The 2008 Global Financial Crisis: Looking Back International Journal of Political Economy

International Journal of Political Economy

The Global Financial Crisis of 2008, precipitated by the subprime crisis in the US mortgage market in 2007-2008 and then followed by a Great Recession of 2008-2009, remains to many economic analysts the deepest and most profound crisis that afflicted the world economy since the Great Depression of the 1930s.

The International Journal of Political Economy was at the forefront in publishing innovative research work on the financial crisis. To mainstream economists steeped in theories of general equilibrium, such a global financial collapse could not even exist in their highly abstract and unrealistic models of the economy. For this reason, most of the truly ground-breaking research was being produced almost exclusively by non-mainstream political economists during that whole turbulent period of the world economy. On the tenth anniversary of the crisis symbolized by the dramatic collapse of Lehmann Brothers in September of 2008, we have decided to make available online a virtual special issue that provides a sample of the large amount of solid pioneering research that was published in our journal during the five-year period from 2008 and 2013, as the crisis unfolded and spread from its US epicenter.

We begin with an important article by Jan Kregel published right at the beginning of 2008 as the subprime crisis had previously unfolded and now was slowly being revealed to researchers. It is then followed by the meticulous research on the anatomy of the US financial crisis and policy responses offered by the highly-cited two-part article by Thomas Ferguson and Robert Johnson. From its original “Minsky moment” of 2007-2008, it transformed itself into a “Keynes moment” as the crisis in the financial sector and its contagion eventually impacted on the macro economy. In response, this crisis necessitated innovative policy responses to the macroeconomic shock demanding significant fiscal and monetary policy stimuli that differed completely from the conventional neoliberal policy orthodoxy of the previous era of the “great moderation”. The previous era in most advanced Western economies had been associated with an evolution towards a hyper globalized, financialized, and highly deregulated international economy characterized by an extremely skewed distribution of income and wealth. As the global financial crisis ravaged the financial sector and then the real economy and as the public bailouts multiplied worldwide, by 2010 the financial drain on governments also triggered a sovereign debt crisis in the Eurozone, as analyzed by economists such as Alain Parguez who points to implications of the structural design of the European Economic and Monetary Union.  Out of the 15 articles being made available, we also have a multitude of important research inspired especially by the models of the financial sector first developed by Hyman Minsky.

It is with great pleasure that we present this selection of papers to our readers to understand what were the causes and structural features of the crisis, as well as its policy consequences. Reading these articles today can offer some important insights to historians of economics and, more broadly, to students of political economy. Also it offers many valuable lessons for present-day policy makers whose short memories seem sometimes to prevent them from learning from the past, thereby repeating some of the same policy mistakes nowadays that were partly responsible for generating and propagating the financial crisis worldwide.