Explanations of the Financial Meltdown and the Present Recession

Abstract

The concern of this article is to locate the unfolding literature that seeks to explain the present financial crisis into three dimensions of contestability. The major areas of disagreements between various authors include: the role of government; the issues of whether the recession was unavoidable or whether it was inevitable; and the area of ideas and ideals and how economic ideas shaped and influenced the policy process. These explanations include the pragmatists and all that literature that had a time dimension of major actors trying to produce policies that aimed to stabilise the financial markets. These policy makers did not have the benefit of hindsight but were concerned that the financial markets were so fragile that there was no other choice but for governments to intervene. By contrast, there were the market fundamentalists who argued that the pragmatists had got it wrong and were therefore highly critical of the Federal Reserve and the Treasury and tended to blame the recession on government housing policy. Institutionalists have argued that the regulatory system is broken, while structuralists tend to focus on growing income inequalities, the concentration of wealth and how the changing structure explains the recession in the sense that households took the avenue of higher debt on their homes to sustain higher levels of consumption. Finally, there is the Keynesian Collectivist argument that points to the limits of Rational Expectations and Efficient markets. No one really know who is right, but the fierce debate that is emerging is highly important in that each explanation seeks to provide a framework for policy making

Collective dissonance and the transition to post-consumerism

“…Viewed against other trends in many of these nations of changing demographics, technological changes, and new social values such developments suggest erosion of several important pillars of the post-World War II consumer society [4][5][6]. Concomitantly, many long-standing shared assumptions undergirding everyday life remain in place, though they are showing increasing signs of strain.…”

“…Contemporary usage has veered from this original intent and the expression now typically connotes aspirations pertaining to economic 6 See [113] for a provocative defense of this strategy. 7 The dynamics surrounding homeownership-a critically important driver and crucible for consumption in the United States-also appear to be changing.…”

“…This infusion provided the resources necessary to maintain (and in many respects extend) consumer lifestyles and to feed a period of robust consumption-driven economic growth. 6 The process of expansion continued in several ebb-and-flow iterations until 2007 when efforts to increase purchasing capacity through ever-more inventive techniques came crashing down in a wave of worthless credit-default swaps, impenetrable derivative deals, and various other financial innovations of dubious integrity [52,53].…”

Recession, Austerity and the ‘Great Risk Shift’: Local Government and Household Impacts and Responses in Bristol and Liverpool

“…The causes of the global economic crisis have been extensively discussed (Smith 2010;Mullard 2011;Gamble 2009;Turner 2008). There is an intimate relationship between globalisation, financialisation and urbanisation, and the role of cities in highlighting the temporal, spatial and social dimensions of the crisis.…”

Disparities in Health, Poverty, Incarceration, and Social Justice among Racial Groups in the United States: A Critical Review of Evidence of Close Links with Neoliberalism

“…These include the de-regulation of oil mining and processing that led to oil spills along the Gulf of Mexico, which devastated the region's economy and ecology and caused considerable public health concerns (77)(78)(79). In addition, gun control legislation arguably influences the likelihood of traumatic injury due to gunshot wounds among poor populations (80). Of course, the 2008 financial meltdown, considered by most to be the result of poor regulation of U.S. financial markets, and the severe economic recession that followed have taken a huge toll on population well-being in the United States and the rest of the world (81,82).…”