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

Cover......Page 1
From Financial Crisis to Stagnation......Page 3
Title......Page 5
Copyright......Page 6
Dedication......Page 7
Contents......Page 9
Preface......Page 15
Peeling the Onion of Misunderstanding......Page 16
Acknowledgments......Page 19
PART I: ORIGINS OF THE GREAT RECESSION......Page 21
1: Goodbye Financial Crash, Hello Stagnation......Page 23
Core Thesis......Page 24
Economic Policy and the Metaphor of Pump Priming......Page 25
History, Politics, and Where to Begin......Page 26
2: The Tragedy of Bad Ideas......Page 29
The Origins and Logic of Neoliberalism......Page 30
The Keynesian Critique of Neoliberalism......Page 34
The Unfreedom Critique......Page 37
The End of History, Again?......Page 39
3: Overview: Three Perspectives on the Crisis......Page 41
The Hard-Core Government Failure Perspective......Page 43
The Soft-Core Market Failure Perspective......Page 44
The Destruction of Shared Prosperity Perspective......Page 46
The Soft-Core Market Failure Policy Response......Page 48
The Structural Keynesian Policy Response......Page 50
4: America’s Exhausted Paradigm: Macroeconomic Causes of the Crisis......Page 52
The Flawed U.S. Growth Model......Page 53
The Post-1980 Neoliberal Growth Model......Page 54
The Role of Economic Policy......Page 57
The Neoliberal Bubble Economy......Page 60
The Flawed Model of Global Economic Engagement......Page 63
The Triple Hemorrhage......Page 64
NAFTA......Page 66
The Response to the East Asian Financial Crisis......Page 67
China and Permanent Normal Trading Relations (PNTR)......Page 70
America’s Exhausted Macroeconomic Paradigm......Page 73
5: The Role of Finance......Page 77
The Role of Finance......Page 78
The Mechanics of the Crash......Page 86
Global Transmission of the Crisis......Page 92
Ideas and Unintended Consequences......Page 95
The Paradox of Financial Reform......Page 96
6: Myths and Fallacies about the Crisis: Stories about the Domestic Economy......Page 99
The Regulatory Excess Hypothesis......Page 101
The Regulatory Deficiency Hypothesis......Page 106
The Flawed Monetary Policy Hypothesis......Page 110
The Yield Chasing, Animal Spirits, and Black Swan Hypotheses......Page 113
Changing Neoliberal Explanations of the Trade Deficit......Page 117
Stage 1: The Twin Deficits and Saving Shortage Hypotheses, 1980–2000......Page 118
The Saving Shortage Hypothesis......Page 120
Stage 2: The New Bretton Woods and Dark Matter Hypotheses, 2000–2005......Page 122
A Partial Assessment......Page 124
Stage 3: The Saving Glut, Asset Shortage, and the Dollar’s Special Status Hypotheses......Page 126
The Asset Shortage Hypothesis......Page 132
The Dollar’s Special Status Hypothesis......Page 134
The New Neoliberal Consensus: Gato Pardo Economics......Page 137
Conclusion: Theory on the Fly......Page 142
PART II: AVOIDING THE GREAT STAGNATION......Page 143
The Danger of Stagnation......Page 145
The Economic Outlook......Page 146
Why this Recession Really is Different......Page 148
Why U.S. Economic Policy is Failing......Page 154
Even the Best Mainstream Economists do not Understand the Problem......Page 156
The Risk of Further Policy Failures......Page 158
The Failure of Neoliberalism......Page 161
Structural Keynesianism versus Textbook Keynesianism......Page 165
Repacking the Box: A Structural Keynesian Model......Page 167
Budget Deficits during the Transition to a New Paradigm......Page 173
The Third Way and the Split among Social Democrats......Page 176
Difficulties in Dislodging the Third Way......Page 178
The Curse of Clintonomics......Page 179
Conclusion: Politics and Paradigms......Page 180
The Special Significance of Globalization......Page 182
The Economics of Globalization......Page 186
Core Labor Standards......Page 190
A Global Minimum-Wage System......Page 194
Managed Exchange Rates......Page 195
Legitimize Capital Controls......Page 198
Rewrite Trade Rules......Page 199
Lessons from History......Page 201
The Problem of Lock-in......Page 202
Conclusion: Mend it or End it......Page 204
11: Economists and the Crisis: The Tragedy of Bad Ideas Revisited......Page 206
The Crisis, the Destruction of Shared Prosperity and the Role of Economists......Page 207
The Vulnerability of Orthodox Economics......Page 211
Obstacles to Change......Page 216
The Neoclassical Monopoly: Coke versus Pepsi......Page 217
The Cuckoo Tactic......Page 220
The Paradigm of Perfection......Page 221
The Science Myth in Economics......Page 222
Sociological Obstructions......Page 224
Power and Ideas......Page 225
Expert Opinion and Open Society......Page 227
12: Markets and the Common Good: Time for a Great Rebalancing......Page 229
The Fallacy of the Philosophy of Greed is Good......Page 230
The Liberal Ethical Critique......Page 235
Time for a Great Rebalancing......Page 236
References......Page 241
Index......Page 253