Financial crisis and right-wing extremism in Germany, 1931-33

a column by Sebastian Doerr, José-Luis Peydró and Hans-Joachim Voth for VOX: CEPR’s Policy Portal

Polarised politics in the wake of financial crises echo throughout modern history, but evidence of a causal link between economic downturns and populism is limited.

This column shows that financial crisis-induced misery boosted far right-wing voting in interwar Germany. In towns and cities where many firms were exposed to failing banks, Nazi votes surged. In particular, places exposed to the one bank led by a Jewish chairman registered particularly strong increases of support – scapegoating Jews was easier with seemingly damning evidence of their negative influence.

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The End of Economics?

an article by Fareed Zakaria for Foreign Policy via Arts & Letters Daily

Human beings are rarely rational—so it’s time we all stopped pretending they are.


The Fearless Girl statue looks up at Wall Street's Charging Bull sculpture in New York on March 29, 2018. (Volkan Furuncu/Anadolu Agency/Getty Images) 

In 1998, as the Asian financial crisis was ravaging what had been some of the fastest-growing economies in the world, the New Yorker ran an article describing the international rescue efforts. It profiled the super-diplomat of the day, a big-idea man the Economist had recently likened to Henry Kissinger. The New Yorker went further, noting that when he arrived in Japan in June, this American official was treated “as if he were General [Douglas] MacArthur.” In retrospect, such reverence seems surprising, given that the man in question, Larry Summers, was a disheveled, somewhat awkward nerd then serving as the U.S. deputy treasury secretary. His extraordinary status owed, in part, to the fact that the United States was then (and still is) the world’s sole superpower and the fact that Summers was (and still is) extremely intelligent. But the biggest reason for Summers’s welcome was the widespread perception that he possessed a special knowledge that would save Asia from collapse. Summers was an economist.

During the Cold War, the tensions that defined the world were ideological and geopolitical. As a result, the superstar experts of that era were those with special expertise in those areas. And policymakers who could combine an understanding of both, such as Kissinger, George Kennan, and Zbigniew Brzezinski, ascended to the top of the heap, winning the admiration of both politicians and the public. Once the Cold War ended, however, geopolitical and ideological issues faded in significance, overshadowed by the rapidly expanding global market as formerly socialist countries joined the Western free trade system. All of a sudden, the most valuable intellectual training and practical experience became economics, which was seen as the secret sauce that could make and unmake nations. In 1999, after the Asian crisis abated, Time magazine ran a cover story with a photograph of Summers, U.S. Treasury Secretary Robert Rubin, and U.S. Federal Reserve Chairman Alan Greenspan and the headline “The Committee to Save the World.”

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The crowding out effect from the European debt crisis perspective: Eurozone experience

an article by Baki Demirel and İlhan Eroğlu (Gaziosmanpasa University, Tokat, Turkey) and Cumhur Erdem (Abant İzzet Baysal University, Bolu, Turkey) published in International Journal of Sustainable Economy Volume 9 Number 1 (2017)

Abstract

The present study aims to measure the crowding out effect for the countries in the Eurozone that have tried to finance budget deficits through borrowing. We have examined the effects of government debt, government expenditure, interest rate and growth rate on private investments for the 2000-2015 period.

The results show that government debt, government expenditure, interest rates and budget deficits all affect private investment negatively and the impact of economic growth is positive.

The findings of the study support the existence of the crowding out effect in the Eurozone for the period of 2000-2015.

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The impact of the austerity measures to confront the economic crisis on the EU objectives and EU values

an article by Despina Anagnostopoulou (University of Macedonia, Thessaloniki, Greece) published in International Journal of Diplomacy and Economy Volume 3, Number 2 (2016)

Abstract

According to the EU Treaties, the EU economic policy coordination should serve the objectives of the EU, among which is the promotion of the EU values.

The paper demonstrates that:

• the EU values and objectives as well as the Charter of Fundamental Rights are binding on the EU institutions, even when they are acting outside the EU legal order (e.g., when drafting the MoUs);
• democratic principles are lacking in the EMU patchwork, especially in the case of member states under adjustment programmes;
• the national constitutional courts have recently ruled that equality and dignity were infringed by the laws implementing the MoUs, and so did the European Committee of Social Rights as far as social rights are concerned.

However, the European Court of Human Rights rules that the right to property is not infringed, while the EU Court of Justice denies competence to rule on the MoUs. Such approaches undermine the European citizenship project, and thus European integration.

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Long-Term Growth in Europe: What Difference does the Crisis Make?

an article by Nicholas Crafts (Warwick University, UK) published in National Institute Economic Review Volume 224 Number 1 (May 2013)

Abstract

OECD projections for European countries imply that the crisis will have no long-term effect on trend growth.

An historical perspective says this is too optimistic.

Not only is the legacy of public debt and its requirement for fiscal consolidation unfavourable but the experience of the 1930s suggests that much needed supply-side reforms are now less probable – indeed policy may well become less growth friendly.

Whereas the 1940s saw the Bretton Woods agreement and the Marshall Plan pave the way for the ‘Golden Age’, it is unlikely that anything similar will rescue Europe this time around.

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Global employment trends 2013: recovering from a second jobs dip

a report from the International Labour Organization

Five years after the outbreak of the global financial crisis, the study offers the latest global and regional information and projections on several indicators of the labour market, including employment, unemployment, working poverty and vulnerable employment. It also presents a number of policy considerations in light of the new challenges facing policy makers in the coming year.

Global Employment Trends 2013 highlights how the crisis is increasingly raising trend unemployment rates, partly driven by sectoral shifts of jobs that had been triggered by the crisis. Despite historically low interest rates in many advanced economies, investment and employment have not shown tangible signs of recovery. Depressed growth prospects have started to spread to the developing world, where low productivity and wage growth continues to remain an issue in most regions, preventing improvements in employment and disposable incomes, in particular among poorer countries, and adding to a rise in global inequality.

The report argues that in countries with high and rising unemployment, job guarantee programmes for targeted labour market groups should be the preferred policy measure. Moreover, rising labour market discouragement and structural unemployment should be tackled with new skills and training initiatives to help job-seekers find employment in alternative industries and to promote their employability more broadly. Other possible areas of intervention are further investments in public infrastructure in developing countries and a swift implementation of financial market regulation to help stabilize the macroeconomic environment and stimulate job creation.

Full text (PDF 170pp)

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Can Theories of Empire Explain the American Political Response to the Financial Crisis?

an article by Brandon Tozzo (Queen’s University, Canada) published in Critical Sociology Volume 39 Number 1 (January 2013)

Abstract

The repercussions of the 2008 financial crisis, which began in the USA, were felt around the world: credit markets froze, consumer demand collapsed, and major banks and industries required government money to avoid bankruptcy.

Given the severity of the crisis and the American Government’s unprecedented intervention in the economy, the financial crisis presents an ideal case for a critical reassessment of major theories of empire.

There are three prominent, yet distinct, views of empire that will be examined in this article.

The first is the Empire offered by Michael Hardt and Antonio Negri.

The second theory of empire is that of Leo Panitch and Sam Gindin.

Finally, there is David Harvey’s ‘new imperialism’.

The purpose of this article is to challenge several limitations in each theory of empire, and to conclude that Harvey’s ‘new imperialism’ provides the greatest insight into the USA’s immediate responses to the economic crisis.

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The Statistics Newsletter - Issue No. 57, October 2012

In this issue:

• Re-engineering the Japanese Statistical System (Ministry of Internal Affairs and Communications, Japan);
• Be a Part of the Future ABS: Collaborating with the Public to Enhance the Future of ABS Online (ABS);
• A Long-Standing Statistical Cooperation Program with China (Statistics Canada);
• Some Findings Based on Option Prices during the Financial Crisis (ECB);
• Conclusions from OECD SDMX Experts Meeting, Paris 13th - 14th September 2012 (OECD);
• OECD Financial Dashboard (OECD);
• MOFCOM-WTO-UNCTAD-OECD Conference on Global Value Chains in the 21st Century: Policy Implications on Trade, Investment, Statistics and Developing Countries - 19th-20th September 2012, Beijing (OECD).

Full text (PDF 23pp)

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44% of 55-64-year-olds don't know when they'll retire

Press Release from Barings Asset Management via TAEN Site news

More than 2.1 million British adults aged between 55 and 64 (44% of non-retired GB adults in this age group) do not know when they will be able to retire, according to new research by Baring Asset Management (“Barings”), the international investment management firm.

The study found that nearly two fifths (38% or 13.5 million people) of all non-retired Brits do not know when they will be able to retire while 12% (equivalent to 4.3 million people) do not plan to retire at all. The results of this year’s survey are in stark contrast to the results from before the financial crisis in 2008. Back then, 100% of non-retired respondents were confident that they would retire, with only 1% saying that they did not know at what age they would be able to do so.

Continue reading here (PDF 3pp)

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The impact of the economic crisis on the EU labour market: a comparative perspective

a paper by Pasquale Tridico (University Roma Tre)

Abstract

The objective of this paper is to explore why some countries perform better than others in managing the current economic crisis, which started in 2007 in the US financial sector.

I will elaborate on this question using the Crisis Management Index, taking into consideration GDP and labour market performance among European Union member states.

My findings conclude that countries which performed better during the economic crisis of 2007-2011 are countries which do not have a flexible labour market and have managed to keep stable employment levels. These countries combine a very good mix of economic policies and social institutions oriented to stabilize the level of consumption and the aggregate demand.

Coordination mechanisms, higher level of financial regulation and monitoring are also important features of these economies. Clearly, this group of countries identifies better, in the EU, a coordinated market economy model.

JEL classifications: G100, J100, H120, O570

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Managing masculinity/mismanaging the corporation

an article by David Knights (University of West England) and Maria Tullberg (Gothenburg University, Sweden) published in Organization Volume 19 Number 4 (July 2012)

Abstract

There are numerous accounts of the financial crisis that shocked the Western world in 2008. Almost all the commentaries are steeped in the same cognitive paradigm of linear thinking and assumptions of economic self-interest that could be seen to have created the crisis.

While acknowledging the multiplicity of reasons for the crisis and how it should be managed, this article offers an alternative in presenting a gendered perspective that could complement but also challenge some of the conventional wisdom. It suggests a link between managing masculinity and mismanaging the corporation leading to government bailouts for the banks and a near collapse of Western economies.

Although new governance and regulation are clearly important responses to the crisis, they do not necessarily get to the root of the problem. A more sociological form of analysis could help us to understand how individual material and symbolic self-interest deriving partly from misrecognition of the self as autonomous but reinforced by masculine fragilities was a major condition of the excesses leading to the crisis.

This article explores how this self-interest is not just a reflection of the neo-liberal economic consensus but also of masculine discourses within the business class élite that make the pursuit of ever spiralling remuneration almost obligatory.

Hazel’s comment:
Not, perhaps, in the mainstream of careers information this article will help advisers to understand a little more about the psychology involved in the banking and finance sectors – particularly male egos.

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Comparing Labor Market Performance: Some Stylized Facts and Key Findings

an article by Josef C Brada (Arizona State University, USA) and Marcello Signorelli (University of Perugia, Italy) published in Comparative Economic Studies Volume 54 Issue 2 (June 2012)

Abstract

Comparative evidence based on key labor market performance indicators is discussed for the US, Japan and Europe in a long-run perspective and, especially, showing the impact of the financial crisis and Great Recession.

As for Europe, the huge national and regional level differences are highlighted. In addition, some key findings on labor market performance raised by the empirical studies published in this issue are briefly presented in the wider context of the existing literature and their policy implications are explored.

JEL Classifications: J08; J24; J64; J65

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Youth unemployment rate and impact of financial crises

an article by Misbah Tanveer Choudhry (University of Groningen, The Netherlands) Enrico Marelli (University of Brescia, Italy) and Marcello Signorelli, (University of Perugia, Italy)published in International Journal of Manpower Volume 33 Issue 1 (2012)

Abstract

Purpose
The purpose of this paper is to assess the impact of financial crises on the youth unemployment rate (YUR). The authors consider different types of financial crises (systemic banking crises, non-systemic banking crises, currency crises and debt crises) and different groups of countries, according to their income level.
Design/methodology/approach
After a review of the existing (theoretical and empirical) literature on the determinants of the YUR in general and at the occurrence of economic crises, the authors present empirical estimations on the impact of past financial crises on young workers. The relationship between financial crises and YUR is investigated by employing fixed effects panel estimation on a large panel of countries (about 70) around the world for the period 1980-2005. The “persistence” over time of the impact is also investigated. Finally the Arellano-Bond dynamic panel is estimated, confirming the significance of the results.
Findings
According to the authors’ empirical estimates, two key results are relevant: financial crises have an impact on the YUR that goes beyond the impact resulting from GDP changes; and the effect on the YUR is greater than the effect on overall unemployment. The inclusion of many control variables – including in particular GDP growth – does not change the sign and significance of the key explanatory variable. The results suggest that financial crises affect the YUR for five years after the onset of the crises; however, the most adverse effects are found in the second and third year after the financial crisis.
Research limitations/implications
Although fully aware of the peculiarities of the last crisis, the authors believe that the econometric results facilitate a better understanding of the impact of the 2007-2008 financial crisis on the youth labour market.
Practical implications
The main policy implication is that effective active labour market policies and better school-to-work transition institutions are particularly needed to reduce the risk of persistence and structural (long-term) unemployment, since young people have been worst affected by the last crisis.
Originality/value
There are many studies on the characteristics and causes of youth unemployment; considerable research has also been carried out into the labour market impact of financial crises. This paper brings the two strands of literature together, by econometrically investigating the impact of financial crises on YUR.

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Bankers in the dock: Moral storytelling in action

an article by Andrea Whittle (Cardiff Business School) and Frank Mueller (University of St Andrews) published in Human Relations Volume 66 Number 1 (January 2012)

Abstract

This article draws on insights from a variety of fields, including discursive psychology, ethnomethodology, dramatism, rhetoric, ante-narrative analysis and conversation analysis, to examine the discursive devices employed in the storytelling surrounding the recent financial crisis. Discursive devices refer to the linguistic styles, phrases, tropes and figures of speech that, we propose, are central to the development of a compelling story.

We focus our analysis on the moral stories constructed during a public hearing involving senior banking executives in the UK.

The analysis suggests that two competing storylines were used by the bankers and their questioners to emplot the events preceding the financial crisis. We propose that a discursive devices approach contributes to the understanding of storytelling by highlighting the power of micro-linguistic tools in laying out the moral landscape of the story. We argue that the stories surrounding the financial crisis are important because they shaped how the crisis was made sense of and acted upon.

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