Being closely involved with economic subjects — both in practice and in teaching — my interest in how economies develop and how they collapse has grown steadily over the years. Economics is not an abstract subject meant only for academics or policymakers. It shapes how people live, work, borrow, save and dream. That alone should make everyone curious about a simple but uncomfortable question: why does economics fail?
Have we ever seriously compared the economic models of European countries with those of Arab countries? Beyond income levels, what differences do we notice in regulation, social protection, labour markets and accountability? Which systems appear more resilient during crises, and which leave ordinary citizens exposed? More importantly, how often do we ask these difficult questions directly to economic policymakers?
Economics rarely announces its failure loudly. It collapses quietly, behind polished reports, confident forecasts and reassuring technical language. By the time ordinary people feel the damage — lost jobs, shrinking savings, rising prices — the experts are already calling it an “unexpected shock.”
The global financial crisis of 2008 was one such moment, and few books capture its anatomy better than Too Big to Fail. What the book ultimately exposes is not just the failure of banks, but the failure of economics itself, its assumptions, blind spots and moral indifference.
The crisis did not begin with greed alone. Greed has always existed. What changed was the intellectual confidence that markets could regulate themselves, that risks could be sliced, priced and sold away, and that human behaviour could be reduced to rational decision-making.
Modern economics trusted its models more than it was in reality. When housing prices rose endlessly, economists did not ask whether the growth was healthy; they asked how fast it could continue. When leverage multiplied profits, few questioned the fragility beneath. Economics failed because it stopped asking uncomfortable questions.
One of the most disturbing realities revealed in Too Big to Fail is scale without responsibility. Financial institutions became so large and interconnected that their collapse threatened entire economies. Governments rushed to rescue them, not because they were innocent, but because the system had been designed to depend on them.
This was presented as necessity, yet it created a dangerous precedent. When institutions know they will be rescued, risk-taking becomes reckless. Losses are absorbed by society, while profits remain private. This is not market discipline; it is institutionalised moral hazard.
Economics also failed by mistaking complexity for sophistication. The rise of derivatives, structured products and financial engineering created the illusion of control. Risk was not eliminated; it was hidden.
Economist Hyman Minsky warned that long periods of stability encourage excessive risk-taking and speculative behaviour, leading inevitably to crisis. His warnings were largely ignored because they did not fit the dominant narrative of efficient markets and self-correcting systems. When the crisis finally arrived, it was described as a “black swan", as if it were unknowable rather than neglected.
Another major failure lies in how economics measures success. GDP growth became the ultimate scoreboard. It did not matter whether growth came from productive investment or speculative bubbles, innovation or debt. Simon Kuznets, who helped design GDP, explicitly warned that it was never meant to measure social well-being.
Yet policymakers treated it as a proxy for happiness, stability and progress. An economy could grow while inequality widened, wages stagnated and households drowned in debt — and still be labelled successful. Economics failed by confusing activity with prosperity.
Inequality, long treated as a side effect, has revealed itself as a central fault line. Thomas Piketty’s Capital in the Twenty-First Century demonstrated how wealth naturally concentrates when returns on capital exceed wage growth. This is not a malfunction; it is a structural outcome.
Mainstream economics assumed wealth would eventually “trickle down.” Instead, it pooled at the top. The crisis merely exposed what had been building quietly for decades.
There is also a deeper philosophical failure. Early economists were moral thinkers. Adam Smith wrote about sympathy and justice before markets. John Maynard Keynes, in The General Theory of Employment, Interest and Money, emphasised uncertainty and the limits of human foresight.
Modern economics, however, stripped itself of ethics in the name of scientific objectivity. It claimed to be neutral and technical, but in practice it aligned itself with power. Decisions about bailouts, austerity and deregulation were never neutral; they reflected choices about who would be protected and who would bear the pain.
The real failure of economics is not mathematical — it is human. It underestimated fear, ignored inequality, dismissed ethics and trusted power to regulate itself. Crises, then, are not accidents. They are outcomes. Until economics re-centres itself around human well-being rather than abstract growth, accountability rather than size, and ethics rather than elegance, it will continue to fail — quietly at first, and then all at once.
Perhaps the most honest economic question today is not how fast an economy grows, but how many people it leaves behind while doing so.
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