The World Economy in Crisis - The Return of Keynesianism?

The world economy is in crisis. Since the initial turbulences in the U.S. subprime mortgage market in the summer of 2007, we have experienced a global recession in 2008-9 and a wave of financial speculation threatening the existence of the European Monetary Union in 2009-10. At the same time, there has been a remarkable shift in economic policies and economic thinking more broadly. Hardly anyone would doubt today that the Keynesian stimulus packages which were put in place all over the world have so far prevented an even sharper fall in output and increase in unemployment and poverty. Fiscal policy is again considered a powerful tool for macroeconomic stabilisation policies. Similarly, few would now question the necessity of tighter regulation of the financial markets. Central banks around the world have taken ‘unconventional measures’ such as the purchase of asset-backed-securities to stabilise the financial system and the real economy. But the crisis also has more structural roots, amongst which are the massive increases in income and wealth inequalities over the past three decades or so, and the global imbalances in international trade. At this stage, it is still unclear how far policy makers around the world will be able to live up to these challenges. The chapters in this book address these issues from different angles, analysing the underlying structural causes of the crisis, assessing the policy responses to the crisis with a special emphasis on Europe, and making concrete proposals for financial market reforms and a Keynesian New Deal more broadly. Contents The Research Network Macroeconomics and Macroeconomic Policies (FMM) Introduction Sebastian Dullien, Eckhard Hein, Achim Truger and Till van Treeck I. Understanding the crisis What went wrong? Alternative interpretations of the global financial crisis Jan Priewe Income distribution, the finance-dominated accumulation regime, and the present crisis Engelbert Stockhammer Asset price bubble, financial crisis and deflation in Japan Hansjörg Herr and Milka Kazandziska Institutional investors, the equity market and forced indebtedness Jan Toporowski II. Policy responses to the crisis – a European perspective The ‘Keynesian Moment’ in policy making and the perils ahead Andrea Terzi Global financial crisis: The French policy answer in an EU perspective Catherine Mathieu and Henri Sterdyniak Financial crisis, global recession and macroeconomic policy reactions – the case of Germany Eckhard Hein and Achim Truger III. Which reforms for the financial markets? Is this the Minsky Moment for reform of financial regulation? Jan Kregel Post crisis policy: Some reflections of a Keynesian economist Karl Aiginger IV. Perspectives on a Keynesian New Deal Economic policies after the New Concensus macroeconomics Philip Arestis The Great Recession and perspectives on Keynesian policy Barry Z. Cynamon and Steven M. Fazzari Building the Green New Deal in the United States Robert Pollin Responding to the crisis, promoting gender equality: Stimulus packages, public job creation and lessons learned from South Africa’s expanded public works programme Rania Antonopoulos and Kijong Kim Editors and Authors