And the Money Kept Rolling in (and Out): Wall Street, the IMF, and the Bankrupting of Argentina

The globalization of the world's economy, with all of its implications for wealth and poverty, international security and cultural homogenization, is clearly one of the defining issues of our time. But it is one of the most difficult stories to understand, with so many subplots and cross-currents, actors and institutions. Much of what truly affects the pace and character of globalization occurs behind the scenes and is transparent only to specialists in one field or another. With his books on the International Monetary Fund and its role in the international financial crises of the past decade, Paul Blustein illuminates an important dimension of globalization in an understandable and highly readable manner. His previous book, The Chastening, was concerned primarily with the East Asian financial crisis of the late 1990's; this awkwardly-titled book focuses soley on Argentina's crisis of 2001. It lacks the narrative drama of the The Chastening, but its narrower scope makes it easier to digest. The IMF he portrays is a less assertive institution than its critics might expect. I would think that there are many business professionals, academics, and informed citizens who are not specialists in international finance who would find this book useful and interesting.

In his previous book The Chastening, Paul Blustein went on a quest to understand what happened to the Asian economies hit by the currency and financial maelstrom that began with the collapse of the Thai baht in July 1997. Although he did not refrain to point out the costly mistakes that were made in responding to the crises, his purpose was not to distribute blame, but to understand what had happened and to share his sense of awe that such crises might unfold again. Four years later, Paul Blustein is back at it, but his "indignation quotient", as he states in the introduction, is substantially higher. According to him, the Argentina debacle of 2001-2002 not only illustrates the risks inherent in modern international finance, but it also provides a damning case of personal hubris, unrestrained greed and institutional myopia in which the international community particularly "blew it". Charting the course that started with the adoption of a new currency tightly tied to the dollar in 1991 and with the subsequent growth episode that followed, he describes the mounting imbalances that resulted from the massive capital inflows led by international investors whose irrational exuberance went mostly unchecked by the IMF. This complicity of government officials, Wall Street investors and Washington money watchmen in creating a bubble was further aggravated by the incapacity of policy makers and their international advisers to provide an exit strategy to the convertibility regime and to secure a soft landing or at least minimize the impact of the financial meltdown for the population. Indeed, Blustein makes the case that the protracted rescue effort orchestrated by the IMF and the US Treasury only prolonged Argentina's agony and made the crash all the more devastating in the end. Blustein bases his case on extensive interviews with all the most important players, including Argentine's Minister of Economy Domingo Cavallo and IMF Managing Director Horst Kohler. He also had access to a trove of documents, including internal memos, confidential reports and notes meetings, and seems to have read them all. At every juncture, he reconstructs the internal debates, spells out the policy choices, and weighs the pros and cons that were advanced by the main institutional actors at the time when the decisions were taken and in retrospect. But Blustein is not just a journalist who writes well, works hard, and knows how to get sources to talk. He also knows the professional literature on financial crises and clearly has a solid understanding of the fundamental debates on the subject. The accusations that he wields to the international financial community are therefore to be taken seriously. Blustein makes amply clear that Argentina's woes were first and foremost the result of the country leaders' own wrongdoings: they spent more than they should have, taxed less than they should have, and borrowed more than they should have, all the while keeping a currency system tha

This is a very readable, lively presentation of the story of how Argentina overcame decades of monetary mismanagement and put itself on the path to economic growth during the early 1990s only to descend again into economic chaos. We recommend this book to those interested in international finance, although it suffers slightly from a moralistic tone, as author Paul Blustein points an accusing finger at international banks and brokerage firms. One might also have hoped for a bit more insight into what happened to the billions of dollars that flowed into Argentina during its brief boom years. But Blustein's expert analysis (organized around metaphorical references to the musical `Evita') says much about the dark side of globalization and points to some severe, apparently recurring problems in the international financial system. Most instructive is his observation that elements of Argentina's experience are now apparent in the flow of funds to emerging markets newly favored by international investors. Therefore, this book unfortunately may be a harbinger of things to come.

I ran a Latin American capital markets desk in NYC during this crazy time in Argentina, so I am intimately familiar with what Paul Blustein has written about. His book is a very fair and balanced account of what, why and how it happened without resorting to sensationalized story telling. I highly recommend it for anyone who wants to understand what happened in Argentina or the IMF.

After finishing And The Money Rolled In, I recalled the observation that, despite appearances, catastrophes don't happen spontaneously. Instead, they are usually the result of a series of small mistakes that compound to become memorably devastating events. Blustein must have recalled the same observation, because he spends critical time and effort documenting the "small" mistakes behind the Argentine default. In doing so, he exposes the greed, stubbornness, and political cowardice that combined to make this maelstrom as devastating as it was. Blustein also takes great lengths to point out that these emotions are still prevalent in both financial markets and seats of government, thereby making another Argentina-like financial collapse more of an inevitability than a fluke. This book works on all levels. It's a thorough analysis of (arguably) the largest financial crisis in recent history; a cautionary tale with solutions to avoid a repeat of the crisis; and an accessible, entertaining read. Given these qualities, it's very likely that And The Money Rolled In will join Secrets Of The Temple by William Greider as one of the definitive texts to shed light on the integration between financial markets and government fiscal policy.