles have been growing bigger and bigger, each working to lift the others and supporting the U.S. economy (Reich 2010):

Real estate bubble

Stock market bubble

Private debt bubble

Discretionary spending bubble

Dollar bubble

Government debt bubble

The first four of these bubbles began to burst ...