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On the Global Financial and Economic Crisis
International Development Economics Associates on the global financial and economic crisis 2008-2009
The Global Financial Crisis

It is now more than a year since the sub-prime lending crisis in the US mortgage sector came to light. The unprecedented and still unfolding financial crisis in the developed world brings with it the end of the illusion of the market being “efficient”. This is the time for a fundamental rethinking on financial liberalisation in order to reduce systemic and global instability. This section presents papers and articles that seek to explain the causes and consequences of the U.S. subprime mortgage crisis. Through a critique of the underlying structure and dynamics of deregulated finance, they analyse how this crisis has led to a generalized credit crunch in other financial sectors, which ultimately affects the real economy and the world economy at large.

  • Will the Paulson Bailout produce the basis for another Minsky Moment?
    Jan Kregel
    The reorganisation of the financial system that appears to be taking place in the US does not seem to respect the basic principle that any reformulation of the regulatory system should limit the size and activities of financial institutions, and should be dictated by the ability of supervisors, regulators etc. to understand the institutions’ operations. Instead, it seems to support larger financial institutions that are created by merging weak institutions with stronger ones. If the present trend of bank mergers continues, the resolution of the crisis, as Minsky always predicted, will lay the basis for another financial crisis.

  • A Perspective on the Crisis
    Prabhat Patnaik
    Discussions of the current world economic crisis tend to focus exclusively on the bursting of the housing bubble in the United States. This no doubt is the immediate cause of the crisis, but underlying its operation is the fact that the stimulus for booms in contemporary capitalism has increasingly come from such bubbles. The U.S. whose size and strength make it, in the current regime of trade liberalization, the main determinant of the pace of expansion of the world economy as a whole, has increasingly come to rely on such bubbles to initiate and sustain booms. The dot-com bubble whose bursting had caused the previous crisis was followed by the housing bubble which started a new boom. This has now come to an end, precipitating a major financial crisis and initiating what looks like a major depression reminiscent of the 1930s.

  • Proposals for Effectively Regulating the U.S. Financial System to Avoid Yet Another Meltdown
    James Crotty & Gerald Epstein
  • Policy and Security Implications of the Financial Crisis: A Plan for America
    James K. Galbraith

  • The Time has come: Let's Shut Down the Financial Casino
    ATTAC's Statement on the Financial Crisis and Democratic Alternatives
  • We need a Paradigm Shift
    Jayati Ghosh
    Everyone now recognises the need to reform the international economic regime. But the idea should not simply be to fix a system that is obviously broken: we need to exchange it for a better model. That is because the current financial architecture has failed in some very important ways.

    Most importantly, the international financial system has failed to meet two obvious requirements: of preventing instability and crises, and of transferring resources from richer to poorer economies. Not only have we experienced much greater volatility and propensity to financial meltdown across emerging markets and now even industrial countries, but even the periods of economic expansion have been based on the global poor subsidising the rich.
    The Financial Crisis and the Developing World
    Jayati Ghosh
    The past two weeks have made it clear that the developing world is far from immune to the storms raging in financial markets in industrial countries. Stock prices in emerging markets have gone on similar roller coaster rides to those in New York and Europe. Indeed, they have shown such very high volatility, going sharply up and down on a daily basis around an overall declining trend, that the pattern is reminiscent of the behaviour of stock indices in the last major international financial upheaval in 1929/30 – the Great Depression. And the credit crunch and freezing of interbank lending have been only too evident even in developing countries whose economic “fundamentals” are apparently strong and whose policy makers believed that they could de-couple from the global trends.
    This almost immediate diffusion of bad news is the result of financial liberalisation policies across the developing world that have made capital markets much more integrated directly through mobile capital flows, as well as created newer and similar forms of financial fragility almost everywhere. But the international transmission of turbulence is only one of the ways in which the global financial crisis can and will affect developing countries.

  • Structural Causes of the Global Financial Crisis: A Critical Assessment of the 'New Financial Architecture'
    James Crotty

The Accumulation Process in the Period of Globalization
Prabhat Patnaik - 2008
This paper, based on a lecture given in memory of D. D. Kosambi, discusses the current global crises in terms of rising inflation and food shortages, and argues that this situation reflects the inherent nature of capitalism which engages in accumulation through both expansion and encroachment. This squeezes out peasant agriculture and all petty producers, and ultimately leads to a supply constraint on goods produced by these groups. Under the current context of capitalism, these forces are creating a crisis for mankind.

The Global Food Crisis
Jayati Ghosh - 2008
The recent food shortages and rapidly rising prices of food have adversely affected billions of people, especially the poor in the developing world. This is very much a man-made crisis, resulting from the market-oriented and liberalising policies adopted by choice or compulsion in almost all countries, which have either neglected agriculture or allowed shifts in global prices to determine both cropping patterns and the viability of farming, and also generated greater possibilities of speculative activity in food items. This article discusses the features, causes of the current crisis and indicates an alternative policy framework for redressal.

New Economic Foundation:
The Real World Economics

The international economic system creates damaging inequalities between rich and poor, and fuels climate change and environmental degradation. Through Real World Economic Outlook, NEF aims to expose the problems with the international finance and economic systems and create appropriate remedies. We are also researching and campaigning on changes to global governance to tackle international issues like climate change, and work by jubilee research continues nef’s pioneering involvement in tackling international debt. transforming markets goes beyond corporate responsibility to set out a new vision for harnessing and channelling enterprise to meet social and environmental need.




International Development Economics Associates

IDEAs or International Development Economics Associates is a pluralist network of progressive economists across the world, engaged in research, teaching, and dissemination of critical analyses of economic policy and development. Its members are motivated by the need to strengthen and develop alternatives to the current mainstream economic paradigm as formulated by the neo-liberal orthodoxy. The organisation is based in the South and led by economists based in several developing countries, but membership of the network is open to all those committed to developing and using alternative non-orthodox tools of economic analysis appropriate for meeting development challenges.
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