Macroeconomic Policy in the Shadow of the Great Financial Crisis

The Great Financial Crisis of 2007–2008 (GFC) has cast a long shadow on the economic and political realities we confront today, as did the Great Depression of the 1930’s on the decades that followed. These economic earthquakes also upended prevailing economic thinking, particularly in the realm of macroeconomics. In fact, in the 1930’s, it was the revolutionary writings of John Maynard Keynes that effectively created the field of Macroeconomics itself, potentially ushering in a revolutionary paradigm in economic thought and practice. Similarly, today, the GFC has all but destroyed the conventional macroeconomic wisdom of austerity and inflation control as the main guide to macroeconomics, but without yet finding an agreed upon substitute to guide government policy.

Macroeconomic policy – like so much else – is now adrift.

This event, Macroeconomic Policy in the Shadow of the Great Financial Crisis, presents four new books that address various aspects of this juncture in Macroeconomic theory and policy making. Our center-piece book asks, what can we learn of relevance today from the seminal work of John Maynard Keynes? James Crotty’s Keynes Against Capitalism: His Economic Case for Liberal Socialism recovers the long-lost message of Keynes’ macroeconomic thinking–ideas that modern day “Keynesian” approaches all but obscure. James Crotty shows that Keynes’ work, including his magnum opus, The General Theory, was a detailed argument for a “liberal socialism” to replace the dysfunctional capitalism of his era. Far from a simple argument for deficit spending to reach full employment, Keynes’ work showed why the capitalism of his day needed profound structural experimentation and change to not only maintain full employment, but to reduce savage inequality and end destructive financial market speculation.

These themes are made relevant today in the rest of the conference’s events, first in a plenary address by James Galbraith on Pragmatism and Ideology in the Legacy of John Maynard Keynes, and then in the presentation and discussion of three other new books: Ilene Grabel’s When Things Don’t Fall Apart, which chronicles what she calls the productive incoherence of policy experimentation at the IMF since the GFC; Jane D’Arista’s All Fall Down, which charts the global aspects of the GFC and what is needed to bring about fundamental improvements in the international financial governance; and in Gerald Epstein’s The Political Economy of Central Banking, which delineates the costs of living with finance dominated central banks, and then makes a case for more democratic control of central banking to help macroeconomic policy work for everyone.

Three fine discussants, Robert Kuttner of the American Prospect, Gary Dymski, of the Leeds University Business School, and Robert Wade, of the London School of Economics, will share their insights on these books and the important issues they raise.