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Policies to overcome stagnation: the crisis, and the possible futures, of all things euro

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  • Mark Blyth

    (The Watson Institute for International and Public Affairs, Brown University, Providence, RI, USA)

Abstract

This article argues that the Europe's continuing economic underperformance, particularly in the eurozone, is neither a function of insufficient information (policymakers do not know the right policies) nor ideology (policymakers are unable to recognize the right policies due to ideological priors). Rather, this article places the continuation of policies that cause stagnation in a longer historical context. Building upon the insights of Kalecki (1943) regarding the political limits of full employment policies, it is argued that the shift from a regime that generated inflation, low profitability, and a high degree of equality to one that generates deflation, high profitability, and inequality has hamstrung the ability of policymakers to respond positively to the situation at hand. This has generated structural pressures for political realignment across cases that compound the economic problems of stagnation while exacerbating tensions between different European ‘Varieties of Capitalism.’ The result is a set of ‘second-best’ strategies that lead to second-best outcomes in both politics and economics that further stress the already stressed economies and polities of Europe.

Suggested Citation

  • Mark Blyth, 2016. "Policies to overcome stagnation: the crisis, and the possible futures, of all things euro," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 13(2), pages 215-228, September.
  • Handle: RePEc:elg:ejeepi:v:13:y:2016:i:2:p215-228
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    References listed on IDEAS

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    1. Sebastian Gechert, 2015. "What fiscal policy is most effective? A meta-regression analysis," Oxford Economic Papers, Oxford University Press, vol. 67(3), pages 553-580.
    2. Carmen M. Reinhart & M. Belen Sbrancia1, 2015. "The liquidation of government debt," Economic Policy, CEPR;CES;MSH, vol. 30(82), pages 291-333.
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    Cited by:

    1. Lucio Baccaro & Mark Blyth & Jonas Pontusson, 2022. "How should we think about modern capitalism? A growth models approach," Transfer: European Review of Labour and Research, , vol. 28(4), pages 505-513, November.
    2. Karsten Kohler & Engelbert Stockhammer, 2022. "Growing differently? Financial cycles, austerity, and competitiveness in growth models since the Global Financial Crisis," Review of International Political Economy, Taylor & Francis Journals, vol. 29(4), pages 1314-1341, July.
    3. Karsten Kohler, 2022. "Capital Flows and the Eurozone's North-South Divide," Working Papers PKWP2211, Post Keynesian Economics Society (PKES).
    4. Ignatov Augustin, 2018. "Towards a Confident Europe: Fostering European Foreign Policy as a Premise to Enhanced European Economic Security & Competitiveness," Global Economy Journal, De Gruyter, vol. 18(3), pages 1-13, September.
    5. Engelbert Stockhammer & Karsten Kohler, 2019. "Financialization and demand regimes in advanced economies," Working Papers PKWP1911, Post Keynesian Economics Society (PKES).

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    More about this item

    Keywords

    stagnation; economic policy; eurozone; Kalecki; regime change; populism; varieties of capitalism; macroeconomic imbalances;
    All these keywords.

    JEL classification:

    • B20 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - General
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • F00 - International Economics - - General - - - General
    • N00 - Economic History - - General - - - General

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