Elements of Novelty, Known Mechanisms, and the Fundamental Causes of the Recent Crisis

Abstract

We briefly describe the recent evolution of the crisis and, by reviewing some of its explanations based on different theories, we proceed towards our own interpretation. The deregulation wave of the last decades has created new profit opportunities in various contexts -from labour flexibility to privatisation, from financialisation to globalisation -so promoting a renewed process of capitalist accumulation after the stagflation of the 1970s. This has taken place at the cost of a wide-ranging increase of inequality and instability, thus implying a crescendo of crises until the last one (and maybe beyond).

Technical change, sectoral dislocation and barriers to labor mobility: Factors behind the great recession

“…Regarding this aspect, it is important to notice that the recent crisis which has affected the Euro area in particular starting from the 2010, has been mainly interpreted as an issue of excessively high levels of public debt and deficit ( Brancaccio, 2012 ). This interpretation, not taking into account the negative effects in terms of persistent trade imbalances within the Eurozone ( Brancaccio, 2012 ) deriving from a monetary policy which is fully centralized and macroeconomic policies still anchored at the national level ( De Grauwe, 2013 ), has led to the implementation of strong austerity policies based on severe cuts in public expenditure and raising taxes in particular in the periphery of the Euro area ( Russo, 2014 ). The problems of adjustment within a single currency area have been amplified by the austerity policies, which have also undermined the potential process of structural change.…”

Increasing inequality, consumer credit and financial fragility in an agent based macroeconomic model

“…According to a Marxian perspective, consumer credit and, in general, the expansion of finance can be considered as factors that may counteract, at least for a while, the tendency of the profit rate to fall, when the economy has reached the limit of its "material expansion"(Russo 2014).…”

Kenneth Boulding's Theories of Evolutionary Economics and Organizational Change: A Reconstruction

“…Thus, ensuring the sustainability of the growing civilizational complexity calls for an increasing reliance on exchange relative to threat, and on the integrative system relative to exchange (cf. Underwood, Friesner and Cross 2014;Russo 2014).…”