The Global Financial Crisis: a crisis within the economic system

The Global Financial Crisis (GFC) was an endogenous crisis; that is, a crisis within the economic system, and specifically in the banking system. In most countries there was a ‘second dip’ recession in 2012-13, which resulted in higher unemployment and lower economic growth than in the ‘first dip’ of 2008-09. All regimes initially responded to the crisis with Keynesian fiscal and monetary stimuli; acting contrary to mainstream economic theory. But in the second dip responses diverged. Sweden followed social democratic priorities in expanding its active labour market programs to minimise unemployment. Germany followed corporatist priorities by using short-time work programs to share employment and promote family income stability. In the Southern European proto-corporatist regimes, externally imposed austerity and ‘internal devaluation’ measures resulted in disastrously high unemployment and close-to-zero growth.