Many countries are now debating the causes of the global economic crisis and what should be done. That debate is critical for how we explain the crisis will influence what we do.Read the rest at Thomas Palley
Broadly speaking, there exist three different perspectives. Perspective # 1 is the hardcore neoliberal position, which can be labeled the “government failure hypothesis”. In the U.S. it is identified with the Republican Party and the Chicago school of economics. Perspective # 2 is the softcore neoliberal position, which can be labeled the “market failure hypothesis”. It is identified with the Obama administration, half of the Democratic Party, and the MIT economics departments. In Europe it is identified with Third Way politics. Perspective # 3 is the progressive position which can be labeled the “destruction of shared prosperity hypothesis”. It is identified with the other half of the Democratic Party and the labor movement, but it has no standing within major economics departments owing to their suppression of alternatives to orthodox theory.
From Financial Crisis to Stagnation: The Destruction of Shared Prosperity and the Role of Economics
by Thomas I. Palley
Brilliant heterodox summation of the historical background and economic ideology that resulted in the GFC. Palley captures the essence in a few well-chosen words.
As of now, the economics profession is split between the hardcore and softcore neoliberal positions. However, that can change under the pressure of an ugly reality that produces mass political demand for change, as happened in the Great Depression of the 1930s which provided an opening for Keynesian economics. The only certainty is change will be politically opposed as powerful elites and orthodox economists have an interest in preserving the dominance of the existing paradigm by ensuring their explanation of events prevails.Stand by for action. The situation in Europe is now beginning to unwind politically as a result of recent elections repudiating austerity, and the periphery is becoming politically unstable. The global economy is hitting stall speed owing to lack of demand, and the US, still the world leader, is tied up in hopeless political gridlock, hence incapable of responding to looming crisis both domestically and externally. The public in many countries has lost trust in the establishment and its leaders, and extremism is on the rise as people look elsewhere for solutions. The river of time beginning to flow more quickly, stirring the waters.