This conference has been published as:
“The 2008 Crisis Ten Years On: in Retrospect, Context and Prospect Paperback”
The 2008 economic crisis, which often is appraised only as a “financial crisis”, has in fact acquired a manifold character involving the socio-economic structures at worldwide level. Indeed, the crisis was triggered in the financial sector ─ in particular, with the crisis of the subprime mortgage market in the US, which ended up in a general banking crisis and the bankruptcy among many other institutions, and of the investment bank Lehman Brothers. But at the same time this event marked the culmination of a long-term trend of financialisation of the economic system, which gained more impetus with the neo-liberal shift of the 1980s.
Many studies, starting from Hyman Minsky’s seminal contributions on the effects of “financialisation” on the instability of the system, have investigated a number of imbalances that help to explain the widespread character of the crisis. After the bail-outs aimed at stabilising the financial markets, mainly between 2008 and 2011, it has been increasingly clear that deep structural and intertwined problems overwhelm the economic, political and social scenarios. Among them, we can highlight the following ones:
- growing disparities of income between persons and economic areas, often accompanied by severe forms of poverty,
- inflated financial markets, low investment trends and changes in the patterns of production and employment,
- environmental unsustainability of the current way of production and consumption,
- increasing unemployment, mainly among the youth, in the context of the adoption of disruptive technological innovations,
- growing risks in the worldwide geopolitical contexts with a resurgence of massive migrations, xenophobia and armed conflicts.
This Conference addresses the fact that, after 10 years, structural problems are still present and waiting for policy responses. As a matter of fact, the policies addressing the crisis have rarely gone beyond “emergency measures”, such as bank recapitalisation, debt consolidation, and various forms of “quantitative easing”, sometimes accompanied by moderately expansive fiscal policies. These measures, while having the merit of avoiding a complete collapse (like that of the 1929 crisis) and allowing a slight recovery in some cases, are far from solving the structural aspects of the crisis.
With this background consideration, this Conference seeks to investigate into the challenges of economic theory and policy applications. In particular, this conference’s guiding question is how to render objectives of full employment, social justice, environmental sustainability, scientific and technological progress more compatible with each other.
We welcomed contributions aimed at casting light on the manifold aspects of the 2008 global crisis and how to address them in policy action. These contributions could be both theoretical and empirical, focusing on retrospective, contextual and prospective dimensions.
The main tracks included, but were not limited to, the following intertwined topics:
- The financialisation of the economy
- Main economic and institutional features of the financialisation of capitalist economies
- The relations between financialisation and economic crisis
- Finance and changes in the pattern of production and employment
- Indebtedness and consumption of middle-lower classes of incomes
- The role of central banks’ and treasuries’ policies and of relevant supranational institutions like IMF, WTO and World Bank
- The debate on secular stagnation, underconsumption, and on the growing importance of the “immaterial side” of consumption
- The contradictions of The Affluent Society and their role in the emergence of economic crisis.
- Investment and global competition
- Investment flows in the context of global value chains and the role of transnational corporations
- The role of global trade competition in investment and innovation strategies
- Trends in investment strategies and labor-saving technologies
- The new mercantilism: nation states and competition for business
- The fiscal war and global investments
- Employment and working conditions
- The global labor marketplace: offshoring, outsourcing, crowdsourcing.
- Working conditions and unequal income distribution
- Disruptive technologies and technological unemployment
- Policies to fix the problem of technological unemployment
- Social, economic and political imbalances
- Global economic imbalances
- Income and wealth inequalities
- Concentration of economic, financial and political power
- Environmental unsustainability and the notion of circular economy
- New massive migration trends
- Institutional challenges and alternatives
- Economic, social and cultural trends at national and supranational level
- Policies to foster an equitable and sustainable economy
- Alternative institutional frameworks at national and supranational level.
The 2008 economic crisis, which often is appraised as only a “financial crisis”, has indeed acquired a manifold character involving the socio-economic structures at worldwide level. Indeed, the crisis was triggered in financial sector ─ in particular, with the crisis of the subprime mortgage market in the US, which ended up in a general banking crisis and the bankruptcy among many other institutions, and of the investment bank Lehman Brothers. But this event marked the culmination of a long-term trend of financialisation of the economic system, which gained more impetus with the neo-liberal shift of the 1980s.
During the last forty years, most governments around the world supported the long-run process of financial expansion that turned out to be characterised by the financialisation of the capitalist economy. In this historical scenario, monopoly-finance capital became increasingly dependent on bubbles that, both in credit and capital markets, proved to be globally the sources of endogenous financial fragility.
This process was reinforced, in a vicious circle, by a distribution of income, wealth and power. By negatively influencing labor and working conditions, it rendered increasingly difficult for effective demand to reach (or even approach) the level of full employment. In response to this situation, banking and credit policies also supported by governments and supranational institutions were inducing consumers to expand their spending.
While public spending on social and infrastructural objectives was severely restricted, it expanded for sustaining the income and the demand of powerful groups. In this situation, corporate decision making was increasingly subordinated to speculative financial commitments. A financial conception of investment gained ground in the context where financial innovations aimed to achieve short-term profits with lower capital requirements. Managers and owners of firms privileged financial gains often based on speculative shifts of shareholder values. Changes in corporate ownership, through waves of mergers and acquisitions, created new business models where companies, while highly powerful and concentrated, turned out to be simply bundles of financial assets and liabilities to be traded. Hence, current corporate governance came to have the privilege of mobility, liquidity and short-term profits based on high levels of debt.
A trend of high expansion of financial assets, while economic growth remains limited and sporadic, gave way in the new millennium to widespread unemployment, income gaps and less welfare. The same policies that obliterated social services and kept labor cheap favoured global enterprises and financial deepening. Besides, the onset of the new millennium represents a new age of democracy where democracy allows for election to office but not to power. These questions reflect on issues of current power, politics and economics in a social context where democratic institutions are being threatened (Madi, 2015).
In this context, many studies, starting from Hyman Minsky’s seminal contributions on the effects of “financialisation” on the instability of the system, investigated a number of imbalances that help to explain the widespread character of the crisis, which include the following aspects:
(I) The growing disparities of income between persons and economic areas, often accompanied by severe forms of poverty. These effects are reinforced by their negative effects on the security of jobs, the opportunity of employment, the stability of economic and social relations.
(II) These inequalities reduced the capacity to consume by the middle-lower classes of incomes and then the value of the “income multiplier”. As a result, they severely crippled the capacity of the effective demand to reach the supply of full employment (however defined). These imbalances, by reducing the “marginal efficiency of capital” (i.e. the profit expectations over the real interest rate, whose level was most often very high) tended to lessen the incentive for productive investment and reinforced the incentive for financial speculation.
(III) The environmental unsustainability of the present way of production and consumption, that demands an urgent solution for the major problems such as global warming, destruction of natural habitat, various forms of pollution, or urban congestion.
(IV) Last but not least, the crisis exerted very negative effects on the stability of the international relations, with a resurgence of massive migrations, xenophobia and armed conflicts.
In contemporary capitalist societies, the global financial architecture favoured the expansion of financial assets, capital mobility and short-term investment decisions – increasingly subordinated to rules of portfolio risk management. In this scenario, changes in productive organisation were based on competitiveness and corporate governance criteria. Therefore, job instability and fragile conditions of social protection turned out to put pressure on the redefinition of survival strategies. As a result of the new trends in capital accumulation and production, workers turned out to redefine their skills, become informal entrepreneurs or migrate, among other examples of the current worldwide challenges to citizens. Recalling Madi’s own words (2013) “Considering this background, governments faced increasing challenges to support an ethically defensible approach to working conditions. While money is an end in itself social behaviours have mainly turned out to be guided by the profit motive. Consequently, social cohesion was reduced since groups of specific interests turned out to spread their actions and expectations in ways that are desirable to the interest group. Indeed, the outstanding conflicts between solidarity and particular interests revealed growing tensions between ethical values and individual principles in capitalist societies”
This situation poses a major challenge to economic theory and policy action. In fact, after ten years from the 2008, it is evident by now that not much changed in the “mainstream way” of addressing the economic crisis. The prevalent tendency has been to conceive the crisis as caused by an excess of imprudent speculation, with little questioning of the economic and institutional “fundaments” that paved the way to that course of events. Consequently, the policies addressing the crisis rarely went beyond “emergency measures,” such as bank recapitalisation, debt consolidation, or various forms of “quantitative easing,” sometimes accompanied by moderately expansive fiscal policies. These measures, while having the merit of avoiding a complete collapse (like that of the 1929 crisis) and allowing a slight recovery in some cases, are far from still solving the structural aspects of the crisis.
As a matter of fact, the structural and intertwined problems mentioned before are still in the foreground and waiting for a more structural policy response. Will a new reality of disruptive innovations in business and markets create higher levels of inequality within and among nations? Will massive investments in green technology lead the world toward a cleaner future? How can we assess the model of governance and development of China and other emerging economies?
Finally, how will we look back on 2018 a decade from now?
This Conference calls for a reflection in retrospective, contextual and prospectivet dimensions.
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