I N T E R N AT I O N A L PA P E R S I N P O L I T I C A L E C O N O M Y Economic Policies Since the Global Financial Crisis Edited by Philip Arestis and Malcolm Sawyer International Papers in Political Economy Series Editors Philip Arestis University of Cambridge Cambridge, United Kingdom Malcolm Sawyer University of Leeds Leeds, United Kingdom This is the fourteenth volume of the series International Papers in Political Economy (IPPE) This series consists of an annual volume with a single theme The objective of the IPPE is the publication of papers dealing with important topics within the broad framework of Political Economy The original series of International Papers in Political Economy started in 1993, until the new series began in 2005, and was published in the form of three issues a year with each issue containing a single extensive paper Information on the old series and back copies can be obtained from the editors: Philip Arestis (pa267@cam.ac.uk) and Malcolm Sawyer (e-mail: m.c.sawyer@lubs.leeds.ac.uk) More information about this series at http://www.springer.com/series/14844 Philip Arestis • Malcolm Sawyer Editors Economic Policies since the Global Financial Crisis Editors Philip Arestis University of Cambridge Cambridge, United Kingdom Malcolm Sawyer University of Leeds Leeds, United Kingdom International Papers in Political Economy ISBN 978-3-319-60458-9 ISBN 978-3-319-60459-6 (eBook) DOI 10.1007/978-3-319-60459-6 Library of Congress Control Number: 2017951854 © The Editor(s) (if applicable) and The Author(s) 2017 This work is subject to copyright All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar 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Gewerbestrasse 11, 6330 Cham, Switzerland Preface This is the fourteenth volume of the series of International Papers in Political Economy (IPPE) This series consists of an annual volume with eight papers on a single theme The objective of the IPPE is the publication of papers dealing with important topics within the broad framework of Political Economy The original series of International Papers in Political Economy started in 1993 until the new series began in 2005 and was published in the form of three issues a year, each issue containing a single extensive paper Information on the old series and back copies can be obtained from the editors Philip Arestis (e-mail: pa267@cam.ac.uk) and Malcolm Sawyer (e-mail: m.c.sawyer@lubs.leeds.ac.uk) The theme of this volume of eight papers is Economic Policies Since the Global Financial Crisis The papers in this volume were initially presented at a one-day conference in Cambridge, UK (St Catharine’s College), 30 March 2017 The conference was organized by the Department of Land Economy, University of Cambridge, under the aegis of the Cambridge Trust for New Thinking in Economics, entitled Economic Policies Since the Global Financial Crisis The Cambridge Trust for New Thinking in Economics fully supported and financed the conference The papers were subsequently presented at the 14th International Conference, entitled v vi Preface Developments in Economic Theory and Policy, held at the University of the Basque Country UPV/EHU, Bilbao, Spain, 26–27 June 2017, which fully supported and funded the special sessions to which the papers included in this volume were presented We are grateful to the organizers of the Bilbao conference and to the Cambridge Trust for all the help and funding provided Contents onetary Policy Since the Global Financial Crisis 1 M Philip Arestis essons on Fiscal Policy After the Global Financial Crisis 41 L Malcolm Sawyer I nequality and the Need for Relevant Policies 85 Ahmad Seyf inancialisation and Distribution Before and After the Crisis: F Patterns for Six OECD Countries 127 Eckhard Hein, Petra Dünhaupt, Ayoze Alfageme, and Marta Kulesza I nvestment, Unemployment and the Cyber Revolution 173 Michelle Baddeley ack to the Future? UK Industrial Policy After the B Great Financial Crisis 221 David Bailey and Philip R Tomlinson vii viii Contents he Global Financial Crisis and the Labour Markets in T Europe: Do Labour Institutions Matter? 265 Jesús Ferreiro and Carmen Gómez he Tightening Links Between Financial Systems T and the Low-Carbon Transition 313 Emanuele Campiglio, Antoine Godin, Eric Kemp-Benedict, and Sini Matikainen Index 357 Notes on Authors Ayoze Alfageme holds a bachelor’s degree in economics and a postgraduate degree in philosophical and political analysis of capitalism both from the University of Barcelona He is a second-year MA student in international economics at the Berlin School of Economics and Law His research interests are in the field of classical and post-Keynesian macroeconomics, distribution issues, political economy and European economic policies Philip Arestis is Professor and University Director of Research, Cambridge Centre for Economics and Public Policy, Department of Land Economy, University of Cambridge, UK; Professor of Economics, Department of Applied Economics V, Universidad del País Vasco, Spain; Distinguished Adjunct Professor of Economics, Department of Economics, University of Utah, US; a research associate, Levy Economics Institute, New York, US; visiting professor, Leeds Business School, University of Leeds, UK; professorial research associate, Department of Finance and Management Studies, School of Oriental and African Studies (SOAS), University of London, UK. He was awarded the British Hispanic Foundation ‘Queen Victoria Eugenia’ Award (2009–2010); also awarded the ‘homage’ prize for his contribution to the spread of Keynesian Economics in Brazil by the Brazilian Keynesian Association (AKB), 15 August 2013 He served as Chief Academic Adviser to the UK ix 350 E Campiglio et al Bruvoll, A., Már Baldursson, F., Kralik, S., & Vennemo, H (2013) The financial crisis and fiscal consolidation in green budgets Copenhagen: Nordic Council of Ministers Burgess, S., Burrows, O., Godin, A., Kinsella, S., & Millard, S (2016) A dynamic model of financial balances for the United Kingdom (Staff Working Paper 614) London: Bank of England Caldecott, B., & McDaniels, J. 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Greening China’s financial system Winnipeg: International Institute for Sustainable Development Index1 A asset price bubble pressures, 20 austerity, 55, 61, 64, 81, 92, 93, 95, 100, 110, 114, 116, 119, 129, 153, 153n10, 252, 318, 335, 336 austerity strategies, 336 automatic stabilisers, 4, 42, 49, 50, 52, 53, 80, 81 B Bank for International Settlements, 28 Bank of England, 8, 13n12, 17n15, 30, 105, 211, 255, 325, 333, 334, 344, 348 bargaining power, 75, 138, 141, 142, 144–57, 159–63, 165–8 Basel III, 28n29, 30, 31, 330–2, 346 Brazil, 91, 222 Brexit, 210, 224, 235, 248–55, 250n12 budget deficit, 42, 44–52, 51n3, 54–60, 63–6, 70, 72, 73, 80, 81 C cap-and-trade system of emissions allowances, 322 capital income, 89, 111, 135 carbon tax, 323, 336, 337 Catapult Centres, 231–5 central bank rate of interest, central banks, 3, 4, 6–8, 7n4, 15, 15n13, 17–19, 17n16, 19n20, 22, 23, 26n28, 32–4, 44, 212, 213, 315, 325, 332, 333, 339–42, 344, 346 Note: Page numbers followed by “n” refer to notes 1 © The Author(s) 2017 P Arestis, M Sawyer (eds.), Economic Policies since the Global Financial Crisis, International Papers in Political Economy, DOI 10.1007/978-3-319-60459-6 357 358 Index China, 15n13, 91, 98, 99, 222, 328, 340, 342n9, 345 climate financial risks, 325 climate-aligned financial regulation, 338–41 climate-related risks, 324, 338, 340, 348 comparative advantage, 96, 97, 228, 232, 236, 242 competitive advantage, 97, 238, 246 computing investment, 175–80, 190, 192, 193, 195–7, 200, 201, 203, 205, 209, 210, 214 Cyber Revolution, 173–215 cyclically adjusted budget position, 56, 72, 73 D debt, 13, 16–19, 19n18, 20n21, 22, 25n27, 29, 42, 45, 46, 48, 50, 53, 54, 57, 59–64, 70, 81, 89, 90, 95, 98, 106–8, 110, 114, 118, 120, 128, 129, 138, 142, 144, 146, 148, 153, 156, 157, 159, 160, 162, 163, 165, 167, 222, 317, 321, 322, 328, 330, 331, 333, 334, 340, 342 debt scare, 42 debt to GDP ratio, 45, 54, 64 deregulation and liberalisation of the labour market, 155 development banks, 317, 320, 321, 342–4, 342n9, 346 digital economy, 175, 180, 181, 183, 186, 187, 189, 190, 192, 199, 200, 202, 203, 209, 210, 212–15 digital technologies, 182, 184, 190, 192, 201, 209–12, 214 discretionary fiscal policy, 52 Dodd-Frank Act, 30 domestic demand-led economy, 129, 165 double dividend, 337 Dynamic Stochastic General Equilibrium (DSGE) models, 6n4, 7, 28, 347, 348 E economic crisis, 143n6, 147n7, 150n8, 153n12, 158n14, 161n15, 277, 286, 306, 307, 330, 338 Efficient Market Hypothesis, 325 employment, 24, 44, 70, 78, 80, 96, 108, 113, 141, 142, 144, 146, 148, 149, 153, 155, 157, 160, 163, 168, 177, 178, 183, 186, 200, 202, 203, 208–10, 212–14, 225, 255, 267–73, 273n3, 275, 277–94, 291n5, 291n6, 292n9, 292n10, 293n11, 296–8, 300–8, 300n14, 304n15, 327, 328, 346 environmental policy, 335 employment protection, 142, 144, 146, 148, 149, 153, 155, 157, 160, 163, 178, 291n6, 293, 296–8, 300, 303, 305, 308 equivalised income, 133, 134 EU Emissions Trading Scheme, 322 European Central Bank, 273, 333 European Union, 222, 266, 271–305, 322 Index expansionary fiscal consolidation, 46, 57, 65, 68, 70, 71 359 287, 291, 292, 291n6, 294, 295, 297, 298, 300n14, 325, 343 free market, 94, 95, 100 F FDI (See foreign direct investment (FDI)) federal funds rate, 9, 23n24 financial assets, 5, 13, 17n15, 18, 59, 62, 89, 90, 93, 314, 324, 325, 327, 333, 341 financial capital, 95, 112, 187 financial constraints, 188 financial investment, 142, 145, 148, 149, 152, 156, 159, 162, 197, 345 financial liberalisation, 141 financial overheads, 143, 146–52, 154, 156–8, 160–3, 165–7 financial stability, 2, 3, 5n3, 10–12, 23–33, 315, 325, 338, 340, 341, 346 financial system., 25, 30n30, 247, 314, 318, 345 financial technology (FinTech), 174 financialisation, 127–68 fine tuning, 44 fiscal policy, 3, 4, 17, 17n16, 19, 24, 29, 34, 41–81, 120, 255 fiscal stabilization, 43 food banks, 92 food stamps programme, 92 foreign direct investment (FDI), 93, 114, 116, 156, 223, 227, 249 fossil-dependent companies, 314 France, 57, 112, 129, 131–4, 161–8, 161n15, 190, 216, 225, 230, 272, 275, 277, 278, 281–4, G GDP (See gross domestic product (GDP)) Germany, 21, 21n22, 57, 99, 129, 131–4, 153–8, 153n12, 165–8, 216, 222, 230, 232, 271, 272, 274–8, 281, 282, 284, 287, 290, 291, 292n10, 294, 295, 297, 298, 299n13, 328, 328n7, 329, 343 GFC (See Global Financial Crisis (GFC)) Gilded Age, 92 Gini coefficients, 93, 129, 130, 133, 143, 145, 147, 149, 150, 152, 153, 156, 158, 160, 161, 163–6, 168 Global Financial Crisis (GFC), 2, 3, 6–24, 10n8, 17n15, 17n16, 26, 28–34, 42n1, 43, 45, 180, 222–4, 228, 231, 236, 245, 246, 249, 254, 266, 267, 269, 271, 272, 274, 280, 287, 288, 290, 300, 306–8, 315, 327–35, 338, 341, 346, 348 globalisation, 93, 96, 97, 108, 116, 139, 141, 144, 186, 211, 249 Global Landscape of Climate Finance, 318 Great Financial Crisis, 175 great moderation, 43 360 Index Great Recession, 2, 34, 87, 91, 97, 112, 130, 149, 150, 154, 155n13, 167, 222, 266 green growth, 315, 335, 336, 346 green investment, 317, 320, 322, 323, 338, 341, 346 Green New Deal, 327 Green Quantitative Easing, 315 gross domestic product (GDP), 11, 13, 13n12, 20, 22, 42, 45, 47–52, 54–8, 60–4, 70, 72, 76, 77, 116, 117, 130, 130n1, 131, 142, 144, 153, 155, 157, 159, 160, 162, 163, 177, 179–81, 181n2, 188, 189, 195, 215, 224, 230, 252, 266–8, 273, 275, 277–89, 307, 328, 336 growth, 2n2, 6, 10n8, 16–23, 25n27, 34, 42, 46, 49, 52, 55, 60–4, 70, 71, 75, 77, 78, 81, 86, 87, 90, 91, 93, 98, 100, 108, 112, 113, 120, 129, 138, 142, 155, 168, 176–82, 186, 187, 189, 190, 192, 195, 197, 200–11, 213, 216, 223, 225, 227, 228, 232, 235, 236, 243n9, 247, 251–5, 266, 268, 269, 272, 277, 278, 280, 282–5, 287–9, 291n5, 293, 308, 315, 328, 333, 334, 336, 338, 340, 346 H Hartz-laws, 155 high-technology industries, 177 high-carbon lock-in, 342 horizontal industrial policies, 223 housing assets, 89, 187 I ICT (See information and communication technologies (ICT)) Illicit financial outflows, 113–16 imperfect capital markets, income distribution, 94, 106, 107, 111, 128, 130, 133, 135, 135n3, 137, 138, 140n5, 145, 147, 160, 161, 164, 167, 168 income inequality, 87, 88, 130, 134, 149, 161, 164, 293 industrial policy, 222–8, 226n2, 236, 240–2, 243n9, 244, 248, 251, 254, 255 industrial strategy, 222, 224, 228, 243, 250–4 inequality, 55, 86–96, 105, 110, 112, 113, 120, 134, 135, 145, 146, 148, 158, 168, 185, 189, 190, 203, 210, 292 inflation, 3, 4, 5n3, 6, 11, 13, 16–19, 17n16, 22, 24n24, 34, 43, 50, 64, 74, 75, 78, 87, 107, 155, 211, 213, 333, 334 inflation target (IT), 3–7, 11, 13, 16, 19, 28, 33, 34, 43, 211, 213 information and communication technologies (ICT), 178, 184, 203, 205–9, 214, 216, 228 institutional investors, 317 intangible investments, 179, 191, 205 Index interest rates, 4, 11, 12, 15–26, 15n13, 18n17, 19n20, 21n22, 24n24, 29, 33, 34, 43, 44, 54, 69, 81, 106, 138, 139, 156, 159, 212, 332, 333, 341 International Monetary Fund, 28, 226, 266 Internet technologies, 174, 182, 190 investment, 8, 10n8, 15, 16, 21, 30, 31, 43, 45, 46, 56, 64, 66–8, 70–2, 78, 80, 81, 99, 103, 104, 108–10, 113, 118, 120, 129, 138, 139, 148, 149, 152, 156, 159, 175, 177–81, 187, 188, 190–210, 214–16, 224, 225, 227, 229, 229n4, 230, 232–5, 245–7, 249–52, 254, 255, 292, 314, 314n2, 316–23, 326–9, 331, 334, 337, 338, 341, 342 361 liquidity constrained, liquidity regulation, 330 Lisbon strategy (2000), 228 Local Economic Partnerships (LEPs), 239, 240, 243, 244n10, 245, 246 Long-Term Refinancing Operation, 13 long-term unemployment, 175, 185, 203, 205–8, 210, 213–15 low-carbon finance, 316–23 low-carbon investment, 315–17, 326, 338, 346 low-carbon projects, 331, 332, 342–4 low-carbon transition, 314–16, 320, 324, 325, 327–9, 334, 337, 346, 347 M K Kaleckian theory, 130, 135, 167 L labour market institutions, 159, 269, 270, 277, 289 labour market performances, 273, 280, 303, 307, 308 labour market rigidities, 270 labour productivity, 99, 111, 183, 189 labour segmentation, 297 LEPs (See Local Economic Partnerships (LEPs)) Liikanen Report, 30 macroprudential policies., 27 macroprudential regulation, 27, 315, 327, 330, 335, 338 management salaries, 128, 132, 135, 136, 138, 139, 141, 143 manufacturing employment, 96 market failure, 229, 237, 254, 322, 323, 336 mark-up pricing, 138 microprudential policies, microprudential regulation, 330 monetary policy, 1–7, 17n15, 18, 19, 23, 24, 26–8, 33, 43, 44, 49, 66, 70, 176, 211–13, 255, 270, 315, 344 Moore’s Law, 176, 202, 204 multiplier, 42, 65–71, 81, 90, 212 362 Index N negative interest rates, 2, 3, 13, 15, 17n15, 18–24, 18n17, 19n20, 29, 33 neo-liberalism, 135, 139–41, 144 network effects, 178, 192 New Consensus Macroeconomics (NCM), 3, 5, 6, 6n5 non-accelerating inflation rate of unemployment, 75 O one per cent income share, 112 P permanent employment contracts., 297 policy coordination, 228 potential output, 4, 42, 48, 51, 52, 56, 72–8, 80, 81 profit shares, 129, 135, 137, 140, 141, 143, 147, 160, 165, 167 progressive tax system, 44 public debt, 45, 50, 53, 54, 60–4, 81, 110 Q Quantitative Easing (QE), 2, 9–11, 13–18, 13n12, 15n13, 19n18, 21, 26, 29, 33, 315, 332–5, 341–6 R rational expectations, 3, regional policy, 224, 227, 236, 238, 241–3 Reinhart, C. M., 60–2 renewable capital, 318 renewable energy projects, 316, 321, 331, 332, 342, 346 rent deflation, 109 rent extraction., 102, 119 rentier capitalism, 105, 108, 110, 120 rentiers, 95, 102, 103, 105, 109, 110, 141–54, 156–8, 160–3, 165–7 rentiers’ profit claims, 142, 143, 145–52, 154, 156–63, 165–8 rent-seeking, 105, 226 repo (repurchase) operations, reserve ratio requirements, 338 Ricardian equivalence, 44 Rogoff, K. S., 60–2 S sectoral policies, 224, 245–8 secular stagnation, 128, 175, 207, 214 shareholder value orientation, 139, 142, 144–6, 148, 151, 153, 156, 157, 159, 161–4, 166 small and medium sized enterprises (SME), 229, 235, 247, 341, 344 smart specialisation, 224, 231, 236–41, 243, 245, 250, 253 SME (See small and medium sized enterprises (SME)) Spain, 56, 57, 77, 78, 129, 131–4, 150–3, 150n8, 153n10, Index 164–7, 216, 271, 274–8, 281, 282, 285, 290–5, 291n6, 297, 298, 328, 329 specialisation, 236, 237, 239, 240 Stability and Growth Pact, 45, 54 sticky prices and wages, stress tests, 14 structural budgets, 48, 52 subprime crisis, sustainable development, 346 sustainable economy., 314, 335, 342 Sweden, 93n2, 129, 131–4, 158–61, 158n14, 165–8, 216, 272, 275, 277, 278, 282, 286, 287, 290–2, 291n6, 294, 295, 297, 298 T TARP, tax avoidance, 116, 117, 120 tax evasion, 116, 117, 119, 120 technological change, 174, 176, 179, 190–2, 196, 197, 200, 214 technology and innovation policy., 228 temporary agency workers, 289, 292, 294, 296 TLTROs, 344 top income shares, 130, 132, 143, 145, 147, 149, 150, 152, 153, 158, 160, 161, 163–6, 168 trade unions, 137, 138, 141, 142, 144–6, 149, 150, 152–7, 159–63, 165, 167, 168 transmission mechanism, 4–7, 49, 211, 212 transversality condition, Troubled Asset Relief Programme, 363 U UK, 8, 10, 11, 11n9, 14, 17n15, 21n22, 30–2, 45–7, 55, 55n5, 57, 71, 88, 91, 92, 93n2, 96, 99, 100, 103, 106, 111–13, 115, 129–33, 147–50, 147n7, 164–7, 177, 180, 183, 189, 190, 203, 208, 210, 211, 213, 216, 222–35, 229n4, 237, 239, 242, 245–55, 249n11, 333 uncertainty, 6, 16, 21, 23, 71, 191, 196, 197, 200, 202, 228, 229, 237, 247, 250, 255, 321, 323, 327 unconventional monetary policies, 17n15, 18, 346 unemployment, 22, 24n24, 42, 48, 53, 55, 65, 70, 75, 78, 80, 97, 142, 144, 146, 148, 149, 151–3, 155, 157, 160, 163, 175, 177, 183–5, 190, 201, 203, 205–10, 214–16, 267–89, 273n3, 291n6, 292, 293, 298–303, 299n13, 305–8 unorthodox monetary policy instruments, 7, 15–24 US Federal Reserve System (the Fed), USA, 45, 47, 49, 51, 55, 57–9, 62, 87, 89, 90, 92, 93, 93n2, 95–9, 105–7, 111, 113, 118, 128, 129, 131–4, 143–7, 143n6, 150, 164–7, 179, 180, 188, 189, 216, 222, 227, 230, 232, 249, 249n11, 266–8 364 Index V Y vertical industrial policies, 223 Vickers Report, 30, 31 yieldco model, 322 Z W wage share, 130, 131, 130n1, 135, 137, 141, 143–54, 156–68 wealth inequality, 17n15, 108 zero interest rates, 16 ... Policy Since the Global Financial Crisis Philip Arestis Abstract This chapter focuses on monetary policy since the Global Financial Crisis (GFC), and the subsequent ‘Great Recession’ (GR) In effect,... Cambridge CB3 9EP, UK University of the Basque Country, Spain © The Author(s) 2017 P Arestis, M Sawyer (eds .), Economic Policies since the Global Financial Crisis, International Papers in Political... by the Department of Land Economy, University of Cambridge, under the aegis of the Cambridge Trust for New Thinking in Economics, entitled Economic Policies Since the Global Financial Crisis The