Severe international debt crises have become a defining feature of the contemporary world economy. In the 1980s and 1990s, severe international debt and currency crises occurred in developing economies; the most severe were the 1982 Latin American debt crisis and the 1997 East Asian financial crisis. The most severe crises of the 2000s – the 2007–08 subprime crisis and the 2010 European crisis – marked a step-change, as international debt crisis moved from the periphery of the global financial system to its core, and shook the global financial system to its foundations. This chapter reviews this history and explores economists’ explanations of both why they occur and what should be done about them.
While the explicit adoption of a UK industrial strategy in 2017 demonstrates the national priority accorded to reversing the productivity slowdown, this industrial strategy relies on a problematic centralized science/technology approach, first articulated in 1993. The UK productivity paradox arises because UK productivity growth has declined consistently despite adherence to this science/technology approach. The effort to implement this industrial policy is undercut by the UK’s continued commitment to macroeconomic austerity policy. Further, the adoption of this strategy has furthered the decades-long pattern of instability in the ministerial and research council structures tasked with coordinating national policy. The coordination of a contradictory top-down science/technology approach by shifting structures of national government guidance, combined with the impact of austerity macroeconomic policy on devolved sub-national governments, is unlikely to permit national or local seedbeds of innovation and employment growth to flourish. In effect, challenges of organization and governance in UK industrial and science/technology policy must be addressed as a precondition to moving past the UK productivity paradox. A brief consideration of parallel developments in California, a state widely admired as a seedbed of economic growth and innovation, reveals some possibly useful insights for the UK.
Gary A. Dymski
Gary A. Dymski
A crisis that started as a textbook case of how financial and asset markets can spin out of control without adequate public oversight has transmuted in 5 years into a crisis of irresponsible sovereigns, such that restoring prosperity requires that governments re-establish control over their own excessive spending. How did this happen? This paper explains the recovery of position by pro-market, restricted-government proponents in economics on the basis of political divides and segmented lines of communication within the academic economics profession. These political divides involve a double invisibilization of power within economics: an invisibilization both of the political purposes served by a profession whose leading models deny the relevance of social and political power, and of the ideational barriers to entry into ‘mainstream’ departments. The argument is motivated and illustrated by the cases of the subprime and the eurozone crises.
Jim Crotty and Gary Dymski
Gary Dymski and Nicole Cerpa Vielma
This chapter argues that the emerging field of financial geography can provide the necessary terrain for interdisciplinary exchange between economists and geographers who want to work on what Dariusz W—jcik has termed ‘the social reality of finance.’ Closing the gap between those trained in these two disciplines will require some adjustments on both sides. Geographers, on their side, must see beyond the analytical conventions used in mainstream economics, and work with economists whose methods and topics place them firmly within the ‘heterodoxy’ of that discipline. Economists, in turn, must develop much clearer ideas about the boundaries and possibilities of spatial analysis in economics. We illustrate our argument by exploring several economic models of financial crises in developing countries. The modeling conventions that guide mainstream models rule out both social factors and ‘real space,’ just as they rule out the ‘real time’ approach used in Post-Keynesian economics. Bringing in ‘real time’ and ‘real space’ requires breaking with these conventions.