Causes and consequences of the financial crisis and the implications for a more resilient financial and economic system

Eckhard Hein

No 61/2016, IPE Working Papers from Berlin School of Economics and Law, Institute for International Political Economy (IPE)

Abstract: The increasing dominance of finance starting in the late 1970s/early 1980s in the US and the UK, and somewhat later in other countries, was associated with two fundamental and structural processes generating the contradictions of this phase of development and finally the financial and economic crises starting in 2007: the deregulation of the financial (and economic) system and the massive redistribution of income at the expense of labour and low income households. These fundamental processes provided the conditions for the generation of major imbalances within some of the national economies, on the one hand, and at the international level, on the other hand. These imbalances and contradictions led eventually to the deep financial and economic crisis, starting in 2007. Therefore, a more resilient financial and economic system requires the re-regulation and downsizing of the financial sector, the re-distribution of income (and wealth) from top to bottom and from capital to labour, the re-orientation of macroeconomic policies towards stabilizing domestic demand at non-inflationary full employment levels, and the re-creation of international monetary and economic policy coordination.

Keywords: financialisation; distribution; growth; financial and economic crisis; resilient financial and economic system (search for similar items in EconPapers)
JEL-codes: D30 E02 E11 E12 E21 E22 E25 E44 E61 E65 G01 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cba, nep-mac and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ipewps:612016

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