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Finance-dominated capitalism, re-distribution and the financial and economic crises - a European perspective

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  • Hein, Eckhard

Abstract

In this paper the euro crisis is viewed as the most recent episode of the crisis of finance-dominated capitalism. Therefore, two major features of finance-dominated capitalism, the increasing inequality of income distribution and the rising imbalances of current accounts, are analysed for a set of major Euro area countries. Against this background the euro crisis is examined, and it is shown that the economic policy reactions of European governments and institutions, narrowly interpreting the crisis as a sovereign debt crisis caused by irresponsible behaviour of some member country governments, are misguided and will lead to deflationary stagnation and an increasing risk of disintegration of the Euro area. For this reason, finally an alternative macroeconomic policy approach tackling the basic contradictions of finance-dominated capitalism and the deficiencies of European economic policy institutions and economic policy strategies is outlined. It is argued that, on the one hand, an institution which convincingly guarantees public debt of Euro area member countries and, on the other hand, an expansionary macroeconomic policy approach, in particular in the current account surplus countries of the Euro area, need to be introduced.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35903.

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Date of creation: 12 Jan 2012
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Handle: RePEc:pra:mprapa:35903

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Keywords: Finance-dominated capitalism; distribution; financial and economic crisis; European economic policies;

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References

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  1. Petra Dünhaupt & Eckhard Hein & Till van Treeck, 2007. "Finanzsystem und wirtschaftliche Entwicklung: Tendenzen in den USA und in Deutschland aus makroökonomischer Perspektive," IMK Studies 05-2007, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  2. Sergio Cesaratto & Antonella Stirati, 2010. "Germany and the European and Global Crises," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 39(4), pages 56-86, January.
  3. Anthony Philip Thirlwall, 1979. "The Balance of Payments Constraint as an Explanation of International Growth Rate Differences," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 32(128), pages 45-53.
  4. Nathalie Girouard & Mike Kennedy & Christophe André, 2006. "Has the Rise in Debt Made Households More Vulnerable?," OECD Economics Department Working Papers 535, OECD Publishing.
  5. Eckhard Hein & Achim Truger, 2006. "Germany's post-2000 stagnation in the European context - a lesson in macroeconomic mismanagement," IMK Working Paper 03-2006, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  6. Hein, Eckhard & Truger, Achim, 2010. "Finance-dominated capitalism in crisis: The case for a Global Keynesian New Deal," IPE Working Papers 06/2010, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  7. Eckhard Hein & Engelbert Stockhammer, 2010. "Macroeconomic Policy Mix, Employment and Inflation in a Post-Keynesian Alternative to the New Consensus Model," Review of Political Economy, Taylor & Francis Journals, vol. 22(3), pages 317-354.
  8. Robert Wade, 2009. "From global imbalances to global reorganisations," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 539-562, July.
  9. Thomas I. Palley, 2010. "Asset price bubbles and counter-cyclical monetary policy: Why central banks have been wrong and what should be done," European Journal of Economics and Economic Policies: Intervention, Edward Elgar, vol. 7(1), pages 91-107.
  10. Till van Treeck, 2008. "The political economy debate on ‘financialisation’ – a macroeconomic perspective," IMK Working Paper 01-2008, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  11. Engelbert Stockhammer, 2011. "Peripheral Europe's debt and German wages: the role of wage policy in the Euro area," International Journal of Public Policy, Inderscience Enterprises Ltd, vol. 7(1/2/3), pages 83-96.
  12. Hein, Eckhard & Mundt, Matthias, 2012. "Financialisation and the requirements and potentials for wage-led recovery : a review focussing on the G20," ILO Working Papers 470932, International Labour Organization.
  13. Eckhard Hein & Achim Truger & Till van Treeck, 2011. "The European Financial and Economic Crisis: Alternative Solutions from a (Post-) Keynesian Perspective," IMK Working Paper 9-2011, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
  14. Jorge Uxó & Jesús Paúl & Eladio Febrero, 2011. "Current Account Imbalances in the Monetary Union and the Great Recession: Causes and Policies," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(5), pages 571-592, December.
  15. Eckhard Hein & Achim Truger, 2009. "How to Fight (or Not to Fight) a Slowdown," Challenge, M.E. Sharpe, Inc., vol. 52(3), pages 52-75, May.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Caro Emiliano ti scrivo...
    by Alberto Bagnai in Goofynomics on 2012-07-22 17:33:00
  2. A domanda rispondo
    by Alberto Bagnai in Goofynomics on 2012-11-25 22:59:00
  3. Lessons from the crisis
    by Alberto Bagnai in Goofynomics on 2013-12-27 22:36:00
  4. Lezioni dalla crisi: perché il Parlamento dovrebbe sfiduciare la Commissione
    by Alberto Bagnai in Goofynomics on 2013-12-28 18:32:00
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Cited by:
  1. Hermann, Christoph, 2013. "Crisis, structural reform and the dismantling of the European Social Model(s)," IPE Working Papers 26/2013, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  2. Georg Feigl & Sepp Zuckerstätter, 2013. "Wettbewerbs(des)orientierung," WWWforEurope Policy Paper series 2, WWWforEurope.

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