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Contradictions of austerity

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  • Alex Callinicos
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    Abstract

    The global economic and financial crisis has been marked by the following paradox. A much more severe depression than the global slump of 2008--09 was prevented by determined state intervention in the form of bank bailouts and fiscal stimuli. Yet this bout of apparently successful Keynesianism has been followed by a turn to fiscal austerity justified in terms reminiscent of the Treasury View against which Keynes relentlessly polemicised in the 1930s. This article explores the sources of this policy shift. Among the factors considered are the ideology of neoliberalism, the economic and political power of the banks, and the relative weight of finance in individual economies. The broader context of financialisation is also considered. The conclusion is reached that an oscillation between bouts of austerity and laxer policies encouraging the development of asset bubbles may be built into neoliberalism as an economic policy regime. The implication is that alternatives to austerity must embrace broad institutional transformation. Copyright The Author 2012. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.

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    File URL: http://hdl.handle.net/10.1093/cje/ber026
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    Bibliographic Info

    Article provided by Oxford University Press in its journal Cambridge Journal of Economics.

    Volume (Year): 36 (2012)
    Issue (Month): 1 ()
    Pages: 65-77

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    Handle: RePEc:oup:cambje:v:36:y:2012:i:1:p:65-77

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    1. Milton Friedman & Anna J. Schwartz, 1963. "A Monetary History of the United States, 1867-1960," NBER Books, National Bureau of Economic Research, Inc, number frie63-1.
    2. Ke Tang & Wei Xiong, 2010. "Index Investment and Financialization of Commodities," NBER Working Papers 16385, National Bureau of Economic Research, Inc.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
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