From Financial Crisis to Stagnation
The Destruction of Shared Prosperity and the Role of Economics

Offers a novel explanation of the financial crisis and Great Recession that emphasizes the destruction of shared prosperity over the past thirty years.

Thomas I. Palley (Author)

9781107016620, Cambridge University Press

Hardback, published 27 February 2012

258 pages, 26 b/w illus. 26 tables
22.9 x 15.2 x 1.6 cm, 0.52 kg

'In this perspicacious and persuasive book, Tom Palley shows how conventional economic thinking led ultimately to the disaster of the Great Recession and how it is now threatening to culminate in the Great Stagnation. His thoughts on how to avoid that and how to recover are compelling and important.' Clyde Prestowitz, President, Economic Strategy Institute

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.

Subject Areas: Business strategy [KJC], Economic & financial crises & disasters [KCX], Political economy [KCP], Monetary economics [KCBM]