Loose Credit and Low Wages: A Re-examination of US Postwar Economic History in Light of the Recent Recession

The protracted nature of the current global economic downturn, beginning in late 2007 with the crash of the US credit markets and continuing on into today, suggests that a wider range of policy responses are now required by the international community to get the global economy back on an upwards trajectory of growth. Orthodox economics, with its disproportionate bias towards the supply-side of the economic equation, has proved extremely ineffectual in addressing the multitude of problems associated with the current global recession. In particular, the apathetic approach encapsulated by the neo-classical position, which asserts that the "free market" should be left alone to generate a solution to any economic downturn, has proved a highly costly ideological position for the global economy to follow. Fortunately however, in policy-making circles, a slight move away from the debilitating neo-classical supply-side position is now under way, giving rise to proactive policies that do not wait for the market to "inevitably" fix itself.