From Marx to Morgan Stanley: Inequality and financial crisis Michael Lim Mah-Hui and Khor Hoe Ee

Despite robust growth, rising inequalities and financial instability have affected many countries. This is a result of skewed distribution of economic output between labour and capital favouring the latter. Consumptions of households have been falling with rising savings by the rich. This tension between declining consumption and rising savings is ‘resolved’ by the financial system through the recycling of funds from the rich minority to the average household in the form of credit. At the global level, the tension is ‘resolved’ through recycling ‘excess savings’ from China to the US, adding to the debt and asset bubble in the US.…

The Myth of the ”Sub-prime” Crisis Prabhat Patnaik

Capitalism, like the proverbial horse, kicks even when in decline. Even as the current crisis hit it, it gave an ideological kick by attributing the crisis to ''sub-prime'' lending; and so well-directed was its kick that the whole world ended up calling it the ''sub-prime crisis''. The idea, bought even in progressive circles, was that in the euphoria of the boom that had preceded the crisis, financial institutions in the U.S. had given loans even to sections of the population who were not really ''credit-worthy'', i.e. who were poor and had few assets of their own. They would normally not…

Should Greece Follow Estonia’s Example? Rainer Kattel

One of the suggestions regarding Greece’s current woes is that it should cut its public spending, just like Estonia. But, Estonia’s massive cut in public spending, praised by both the EC and the IMF, has resulted in a 15% contraction in Estonia’s GDP in 2009, as compared to only 2% of Greece. Such simplistic fiscal retrenchment may thus worsen matters for Greece. Greece_follow_Estonia (Download the full text in PDF format)

Productive Incoherence in an Uncertain World: Financial governance, policy space and development after the global crisis Ilene Grabel

The current global financial crisis raises important questions for scholars of international political economy. Among the most important of these is how it is influencing various dimensions of financial governance vis-à-vis developing and transitional economies. The paper examines three related questions. How is the crisis affecting the governance and policies of the IMF; the prospects of regional alternatives to the Fund; and the policy space available to developing and transitional countries? uncertain_world (Download the full text in PDF format)

Financial and Monetary Issues as the Crisis Unfolds James Galbraith

On June 15 and 16, 2009, the working group on financial and monetary issues of Economists for Peace and Security and the Initiative for Rethinking the Economy met in Paris for a closed discussion of the ongoing crisis and reform proposals, including the new initiatives of the G-20 and the Obama administration. This memorandum provides a structured summary of the major points of the meetings. It reflects in general terms the center of gravity of the views expressed, drawing on the expertise and careful reflection of the specialists and experts who were there. crisis_unfolds (Download the full text in PDF…

The Revenge of the Market on the Rentiers: Why Neo-Liberal Reports of the End of History turned out to be Premature Jose Gabriel Palma

Starting from the perspective of heterodox Keynesian-Minskyian-Kindlebergian financial economics, this paper begins by highlighting a number of mechanisms that contributed to the current financial crisis. However, the paper then proceeds to argue that perhaps more than ever the ‘macroeconomics’ that led to this crisis only makes analytical sense if examined within the framework of the political settlements and distributional outcomes in which it had operated. The paper concludes that the current financial crisis is the outcome of something much more systemic, namely an attempt to use neo-liberalism (or, in US terms, neo-conservatism) as a new technology of power to help…

The Relevance of Ragnar Nurkse and Classical Development Economics Rainer kattel, Jan Kregel, Erik S, Reinert

The Authors aim to show how the classical development economics of Ragnar Nurkse’s (1907-1957) generation epitomized the best development practices of the past 500 years. Secondly, they argue that the alleged death of the classical development economics and subsequent rise of the Washington Consensus has to do not so much with increasing modeling in economics, but much more with misunderstanding the reasons for East Asia’s success and Latin America’s demise Thirdly, they aim to indicate key areas of further research that the current development mainstream should pursue in order to re-learn how to create middle-income economies and middle-class jobs. ragnar_nurkse…

What is Minsky All About, Anyway? Korkut Ertürk and Gökcer Özgür

The current financial crisis has been interpreted as the fulfillment of Hyman P. Minsky’s predictions by many, while others have opposed this suggestion. In this paper, the author tries to sketch uot an alternative understanding of Minsky as an evolving research agenda. He arugues that if Minskyan work means solely his own writings and their restatement, then, those who refute this current crisis as Minsky’e prediction are probably right – one cannot help but focus on what is different about the current crisis. But, if instead Minksyan refers to an evolving literature that emanate from but transcend his work, their…

A Comparison of Two Cycles in the World Economy: 1989-2007 Korkut Boratav

The paper compares and analyses some of the quantitative indicators of the world economy during the 1989-2007 years. The global economic system is studied on the basis of the division of an imperialist system consisting of the metropole and the periphery, and their major sub groups and is divided into two cycles, namely 1989-1997 and 1998-2007. The paper concludes that nature of external linkages on the basis of which peripheral economies confronted the 2008-2009 upheaval determines their degree of vulnerability  vis a vis the international crisis. world_economy (Download the full text in PDF format)

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