The Pedagogy of Economic, Political and Social Crises by Bob Jessop Karim Knio & Knio Karim

Author:Bob Jessop,Karim Knio & Knio, Karim
Language: eng
Format: epub
Publisher: Taylor & Francis (CAM)

8 After the crisis

Lessons on economic and political paradigms and policies

Robert Boyer1

As belief in the omnipotence of market mechanisms collapsed after the crisis of finance-led accumulation, it is time to reconsider the nature and dynamic of economic crises and the role of the state to govern the economy and secure social justice. I start from three lessons drawn from the structural crisis of finance-led growth and other major crises.

First, endogenous mechanisms recurrently generate crises in modern capitalism. Nonetheless, the specific type of crisis, the precise mix of mechanisms, and the affected economic spaces in each case are always distinctive. This makes it hard to generalize lessons learnt from one structural crisis to the next, even for the same kind of capitalism or the same period.2 It is even harder when intellectual and political elites resort to magical thinking. Examples include the conviction that ‘this time is different’ (a recurrent error), that ‘the business cycle is obsolete’ (the 1970s), that ‘Japan is No. 1’ (1980s), that ‘we are entering a new epoch devoid of crisis’ thanks to central bank policies that produced the ‘great moderation’ (1990s), and that the Euro has proved a success after 10 years because it protected the EU from the subprime crisis (2009). Such magical thinking dramatically increases the probability of a major crisis. For it illustrates Hyman Minsky’s paradox that ‘stability produces instability’ through complacency (Minsky, 1982), leading to what Alan Greenspan described during the dot.com bubble as ‘irrational exuberance’ (Greenspan, 1996).

Second, structural crises involve the breakdown of the factors that previously governed capital accumulation. This explains why it takes time for contemporaries to recognize ‘this is a crisis’ and give it a name. There are delays before the nature of the crisis is recognized, especially where it is denied outright, described in euphemistic terms, or expected to end quickly with a return to a mythical golden age. It is tempting to identify the symptoms of crisis as no more than turbulence amidst prosperity, a pure exception highly unlikely to return, an adverse shock, the effect of irrational conduct, and so on. Once it is seen as a structural crisis, there is radical uncertainty in economic paradigms, analyses, and policy recommendations. For, as Joseph Schumpeter (1954) acknowledged, if economic paradigms and policy models fail, their underlying macroeconomic doctrine must be wrong. Yet the initial strategies deployed by private and public actors in response to structural crises generally favour a return to the status quo ante, thus reinforcing the previous policies that led to the crisis. In the Great Depression in 1929–1932, for example, there was a return to financial orthodoxy; likewise, the initial response to the internationalization and supply-side problems that contributed to the crisis of Fordism was resort to Keynesian demand management policies. Recent examples include attempts to create a market for non-performing derivatives in the sub-prime crisis; and, for the Eurozone crisis, the adoption of the failed Washington Consensus policies of austerity. These attempts to turn the clock back mean leading actors struggle over the required strategies for overcoming the crises.

Download

Copyright Disclaimer:
This site does not store any files on its server. We only index and link to content provided by other sites. Please contact the content providers to delete copyright contents if any and email us, we'll remove relevant links or contents immediately.