The financial collapse of 2007 and the ‘Great Recession’ that followed left many economists on the defensive. News programs, magazines, pundits, and even the Queen of England asked, with some variation, the same question: Why didn’t you see it coming? While there are broad similarities in the things that go wrong in every financial crisis, this was a crisis centred on what many would agree is the most sophisticated financial system in the world. What happened to the usual regulatory checks and balances? What happened to the discipline imposed by markets? What happened to the private instinct for self-preservation? Is the free enterprise system fundamentally flawed? These are not questions that would arise if this were ‘just another’ emerging market crisis. And given the cost of this crisis, we cannot afford facile or wrong answers. Fault Lines is a perceptive, detailed look at where the answers to the questions that were raised during the recession may lie.

Raghuram Rajan was the Economic Counselor and Director of Research (Chief Economist) at the International Monetary Fund from September 2003 until January 2007. He is presently the Eric J. Gleacher Distinguished Service Professor of Finance at the University of Chicago’s Graduate School of Business. He is also an economic advisor to the Prime Minister of India. He has co-authored (with Luigi Zingales) a book entitled Saving Capitalism from the Capitalists.