Market economies in crisis – mayor shift in the dominant macroeconomic paradigms

Abstract

The contemporary global economic crisis has "stirred the waters" and made many people wonder what it represents, where it came from and where it leads us. In this paper we are going deeper, analyzing the shift in the dominant economic paradigms as the cause for a global economic crisis that began in developed market economies. The global economic crisis has changed the balance between the two dominant macroeconomic conceptions - Keynesian and neo-liberal, and created a need for the reconstruction of the core of the contemporary economic science, policy and practice. In the fi rst part of the paper we analyze the relationship between economic theory, economic policy and economic practices in order to better understand the process of the changing balance between the dominant macroeconomic paradigms and the changes that are taking place in the economies affected by the crisis. The second part will explore the relation between the 1930s, 1970s and the contemporary economic crisis on the one hand, and the economic paradigms shift on the other. The third part of the paper will be focused on the neo-liberal economic paradigm which in the last two or three decades has dominated in economic theory, policy and practice and is one of the main causes for today's global economic crisis (starting from the concept and origins of neo-liberalism, its fundamentals, the Washington Consensus as a neo-liberal manifesto and the role of the neo-liberal conception in the fi nancial crisis that has shaken the world). At the end, appropriate attention will be devoted to shaping the relationship between the dominant economic paradigms under the impact of the contemporary economic crisis, its implications on the economic policy and practice, the future of the standard economic science and similar issues.