The recent financial crisis has stimulated a justifiable interest in the future of developed economies. Since the 2008 Lehman Brothers collapse the economics discipline has been forced to confront its failings. As Dominic Lawson has noted, it has partially undergone a much needed shift towards behavioural economics rather than the cold “rational” mathematical economics that failed so spectacularly. However, as this article describes, there remains enormous scope for a more fundamental rethinking of the political economy of the developed world.
For decades a generation of Latin American thinkers criticized the unequal relationships between the region and developed countries - especially the US. Their preferred weapon was Dependency Theory, which focuses on the pattern of poor countries providing cheap labour and natural resources to rich ones, and receiving in exchange manufactured goods in a way that perpetuates the backwardness of Third World economies. In the last decade, the rise of another developing economy, China, has made the old theory resurface.
The financial crises since 2007 have led to a resurgence in the stock of John Maynard Keynes. Recognised as one of the giants of economics, Keynes had been overtaken and largely forgotten by the neo-classical economics that had dominated public policy since the 1980s. Yet, Keynes’ concept of government stimulus spending became the go-to policy for a number of world governments desperate to avoid economic catastrophe. As Robert Lucas, a prominent member of the neo-classical orthodoxy, has dismissively remarked, “Everyone is a Keynesian in a foxhole”. Is this the limit to which Keynes is of use to us in the present?
Since the beginning of the revolt in Libya, the Italian government has been under pressure for its role in the management of the crisis. Its behaviour has been assiduously scrutinised by international observers. The shared history of Italy and Libya has bound the two countries in a special relationship, sometimes positive, other times negative. Libya’s grudge towards its colonial past has tarnished Italy’s image in the country. For this reason, Italian governments have progressively increased the level of bilateral cooperation with Tripoli in recent decades. Moreover, both left and right-wing Italian governments have supported Colonel Gaddafi’s re-entering the international political stage, gaining him some credibility and legitimisation as a “not-as-bad-as-the-others” African dictator. The apogee of that policy has been the signature of Italy-Libya treaty in Benghazi on 30 August 2008.
When Estonian Prime Minister Andrus Ansip marked his country’s adoption of the Euro on 1 January 2011, by withdrawing cash from a specially installed ATM in Tallinn, not all of his compatriots shared his enthusiasm. Many people, both within Estonia and further afield, question why the Baltic state would wish to join the troubled single European currency and, indeed, whether the Euro can even survive.
The Third Annual US-China Strategic and Economic Dialogue (S&ED), a round of bilateral talks that are meant to improve relations and cooperation between the two largest economies in the world, was held on 9-10 May 2011 in Washington, DC. For as much lip service as has been given to China as the nation to restore bipolarity to the world order, it seems more and more that the two countries are far too economically co-dependent to truly be opposite forces outside of their own bilateral relations. What was most interesting about this year’s round of talks was China’s open concern for its significant investment in the US Treasury, and how willing it is now to use its influence.
Those of us engaged in research in the field of European studies are, it is safe to say, “Europhiles”. In many cases this is owing to a story we have relating to the EU, or an 8-year-old’s memory of the signing of the Maastricht Treaty and the birth of EU citizenship. There are many other reasons, historical and cultural, of course, but these are not a panacea; what we perceive as Eurosceptism is now growing. This is apparent not only in the UK, a traditionally distant bedfellow of the European experiment, but in other, more pro-EU member states.