Financial Markets, Money and the Real World
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Financial Markets, Money and the Real World

Paul Davidson

Paul Davidson investigates why the 1990s was a decade of financial crises that almost precipitated a global market crash. He explores the reasons why the global economy still struggles with the aftermath of these crises and discusses the possibility that volatile financial markets in the future will have real impacts on whole industries and national economic systems.
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Chapter 15: The Economy and the Twenty-first Century

Paul Davidson

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15. The economy and the twenty-first century As this book is being written, the global economy is teetering on the worst global recession since the Great Depression of the 1930s. The terrorist attacks on the World Trade Center on September 11, 2001 were not only an attack on the American way of life, but were also a severe blow to the entire financial capitalist world. The only question that remains is will the major capitalist economies again try to muddle through with the hope that a laissez-faire market system is the best of all possible worlds in this worst of times or will we use this troubled time to rebuild and strengthen the financial capitalist system that is the best hope for a civilized global community that humankind has been able to devise. 15.1 THE POSITIVE ROLE OF GOVERNMENT In Chapter 1, we listed five key points that can be extracted from Keynes’s vision of the capitalist system. In the almost 70 years since Keynes wrote we still find that the outstanding faults of the economic system in which we live are its failure to provide a job for everyone willing and able to work and its arbitrary and very inequitable distribution of income and wealth both nationally and globally. Moreover in recent decades, the mainstream of the economics profession has promoted this persistent unemployment flaw to a positive virtue in its concept of a non-accelerating inflation rate of unemployment (NAIRU) instead of labeling unemployment for what it...

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