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"This article focuses on the macroeconomic implications of inequality by identifying four themes on which there seems to be growing consensus among many economists, especially in the various heterodox traditions, but also increasingly in the mainstream of the economics profession. The first theme on which there is growing consensus is the notion that the rise in inequality has contributed in an important way to the unsustainable rise in household debt in the United States and ultimately the financial and economic crisis starting in 2007. Second, there is the by-now widely held view that rising inequality at the international level has contributed to the so-called global imbalances in terms of national current-account positions. Third, there has recently been a shift in the focus of attention from merely looking at income inequality to analysing the longer-term implications of income inequality for wealth inequality. Fourth, the argument has been made that a high level of inequality can, generally speaking, be a cause of low economic growth, or even secular stagnation. The article gives a broad and non-technical overview on how these issues can be seen to be linked."

"Der Beitrag argumentiert, dass die in Deutschland erfolgte Arbeitsmarkderegulierung nicht die von den Deregulierungsbefürwortern angekündigten Effekte gezeigt hat. Die Beschäftigungsentwicklung blieb im europäischen Vergleich unterdurchschnittlich, hingegen nahm die Einkommensungleichheit äußergewöhnlich stark zu. Auch trugen die Reformen zur weiteren Schwächung der Lohnverhandlungsmacht der Arbeitnehmerinnen und Arbeitnehmer bei. Die hierdurch beförderte Stagnation der Lohnstückkosten, einhergehend mit einer einseitigen Exportorientierung der größten Volkswirtschaft im Euroraum im letzten Jahrzehnt, ist auf Dauer nicht nachhaltig und wird zunehmend als Mitursache der Krise des Euroraums erkannt. Zuweilen wird argumentiert, die Reformen hätten die Stabilität des deutschen Arbeitsmarkts seit Ausbruch der weltweiten Finanz- und Wirtschaftskrise mitbewirkt. Ursächlich hierfür waren de facto jedoch die Ausweitung der Kurzarbeit und die von den Tarifparteien ab Ende der 1990er Jahre verstärkt eingeführten Arbeitszeitkonten - und nicht die Flexibilisierung des Arbeitsmarktes."

"We analyse the newly updated Stability Programmes of the Euro area governments by applying the simple accounting identity by which the financial balances of the government, the private sector and the foreign sector always sum to zero. While the focus of the old Stability and Growth Pact was solely on the government balance, the current euro crisis has shown that this narrow focus was wrong and that macroeconomic stability within the monetary union requires reducing imbalances between all three sectors of individual member states. While the need for overcoming these imbalances is now increasingly recognised by economists and policymakers, we argue that the projections for achieving stability in the current Stability Programmes are very likely too optimistic. We show that, individually, the Stability Programmes rely on optimistic assumptions about GDP growth; collectively, they require an improvement of the Euro area's current account with the rest of the world, the continuation of significant current account imbalances within the Euro area, and a steep drop of private balances in some countries. Based on some simple counterfactual simulations, we conclude that a symmetric effort at rebalancing current accounts would most likely require a slowdown of fiscal consolidation (in the current account surplus countries) but would be required to successfully address the euro area's macroeconomic challenges and thereby not only allow for consolidation in the medium term but also lead to the desired stability."

"The macroeconomic stabilisation policies which were put in place in most countries hit by the financial and economic crisis of 2008 - 09 have been successful in preventing a great depression. Economic policy has witnessed a certain "return of Keynesianism" (see, e.g., Dullien et al. 2010), but it is a strange sort of Keynesianism. Hyman Minsky's (1986 [2008]) famous question of how to "stabilise an unstable economy" in the light of "financial fragility" is still the burning question of our time. Minsky's answer to the question was "big government". Keynes's vision was one of not merely stabilising the economy, but also one of creating a more equal society. However, this is not what Keynesian, anti-cyclical policies are aiming at today.



With the crisis the 'efficient market' consensus in academia and politics has begun to crack. There has been, at least so it appeared for a few months, a new consensus in economic policy that financial markets need to be tightly regulated and that under some conditions discretionary stabilisation policies can be necessary in the face of negative aggregate demand shocks. But if there is to be veritable "return of Keynesianism", it will require more thorough revisions and in particular a rethinking of the role of inequality, which, as many argue, contributed importantly to the global crisis.



In light of these remaining global problems, unequal national economic outlooks, and the return of the austerity policies, the initial success of the stabilisation policies put in place since 2008 - 09 may turn out to be insufficient. This raises the following questions: Are the present policies merely stabilising an unsustainable accumulation regime based on income polarisation and the dominance of financial markets? What are the economic and political implications of rising public debt? How can financial regulation contribute to stability as well as equity? These questions are addressed, among others, in this book."

"In den USA ist "Finanzialisierung" während der letzten zweieinhalb Jahrzehnte mit einer tendenziellen Abschwächung der Investitionstätigkeit bei gleichzeitig kräftiger Entwicklung des privaten Konsums u.a. auf der Grundlage von Vermögenspreissteigerungen einhergegangen. Im Ergebnis zeigte sich eine trotz schwacher Investitionstätigkeit positive Entwicklung der Unternehmensgewinne sowie eine relativ robuste gesamtwirtschaftliche Dynamik. Dieses Modell ist aber wegen der latenten Überschuldung vieler privater Haushalte sowie der hohen Auslandsverschuldung mit erheblicher Fragilität des nationalen und internationalen Finanzsystems verbunden. In Deutschland ist es nach dem Wiedervereinigungsboom ebenfalls zu einer tendenziellen Abschwächung der privaten Investitionstätigkeit gekommen - zusammen mit ersten Finanzialisierungstendenzen im Unternehmenssektor. Allerdings stand die unverändert hohe Sparquote der einkommensstarken und vermögenden Haushalte - zusammen mit einem deutlich restriktiverem makroökonomischen Politik-Mix und einer deutlicheren Umverteilung zulasten der Arbeitseinkommen - bisher einem nachhaltigen Anstieg der Konsumnachfrage im Wege. In Deutschland wird die Auseinanderentwicklung von Profiten und Investitionen vor allem durch hohe Leistungsbilanzüberschüsse ermöglicht, bei allerdings deutlich geringerem Wachstum als in den USA. Hieraus ergibt sich zudem eine besondere Gefährdung des realwirtschaftlichen Wachstums und der Finanzsystemstabilität durch Finanzkrisen im Ausland."

"The financial and economic crisis in the Euro area has revealed a number of important flaws in the economic policy framework in Europe. On the one hand, the imbalances, which have dominated European development since the introduction of the euro, are not sustainable; and this is more serious in a period of crisis in particular. On the other hand, it has become clear that the Euro area suffers from a serious lack of institutions and policy concepts, which will not allow coping with deep financial and economic crises unless a deep restructuring takes place. The policy reactions of European governments, the European Commission and the European Central Bank in cooperation with the IMF will, therefore, hardly be able to initiate recovery. On the one hand, some important steps towards financial stabilisation have been made. On the other hand, however, these are combined with restrictive fiscal and wage policies, which will impose deflationary pressure on major parts of the Euro area and thus prevent stabilisation (or reduction) of public debt-GDP ratios. In the paper we will first analyse the imbalances, which have been built up in the Euro area, before we briefly review the policy responses towards the crisis. Since the prescribed fiscal and wage policies are still dominated by the New Consensus Macroeconomics theoretical framework, we will then develop an alternative macroeconomic policy model based on Keynesian and Post-Keynesian principles. It will be shown that stabilising wage and active fiscal policies will have major roles to play in order to cope with the imbalances and to initiate recovery for the EU as a whole. Furthermore, current account targets will have to be included into intra-Euro area policy coordination."

"In recent years, the interdisciplinary literature on financialisation has become one of the most quickly developing areas in the social sciences, including (Post Keynesian) macroeconomics. We discuss the relevance of the financialisation hypothesis in a non-technical manner from a macroeconomic perspective. Our interpretation of financialisation allows one to analyse the fundamental changes that the US and other economies have undergone over the past three decades or so. In particular, it helps to understand how the US economy has turned from a "debt-led" system, combining relatively weak physical investment activity, strong consumer spending, high income inequality and increasing indebtedness of firms and private households, to a "debt-burdened" system. In light of the current world economic crisis, the Keynesian financialisation hypothesis now seems to be increasingly shared among policy makers and economists."