Left Out, a podcast produced by Paul, Sliker, Dante Dallavalle, and Michael Palmieri, creates in-depth conversations with the most interesting political thinkers, heterodox economists, and organizers on the Left. Follow Left Out on Twitter: @leftoutpodcast
A decade after the largest economic downturn since the Great Depression, it is still a popular belief among the public and mainstream press that “no one saw” the 2007-08 financial crisis coming. The truth is, however, that a handful of unorthodox economists had the foresight to warn of the crisis, and were able to develop and apply the right analytical framework to the large amounts of empirical data available, allowing them to forecast why and how it would happen.
In late 2005, Keen became one of the first in this tiny club of economists to get it right (and one of only two do so with mathematical models), earning himself the Revere Award from the Real-World Economics Review for “being the economist who most cogently warned of the crisis, and whose work is most likely to prevent future crises.”
So what distinguishes Keen’s approach to economics from the mainstream theory (also known as “Neoclassical” economics)?
According to Keen, it’s because of his focus on the importance of credit in a dynamic, non-equilibrium framework. From that viewpoint, he identifies the ratio of private debt to GDP—and the rate of change of that ratio—as a key determinant of the state of the economy.
In the first half of our interview, Professor Keen explains why conventional economic theory doesn’t describe capitalism accurately, as well as Hyman Minsky’s hypothesis on the significance of private debt in the economy— something that is largely ignored by the predominant “Neoclassical” school of economics today.
In the second half, we turn to the prescriptive. Keen contends the main thing people need to think about is that “as well as workers and capitalists we have creditors and debtors in this economy— and by far the most important social clash these days is not between workers and capitalists, it’s between the financial sector and the rest of the economy.”
As for the Left, Keen thinks in order to win it must be less reactive and more intelligent in their campaigning, otherwise the future we’ll face “will be that of The Hunger Games and not of a democratic society.” That means focusing more on the role of private debt than on wage campaigns or unionization, and fighting for a modern debt jubilee and universal basic income.
Keen wraps up our discussion with his forecast for the global economy and gives us his predictions for what countries are most likely to face a crisis in the next 1-3 years.
Enjoy this piece?
… then let us make a small request. AlterNet’s journalists work tirelessly to counter the traditional corporate media narrative. We’re here seven days a week, 365 days a year. And we’re proud to say that we’ve been bringing you the real, unfiltered news for 20 years—longer than any other progressive news site on the Internet.
It’s through the generosity of our supporters that we’re able to share with you all the underreported news you need to know. Independent journalism is increasingly imperiled; ads alone can’t pay our bills. AlterNet counts on readers like you to support our coverage. Did you enjoy content from David Cay Johnston, Common Dreams, Raw Story and Robert Reich? Opinion from Salon and Jim Hightower? Analysis by The Conversation? Then join the hundreds of readers who have supported AlterNet this year.
Every reader contribution, whatever the amount, makes a tremendous difference. Help ensure AlterNet remains independent long into the future. Support progressive journalism with a one-time contribution to AlterNet, or click here to become a subscriber. Thank you. Click here to donate by check.