The global financial crisis and the world recession it produced were the latest in a series of crises that have come to plague the international economy. Such crises have become increasingly frequent and more intense as the liberalization of financial markets accelerated after the collapse of the Bretton Woods system some forty years ago. That each of them cannot be treated as an isolated event with solitary causes, but were instead events that shared common origins, has become clear to us all. Their origins, we now find, reside in part in the consequences of a process of financial liberalization that was allowed to proceed without sufficient consideration being given to the magnification of systemic risk it entailed, and in part in the consequences of the neoliberal dogmas that came to dominate practical policymaking during those same years.
The almost hypnotic power of these failed dogmas should not be underestimated. There are grown men and women—some even among professional economists—who continue to maintain that there are no multiplier effects to be had from loan expenditure undertaken by governments during a slump. It is still possible to hear the wrong-headed opinion that while an increase in public indebtedness during a recession is to be avoided at all costs, an increase in the aggregate of private indebtedness on a similar scale (supposedly easily engineered simply by getting credit channels flowing) offers an entirely unproblematic solution to our present problems.