The Financial Crisis and 'Rational Economic Man'

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Slides for lecture given as part of UCD module, 'Gender and the Economy' - 4 November 2013

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The Financial Crisis and 'Rational Economic Man'

  1. 1. Gender and the Economy Lecture Nine: The Financial Crisis and ‘Economic Man’ 4 November 2013
  2. 2. 11 May 2010 Dear Chief Secretary, I'm afraid to tell you there's no money left. Sincerely, Liam Byrne. chief secretary to the Treasury.
  3. 3. “The British Government has run out of money because all the money was spent in the good years.” George Osborne, 25 February 2012
  4. 4. “So we cannot just carry on as we are. Unless we reform our economy - rebalance demand, restructure banking, and restore the sustainability of our public finances - we shall not only jeopardise recovery, but also fail the next generation.” Mervyn King, TUC Conference, 15 September 2010.
  5. 5. 5 March 2009. QE : £75 billion 10 October 2011. QE : £75 billion 2009 – 2011. corporate bond purchase via asset purchase facility : £375 billion 2012: Monetary Policy Committee approve a further £50 billion. “So we cannot just carry on as we are. Unless we reform our economy - rebalance demand, restructure banking, and restore the sustainability of our public finances - we shall not only jeopardise recovery, but also fail the next generation.” Mervyn King, TUC Conference, 15 September 2010.
  6. 6. “In the European context tax rates are high and government expenditure is focused on current expenditure. A “good” consolidation is one where taxes are lower and the lower government expenditure is on infrastructures and other investments.” Mario Draghi. 24 February 2012. “The ideal fiscal consolidation ... must be focused on spending cuts and not tax hikes. It is essential that [this consolidation effort] is perceived as credible, irreversible and structural to have impact on sovereign debt spreads.” Mario Draghi. 15 November 2012
  7. 7. Long Term Refinancing Operations (LTRO) 21 December 2011: €489.2 billion to 523 banks – 3yrs @ 1 per cent 29 February 2012: €529.5 billion to 800 banks – 3yrs @ 1 per cent
  8. 8. Long Term Refinancing Operations (LTRO) 21 December 2011: €489.2 billion to 523 banks – 3yrs @ 1 per cent 29 February 2012: €529.5 billion to 800 banks – 3yrs @ 1 per cent “Some banks, particularly in Spain and Italy, used portions of those funds to buy higher-yielding bonds issued by their governments at a time when most investors remained skittish, and it helped reduce government borrowing costs. But many banks primarily used the funds to pay down maturing debts or simply deposited the money at other banks or with the ECB itself, even though they yield less. The infusion fell short of some politicians' hope that it would stimulate bank lending to customers in struggling European economies.” Wall Street Journal, 1 March 2012
  9. 9. Implementing reform is a real challenge and this requires that we win the hearts and minds of the people. Countries are faced with the option of either profoundly reforming their public expenditure and social security systems or putting their long-term sustainability at risk. Jean-Claude Trichet, 31 May 2004
  10. 10. 1. Cut government spending 2. Cut wages 3. Use central bank credit to buy paper assets 4. Keep inflation at a low rate
  11. 11. Financialization refers to the increasing importance of financial markets, financial motives, financial institutions and financial elites in the operation of the economy and its governing institutions, both at the national and international levels. Gerald Epstein, „Financialization, Rentier Interests, and Central Bank Policy‟,2002 1970s – The Monetarist revolution 1980s – war on labour 1990s – Credit as a substitute for wage increases 2000s – Credit solution for wage stagnation fails Present day – open conflict over monetary policy once again
  12. 12. Some characteristics of Neo-liberalism  Attacks the post-war compromise between producer capital and labour – compromise that put severe checks on free movement of capital - Great Britain and Northern Ireland = Social Democratic Welfare State - Irish Republic = Corporatist State / Rerum Novarum (Vocationalism) • Pushes a monetary policy designed to benefit financial rentiers • Privileges asset-price speculation over producer-led employment • Needs to kill inflation in order for asset price profit-seeking to work
  13. 13. “[According to the BIS*], due to central banks’ success and gained reputation in fighting inflation, inflationary pressures would first show up in asset price inflation and increase the vulnerability of financial systems. Is this something a central bank should be concerned about to a degree that policy strategies have to be amended? Should a central bank react to asset prices directly or indirectly with regard to possible future threats to price stability? Do we know which of the observed asset price booms are bubbles? Do we need to know?” Jean-Claude Trichet, President of the ECB, 8 June 2005, Singapore *BIS – Bank for International Settlements
  14. 14. “I would argue that, yes, bubbles do exist, but that it is very hard to identify them with certainty and almost impossible to reach a consensus about whether a particular asset price boom period should be considered a bubble or not… Jean-Claude Trichet, 8 June 2005, Singapore
  15. 15. “I would argue that, yes, bubbles do exist, but that it is very hard to identify them with certainty and almost impossible to reach a consensus about whether a particular asset price boom period should be considered a bubble or not… Empirical evidence confirms the link between money and credit developments and asset price booms. Thus, a comprehensive monetary analysis will detect those risks to medium and long-run price stability. …the ECB’s monetary policy strategy has this property Jean-Claude Trichet, 8 June 2005, Singapore
  16. 16. https://www.youtube.com/watch?v=MP-pR8boaxQ
  17. 17. Over the past thirty years, despite their being essential to human life, neoliberal restructuring across the world has privatised, eroded and demolished our shared resources, and ushered in a ‘crisis of social reproduction.’ ‘Cuts are a Feminist Issue’, Soundings (Dec 2011), p.73.
  18. 18. The term social reproduction encompasses all the means by which society reproduces its families, citizens and workers. It includes all the labour that is necessary for a society to reproduce itself: the biological production of people and workers, and all the social practices that sustain the population – bearing children, raising children, performing emotional work, providing clothing and food, and cooking and cleaning.
  19. 19. The term social reproduction encompasses all the means by which society reproduces its families, citizens and workers. It includes all the labour that is necessary for a society to reproduce itself: the biological production of people and workers, and all the social practices that sustain the population – bearing children, raising children, performing emotional work, providing clothing and food, and cooking and cleaning. As a concept social reproduction has been key to feminist social theory, because it challenges the usual distinctions that are made between productive and reproductive labour, or between the labour market and the home.
  20. 20. The term social reproduction encompasses all the means by which society reproduces its families, citizens and workers. It includes all the labour that is necessary for a society to reproduce itself: the biological production of people and workers, and all the social practices that sustain the population – bearing children, raising children, performing emotional work, providing clothing and food, and cooking and cleaning. As a concept social reproduction has been key to feminist social theory, because it challenges the usual distinctions that are made between productive and reproductive labour, or between the labour market and the home. Labour in this sphere is often devalued and privatised, and is typically performed by women in their ‘double day’ or ‘second shift’, alongside paid wage labour. But reproductive labour of this kind is just as central to capitalist accumulation as are other forms of labour, which means that struggles over its structure and distribution are fundamental to any understanding of issues of power and the relationships between labour and capital, as well as the potential for their transformation.
  21. 21. Social Reproduction Renewing life is a form of work, a kind of production, as fundamental to the perpetuation of society as the production of things. Moreover, the social organization of that work, the set of social relationships through which people act to get it done, has varied widely and that variation has been central to the organization of gender relations and gender inequality. From this point of view, societal reproduction includes not only the organization of production but the organization of social reproduction, and the perpetuation of gender as well as class relations. Barbara Laslett and Johanna Brenner, ’ Gender and Social Reproduction: Historical Perspectives,’ Annual Review of Sociology, Vol. 15 (1989): 383
  22. 22. https://www.youtube.com/watch?v=QqYnOWoyC5M

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