A Post-Keynesian Approach
New Directions in Modern Economics series
Edited by Claude Gnos, Louis-Philippe Rochon and Domenica Tropeano
Introduction: Post-Keynesian Economic Policy – a Post-crisis View
Claude Gnos, Louis-Philippe Rochon and Domenica Tropeano Whether the worldwide crisis is over is a question that is not easy to answer. After all, economic performances have differed considerably from one country to another, and while banks, where the crisis originated, are now doing much better, the lingering macroeconomic effects are still being felt. Nowhere is this more evident than in the USA, where there is increasing talk of a second recession, and within Europe, where some countries, such as Greece, Ireland, Portugal and Italy, are approaching a catastrophic end, exacerbated no doubt by the strict austerity measures now being contemplated by the European Parliament. And while it has already been almost four years since the crisis began, the prospects for sustained growth seem far away, leading some now to be openly discussing the industrialized world’s own ‘lost decade’. Indeed, it is surely legitimate to ask: where will growth come from? On the consumption side, consumers do not seem to be in any hurry to spend; rather, they seem unable to spend. With historic levels of debt, consumers will more probably be busy reducing those debt levels than consuming. Indeed, in most countries, growth in nominal wages has been flat, resulting in decreasing wage shares. In addition, income distribution has become even more skewed, with the top 1 per cent of income earners increasing dramatically their share of total income and total wealth. In the end, consumers are being squeezed and are unlikely able to contribute much to the growth...