What Global Economic Crisis?

With unprecedented trends towards globalization, the repercussions of economic crises are more profound than ever before, particularly for developing countries. What Global Economic Crises? bridges the gap between theory and policy-making by examining the destabilizing effects of financial crises on economic growth, stability, and development. It also presents innovative ideas intended to inform the design of institutions able to foster more effective international policy coordination.

Philip Arestis is Professor and Director of Research in Economics, South Bank Business School, London. Michelle Baddeley is Fellow and Director of Studies in Economics, Gonville and Caius College, Cambridge.

John McCombie is Fellow and Director of Studies in Economics, Downing College, Cambridge.

List of Tables and Figures

ix

Foreword

xi

G. C. Harcourt

List of Abbreviations

xii

Notes on the Contributors

xiii

Introduction: What Global Economic Crisis?

1

(11)

Philip Arestis

Michelle Baddeley

John McCombie

If Markets are Efficient, Why Have There Been So Many International Financial Market Crises Since the 1970s?

12

(23)

Paul Davidson

Introduction

12

(1)

Why the Change Since 1973?

12

(2)

Alternative Theories of Financial Markets

14

(2)

Claims of Efficient Market Advocates and the Post-War Facts

16

(1)

A Lesson from the Gold Standard Era

17

(1)

Proposed Solutions and the `Third Way'

18

(3)

Liquidity, Uncertainty and the Stability of Markets

21

(2)

Liquidity and Orderly Markets

23

(2)

Irrational Exuberance and Bandwagon Behaviour

25

(1)

Policy Recommendations

26

(3)

Conclusion

29

(2)

Notes

31

(2)

References

33

(2)

Reforming the International Financial Architecture: An Asian Perspective

35

(24)

M. G. Quibria

Joy Quitazol

Introduction

35

(1)

The Trilemma of International Financial Architecture

36

(2)

Proposals for Strengthening the Architecture

38

(14)

Conclusions

52

(2)

Acknowledgements

54

(1)

Notes

54

(2)

References

56

(3)

An Agenda for a New Bretton Woods

59

(19)

John Grieve Smith

Introduction

59

(1)

Unstable Capital Flows

60

(4)

The Tobin Tax

64

(2)

Reforming the Exchange Rate System

66

(6)

Regulation and Crisis Management

72

(2)

A New Bretton Woods

74

(2)

Summary and Conclusions

76

(1)

References

77

(1)

Will the Euro Bring Economic Crisis to Europe?

78

(26)

Philip Arestis

Malcolm Sawyer

Introduction

78

(1)

The Institutional Policy Framework

79

(6)

The Problematic Nature of the Institutional Policy Framework

85

(14)

Summary and Conclusions

99

(1)

Acknowledgements

100

(1)

Notes

100

(1)

References

101

(3)

Globalization, the Distribution of Power, and Full Employment

104

(18)

John Cornwall

Wendy Cornwall

Introduction

104

(1)

Power

105

(3)

The Origins of the Social Bargain Regimes

108

(4)

Self-Reinforcing Tendencies

112

(1)

The Origins of the Market Power Regimes

112

(1)

Institutional Changes in the Labour Market

113

(1)

Globalization and Locking in the Market Power Regimes

114

(2)

Globalization and the Role of the Hegemony

116

(2)

Conclusions

118

(1)

Notes

119

(1)

References

120

(2)

Competition Policy, Development, and Developing Countries

122

(24)

Ajit Singh

Rahule Dhumale

WTO, Competition Policy and Development

122

(2)

The Global Merger Wave

124

(4)

Privatization, Deregulation and Competition Policy

128

(2)

Competition Policies in Advanced Economies: A Model for Developing Countries?

130

(2)

Economic Theory, Competition Policy and Development

132

(4)

Analytical Conclusions and Implications

136

(5)

Notes

141

(2)

References

143

(3)

A Brazilian-Style `Ponzi'

146

(32)

Gabriel Palma

Introduction

146

(3)

Financial Liberalization and Economic Reform in Latin America

149

(3)

The Brazilian Reforms

152

(11)

How to Sleepwalk into a (Public Sector) `Ponzi' Finance

163

(9)

Conclusions

172

(3)

Acknowledgements

175

(1)

Notes

175

(2)

References

177

(1)

Technology and Growth: Between Regionalization and Globalization

178

(25)

Pascal Petit

Introduction

178

(3)

What is New About the Present Phase of Internationalization?

181

(4)

How does Internationalization Affect the Growth Regimes of Nations?

185

(2)

On the Forms of Internationalization in a New Growth Regime

187

(5)

To What Extent are Regional Levels Relevant for Policies to Increase Growth?

192

(5)

Conclusions

197

(2)

Notes

199

(1)

References

200

(3)

The Keynesian Micro-Foundations of the Business Cycle: Some Implications of Globalization

203

(16)

Paul Ormerod

Introduction

203

(1)

The Microeconomic Model of Interacting Keynesian Agents

204

(5)

Model Simulations and Business Cycle Data

209

(3)

Implications for Globalization

212

(3)

Conclusion

215

(1)

Acknowledgements

216

(1)

Appendix: Derivation of an Analytical Solution of the Model

216

(1)

References

217

(2)

An Historical Perspective on Speculative Bubbles and Financial Crises: Tulipmania and the South Sea Bubble

219

(25)

Michelle Baddeley

John McCombie

Introduction

219

(1)

Theoretical Perspectives on Bubbles

220

(2)

Critiques of the Rational Expectations Approaches

222

(5)

A Reconsideration of Two Early Speculative Bubbles

227

(12)

Conclusions

239

(1)

Notes

240

(2)

References

242

(2)

John Cornwall: A Brief Appreciation

244

(7)

Mark Setterfield

Introduction

244

(1)

`Say's Law in Reverse': The Importance of Demand in a Capitalist Economy

245

(1)

Conflict, Uncertainty and Institutions

245

(1)

Path Dependence and Evolutionary Keynesianism

246

(1)

Outstanding Issues: Towards the Further Development and Application of Evolutionary Keynesianism

247

(2)

Acknowledgements

249

(1)

Notes

249

(1)

References

249

(2)

Index

251

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What Global Economic Crisis?

Summary

Author Biography

Table of Contents

Supplemental Materials