Financial crisis and political economic change: the return of history

Abstract

The most robust ex-post analyses of the current crisis explain it as another episode, although of great virulence, in the uninterrupted process of chronic instability in financial markets, as studied by authors such as Charles Kindleberger. The idea of recuperating historical knowledge as a fundamental element to not only aid in the recovery from the crisis, but also to prevent future ones, has risen with great force. This has happened both in the theoretical level and the policy formation level. In theoretical terms, the need to overcome the separation of economic analysis from history (an old methodological problem, but very accentuated during the last decades) has become one of the key vectors in the crucial debates on the future course of academic economics. On the decision making end, historical comparison, particularly with the Great Depression, has become a fundamental element in the development of preventative and reactive counter-cyclical measures, contributing to a drastic reorientation of the criteria of political economy.