'Two or three things I know about her': Europe in the global crisis and heterodox economics

Riccardo Bellofiore

Cambridge Journal of Economics, 2013, vol. 37, issue 3, 497-512

Abstract: Europe is in the middle of an economic and social storm. Although the turmoil since the mid-2008 originated elsewhere, the European dynamics may turn the Great Recession into a full-blown Great Depression. Within this dynamics, the faulty design of the 'single currency' is a key element, together with the neomercantilist fracture dividing the 'core' of Northern Europe and the 'periphery', mostly composed of Southern European countries. The paper gives a quick reminder of what the true nature of the global crisis is (Section 2). The neoliberal Great Moderation was a paradoxical kind of financial and 'privatised Keynesianism'. The heart of the Anglo-Saxon model has been the overcoming of the stagnationist tendencies emerging from 'traumatised workers' thanks to the transformation of 'manic savers' into 'indebted consumers'. I will then (Section 3) dissect the peculiarities of the neomercantilist export-led posture. The eventual establishment of the euro as the 'single currency' was in stark discontinuity with the Maastricht Treaty originating from the Delors Commission (Section 4). The real puzzle is to understand how the euro actually came into being from such fragile foundations, and also why for many years it seemed a happy experiment. The institutional setting of the eurozone and the German self-defeating obsession for fiscal austerity decisively drove the area into a double-dip recession. A way out of the crisis (Section 5) requires not only monetary reforms and expansionary coordinated fiscal measures, but also a wholesale change of economic model. This latter must be built upon a new 'engine' of demand and growth. A monetary finance of 'good' deficits is called for realising a radicalised 'socialisation of the investment': a class and Keynesian new deal. Copyright , Oxford University Press.

Date: 2013
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