Palley versus Foster and McChesney: The Causes of the Crisis

I raised the issue of the Right Marxists or “Keynesian Marxists” in the last post. There is an interesting debate here between the Post Keynesian Thomas I. Palley and the Marxists John Bellamy Foster and Robert W. McChesney on the origins and causes of the financial crisis of 2008:

Thomas I. Palley, “The Limits of Minsky’s Financial Instability Hypothesis as an Explanation of the Crisis,” Monthly Review 61.11 (April, 2010).

John Bellamy Foster and Robert W. McChesney, “Listen Keynesians, It’s the System! Response to Palley,” Monthly Review 61.11 (April, 2010).

In his article, Thomas Palley reviews four explanations of the crisis, as follows:

(1) Minsky’s financial instability hypothesis (as argued by Jan Kregel, Charles Whalen, and L. Randall Wray);

(2) the structural Keynesian view of Palley himself⁽¹⁾;

(3) the new Marxist view of Foster and McChesney⁽²⁾, and

(4) the social structure of accumulation (SSA) view of Kotz⁽³⁾.

Palley’s “structural Keynesian” view also incorporates the Minsky’s financial instability hypothesis, but looks at longer economic factors from the 1970s that have encouraged neoliberal bubble economics. Once we consider the dynamics of debt deflation as argued by Steve Keen and Richard Koo, Palley’s view of the crisis is an interesting interpretation.


Footnotes

(1) Thomas I. Palley, “America’s Exhausted Growth Paradigm,” Chronicle of Higher Education (April 11, 2008); and Thomas I. Palley, “America’s Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and the Great Recession,” New America Foundation (July 22, 2009), http://newamerica.net

(2) John Bellamy Foster and Robert W. McChesney, “Monopoly-Finance Capital and the Paradox of Accumulation,” Monthly Review 61.5 (October, 2009), 1–20.

(3) David M. Kotz, “The Financial and Economic Crisis of 2008,” Review of Radical Political Economics 41.3 (2009): 305–317.