An Assessment of the Global Impact of the Financial Crisis

The 2008 financial crisis hit the heart of capitalism, but the effects were much weaker at the `periphery' of the capitalist system than in its centre. This book provides a solution to this paradox. The analysis presented here shows that current account surpluses and the accumulation of foreign reserves are important for developing countries because they allow them to conduct anti-cyclical policies in the face of a financial crisis in developed countries. Stabilization of output is important for robust growth in the long term due to its effects over capitalist animal spirits. Developed countries should never pursue a growth strategy based merely on the accumulation of `foreign savings'.

This book presents an extensive and in-depth analysis of the crisis as it influenced both developed and developing countries. It is shown that the impact of this crisis is far from being homogenous across the developed and developing world. The most intriguing aspect of it is the fact that it affected less those economies responsible for the generation of the `global savings glut', and more those economies that have a greater dependence on foreign capital inflows. In this aspect, the book also addresses the question of why this crisis has been rather limited in magnitude and of such relatively short duration. It is also shown that financial liberalization alone cannot fully explain the crisis. It is necessary to take a good look at the size of the financial sector all over the world and the redistributive impact related to it. Thus, one of the main lessons that can be learned from this volume is a profound need to implement policies that can guarantee financial stability.

This book is essential reading for all interested in economic growth, macroeconomics, and development economics.

Philip Arestis, Cambridge Centre for Economics and Public Policy, Department of Land Economy, University of Cambridge, UK. He is Professor of Economics, Department of Applied Economics V. Universidad del Pais Vasco, Spain; Distinguished Adjunct Professor of Economics, Department of Economics, University of Utah, US; Senior Scholar, Levy Economics Institute, New York, US; Visiting Professor, Leeds Business School, University of Leeds, UK; Professorial Research Associate, Department of Finance and Management Studies, School of Oriental and African Studies (SOAS), University of London, UK; and current holder of the British Hispanic Foundation `Queen Victoria Eugenia' British Hispanic Chair of Doctoral Studies. He is also Chief Academic Adviser to the UK Government Economic Service (GES) on Professional Developments in Economics.
Rogerio Sobreira is Associate Professor of Economics and Finance, the Brazilian School of Public and Business Administration at Getulio Vargas Foundation and CNPq REsearcher.
Jose Luis Oreiro is Associate Professor of Economics at the University of Brasilia (UnB), Level I Researcher at National Scientific Council (CNPq/Brazil), Director of the Brazilian Keynesian Association (AKB) and Member of the Editorial Board of the Brazilian Journal of Political Economy (REP).