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Economic Policies for Growth and Sustainability
Edited by Nikolaos Karagiannis and John E. King
Edited by Louis-Philippe Rochon and Virginie Monvoisin
Louis-Philippe Rochon and Virginie Monvoisin
The financial crisis that began in 2007 has generally shown the weaknesses of neoclassical theories and policies, in particular by highlighting the irrelevance of modern macro models such as the Dynamic Stochastic General Equilibrium (DSGE) model and its microfoundations, which has come under considerable attack in the last few years, even from the mainstream. Indeed, as Lavoie (2018, p. 15) observes, “there is considerable dissatisfaction with the current state of mainstream macroeconomics”, leading The Economist (2009) to refer to the “turmoil among macroeconomists”. As early as 2009, Krugman (2009a, Internet) was claiming “[t]he economics profession mistook beauty, clad in impressive-looking mathematics, for truth”. More recently, he once again criticised the quest for microfoundations (see 2013, Internet), arguing “so the truth was that microfoundations in macroeconomics had its moment, but failed utterly at the one thing it was sold, above all, as being able to do - namely, give a better explanation of why nominal shocks have real effects. Time, you might think, to reconsider the project”. A few years earlier, Solow, in a 2010 address to the United States Congress, disapprovingly claimed “I do not think that the currently popular DSGE models pass the smell test” (see Solow, 2010).
An Insider’s View on the Economics of Hyman Minsky
In the chapter, ‘The accumulation mode of production in Mexico and the economic structure of the manufacturing industry,’ the author discusses the stagnation of productivity of the workforce in relation to the dominance of large corporations that are connected to global commodity chains and use global competitive advantages to maximize profits; meanwhile, small and medium enterprises compete on the basis of lower costs (wages), which reduces the growth of accumulation and productivity.
Ma. Guadalupe Huerta
In the chapter, ‘The big financial crisis and the European economic adjustment: a road towards the strengthening of the neoliberal agenda,’ the authors argue that the institutional design of the eurozone does not allow for the deployment of fiscal and monetary policies to overcome the crisis, which raises the need for a thorough analysis of European integration in terms of macroeconomic and social aspects, accompanied by an assessment of the economic policies necessary to restore growth.
Domenica Tropeano and Alessandro Vercelli
In the chapter, ‘Debt deflation theory and the Great Recession,’ on the basis of the theory of Irving Fisher, the authors analyse the accumulation of debt in the USA and Europe, emphasizing that the monetary policy deployed in the former did manage to save the banking system, and this did not happen in Europe due to the European Central Bank being less able to intervene in the economy, and the absence of an authority empowered to coordinate spending.
Teresa López and Eufemia Basilio
In the chapter, ‘Economic growth and financial development in Mexico: from a virtuous circle of a bi-directional causality to financial subordination,’ the authors develop the theme of bank lending to non-financial activities in the context of the Mexican economy between 1990 and 2013. An empirical and econometric assessment shows that deregulation and globalization, instead of increasing savings, caused the banking system to lose sight of its core activity, which is the financing of production. On this basis, the authors assert the need to establish regulatory mechanisms to ensure financial resources for production.