1,720,964 research outputs found
The crisis in context
No full textWOS: 000385216000001Economic crises have long occupied an important place in the political economy literature. Political economy approaches to the global crisis can roughly be divided into three. First, there are those that result from the contradictory structural characteristics of the capitalist mode of production. These explanations include theories such as the tendency of the rate of profit to fall, the profit squeeze, underconsumption, overaccumulation, disproportionality and the moral depreciation of capital. Second, many argue that crises result from the conjuncture of unanticipated events such as rapid oil price increases, rapid advances in technologies, excessive financialization, the emergence of alternative centers of capital accumulation and repositioning in the class relationships. Third, economic crisis can also result from government policies, either intentional or unintentional. This approach is prompted by the apparent increase in the frequency and economic cost of crises since the 1980s when neoliberal policies became dominant in the major capitalist countries. In this view, the crisis of 2008 was the necessary outcome of a 30year trend in economic deregulation in the advanced capitalist economies. This policy shift represented a conscious choice by the capitalist classes in each country, just as the previous period of regulation had been a policy choice. Most authors in this book recognize that the separation of causes along the above distinct lines may not be easy, as systemic, conjunctural and policydriven factors often overlap and display a complex relationship. Let alone complicated issues such as financialization, seemingly straightforward conjunctural issues such as the 1973–1979 oil crisis has been considered as a crisis of accumulation linked with the contradictory nature of capital accumulation. Alan Freeman (Chapter 5) suggests that the immediate causes of crisis and systemic underlying causes, such as declining profit rates which can worsen all the other contradictions, should be separated from each other. Therefore, he argues, while financialization may seem to cause the crisis, what caused financialization requires an explanatio
The policy-based and conjunctural causes of the 2008 crisis
No full textWOS: 000385216000010This chapter argues that while the conjunctural and policy-based factors played an important role in the 2008 crisis, the systemic causes of crisis should not be ignored. Prior to the crisis, for example, the United States economy was already unsustainable, not only because of the large current account deficits but also due to the stagnant real wages which had been compensated by excessive lending to workers to offset insufficient demand. Based on Marx’s reproduction schemes, and by emphasizing the distribution of income between capitalists and workers, and the time gap between the production of means of production and consumption, this chapter develops a new theoretical model to explain the cyclical nature of capital accumulation and crisis. The model shows that even when the shares of profits and wages in total output remain the same, problems associated with insufficient demand and crisis can occur, since different stages of capital accumulation require different levels of wages and profits to avoid insufficient demand. The dynamics of capital accumulation process necessitates radical changes in income distribution to maintain sufficient demand which is near impossible to achieve. When there is a large reserve army of labor (unemployment), lower wages bring about faster accumulation of capital; and once the reserve army of labor declines substantially, demand deficiency starts which requires capitalists to radically increase either their consumption or wages. Both are very difficult adjustments for capitalists
The Political Economy of Turkey’s Economic Miracles and Crisis
No full textThis paper argues that Turkey experienced two manufactured economic miracles since 2002 which required a corrective crisis. The first miracle occurred between 2002 and 2008 when Turkey’s GDP tripled. This miracle was fictional since the increase in GDP was largely due to the appreciation of the exchange rate. During this period, Turkey experienced large current account deficits and accumulated large external debt, which are at the heart of the current crisis. Turkey experienced the second miracle between 2009 and 2013 when the economy grew faster than most countries in the world. This miracle was even more peculiar since it was associated with the deterioration of many economic and political indicators. This miracle was fostered by the 2016 revision of the Turkish Statistical Institute and therefore was also fictional. In this period, Turkey continued to experience large current account deficits and the external debt has become large enough to threaten the economy. The deterioration of the global environment marked the end of the second miracle and created the conditions for a painful adjustment. This paper argues that Turkey’s two economic miracles and the current crisis are dialectically linked and the crisis cannot be comprehended without a proper grasp of how the miracles were manufactured. © 2020, The Author(s)
Crisis in Turkey: Estimating the Potential Welfare Loss?
No full textWOS: 000557593400001While large and persistent current account deficit and external debt stock are among the most common causes of economic crises, measuring the risk associated with them is not easy. The literature typically focuses on the total external debt stock and the size of the current account deficit, which provide limited information. This study proposes a more accurate risk index by measuring therealsize of the external debt stock and considering how external resources are utilized. Once external borrowing becomes a significant risk factor, a painful adjustment process starts in the form of slow growth or a crisis. Our index measures the extent of risk and the potential cost of the adjustment process. We empirically test the accuracy of our index by using the experiences of a number of selected countries affected by the 2008 crisis and show that the index can explain 77% of the variation in real consumption in those countries. By using the empirical results, we also estimate the potential cost that Turkey might experience once the currency crisis develops into a full-blown crisis
Financialization Hypothesis: A Theoretical and Empirical Critique
No full textThe financialization hypothesis (FH) is a popular leitmotiv which argues that the financial system conquers the commanding heights of the capitalist economy. It maintains that finance gained independence from productive-capital and began to dominate it. The FH bases this argument on several empirical claims concerning the size and the strategic role of financial entities. This article offers a critique of crucial analytical and empirical claims of the FH. It argues that the FH overrates the importance of novel financial instruments, misunderstands their function and, thus, fails to situate the role of finance in the capitalist system. Especially, it erroneously divorces finance from and superimposes it on productive-capital. Moreover, this article argues that crucial empirical claims of the FH do not stand up to scrutiny
What is Globalisation and What is Not?: A Political Economy Perspective
No full textDespite the widespread use of the concept there is neither a consistent theoretical construction nor a clear definition of globalisation. Although the debate between pro and anti globalisation scholars and activists is interesting, it largely fails to address globalisation as a fundamental structural transformation of modern capitalism from a historical perspective and tends to reduce it to a re-articulation of the old debate on states versus markets. The first aim of this paper is to provide a clearer definition of globalisation which will be helpful in assessing the validity of various arguments surrounding the concept of globalisation, including whether such a process exists. Then an alternative interpretation of globalisation viewed from a political economy perspective will be introduced. It will be argued that internationalisation in the form of increased trade and foreign direct investment is the nature of capitalist accumulation process, thus, cannot be impeded. This accumulation process necessarily creates its own ideological climate to facilitate acceptance of the doctrine and to justify the economic and social problems it creates. Finally it will argue that there is a globalisation tendency since increased internationalisation inevitably weakens the role of nation states by transferring some of their functions to newly created supranational states that are created by the dynamics of this internationalisation process
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