Economic policy after the crisis

Feeble economic growth in developed countries, experienced in the wake of the crisis, calls for a change in economic policy. Methods originating from liberal doctrine are inadequate to stimulate the economy. There is an obvious need for the restoration of sector-specific policy and for support of sectors that enable employment growth. Public finance is in bad condition due to an enormous part of its funds allocated to rescuing banks and financial institutions. Indebted countries save through cuts in public spending. Thus, the authority of markets matches the opportunism of governments. Such a condition makes the return to sector-specific policy harder.

As the present crisis continues, it is hard to see when the turbulence in the global economy is going to cease. Still, a question arises: As economies emerge from the recent crisis, what are the lessons economists and policy makers should take away and draw for economic policy? Heated debates in the economic and political literature unfold about the crisis - its sources, its consequences, and methods of recovery.

Policy makers are now more knowledgeable about the nature of the crisis, its reasons, and its effects. Due to strong remedies applied by governments and central banks, the gross domestic product (GDP) did not fall as dramatically in the recent crisis as it did during the crisis of late 1920s and early 1930s. Yet other serious consequences—such as high unemployment—could adversely affect productivity, and cause economic unrest and stagnation. The social consequences of the crisis are also high on the list of issues for debate. This article deals with the social aspects of economic policy—specifically, the social effects of a neo-liberal model of economic policy. Furthermore, this paper discusses issues of unemployment and national income distribution.