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The Long Recession 2008–?

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Innovations Lead to Economic Crises

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Abstract

This chapter will examine the assumption that there is a relationship between innovations and economic crises . The specific analysis will focus on the ongoing economic crisis that started in the autumn of 2007. The following question will be considered: Is there a relationship between innovations and the economic crisis that was triggered in 2007? The purpose of the investigation is to discover which innovations triggered the social mechanisms that led to the economic crisis.

The findings presented reveal that the following innovations, working through social mechanisms , brought about the crisis : globalisation (institutional, political innovation ), modular flexibility (economic, organisational innovation), internet and personal computers (economic, technological innovation), the dollar standard and a credit -driven economy , as well as several financial product-innovations (economic and financial innovations ), and the ethos of the age : What’s in it for me? (institutional, cultural innovation).

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Notes

  1. 1.

    Krugman in the New York Times, 26 October 2008, under the headline: “Desperately seeking seriousness”.

  2. 2.

    In April 2013 there was queuing outside the Cypriot banks for the same reason.

  3. 3.

    Archibugi and Filippetti (2012: 9).

  4. 4.

    Minsky (1975, 1986).

  5. 5.

    Macdonald (2012: 1–3).

  6. 6.

    Duncan (2012: 6).

  7. 7.

    Soros (2009: xv) (introduction).

  8. 8.

    Soros (2009: xv) (introduction)

  9. 9.

    These instruments were termed “collateralized debt obligations” (CDOs).

  10. 10.

    Soros (2009: xviii) (introduction)

  11. 11.

    Duncan (2012a: 85).

  12. 12.

    Duncan (2012a: 86).

  13. 13.

    Blinder (2013).

  14. 14.

    Soros (2009: 161–164).

  15. 15.

    Nelson (2008: B98).

  16. 16.

    Florida (2010: 4, 12).

  17. 17.

    Duncan (2012).

  18. 18.

    Soros (2009: x) (Introduction)

  19. 19.

    Duncan (2012, 2012a).

  20. 20.

    Brunnermeier (2009); Crotty (2009); Roubini and Mihm (2010); amongst many others.

  21. 21.

    Soros (2009: xi) (Introduction)

  22. 22.

    Reinert and Rogoff (2010).

  23. 23.

    Referred to in Foster and Magdoff (2009: 7).

  24. 24.

    Chorafas (2009: 3).

  25. 25.

    Reinart and Rogoff (2009).

  26. 26.

    Schumpeter (2012: 1045).

  27. 27.

    The Mexican crisis in 1994, the Asian crisis in 1997, the Russian crisis in 1998, the Argentine crisis in 2001, the Dot.com Bubble in 2001 and the “subprime” crisis in 2007 (Sabado 2009: 15).

  28. 28.

    Here I argue that globalisation, the internet , the personal computer , a modular production structure and financial innovations led to the crisis . Based on the assumptions that are put forward here in the six previous cases, it will be the same innovations that transform and lead us out of the crisis.

  29. 29.

    Sabado (2009: 16).

  30. 30.

    Sabado (2009: 17).

  31. 31.

    Sabado (2009: 15).

  32. 32.

    Geier (2009: 105).

  33. 33.

    Sabado (2009: 15).

  34. 34.

    Deng Xiaoping (1992), Vol. 1 (1938–1965); 1984, Vol. 2 (1975–1982); 1994, Vol. 3 (1982–1992).

  35. 35.

    Duncan (2009: 46).

  36. 36.

    Duncan (2012a: 169).

  37. 37.

    Duncan (2012: 27–34, 2012a: 170)

  38. 38.

    Duncan (2012a: 1).

  39. 39.

    Duncan (2012a: ix).(preface)

  40. 40.

    Duncan (2012a: 3–15).

  41. 41.

    Duncan (2012a).

  42. 42.

    Duncan (2003, 2009, 2012, 2012a).

  43. 43.

    Von Mises (1949: 563).

  44. 44.

    This is a quantitative measure which resulted in money being pumped into the American economy from the Federal Reserve . See http://en.wikipedia.org/wiki/Quantitative_easing (date of access: 15 February 2013).

  45. 45.

    QE3 was introduced 13 September 2012. See http://en.wikipedia.org/wiki/Quantitative_easing (date of access: 15 February 2013).

  46. 46.

    Duncan (2012a: 114).

  47. 47.

    Duncan (2012a: 115–117).

  48. 48.

    Konzelmann et al. (2013: 1).

  49. 49.

    Chorafas (1995).

  50. 50.

    Duncan (2003).

  51. 51.

    Duncan (2012: 6)

  52. 52.

    Xiaoping (1965, 1965a, 1965b).

  53. 53.

    BRICS stands for: Brazil, Russia. India, China and South Africa .

  54. 54.

    Duncan (2012: 6)

  55. 55.

    This concerns the Long Crisis (1873–1897) and the Great Depression after 1929.

  56. 56.

    Johannessen (2009).

  57. 57.

    IMF : International Monetary Fund.

  58. 58.

    Soros (2009: 97; 84–95).

  59. 59.

    Duncan (2012a); Soros (2009: 97).

  60. 60.

    Duncan (2012: 8).

  61. 61.

    Duncan (2012: 7).

  62. 62.

    Duncan (2012: 8).

  63. 63.

    Rothbarth (2011).

  64. 64.

    Duncan (2012: 8)

  65. 65.

    Kahneman (2011); Kahneman and Frederick (2002); Kahneman and Tversky (1979, 2000, 2000a); Kahneman Slovick and Tversky (1982).

  66. 66.

    The word “adequate” is used deliberately as a form of precise ambiguity, because no one knows when the adequate level is reached. One can perhaps develop a rule of thumb, for example, how much a house costs in terms of income, 4 – 6 × gross income or the like, but it is not possible to be exact here. The assumption here is when you pay down a loan over 30 years. If house prices are more than 4 – 6 × gross income, for example, 10 × gross income, then this may be an indication of a bubble in the housing market (see Duncan 2012: 8).

  67. 67.

    Duncan (2012: 8–9).

  68. 68.

    Duncan (2012: 10).

  69. 69.

    Chorafas (2009: 7).

  70. 70.

    Chorafas (1995).

  71. 71.

    Derivative: “A financial instrument whose price, directly or indirectly relates to the market price development of other financial product(s) or commodities” (Chorafas 2009: xvii).

  72. 72.

    Chorafas (2009: 7).

  73. 73.

    Duncan (2012: 11).

  74. 74.

    Duncan (2012: 13).

  75. 75.

    Gladwell (2000).

  76. 76.

    Duncan (2012: 13).

  77. 77.

    Duncan (2012a).

  78. 78.

    Duncan (2012a).

  79. 79.

    Duncan (2012: 20).

  80. 80.

    Duncan (2012: 22).

  81. 81.

    Duncan (2012: 22–23).

  82. 82.

    Duncan (2012: 22).

  83. 83.

    Duncan (2012: 23).

  84. 84.

    Duncan (2012: 24).

  85. 85.

    Duncan (2009: 63).

  86. 86.

    Duncan (2012: 25).

  87. 87.

    Duncan (2012: 26).

  88. 88.

    Duncan (2012: 26).

  89. 89.

    Mandel (1995: 113).

  90. 90.

    Derivatives: to gamble on price developments, for example, various agricultural commodities.

  91. 91.

    Duncan (2012: 30).

  92. 92.

    Stiglitz (2012).

  93. 93.

    Duncan (2012: 31).

  94. 94.

    Florida (2010: ix (preface)).

  95. 95.

    Keynes (1973: 235).

  96. 96.

    Krugman (2008: 9).

  97. 97.

    Stiglitz (2012).

  98. 98.

    Keynes (1973).

  99. 99.

    Chorafas (2009: xxi).

  100. 100.

    Konzelmann and Fovargue-Davies (2013: 269).

  101. 101.

    Stiglitz (2012).

  102. 102.

    We see, for example, a change in demand for cars in Europe . This has led to vehicle production changing from large to small and micro cars.

  103. 103.

    Stiglitz (2012)

  104. 104.

    Ibid.

  105. 105.

    Konzelmann and Fovargue-Davies (2013: 278–279).

  106. 106.

    Husson (2013: 119).

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  1. Kristiania University College and Nord University, Oslo/Bodø, Norway

    Jon-Arild Johannessen

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Johannessen, JA. (2017). The Long Recession 2008–?. In: Innovations Lead to Economic Crises. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-41793-6_7

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  • DOI: https://doi.org/10.1007/978-3-319-41793-6_7

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