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Realeconomik: The Hidden Cause of the Great Recession (And How to Avert the Next One)

Translated from the Russian by Antonina W. Bouis
Copyright Date: 2011
Published by: Yale University Press
Pages: 224
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  • Book Info
    Book Description:

    This book directly confronts uncomfortable questions that many prefer to brush aside: if economists and other scholars, politicians, and business professionals understand the causes of economic crises, as they claim, then why do such damaging crises continue to occur? Can we trust business and intellectual elites who advocate the principles of Realpolitik and claim the "public good" as their priority, yet consistently favor maximization of profit over ethical issues?

    Former deputy prime minister of Russia Grigory Yavlinsky, an internationally respected free-market economist, makes a powerful case that the often-cited causes of global economic instability-institutional failings, wrong decisions by regulators, insufficient or incorrect information, and the like-are only secondary to a far more significant underlying cause: the failure to understand that universal social norms are essential to thriving businesses and social and economic progress. Yavlinsky explores the widespread disregard for moral values in business decisions and calls for restoration of principled behavior in politics and economic practices. The unwelcome alternative, he warns, will be a twenty-first-century global economy in the grip of unending crises.

    eISBN: 978-0-300-16126-7
    Subjects: Business, Economics

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
    (pp. ix-xvi)
  4. Introduction
    (pp. 1-10)

    The financial meltdown of 2007–2009 prompted me to write this book. While there have been lots of theories and discussions about the crisis, they primarily centered on the surface issues, or those not far beneath. Causes have been discussed, too, but largely the immediate and simple ones, which explain many things but not all that matter. Being an observer of developments rather than an interested participant in stock exchange gambling, I longed for answers to questions more about the deeper meaning of market disorders than about how particular markets function (and malfunction), and I couldn’t find answers that satisfied...

  5. CHAPTER 1 Developments in the Global Economy
    (pp. 11-34)

    In the spring of 2009, when I read newspaper coverage of worldwide economic developments and tried to formulate my own impression, I caught myself thinking that any evaluation of past events can be neither simple nor unambiguous. A variety of shocks, changes, and phenomena appear to occur simultaneously in different dimensions of economic life. Thus many descriptions and interpretations of contemporary economic developments can be found every day in the media, but none of them provides an exhaustive picture of the situation as a whole.

    Most important, however, as I acquainted myself more and more with media coverage of the...

  6. CHAPTER 2 Capitalism, the Market, and Morality
    (pp. 35-47)

    Few today would deny that a key role in the viability and efficiency of a market economy is played by the norms of behavior and values—including those we call morals—inherent in society, predetermined by mankind’s biological makeup or socially conditioned. This influence is attributable primarily to the specific role of trust between economic agents in a market economy.

    It has long been a given that agents’ mutual trust, as well as the trust of each in government as arbiter and registrar, is essential to market relations both in theory and in practice. This trust has made possible the...

  7. CHAPTER 3 Shifts in the Global Economy of the 1980s–2010 and Changes in the Moral and Psychological Climate
    (pp. 48-79)

    It’s time to return to the overall picture. The examples I have cited reflect individual events and therefore cannot reveal the catastrophic phenomena underlying the recent financial crisis. The most significant and simultaneously most dangerous aspect of the crisis is attributable to the fundamental structural shifts directly related to a gradual slackening of moral constraints in developed countries. These structural realignments are cited with increasing frequency in economic literature in connection with the crisis and even more so with concerns that the global economy could be subjected to far greater disruptions than a brief slowdown in growth or contraction in...

  8. CHAPTER 4 International Relations, 1980s–2008: Putting Self-Interest First
    (pp. 80-105)

    In this chapter I shall focus on developments in international relations over the past two decades and link the evolution of these relations to my main topic, which is the changing role of moral restraints in today’s global economy as a by-product of Realeconomik beliefs.

    From the 1960s through the 1980s, it was commonly held that the gap between rich and poor countries was an abnormal phenomenon and that the developed world should work toward eliminating this gap, partly to forward its own interests—to guarantee stability in the Third World, curb the flow of refugees, and expand markets, for...

  9. CHAPTER 5 The Crisis in Russia Is a Different Matter
    (pp. 106-122)

    In view of my personal experience as someone directly involved in Russian realities, who had an opportunity both to participate in them and observe developments from within, I now turn, in view of everything I have written on the Great Recession of the early twenty-first century, to my impression of how it affects Russia.

    The Russian economic system not only is a reflection of the cultural and historical development of the country and the reform of the Soviet economy; it also developed to a great extent out of the powerful influence of modern trends in the Western economy. Indeed, the...

  10. CHAPTER 6 Lessons from the Crisis in a Globalized World: Morality as the Key to Survival
    (pp. 123-136)

    Returning now from a consideration of the Russian crisis to the global economy as a whole, it is hard to shake off the sensation that a very specific and extremely complicated situation has emerged over the past twenty years for the developed world. In Chapter 3 I argued that mainstream business in developed countries has come increasingly to resemble a black box, where goods or services are produced with the assistance of opaque technologies but are promoted as high-tech and innovative and consequently sold at prices that bear little relation to actual expenses.

    The apotheosis of this trend appears in...

  11. Conclusion
    (pp. 137-142)

    The idea of writing this book came to me as the world financial crisis began unfolding, and the writing itself was done mostly against the background of this crisis as it grew into the Great Recession of the early twenty-first century. But the crisis served only as a convenient context for making some generalizations concerning certain trends in market capitalism of recent decades. That ultimately led to an attempt to establish the role today of morality—or, alternatively, its neglect—primarily in connection with the events of the past two decades.

    Since I began writing, changes may have occurred in...

  12. NOTES
    (pp. 143-154)
    (pp. 155-158)
    (pp. 159-160)
  15. INDEX
    (pp. 161-166)