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Torsten Niechoj

Niechoj analyses the emergence of the modern welfare state - based on the writings of Marx and Polanyi - as a response to the evolution of a market society, and describes the provision of welfare as a collective action problem which is solved by a state that takes responsibility for welfare. The author focuses then on the character of welfare as interventionism and discusses and weighs liberal arguments against welfare.

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Torsten Niechoj

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Editorial to the special forum

Making the euro area work: proposals for monetary and fiscal reform

Stefan Ederer and Torsten Niechoj

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Eckhard Hein and Torsten Niechoj

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Torsten Niechoj and Marc Lavoie

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Torsten Niechoj and Till van Treeck

First paragraph

The financial market crisis that transformed into a global recession is a challenge for both economic theory and policy. In retrospect, nearly three years after the first signs of the crisis, a few tentative conclusions concerning the appropriateness and effectiveness of the responses to the crisis might be possible. After an initial state of shock, the political system acted forcefully and issued programmes to stabilise both financial sector and the real economy all over the world. Moreover, governments started to talk about an encompassing regulation of the financial sector, which was supported by many economists. This is indeed remarkable compared to what used to be common sense in the years before within advisory bodies – among others the European Commission, the IMF and academic think tanks. Privatisation and liberalisation of markets were, then, thought to be key to increasing the capacity of the economy to absorb shocks and to guarantee high growth rates and economic well-being. Although in that respect politicians and economists obviously did learn from the crisis and began to take seriously alternative ideas which had for a long time been absent in the debates, a ›return to normality‹ is already imminent; the planned fiscal retrenchment programmes, particularly within the European Union, and the deferral of regulatory measures for financial markets are testament to this. The king is dead, long live the king? From today's view it is not clear whether or not, in the longer run, this crisis has really shaken the foundations of economic thinking and policy making.

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Eckhard Hein, Torsten Niechoj and Engelbert Stockhammer

First paragraph

During the recent decades the financial sectors of developed and developing countries as well as global financial relations have changed remarkably. The overall importance of financial factors for real investment and growth of non-financial business has risen, as has the financial activity of non-financial corporations. Power relations between shareholders in joint stock companies, management, and labourers seem to have changed. The development of new financial instruments, together with the booms in stock market and real estate prices, has increased the potential for wealth-based and debt-financed consumption. As a result of these developments financial fragility (Minsky 1977) has increased. The current financial turbulences, generated by the sub-prime mortgage crisis in the USA and spreading over international financial markets since summer 2007, may be seen as a result of this increased fragility. Finally, global financial relations and conditions have changed with the rapid development in Asia and the associated current account surpluses, in particular in China but also in Japan.