Lecture 7

Historical Context of Economic Phenomena

• The increasing inequality phenomenon has its roots in the Middle Ages.

Factors Contributing to Inequality

• The growing inequality is mainly attributed to the increasing wealth of the top 1% of the population.

Most Affected Groups by Crises

• The 2008 financial crisis and Covid-19 pandemic most affected low-income households, young people, and minorities.

Post-War Economic Recovery

• The European Recovery Program (Marshall Plan) aimed to rebuild and strengthen the European economy after World War II.

Political Consequences of Economic Crisis

• The economic crisis in Europe after World War II led to the rise of social democratic parties and the creation of welfare states.

Welfare State Development

• Sweden experienced the greatest transformation in terms of creating a comprehensive welfare state after World War II.

Emergence of New Economy

• The Industrial Revolution contributed to the emergence of a new economy beyond luxury goods.

Consequences of the Oil Crisis

• One of the consequences of the 1973 oil crisis was the decline of the Keynesian economy and the rise of neoliberalism.

Bretton Woods Agreement

• The 1971 Nixon shock marked the end of the Bretton Woods agreement and the introduction of the floating dollar.

Economic Crisis in Western Europe

• The 1970s crisis, caused by the oil price shocks, led to reduced growth and inflation in Western Europe.

Unemployment Impact

• The 1970s crisis led to a significant increase in unemployment in Germany.

Welfare State Challenges

• The welfare state faced the challenge of reduced funding and increased costs during the 1970s crisis.

Dominant Economic Concept

• Neoliberalism, emphasizing supply-side economics, became the dominant economic concept since the 1980s.

Monetary Policy in Neoliberalism

• The central role of monetary policy in neoliberalism is to control inflation and promote economic growth.

Growth of Hedge Funds and Securitization

• Deregulation of the financial sector contributed to the growth of hedge funds and securitization of credits.