Skip to main content
b25e690446f86f380efcc928_jk869.jpg Jon Krause

The Cycles of Economic Discontent

Every ten years or so, we think that a particular model of growth is so broken that it cannot be resurrected. The world needed to be rethought in 1979, 1989, 1998, and 2008, with each wave of collapse breeding a greater degree of disillusion about particular institutions.

FLORENCE – The nineteenth century was mesmerized by the cyclical behavior of business. The French economist Clement Juglar became famous for establishing that business cycles ran for around nine or ten years. We have recently had our own cycles of exuberance and disintegration. But they are very different.

In the nineteenth-century world, people rapidly picked themselves up after downturns and went back to business as usual. In that sense, the phenomenon of the business cycle looked relatively permanent and unchanging. Nowadays, however, a cyclical collapse comes as a great surprise. In its aftermath, we start to reinvent our view of economics. Every ten years or so, we think that a particular model of growth is so broken that it cannot be resurrected. The world needed to be rethought in 1979, 1989, 1998, and 2008.

Keynesianism definitively ended in 1979, following the second oil-price shock of the decade. The coincidental combination of the election of Margaret Thatcher in the United Kingdom and Federal Reserve Chairman Paul Volcker’s interest-rate shock of October 1979 ended an era in which inflation had been seen as a solution to social problems. State action and monetary expansion as a means of buying off discontent were discredited, as was the West European welfare state.

We hope you're enjoying Project Syndicate.

To continue reading, subscribe now.

Subscribe

Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.

https://prosyn.org/ctuX1Hh;
  1. haass103_GettyImages_redeastasiamapdotslines Getty Images

    Asia’s Scary Movie

    Richard N. Haass

    A snapshot of Asia would show a region at peace, with stable societies, growing economies, and robust alliances. But, if we view history as a moving picture, we may well come to look back on this moment as the time in which the most economically successful part of the world began to come apart.

  2. roubini130_GettyImages_iphonehandstealingpiggybank Getty Images

    The Great Crypto Heist

    Nouriel Roubini

    Cryptocurrencies have given rise to an entire new criminal industry, comprising unregulated offshore exchanges, paid propagandists, and an army of scammers looking to fleece retail investors. Yet, despite the overwhelming evidence of rampant fraud and abuse, financial regulators and law-enforcement agencies remain asleep at the wheel.

Cookies and Privacy

We use cookies to improve your experience on our website. To find out more, read our updated cookie policy and privacy policy.