The First Great Recession of the 21st Century

The First Great Recession of the 21st Century

Competing Explanations

Edited by Óscar Dejuán, Eladio Febrero and Maria Cristina Marcuzzo

The 2008–10 financial crisis and the global recession it created is a complex phenomenon that warrants detailed examination. The various essays in this book utilise several alternative paradigms to provide a plausible explanation and a credible cure. Great detail is given to this important analysis from different theoretical perspectives, presenting a clearer understanding of what went wrong and expounding misinterpretations of current theories and practices.

Chapter 7: Innovation, Growth, Cycles and Finance: Three (or Four or More) Stories from the 1930s and their Lessons

Catherine P. Winnett and Adrian B. Winnett

Subjects: economics and finance, financial economics and regulation, history of economic thought


Catherine P. Winnett and Adrian B. Winnett Thus it is difficult to consider Keynes’s solution to the investment problem to be satisfactory. The reason for this failure lies in an approach which is basically static to a matter which by its nature is dynamic. Michal Kalecki (1936) 7.1 INTRODUCTION This chapter has two themes. First, vide the title, we discuss the messy interrelationships among innovation, growth, cycles and finance. Second, historically speaking, we focus on what might be termed the non- or even anti-Keynesian analysis of such issues. Thus, we discuss, in particular F.A. Hayek, Joseph Schumpeter and Michal Kalecki. We also give a nod to the ‘Stockholm School’ – well, more than a nod – and many others have walkon parts – notably Nikolai Kondratiev. As the title suggests, the possible array of participants in the debates identified in this chapter is vast, so we are selective but cast our net wider as occasion demands. Why turn back the clock? There are two reasons. First, although the policy prescriptions for the post-2008 recession are manifestly and successfully ‘Keynesian’, it is not at all obvious that the ‘Keynesian model’ – whatever that means – as opposed to the policy prescriptions supposedly derived from it, is at all helpful. We note, though, that some continue to dispute the success of the policies pursued, particularly very low central bank rates. This is, not surprisingly, the case with neo-Austrian commentators, for reasons that will become clear later in our discussion. In fact, somewhat contra our later assertion of...

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