From ‘There is No Alternative’ to ‘Maybe There are Alternatives’: five Challenges to Economic Orthodoxy after the Crash

Prior to the 2008 financial crisis, politicians famously told the public and themselves that ‘there is no alternative’ to a neoliberal economic paradigm. Fast‐forward to 2019 and there is, instead, the sense that ‘maybe there are alternatives’. However, when many observers and commentators look back to the 2008 crisis, they see a general continuity with what went before. In order to gain a better understanding of this ‘interregnum’, we map five sets of ideas and practices that challenge the policies, ideas, and conventions of pre‐crash orthodoxy. In doing so, we argue that there has been a fundamental transformation in legitimate public discourse about the economy since 2008: ideas and practices that were previously unimaginable or illegitimate in mainstream economic debate are now commonplace. Although this does not represent a ‘paradigm shift’, it represents significant political change that is important to understand and interrogate on its own terms.     

Time for a New Paradigm? Past and Present Transitions in Economic Policy

This article seeks to place the UK's present economic ‘moment’ in historical context. Over the course of the decade since the 2007 financial crisis, it has increasingly been acknowledged that a cyclical crisis has become a structural crisis. The failure of most economists to predict the financial crash in the first place, and the inadequacy of economic policy in responding to its lasting effects, has led many to conclude that economics itself is in crisis. This article seeks to contribute to a better understanding of the present period of disjuncture. Drawing on theories of paradigm shift from both the physical and social sciences, we argue that the speed of change in UK economic policy is comparable to the two major historical transitions that ended with the post‐war consensus and neoliberalism. We conclude by offering some remarks on how and where the present change might take us.     

How the City of London lost at Brexit: a historical perspective

The nature of the City of London as an offshore financial centre has long made London dependent on the British state providing protection from external political regulation, even as London’s foreign currency business separated its interests from British governments’ economic policy preoccupations. Since the 2008 crash and the onset of the eurozone crisis, London has faced threats to both its autonomy from external regulatory demands and to its offshore business interests at the same time as the long-standing external statecraft of British governments around EU membership has broken down. The Cameron governments’ efforts to protect the City within the European Union under political conditions that were transformed by the eurozone crisis exposed the limits of Britain’s position as a member of the European Union. When David Cameron then tried to resolve the problem of EU membership through a referendum he made it extremely difficult to defend the City’s broader commercial interests in the Single European Market because freedom of movement issues weighed significantly more in British domestic politics than financial services.     

Environmental protection preferences under strain: an analysis of the impact of changing individual perceptions of economic and financial conditions on environmental public opinion during economic crisis

This paper uses panel survey data from 2002 to 2008 – covering a period of economic prosperity and intense economic difficulties – to analyse the impact of changing levels of economic and financial security from the 2008 economic crisis on individuals’ environmental protection preferences. Declining economic conditions in the aftermath of the crisis have been thought to produce lower levels of support for environmental protection and previous literature has predominantly supported this claim. Due to the availability of data, most analyses undertaken to date have focused on aggregate changes using repeated cross-sectional data and various economic indicators. Research looking at individual-level change and how individuals’ perceptions of changing economic conditions may affect their prioritization of environmental protection has however been lacking. This paper finds that neither changing economic perceptions nor changing household financial circumstances can account for the decline in environmental protection prioritization witnessed in the aftermath of the great recession.     

Where Do We Go from Here?

The left needs a fundamental rethinking of its politics for a new era. The first task is to understand the contemporary conjuncture: the dynamic combination of events and circumstances which structure a political settlement. Two such conjunctures have occurred in recent history. The first produced the postwar welfare settlement of 1945, which broke down in the economic crisis of the 1970s. The second took shape in the 1980s around the revival of liberal market economics and what became known as Thatcherism. It failed following the 2008 financial crash, and has begun to break apart with the vote to leave the EU. New political and cultural faultlines are confounding the orthodoxies of the governing class and cutting across the partisan loyalties of the main political parties. They herald the renewal of politics. But Labour is on the edge of an abyss. This article considers what the left can learn from Labour's previous periods of defeat and revisionism, and suggests where—if it survives—it should go next.     

Fiscal Austerity and Rental Housing Policy in the United States and United Kingdom, 2010–2016

After the 2008 global financial crisis, both the United States and the United Kingdom introduced austerity policies targeted at particular elements of their national budgets. The purpose of this article is to compare the nature of this retrenchment; the similarities and differences in how it was implemented; and its initial impacts on one of the expenditure areas particularly affected: affordable rental housing programs and housing support for low-income households. Using a wide range of data sources, we find evidence of political and fiscal policy analogies in the timing and forms of the initial policy choices and how these were modified in the face of economic and political pressures. There are considerable similarities both in the instruments used to reduce housing expenditures and in the early impacts on support mechanisms and recipients. However, we find different histories and trajectories of support between the two countries that suggest that the longer term differences in outcomes may be more important.     

The Banking Crisis: Grid,Group and the State of the Debate

The banking crisis and the recession it induced provide a salient backdrop to domestic and international politics. ² The International Monetary Fund (IMF 2010) estimates that total banking losses between 2008 and 2010 exceeded US$2.3 trillion. This article uses grid‐group theory to review the existing literature on the causes of the banking crisis and, in doing so, distinguishes between hierarchical, individualist, egalitarian and fatalist accounts of what went wrong and of what needs to be done to prevent another crisis from occurring. It is argued that the existing reform agenda is underpinned by a hierarchical analysis of the causes of the crisis and that this risks narrowing the support base for the reform process.     

State Retrenchment and Administrative Reform in Ireland: Probing Comparative Policy Paradigms

Abstract

Policy choices in response to crisis may carry consequences both for distributive outcomes and for the future policy capacity of the state itself. This paper uses conceptual heuristics to interpret policy practice. It examines the underlying policy paradigms shaping Irish government decisions in the aftermath of the European financial and economic crisis. Drawing on comparative political economy literature, it distinguishes between two such paradigms – market-conforming and social equity – and applies them to three reform themes: reconfiguration of public budgets, the public service pay bargain, and the organizational profile of state competences. The findings entail lessons for understanding the malleability of policy choice, and how state policy choices in response to crisis are framed and implemented.     

Crisis management and the diversity of capitalism: fiscal stimulus packages and the East Asian (neo-)developmental state

Abstract

This paper contributes to the understanding of East Asian capitalism by investigating the political economy of crisis management in Japan, Korea and China during the global economic crisis. Reacting to the global shock of the economic crisis that began in 2008, East Asian capitalism has remained a distinct state-led model that differs substantially from the liberal, neo-corporatist or welfare state varieties of capitalism in the West. More specifically, this paper studies the fiscal stimulus packages implemented by East Asian countries to address the global financial crisis from 2008 to 2010. We find that East Asian fiscal stimulus packages were comparatively large and supply-side-oriented. Unlike in the West, where a (short-lived) revival of demand-side-oriented Keynesian strategies stimulating consumption could be observed, East Asian countries reinforced industrial policies and supported investment and international competitiveness. We argue that the East Asian variety of crisis management can largely be explained by a path-dependent transformation of the East Asian developmental state into a neo-developmental competition state.     

实现我国经济主动权的必要性与战略布局——关于应对当前国际金融危机的思考

自我国采取市场化道路和对外开放政策以来,总体经济发生了翻天覆地的变化,总量经济规模日益壮大,经济改革取得了世人瞩目的成绩.然而,我国高度的对外开放和对外依存度,也使我国的经济发展陷入某种被动,造成一些宏观调控的被动局面.当前国际金融危机爆发,以及对我国经济造成的严重冲击,使得如何取得经济主动权显得更加突出.分析我国经济被动的一些侧面与表现,认为一个崛起中的经济大国必须争取经济主动必要性诉求,并提出了为取得经济及经济政策主动权的思路和相关战略布局的具体措施.     

Design determinism,post-meltdown: urban planners and the search for policy relevance

This commentary explores the roles of planning and urban design in contemporary US urbanization following the global financial crisis in Fall 2008. We focus on the tendency to discuss the planning profession in recovery metaphors – a perspective that has been emphasized in establishing how the profession's past and future relevance may be asserted. In the recent past the planning profession has sought to recover its standing and policy relevance through its contributions to real estate development. In doing so, the profession has gravitated toward design and determinism in order to satisfy pluralist demands within the loosely regulated political economy of neoliberal urban growth. But while design determinism offered numerous practical advantages to the planning profession for the short term, it also served to preclude the profession from engaging with social justice, the social construction of place, and civil society.     

The European Central Bank and the COVID-19 recession

The ECB, turning a page from its sluggish response the 2008–09 financial crisis, has responded to the COVID-19 recession by quickly stabilising banks and flooding the eurozone with cheap capital. Yet the crisis has caused fiscal imbalances – most notably between Germany and Italy – to worsen, with no prospect of making political headway towards mutualising the debts of individual member states.     

Alternative action organizations across different welfare and third sector regimes during hard economic times

ABSTRACT

Since 2008, the international economic and financial crisis has been affecting the living and working conditions of European citizens in different ways and scope. Yet, the pattern is of rising unemployment, social deprivation and poverty, cuts in health, education and social security budgets. These negative socio-economic conditions have led to major transformations in collective responses, which, among others, take place through Alternative Action Organisations (AAOs). The specific organizations carry out non-mainstream activities that primarily target the economic and the social well-being of citizens, including their basic needs, health and lifestyles. Using quantitative data from the LIVEWHAT project and drawing on social origins theory and resource mobilization theory, the article investigates AAOs’ main characteristics across four European countries that have been differently affected from the recent recession as well as belong to different welfare state and third sector regimes, including Germany, Greece, Sweden and Poland. The findings stress the importance of considering the particular combinations of the welfare state and third sector regimes as well as the severity of the experienced economic crisis in understating the variation in AAOs’ main features under a comparative perspective.     

Revitalizing the United States‐Japanese alliance

Abstract

While the notion that subjective economic perceptions as well as objective economic conditions affect electoral outcomes has long been explored in advanced democracies and new democracies, evidence of the link between the economy and elections has been rarely found in East Asian countries. As economic issues have become salient since the 1997 financial crisis, political leaders’ capacity to manage the economy has become one of the most important criteria in electoral choice in East Asia. This paper examines how economic issues influenced the results of the 2007 presidential election in South Korea. By making use of the 2007 Presidential Election Panel Study, this study examines the continuity of and changes in the Korean voters’ electoral behavior. This study describes the political situation in the post-1997 financial crisis period under two liberal governments in Korea and introduces the processes and characteristics of electoral campaigns in the 2007 presidential election. This paper then explores the link between the economy and vote choice, focusing on whether economic issues were salient among the electorate, whether retrospective or prospective economic voting was prevalent among Koreans, and how the voters supported Lee Myung Bak across age groups, regions, and parties in the 2007 presidential election.     

Empowering local government or just passing the austerity buck? The changing balance of central and local government in welfare provision in England 2008–2015

This paper asks two questions: first, how did the balance of decision-making between central and local government in welfare policy in England change between 2010 and 2015? Second, to what extent has that led to divergence in the extent and manner of such provision? It finds significant areas of policy where local flexibility has been increased (such as council tax benefit, crisis loans, and funding for specialist housing), either through a change in the tier of government responsible, or ‘unringfencing’ of grants allowing local authorities greater discretion in whether to deliver particular services, although in other important areas decisions on welfare remain firmly centralized. It also concludes that in areas where responsibility has been localized, divergence has been immediate and substantial. Localization may well reduce entitlements where local authorities enjoy a financial reward for so doing and political costs are low.     

State of the Field

Although scholars of West European politics have long debated whether the region's highly institutionalised party systems were becoming de‐aligned and electorally unstable, the political fallout from the post‐2008 financial crisis has lent a new sense of urgency to the debate. The threats posed to party systems by economic crises are hardly unique to Europe, however. The Latin American experience with the debt crisis of the 1980s and 1990s suggests that party system upheaval was not simply a function of retrospective economic voting during the period of crisis. It was also attributable to programmatically de‐aligning policy responses to crises – namely the ‘bait‐and‐switch’ imposition of austerity and adjustment measures by labour‐based, left‐leaning parties that were traditional champions of statist and redistributive policies. Such patterns of reform made it difficult for party systems to channel societal resistance to market orthodoxy in the post‐adjustment era, setting the stage for convulsive ‘reactive sequences’ when such resistance arose outside and against mainstream parties through varied forms of social and electoral protest, typically on the left flank. This article explores the political fallout from the European and Latin American economic crises from a comparative perspective, arguing that it is essential to think beyond the short‐term political dynamics of crisis management to consider the longer‐term institutional legacies and fragilities of the different political alignments forged around crisis‐induced policy reforms.     

How do fiscally decentralized federations fare in times of crisis? Insights from Switzerland

This article examines federal dynamics during times of crisis in fiscally decentralized federations using Switzerland as an example. Based on qualitative research, we analyse how the relationship between the federal government and the cantons evolved during the recent ‘Great Recession’ and ensuing financial crisis. We contend that fiscally decentralized structures, as well as the consensus-oriented institutions of the political system, protect the federal balance of power. Our results show that Switzerland indeed adapted well to the crisis of the 2009 economic recession. However, the deficit crisis has revealed challenging coordination problems, notably in the areas of fiscal equalization and corporate taxation, which have the potential to put federal stability under stress. So far, the system has adapted well and safeguarded the federal order. Due to its combination of fiscally decentralized institutions and a strong consensus culture, Switzerland has proven to be a particularly robust federation.     

An Obituary for the Third Way: The Financial Crisis and Social Democracy in Europe

Why has the financial crisis not served as an occasion for social democratic revival? It is because, with the ‘Third Way’, European social democracy became imbricated with the financial system in crisis to such an extent that it is in no position to offer an alternative to it. The financial crisis is the crisis of the Third Way. Furthermore, the Third Way was based on the faulty premise that it was possible to replicate USA's apparent success in the 1990s, which, however, was based on very particular conditions. The argument is pursued with reference to inter alia Third Way ideology, transatlantic relations, the political economy of capitalist variety, and the political sociology of mass parties.     

Explanations of the Financial Meltdown and the Present Recession

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     

Assumptions within Policy: A Case Study of Information Communications and Technology Policy

The deeply embedded nature of dominant assumptions creates an accepted language and way of thinking about ICT, leaving little space for alternative perspectives and ideologies. Policy directions link information technology, the information economy, innovation, competition and global markets. Innovation and information and communications technology constructs a particular application of innovation and directs funding accordingly. Given that policy is about how we categorise, about naming and naming shapes action, the question is what lenses do policy makers use to make choices in their synthesis of social, political and economic life? Using the Australian Information Communications and Technology (ICT) policy as a case study, this article will argue that policy reflects the economic, social and political ideologies of the decision makers. Despite opportunities for input into policy multiple perspectives are limited. Specifically the article looks at claims around consultation, the assumption that the information economy will benefit all Australians, the development of framework conditions for the information economy and the role of government.