The Demise of Finance-dominated Capitalism

The Demise of Finance-dominated Capitalism

Explaining the Financial and Economic Crises

New Directions in Modern Economics series

Edited by Eckhard Hein, Daniel Detzer and Nina Dodig

This book provides an overview of different theoretical perspectives on the long-run transition towards finance-dominated capitalism, on the implications for macroeconomic and financial stability, and ultimately on the recent global financial and economic crisis. In the first part, the macroeconomics of finance-dominated capitalism, the theories of financial crisis and important past crises are reviewed. The second part deals with the 2007-09 financial and economic crisis in particular. The special focus is on the long-run problems and inconsistencies of finance-dominated capitalism which played a key role in the crisis and its level of severity.

Chapter 5: Five explanations for the international financial crisis

Trevor Evans

Subjects: economics and finance, financial economics and regulation, post-keynesian economics

Extract

The financial crisis which began in the USA in 2007, and which led to the deepest global recession since the Second World War in 2008 and 2009, is only the most recent in a long string of crises and recessions that have afflicted capitalist economies. Breakdowns in economic reproduction did also occur in pre-capitalist societies, but these were primarily due to external factors, such as wars or droughts or the plague. In capitalist economies, by contrast, crises have emerged as a result of developments within the economy. This chapter will first briefly explain the background and main features of the current crisis and then examine five of the main approaches to explaining it.

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