Description

Offers a novel explanation of the financial crisis and Great Recession that emphasizes the destruction of shared prosperity over the past thirty years. This book offers a novel explanation of the financial crisis and Great Recession that emphasizes the destruction of shared prosperity over the past thirty years. This contrasts with 'black swan' styled explanations that emphasize unexpected financial shocks and speculation. The book explains why the economy is now confronted with stagnation rather than the quick recovery predicted by other accounts. This book offers a novel explanation of the financial crisis and Great Recession that emphasizes the destruction of shared prosperity over the past thirty years. This contrasts with 'black swan' styled explanations that emphasize unexpected financial shocks and speculation. The book explains why the economy is now confronted with stagnation rather than the quick recovery predicted by other accounts. The US economy today is confronted with the prospect of extended stagnation. This book explores why. Thomas I. Palley argues that the Great Recession and destruction of shared prosperity is due to flawed economic policy over the past thirty years. One flaw was the growth model adopted after 1980 that relied on debt and asset price inflation to fuel growth instead of wages. A second flaw was the model of globalization that created an economic gash. Third, financial deregulation and the house price bubble kept the economy going by making ever more credit available. As the economy cannibalized itself by undercutting income distribution and accumulating debt, it needed larger speculative bubbles to grow. That process ended when the housing bubble burst. The earlier post-World War II economic model based on rising middle-class incomes has been dismantled, while the new neoliberal model has imploded. Absent a change of policy paradigm, the logical next step is stagnation. The political challenge we face now is how to achieve paradigm change. Preface; Part I. Origins of the Great Recession: 1. Goodbye financial crash, hello stagnation; 2. The tragedy of bad ideas; 3. Overview: three perspectives on the crisis; 4. America's exhausted paradigm: macroeconomic causes of the crisis; 5. The role of finance; 6. Myths and fallacies about the crisis: stories about the domestic economy; 7. Myths and fallacies about the crisis: stories about the international economy; Part II. Avoiding a Great Stagnation: 8. The coming Great Stagnation; 9. Avoiding a Great Stagnation: rethinking the paradigm; 10. The challenge of corporate globalization; 11. Economists and the crisis: bad ideas revisited; 12. Markets and the common good: time for a great rebalancing. 'Thomas Palley has provided a penetrating analysis of the Great Recession, the weakness of the policy response, and the role of economic ideas in both. If we are to avoid the Great Stagnation – and build a more equitable and sustainable economic future – economists and policy makers must fundamentally change the way they think about economics and politics. Mr Palley points the way.' Ron Blackwell, Chief Economist, AFL-CIO 'Thomas Palley's carefully argued study combines an acute critique of conventional economic thinking with thoughtful and stimulating proposals to fix America's broken economic policies.' Thomas Ferguson, University of Massachusetts, Boston, and Senior Fellow, Roosevelt Institute 'In the depths of the Great Depression, John Maynard Keynes wrote that 'n