IDEAS home Printed from https://ideas.repec.org/a/ris/ejessy/0041.html
   My bibliography  Save this article

Low Wages, Private Indebtedness, and Crisis A Monetary-Theory-of-Production Approach

Author

Listed:
  • Forges Davanzati, Guglielmo

    (Università del Salento)

  • Tortorella Esposito, Guido

    (Università del Sannio)

Abstract

The aim of this paper is to provide an interpretation of the 2007-2009 economic and financial crisis using the framework of the monetary theory of production. This crisis essentially depends on policies designed to redistribute income at the expense of wage earners, with particular reference to labour market deregulation and restrictive fiscal policies. By reducing total demand, these policies have undermined firms' profits, thus driving firms to bankruptcy and consequently leading to a decline in money supply. At the same time, firms producing luxury goods have been obtaining profits from the spending of rentiers. We also suggest that banking policy ­ through "hoarding" caused by the fact that expectations of individual banks worsened owing to the lack of confidence in the possibility of recouping loans in support of production and consumption ­ can have further negative effects, as it involves a reduction in money supply and hence in production, employment, and wages. As a general result, an economic policy hindering public intervention has proved to be the main cause of financial crisis, while the drop in wages and employment has been its main effect.

Suggested Citation

  • Forges Davanzati, Guglielmo & Tortorella Esposito, Guido, 2010. "Low Wages, Private Indebtedness, and Crisis A Monetary-Theory-of-Production Approach," European Journal of Economic and Social Systems, Lavoisier, vol. 23(1), pages 25-44.
  • Handle: RePEc:ris:ejessy:0041
    as

    Download full text from publisher

    File URL: http://ejess.revuesonline.com/article.jsp?articleId=14426
    File Function: Full text
    Download Restriction: no

    More about this item

    Keywords

    Financial Crisis; Fiscal Policy; Labour Market Deregulation; Monetary Theory of Production;

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ris:ejessy:0041. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Stefano Lucarelli). General contact details of provider: http://ejess.revuesonline.com/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.