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.
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.