This was grounded in Keynesian policies to ensure high employment, the welfare state to provide social insurance, health care and education, as well as public ownership of a significant share of productive capital, in order to manage the economy more efficiently and more in the public interest. The monetarist policies her first government adopted played a significant role in the deep recession of the early s and the ensuing explosion of unemployment.
At the same time, income inequalities in Britain rose strongly during the s, as a result of many factors including: economic restructuring, which entailed the loss of better-paid industrial jobs: relatively poorer welfare, pension and unemployment benefits; and very significant tax cuts for high income earners. Industrial conflicts during the s were especially bitter, and led to the destruction of industrial and mining communities.
More important still perhaps is the question of rising wealth inequalities. Data collection concerning wealth is far more difficult to come by, yet historically wealth tends to be much more concentrated than income, and this too is a situation which has been worsened by neoliberalism as asset prices often rise more quickly than wages, and as real interest rates earned by capital r exceed the growth rate g.
This means that over time wealth necessarily concentrates and inequality rises. Moreover, Piketty argues that this is especially so in low-growth economies. He argued that individual rights advanced first from civil rights, then to political rights and lastly to social rights. In many ways, this linear progression of society can indeed be identified in the development of political rights during the 19 th century.
The transformative and destructive power of capitalism described in the first part of the Communist Manifesto , for example, chimes well with the advance of globalisation today. Significantly also, the financial crisis and Great Recession have once again exposed the way capitalism and market forces are unstable, and not self-correcting as is assumed in orthodox economics. Instead they are integral to liberalised financial markets, just as capitalism manifested a historical tendency to demand deficiency prior to the emergence of the post-war Fordist, Keynesian era. It is also a growing economic problem, because of its impact on household demand.
Moreover the OECD notes that for member countries as a whole:. This suggests that the position of certain workers, notably the least educated, in the income distribution worsened over the period. To the extent that less wealthy people tend to have a higher consumption propensity, the worsening of their labour income share might have an adverse effect on the level of aggregate demand and on how quickly economies can recover from the recent crisis.
The response of most governments in the industrialised countries during the initial phase of the Great Recession was therefore to support demand, as the Labour government did, for example, by cutting VAT. But since the Coalition took office in , policy has been reoriented as we have seen.
Moreover, the connection established in the above quote between low wages of less qualified workers and poor demand is rarely made by politicians and especially politicians on the Right, because it challenges the orthodoxy which is largely based on the idea that freer labour markets help support employment, whereas higher wages price workers out of jobs.
As capital accumulates, profits rates must fall as the share of surplus value — labour value which goes to the capitalist in the process of production — diminishes in relationship to the accumulated capital invested in production. So capitalists seek to drive down wages in order to extract more surplus value in the production process, often benefiting from a reserve of unemployed labour to hold down wages. Indeed, in his book Historical Capitalism , the American Marxist sociologist Immanuel Wallerstein argues that capitalism seeks to expand internationally not just to acquire markets, but actually to bring new labour into the market economy.
Europe between financial repression and regulatory capture
Such overproduction in turn is a key factor in the instability of capitalism and explains why capitalism is prone to periodic crises. During such crises, unprofitable capital is destroyed, leading to a reorganisation and concentration of capital so that profits can be restored. Marx essentially believed that industrial capitalism would subordinate older forms of capitalism like financial capitalism, which dates back to Renaissance Italy.
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In the industrial sector, capitalists use money to buy commodities material inputs and labour power. These are used to produce other commodities, and because this output includes a quantity of labour which is greater than the labour embodied in the inputs, more value is created and the resulting commodities are sold to obtain more money than was initially invested.
In the financial sector however, investors expect to earn more money than their initial investment. But in this case, nothing real is actually produced directly, and no extra labour value is embodied in output: the increase in capital obtained by the investor is essentially fictitious.
The process becomes a source of crisis when investors expect compound interest rates which are greater than the rise in real output. As times goes by, the fictitious nature of the financial investments grows, until a point is reached at which it is clear that the real resources generated in the economy cannot meet the paper value of financial assets.
At this point, the market price of such assets collapses. But the financial crisis and the Great Recession have also clearly revealed the fragility of the economic models which were constructed on the basis of the critique of government action and Keynesianism put forward by Hayek and Friedman. The financial crisis clearly showed that market self-regulation may fail. It highlighted the way markets are fundamentally dependent on government, and it also revealed how poorly the price mechanism may function in determining the value of assets. The profound divisions exposed in British society by the Brexit vote also confirm the way neoliberalism and the intense marketisation of society it has entailed in the UK have fractured society, to the extent that the question of Scottish independence continues to be a burning issue.
There is therefore every justification to look beyond mainstream economics in seeking to understand the profound and protracted crisis facing the world economy in general and the UK economy in particular. For all the subsequent — often substantial — regulation which governments have imposed on finance since, the overall policy approach has been very much based on returning to business as usual. The political agenda of the Conservatives before the Brexit referendum was emblematic of this approach: it remains to be seen to what extent their policies may now change.
This view is based on more heterodox interpretations of neoliberalism and the crisis, including some of the key ideas of Marxist economics in explaining the contradictory nature of capitalism and how capitalism is prone to crises. Broadly speaking, such an analysis of capitalism and how markets work falls outside mainstream economics, which fundamentally assumes that markets do return to equilibrium and that economies ultimately return to growth.
If policies do not change however, especially in the financial sector, then there are strong risks that future financial crises may occur, even greater than the last.
Table: Key Economic Indicators. June Speech Bank of England, 6 th November Greenspan Alan, Home Mortgage Market. Greenspan Alan, The mortgage market and consumer debt.
Marshall Thomas H. Stiglitz Joseph, Freefall London, Penguin, Wallerstein Immanuel, Le capitalisme historique , trans. He was a joint winner of the Nobel prize in economics is Main journal in British area studies published in France. It covers all social sciences, including history and the Empire. French Journal of British Studies. Contents - Previous document - Next document. Nicholas Sowels. Outline Introduction. A financial crisis waiting to happen. Full text PDF Send by e-mail.
Introduction 1 Nine years after the public rescue of Northern Rock and eight years after the bankruptcy of Lehman Brothers, the global economy is still dealing with the repercussions of the financial crisis and the ensuing Great Recession. Remarks at the annual convention of the Inde He was a joint winner of the Nobel prize Tutin Christian and Steiner Philippe Paris Top of page. Browse Index Authors Keywords.
Follow us. Newsletters OpenEdition Newsletter. In collaboration with. The following countries had a recession already starting in the first quarter of Latvia,  Ireland,  New Zealand,  and Sweden. South Korea miraculously avoided recession with GDP returning positive at a 0.
Dr Olivier Accominotti
Of the seven largest economies in the world by GDP, only China avoided a recession in Japan was in recovery in the middle of the decade s but slipped back into recession and deflation in On February 26, , an Economic Intelligence Briefing was added to the daily intelligence briefings prepared for the President of the United States.
This addition reflects the assessment of U. Business Week stated in March that global political instability is rising fast because of the global financial crisis and is creating new challenges that need managing. If you're in a much longer-run downturn, then all bets are off.
Political scientists have argued that the economic stasis triggered social churning that got expressed through protests on a variety of issues across the developing world. In Brazil, disaffected youth rallied against a minor bus-fare hike;  in Turkey, they agitated against the conversion of a park to a mall  and in Israel, they protested against high rents in Tel Aviv. In all these cases, the ostensible immediate cause of the protest was amplified by the underlying social suffering induced by the great recession.
In January , the government leaders of Iceland were forced to call elections two years early after the people of Iceland staged mass protests and clashed with the police because of the government's handling of the economy. The rally gathered some 10—20 thousand people. In the evening the rally turned into a Riot.
The crowd moved to the building of the parliament and attempted to force their way into it, but were repelled by the state's police. In late February many Greeks took part in a massive general strike because of the economic situation and they shut down schools, airports, and many other services in Greece. In addition to various levels of unrest in Europe, Asian countries have also seen various degrees of protest. Beyond these initial protests, the protest movement has grown and continued in In late , the Occupy Wall Street protest took place in the United States, spawning several offshoots that came to be known as the Occupy movement.
In the economic difficulties in Spain increased support for secession movements. In Catalonia, support for the secession movement exceeded. On September 11, a pro-independence march drew a crowd that police estimated at 1.