ABSTRACT
The contemporary economic and financial crisis in the global economy – the great depression of 2008 and 2009 and the ongoing instability and threat of double dip recession – has surprised many analysts and opened up the field of economics to much criticism. The current economic downturn was not predicted by mainstream economic theories, or by short-term and intermediate-term theories of business cycles. According to Krugman, in the past decade or two there had emerged a view that modern-day economics had tamed the problem of crises associated with business cycle fluctuations and recessions. In his latest book, The Return of Depression Economics and the Crisis of 2008, Krugman argues against such thinking and makes the point that:
Fifteen years ago hardly anybody thought that modern nations would be forced to endure bone-crushing recessions for fear of currency speculators, and that major advanced nations would find themselves persistently unable to generate enough spending to keep their workers and factories employed. The world economy has turned out to be a much more dangerous place than we imagined.
(2008: 181)Essentially it means that for the first time in two generations, failures on the demand side of the economy – insufficient private spending to make use of available productive capacity – have become the clear and present limitation on prosperity for a large part of the world.
(2008: 182) The failure in mainstream economics has stimulated renewed but marginal interest in the theories of long-term, large-scale cycles, or waves of capitalist development. In circumstances of this sort, the late Ernest Mandel (1984: 195) made the point that “it is amusing that the long waves of capitalist development also produce long waves in the credibility of long-wave theories, as well as additional long waves of these theories themselves”.