Capitalism, Macroeconomics and Reality
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Capitalism, Macroeconomics and Reality

Understanding Globalization, Financialization, Competition and Crisis

James Crotty

The essays comprising this collection analyze the deep flaws in the methodological foundation of mainstream economic theory, and explain how these flaws make mainstream economics more ideology than sound social science. James Crotty develops alternative theories built on realistic assumptions that can explain most of the disastrous economic and financial developments of the past four decades. His work contributes to the collective creation of a solid theoretical foundation on which to build an understanding of the ‘laws of motion’ of capitalism in the post WWII era.
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Chapter 11: The Neoliberal Paradox: The Impact of Destructive Product Market Competition and Modern Financial Markets on Nonfinancial Corporation Performance in the Neoliberal Era

James Crotty

Extract

In the aftermath of the Great Depression and World War II, national economies, even those in which markets played a very powerful role, were placed under the ultimate control of governments, while international economic relations were consciously managed by the International Monetary Fund (IMF) and World Bank. Western governments, with varying degrees of enthusiasm, lent support to unions, regulated business, tightly controlled financial markets, and built social welfare systems. They also began to regulate aggregate demand in pursuit of high employment and fast growth, a phenomenon known as the Keynesian revolution. Business and financial interests accepted these changes in part because strong capital controls and low levels of trade and investment flows after the war left many nations without a credible “run-away” threat to undercut government economic policies they disliked. The global prosperity that characterized the quarter century following the war — the so-called “Golde Age” of modern capitalism — reinforced the belief that market economies need strong social regulation to function effectively.

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