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Editorial to the Special Issue

Eckhard Hein, Torsten Niechoj and Achim Truger

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The world economy is presently suffering from the most severe economic crisis since the Great Depression in the early 1930s. As by now seems to be obvious, the present financial crisis, massive state intervention in the financial markets in order to prevent a melt-down, and fiscal stimulus packages inconceivable even several months ago, mark the failure of an economic policy agenda which might be called ›neo-Liberalism‹. This agenda, broadly speaking, focussed on the deregulation of financial, labour and goods markets and on minimising state intervention. It meant a massive redistribution of income and wealth at the expense of labour and ordinary households, increasing imbalances on the global level and rising financial fragility. The failure of this policy agenda is also a failure of mainstream economic theory which has supported it. In particular those theories which are based on the confidence and firm belief that free markets will be stable and generate a full employment equilibrium – at least in the long run – and that the only role left for macroeconomic policies, in particular monetary policies, is to facilitate and accelerate the adjustment process towards this equilibrium, as for example in the dominating New Consensus Model (NCM), have failed.

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