The recent financial crisis has stimulated a justifiable interest in the future of developed economies. Since the 2008 Lehman Brothers collapse the economics discipline has been forced to confront its failings. As Dominic Lawson has noted, it has partially undergone a much needed shift towards behavioural economics rather than the cold “rational” mathematical economics that failed so spectacularly. However, as this article describes, there remains enormous scope for a more fundamental rethinking of the political economy of the developed world.
It is easy, when confronted by the news that groups of mostly young people have been rioting in London and other parts of the country, to dismiss the people involved as feckless opportunists, intent on causing destruction to property and stealing goods from looted shops. It is easy, but simplistic. Likewise, it is too simplistic for those on the left who attribute the serious criminal damage, destruction and threat to life wreaked by the rioters as symptomatic only of government economic policy and welfare cuts, as if the people involved had no agency in the matter.
The financial crises since 2007 have led to a resurgence in the stock of John Maynard Keynes. Recognised as one of the giants of economics, Keynes had been overtaken and largely forgotten by the neo-classical economics that had dominated public policy since the 1980s. Yet, Keynes’ concept of government stimulus spending became the go-to policy for a number of world governments desperate to avoid economic catastrophe. As Robert Lucas, a prominent member of the neo-classical orthodoxy, has dismissively remarked, “Everyone is a Keynesian in a foxhole”. Is this the limit to which Keynes is of use to us in the present?
When Estonian Prime Minister Andrus Ansip marked his country’s adoption of the Euro on 1 January 2011, by withdrawing cash from a specially installed ATM in Tallinn, not all of his compatriots shared his enthusiasm. Many people, both within Estonia and further afield, question why the Baltic state would wish to join the troubled single European currency and, indeed, whether the Euro can even survive.
Formed within five days of the 6 May 2010 UK general election, the Conservative-Liberal Democrat (Lib Dem) coalition government was a new and unlikely development in British politics. One year on, with the British electorate having delivered a comprehensive “No” in the May 2011 referendum on whether to switch the voting system to the Alternative Vote (AV) and with the Lib Dems having suffered huge losses in English local elections and elections to the devolved Scottish and Welsh parliaments, this unlikely partnership is enduring a rocky patch. Many analysts are predicting imminent divorce.
“Old Europe”. United States Defense Secretary Donald Rumsfeld’s 2003 phrase was one of the more polite, if not fully precise, American descriptions of French and German opposition to the US-UK led invasion of Iraq. It also highlighted the gap at the time between the Anglo-American attitude to military intervention more generally, and that of the French and Germans. Yet the scale of recent French intervention in Africa - notably in Libya and Cote d’Ivoire - indicates that France under President Nicolas Sarkozy has well and truly moved on from the “old Europe” tag.