Academic journal article The European Journal of Comparative Economics

United States of America, European Economy and Inequality: A Perspective from the Economic History, 1910-2010

Academic journal article The European Journal of Comparative Economics

United States of America, European Economy and Inequality: A Perspective from the Economic History, 1910-2010

Article excerpt

1. Introduction

The Great Recession has opened up a new panorama in analysis of the economic crisis, with economic approaches that are less conventional. The more conventional arguments are based primarily on financial, stock-market and monetary factors, but the ongoing recession is forcing social scientists - with holistic views of their disciplines - to work with parameters that are more permeable. They offer perspectives that, though rejected by most of academia, could help to establish a different analysis of the economic crisis. Reviving the concept of the business cycle is one of the key ideas. Although the very existence of the business cycle had been called into question by the staunchest proponents of equilibrium economics, it is very much present in real-world economics, and is beginning to be accepted by its main detractors. Historically, the "industrial cycle" was identified and was linked to fluctuations in investment demand in the form of inventory restocking or fixed capital, the two variables most closely tied to the short-run cycle or industrial cycle, which spans no more than ten years (Sylos Labini 1988). However, there were also analyses of long-run cycles driven by technological developments (Fagerberg and Verspacen 2009; Castro-Fernández de Lucio 2013). It is in this long-term perspective that the hypothesis on the law of the tendency of the rate of profit to fall (LTRPF) and the severe crisis of capitalism was developed (Marx 1894).

These long-term hypotheses are especially fascinating for analysis of capitalist behaviour. However, it is these hypotheses that are most prone to errors resulting from a lack of rigorously constructed supporting statistical data with which to contrast the hypotheses with reality. In this type of analysis, the prevailing idea is that the capitalist economy fluctuates around long-term positions. These positions can either be stable, as in the classical equilibrium hypothesis supported by Adam Smith and David Ricardo; unstable, due to technological progress (examples include Karl Marx and the LTRPF, and Joseph Schumpeter and the hypothesis of technological revolutions [Schumpeter 1942]); or due to a lack of aggregate demand (Keynes 1936), which in the Cambridge school variety (Kalecky 1937; Kaldor 1940; Robinson 1956) is reinterpreted, in terms of income distribution, as a recurring bias in favour of profit and to the detriment of wages.

These basic assumptions about US are guiding our research on the Great Recession, which has already offered some results (Manera, 2013, 2015; Manera, Navinés, Franconetti, 2015). These results constitute the main platform to provide a clear roadmap for economic research. Our arguments focus on selected economies in Europe (the UK, Germany, France, Italy and Spain), which may be representative of what is happening in northern and southern Europe. Greece is excluded as it is considered an extreme example of the very conclusions we initially reached.

The first section of this paper details the methodology followed, using the United States as a benchmark, as mentioned above. In the second section the case of the United States serves as an essential reference for our new methodological analysis. The third section presents four fundamental lines of research related to the US and the European economies considered. The final section presents some initial conclusions, which are still under development and need further research to be validated. This paper is therefore more a document for provoking research than a project with a closed perspective. Our aim is to analyse the points put forward in this paper in greater depth and make a modest contribution to a better understanding of the Great Recession and its contribution to the analysis of the economic crisis.

2.Methodological lines

The methodological lines used are as follows:

Paolo Sylos Labini's contribution (Sylos Labini 1988), who establishes an income distribution range within which aggregate demand will remain sustainable. …

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