The crisis in context

Abstract

Economic crises have long occupied an important place in the political economy literature. Political economy approaches to the global crisis can roughly be divided into three. First, there are those that result from the contradictory structural characteristics of the capitalist mode of production. These explanations include theories such as the tendency of the rate of profit to fall, the profit squeeze, underconsumption, overaccumulation, disproportionality and the moral depreciation of capital. Second, many argue that crises result from the conjuncture of unanticipated events such as rapid oil price increases, rapid advances in technologies, excessive financialization, the emergence of alternative centers of capital accumulation and repositioning in the class relationships. Third, economic crisis can also result from government policies, either intentional or unintentional. This approach is prompted by the apparent increase in the frequency and economic cost of crises since the 1980s when neoliberal policies became dominant in the major capitalist countries. In this view, the crisis of 2008 was the necessary outcome of a 30year trend in economic deregulation in the advanced capitalist economies. This policy shift represented a conscious choice by the capitalist classes in each country, just as the previous period of regulation had been a policy choice. Most authors in this book recognize that the separation of causes along the above distinct lines may not be easy, as systemic, conjunctural and policydriven factors often overlap and display a complex relationship. Let alone complicated issues such as financialization, seemingly straightforward conjunctural issues such as the 1973–1979 oil crisis has been considered as a crisis of accumulation linked with the contradictory nature of capital accumulation. Alan Freeman (Chapter 5) suggests that the immediate causes of crisis and systemic underlying causes, such as declining profit rates which can worsen all the other contradictions, should be separated from each other. Therefore, he argues, while financialization may seem to cause the crisis, what caused financialization requires an explanation