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This book offers a novel interpretation of the Great Recession and the ensuing Euro Crisis as a consequence of the evolution of capitalism since the 1970s. Chapters argue that the neoliberal development trajectory pursued in recent decades is unsustainable, and posit that neither sound macroeconomics nor empirical data support the unqualified faith in free markets that inspired it. The book begins by providing a broad critical perspective on key concepts such as freedom, free market, free trade, globalisation and financialisation, before going on to analyse the long and deep recent crisis as a result of the neoliberal policy strategy adopted since the early 1980s. The alternative narrative outlined in the book provides insights into the policy strategy required to achieve a sustainable development trajectory.

Inhaltsverzeichnis

Frontmatter

1. Introduction: Approach and Basic Concepts

Abstract
The introductive chapter aims to clarify the approach adopted in the book. First, it emphasises its link with the approach of historical economics, as practised by Kindleberger. Differently from Kindleberger, however, the qualitative model worked out in this book aims to focus on the intertwined evolution of economics and economic policy. This chapter emphasises the crucial role played in scientific research by the stage of interpretation as crucial bridge between theory and empirical evidence. The case study of the Phillips curve confirms the crucial role of the investigator’s vision in scientific research. Three visions of the nexus between growth and development are then clarified. The vision adopted by this book focuses on a comprehensive vision of sustainable development and a suggested definition of development trajectory.
Alessandro Vercelli

Globalisation and Financialisation in a Long-Run Perspective

Frontmatter

2. Freedom, Free Markets, and Neoliberalism

Abstract
This chapter provides some necessary background for the arguments developed in the book. First comes a preliminary discussion of the basic concepts underlying the arguments, beginning with the concept of freedom. A critical scrutiny of the concept of free market follows. A brief reconstruction of the evolution of economic liberalism is provided with the aim of clarifying the meanings attached to its main varieties. In particular, a rigorous definition of the controversial concept of neoliberalism is suggested. This leads to a discussion of the misleading conception of the relationship between state and market as a zero-sum game. The concluding remarks emphasise that the evolution of capitalism has produced a growing contradiction between democracy and a narrow view of freedom centred on negative freedom.
Alessandro Vercelli

3. The Globalisation of Markets

Abstract
This chapter examines the main causes, the evolution, the principal consequences, and the policy implications of globalisation. The analysis focuses on its articulation in two surges of globalisation divided by an intermediate period of de-globalisation. The specific features of the First and Second Globalisations are spelled out by reconstructing the co-evolution of history of facts and history of economic analysis (pure theory of free trade). A discussion follows on the main arguments in favour or against the process of globalisation. The controversial issue of cross-country mobility of production factors is then briefly examined. The final remarks advocate a cautious attitude towards free trade, keeping in mind that the freedom of people should always be the ultimate priority.
Alessandro Vercelli

4. The Evolution of Financialisation

Abstract
First, this chapter discusses to what extent financialisation is a recurring phenomenon. The historical evidence shows that episodes of rapid financialisation have analogies and differences and that they alternate with periods of slower, sometimes receding, financialisation. This begs the question whether the fluctuations of financialisation occurred around a trend or not. This chapter argues that we may identify a secular tendency of increasing financialisation. The progressive steps of financialisation have a common root in flexibility-enhancing innovations. These innovations aim to increase the agents’ flexibility of choice as this improves their expected returns. The final part of the chapter investigates the pros and cons of the process of financialisation from the point of view of sustainability.
Alessandro Vercelli

The Great Recession: Causes and Consequences

Frontmatter

5. The Neoliberal Trajectory and the Crisis

Abstract
This chapter argues that the recent global crisis is the direct consequence of a development paradigm that is unsustainable from the economic, financial, social, and environmental viewpoints. Such a paradigm became progressively dominant since the late 1970s when the neoliberal policy strategy started to become hegemonic at the world level.
A dual inflationary bias eventually haunted the neoliberal development trajectory: one in the financial sector in consequence of the financialisation process and the asymmetric monetarism practised by central banks, and one in the real sector because of the growing interaction between financial instability and overexploitation of natural resources. The accumulation of these and other side effects of the neoliberal policies triggered the Great Recession and amplified the effects of its propagation in space and time.
Alessandro Vercelli

6. The Neoliberal Financialisation1

Abstract
This chapter investigates causes and consequences of the second surge of financialisation after the Industrial Revolution. The analysis starts from the main changes in finance theory occurred since the early 1970s that provided the foundations for a new policy strategy in finance of neoliberal inspiration. The implementation of the latter produced far-reaching structural transformations in finance that changed the way in which the economic system, not just the financial system, behaves. The analysis of the genesis and the consequences of shadow banking follow. The focus shifts first to a critical discussion of the reform proposals for the shadow banking system and then for the entire financial system. The concluding remarks discuss causes and implications of the delusion of self-regulation in finance in the neoliberal era.
Alessandro Vercelli

7. Environment and Sustainability

Abstract
This chapter aims to clarify the relationship between the surge of environmental policy started in the early 1970s and the surge of neoliberal policy strategy started in the early 1980s. The surge of environmental policy began under the pressure of the public opinion, but entered soon in conflict with the neoliberal approach. This produced a shift from the prevailing use of command-and-control policy instruments to a systematic use of market-based instruments. The latter were unable to interrupt the trend towards increasing environmental unsustainability, particularly in the energy system. This chapter argues that policy makers may find a way out from this unsustainable trajectory only by implementing a sustainable development model based on a modified technological paradigm.
Alessandro Vercelli

Epilogue

Frontmatter

8. The Eurocrisis

Abstract
This chapter briefly reconstructs the principal features of the crisis in the Eurozone started in 2010. First, the analysis focuses on how the Eurocrisis was triggered, propagated, and reinforced by structural, institutional, and policy factors. It then discusses the mainstream account of the Eurocrisis showing its shortcomings in the light of the optimal currency area theory. An alternative explanation is suggested focusing on the faulty design of the Euro and its management rules. The policy implications of the suggested explanation are then discussed emphasising the shortcomings of austerity policies. The investigation carried on in this chapter concludes that the current design of the Euro, its management rules, and the policy strategy pursued in the Eurozone are unsustainable.
Alessandro Vercelli

9. Concluding Remarks

Abstract
This concluding chapter focuses on the alternative policy vision emerging from the investigation pursued in this book. The unsustainability of the neoliberal development trajectory suggests a few directions where an effective therapy should focus its efforts. The ultimate cause of this disease is a simplistic and distorted concept of liberty reducing it to its negative side of mere defence of individuals from the interference of the state. This also distorts the therapeutic approach to the negative consequences of this disease. The misleading attempt to reduce the policy constraints imposed on market actors leads to a form of casuistic regulation that is more complex and oppressive than previous forms of regulation. The solution of the neoliberal trilemma requires the taming of neoliberal financial globalisation.
Alessandro Vercelli

Backmatter

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