Volume 149 (2010), Number 2
SPECIAL ISSUE: THE GLOBAL CRISIS
A legal perspective on the economic crisis of 2008
The 2008 global financial meltdown was the symptom of an underlying crisis in law
and institutions caused by the neoliberal utopia of Total Market – “scientific” depoliticization
of the economy, full commodification of labour, land and money, and
all-out competition, with even legal systems subject to “law shopping”. Financial
markets were so successfully deregulated, they were the first to collapse: taxpayers
are now paying the bills. But the markets for natural and “human resources” are also
at risk. In the spirit of the 1944 Declaration of Philadelphia, Supiot argues, the rule
of law must be reinstated to end human subordination to economic efficiency.
KEYWORDS: ECONOMIC RECESSION, FINANCIAL MARKET, MARKET ECONOMY, RULE OF LAW.
Richard B. FREEMAN
Wall Street’s 2007–09 implosion and the ensuing global recession highlight the crucial
relationship between finance and the economy. Governments, international
agencies and experts had failed to detect rising risk levels in the deregulated financial
sector. The author outlines the resulting huge cost in lost jobs and likely reductions
in public goods and growth, as economies restabilize budgets after paying for
massive bailouts and stimulus packages. Specifically, he assesses the role of monetary
incentives for rent-seeking in the decisions that led to the crisis. Finally, he makes
the case for radical reform of the institutions linking finance and the real economy.
KEYWORDS: ECONOMIC RECESSION, FINANCIAL MARKET, BANKING, FISCAL POLICY,
LABOUR MARKET, OECD COUNTRIES, UNITED STATES.
Will only an earthquake shake up economics?
“Natural rate theory”, the Efficient Market Hypothesis and its labour market application
dominated interpretations of economic trends and policy prescriptions from the 1970s onwards, with their views of public policy and regulation as distorting
otherwise well-functioning free markets. The upheaval of the current crisis is shaking
these theories to the core. In this context, Schettkat examines European experience
from the 1990s onwards and shows the theories to be unsubstantiated: high
unemployment persisted post-recession despite structural reforms to labour market
institutions, and the resumption of economic growth was hindered by thendominant
deflationary monetary and fiscal policies inspired by these theories.
KEYWORDS: ECONOMIC RECESSION, MARKET ECONOMY, MONETARY POLICY, LABOUR MARKET,
UNEMPLOYMENT, ECONOMIC THEORY, EU COUNTRIES, UNITED STATES.
Global crisis and beyond: Sustainable growth trajectories for the developing world
Despite recent signs of output recovery, casual resumption of the growth model that
crashed in 2008–09 will exacerbate the domestic and global imbalances that caused
the crisis in the first place – to the detriment of the real economy, equitable development,
and employment recovery. The model’s environmental unsustainability is
also evident. The author therefore argues for a broad policy agenda including
reform of the international financial system, development strategies re-focused on
wage-driven domestic demand and viable agriculture, fiscal promotion of greener
technologies and demand patterns, and redistributive social policies to reduce inequalities
and act as macroeconomic stabilizers in downturns.
KEYWORDS: ECONOMIC RECESSION, FINANCIAL MARKET, DEVELOPMENT POLICY,
SOCIAL POLICY, DEVELOPING COUNTRIES.
Incomplete crisis responses: Socio-economic costs and policy implications
This article examines the perverse effects of incomplete crisis responses. Initial
emphasis on the role of government – through coordinated fiscal measures to stimulate
the economy, cushion job losses and support vulnerable groups – was effective
in averting another Great Depression, despite widening public deficits. However, a
policy mistake was made by bailing out banks without reforming the dysfunctional
financial system that triggered the crisis: concern over the financial markets’ reaction
to growing public indebtedness has shifted policy towards a more traditional,
market-oriented approach focusing on fiscal consolidation, smaller government and
weak social protection. The risks are greater inequities and economic instability.
KEYWORDS: ECONOMIC RECESSION, FINANCIAL SYSTEM, FISCAL POLICY, EMPLOYMENT,
INCOME DISTRIBUTION, WAGES, DEVELOPED COUNTRIES, DEVELOPING COUNTRIES.