The Crisis in Western and Eastern EU: Does the Policy Reaction Address its Origins?
We are in a new phase of the global crisis: the struggle to distribute the costs of the crisis. This crisis has been an outcome of a global process of increased exploitation and inequality, since the post-1980s. Neoliberalism tried to solve the crisis of the golden age of capitalism through a major attack on labour. The outcome was a dramatic decline in labour’s bargaining power and labour’s share in income across the globe in the post-1980s period. However, the decline in the labour share has been the source of a potential realisation crisis for the system. The decline in the purchasing power of workers limited their potential to consume. Demand deficiency and financial deregulation reduced investments despite increasing levels of profitability. Thus neoliberalism only replaced the profit squeeze and the over-accumulation problems of the 1970s with the realisation problem. Financial innovations and debt-led consumption seemed to offer a short-term solution to this potential realisation crisis. Since summer 2007 this solution has also collapsed. The crisis was tamed through major banking rescue packages and fiscal stimuli. Now the financial speculators and corporations are relabelling the crisis a ‘sovereign debt crisis’ and pressurising the governments in a variety of countries ranging from Greece to the UK to cut spending to avoid taxes on their profits and wealth.
KeywordsReal Wage Public Debt Budget Deficit Current Account Deficit Euro Zone
Unable to display preview. Download preview PDF.
- Arestis, P. and Sawyer, M. (2009) The Financial Crisis, Recession and the Future of Public Expenditures, mimeo.Google Scholar
- Becker, J. (2007) ‘Dollarisation in Latin America and Euroisation in Eastern Europe: Parallels and Differences’, in J. Becker and R. Weissenbacher (eds), Dollarisation, Euroisation and Financial Instability. Marburg: Metropolis-Verlag, pp. 223–78.Google Scholar
- Fitoussi, J.P. and Saraceno, F. (2010) ‘Europe: How Deep is a Crisis? Policy Responses and Structural Factors Behind Diverging Performances’, Journal of Globalization and Development, 1(1), article 17.Google Scholar
- Gligorov V., Pöschl, J., Richter, S. (2009) ‘Where Have All the Shooting Stars Gone?’, The Vienna Institute for International Economic Studies, Current Analyses and Forecasts 4.Google Scholar
- Goldstein, M. (2005) ‘What Might the Next Emerging-market Financial Crisis Look Like?’, Institute for International Economics, Working Paper 05-7.Google Scholar
- Hunya, G. (2009) ‘FDI in the CEECs under the Impact of the Global Crisis: Sharp Declines’, The Vienna Institute for International Economic Studies Database on Foreign Direct Investment in Central, East and Southeast Europe.Google Scholar
- ILO (2010) World of Work. Geneva: ILO.Google Scholar
- Lapavitsas, C., Kaltenbrunner, N., Lindo, D., Michell, J., Painceira, J.P., Pires, E., Powell, J., Stenfors, A. and Teles, N. (2010) Eurozone Crisis: Not Just a Greek Virus, Research on Money and Finance Occasional Report, School of Oriental and African Studies, London.Google Scholar
- OECD (2009) Economic Outlook, June.Google Scholar
- Onaran, Ö. (2007) ‘International Financial Markets and Fragility in Eastern Europe: “Can it Happen” here?’, in J. Becker and R. Weissenbacher (eds), Dollarization, Euroization and Financial Instability. Marburg: Metropolis-Verlag, pp.129–48.Google Scholar
- Onaran, Ö. (2009) ‘Wage Share, Globalization, and Crisis: The Case of Manufacturing Industry in Korea, Mexico, and Turkey’, International Review of Applied Economics, 23(2).Google Scholar
- Ostry, J.D., Ghosh, A.R., Habermeier, K., Chamon, M., Qureshi, M.S. and Reinhardt, D.B.S. (2010) ‘Capital Inflows: The Role of Controls’, IMF Staff Position Note.Google Scholar
- The Economist (2010a) ‘Greece’s Sovereign Debt Crisis’, 17 April, 66–8.Google Scholar
- The Economist (2010b) ‘Greece’s Bail-out Maths’, 27 March, 78.Google Scholar
- The Economist (2010c) ‘East European Economies’, 20 March, 41.Google Scholar
- Ward, A. (2010) ‘Latvia Hacker Calls for Fat Cat Revolt’, Financial Times, 4 March.Google Scholar