Macroeconomic Theory and Its Failings: Alternative Perspectives on the Global Financial Crisis

ENG-LV translation of 30 lines
Some prominent mainstream economists attribute the GFC to the deep cuts in US interest rates imposed by the Federal Reserve in the early years of the new century. This is a profound mistake. A comprehensive explanation of the GFC would have to go far beyond the impact of lower interest rates on US house prices to consider the increasing financialization of the US (and the global) economy; the dismantling of much of the New Deal system of financial regulation, and the systematic evasion of those regulations that remained; the rise of a free market fundamentalism that cast doubt on the need for anything more than self-regulation of supposedly 'efficient' financial markets governed by 'rational expectations'; the lag of real wages behind the growth in labour productivity, so that workers consumption was increasingly funded by debt; the continuing attrition of trade union power and effective government regulation of the labour market, which allowed this to happen - the whole fabric of neoliberalism, in effect. This would be a very big exercise (although identifying the transmission mechanisms that led from financial crisis to downturn in the real economy and the danger of a collapse in output and employment is, mercifully, a much less complicated task). My own very brief and selective account begins with Hyman Minsky's financial instability hypothesis. …