Why The 2008 Crisis Was A Bad Crisis For New Ideas

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Journal Of International Relations And Development


Economic crises are, theoretically, fertile ground for alternative policy-relevant ideas. Through an examination of the policy debates in the United Kingdom and the United States during the 2008 economic crisis, this article claims that the assumption of the plasticity of the policymaking environment in the wake of crises needs to be rethought. The article argues that both governments' superficial turns towards Keynesianism, the leading alternative policy idea, were undermined by three factors. First, the crisis was subject to two competing conceptualisations of its underlying material reality -- the crisis as deep recession vs the crisis as insurmountable public debt -- and as the crisis unfolded, the former lost ground to the latter. While the first interpretation of the crisis opened space for the Keynesian tool of expansionary fiscal policy, proponents of the second understanding of the crisis rejected the appropriateness of this tool. Second, even if the crisis-as-recession interpretation had carried the day, fiscal policy had been discredited over the course of several decades in favour of monetary policy, making it unlikely that fiscal policy would be judged successful regardless. Third, over the same period, monetary policy had increased its institutional strength via the growing influence of central banks in economic policymaking.