Contemporary Economic Theory

Article excerpt

Contemporary Economic Theory Macmillan, 1999 ISBN 0-333-75362-3 L52.50

Reviewed by Persefoni Tsaliki

The slowdown in the economic activity that started in the early 1970s had two effects on the ideological level. First, it revealed the weaknesses of Keynesianism and, second, it created the necessary conditions for the appearance of the neoliberalism and the new classical economics. Neoliberalism attributes the causes of the economic recession to the malfunctioning of the markets caused by the excessive government intervention and blamed Keynesianism as the main factor responsible. It is ironic that Keynesianism, which once was held responsible for rescuing the market system from its deep crisis of 1930s and led to the `golden age' of capitalism, is nowadays considered a theory incapable of providing solutions to current economic problems. The neoliberal policy proposals actually undo Keynesian prescriptions as they all amount to the decrease in the size of the government.

This book includes articles and comments written by authors who seek to analyse current economic problems using alternative theoretical frameworks. This critical approach stems from the view shared by most of the authors that the neoclassical interpretation of economic phenomena lacks solid theoretical foundations.The book shows that there are radical economic theories, which not only propose an alternative theoretical framework to neoliberalism but also provide empirical analyses which display higher explanatory power than that of the neoclassical theory.

The book is divided into two parts. The first part contains articles that critically evaluate major neoclassical arguments and present and develop the elements of alternative theoretical frameworks.The second part of the book analyses the implications and future of the Economic and Monetary Integration of Europe.

In the first article, Andriana Vlachou and George Christou briefly discuss the basic microeconomic and macroeconomic principles of neoclassical economic theory, the foundation of neoliberalism and critically evaluate the main theoretical differences between alternative schools of economic thought. The article also provides an initial critical analysis of the effects of neoliberalism on European Integration. In the next article, Ben Fine argues that a general theory of privatisation cannot be developed because of the many country-specific socio-economic and historical features. He presents the UK experience and shows that privatisation usually benefits a small group of people and not society at large. In their comment, Stavros Mavroudeas and Lefteris Tsoulfidis argue that a theory on privatisation can be general and should rely on the analysis of the causes of falling profitability. Privatisation should be seen as one of the ways of government intervention to restore profitability in an economy.

In the third article, Richard Wolff takes a critical position towards the neoclassical theoretical concept of efficiency and argues that the analysis and solution of the problems of capitalist economy should be founded on theoretical grounds which recognise the class structure of society and the exploitation of labour. Anwar Shaikh, in his comment, emphasises that the class structure of the capitalist system formulates the economic behaviour of the system and not only the socio-political structure of it.

In the fourth article, Anwar Shaikh shows that the hypothetical inverse relationship between inflation and unemployment (Phillip's curve) cannot be established as a general historical relation. …