Topics and Literature of KSU Reading Group: Roots of the Crisis and Cuts

In the second half of this semester KSU organized a reading group about the roots of the systemic crisis and the cuts in Holland. Below you will find a summary of the topics and literature that we collectively chose to use.

Week 1 – Causes

You’ll see lists, timelines, articles and videos. Since my resources are more economic it would be great if someone provided articles that show effects on society itself, than just on the financial institutions.

Lists: I think we should look at the lists of crises-crashes that have happened in world history. Don’t need to take very close look, just by taking the dates into account we are immediately confronted with The Fact; namely, crises happen…a lot! They are different in kind, though, so I would not suggest taking quick conclusions. Thus, timelines and lists are helpful next to reading the articles, for providing the historical perspective. For example, the time from Lehman Bro’s collapse to the 700bil $ Bailout Plan was almost a week!!Something that had happened before, but never in such scale.

Last comment: It is really hard to find purely historical articles. Every author uses data and circumstances to make a case for some kind of explanation and by founding his analysis on these, promotes his solutions. I have suspended my judgment because there are still a lot to see before taking sides. I hope with our discussion we can make clearer conclusions. I know it is a huge email, but as requested I added information for every article to break things down.


2)Timeline and storyline

Global Crisis: (here go to chapter II, section 1) (also there is a treasure of resources (VI) for opinions on roots and things to come )

Eurozone Sovereign Debt Crisis:

3) Articles

(18 pages) Global Finance in Crisis (Sapir- April 2008): : This article presents the origins of the 2008 financial meltdown, right while it happened. You will see numbers, graphs, mechanisms and the essential transformations. This article is more analytical than Soros’s below and you will get a good picture so that to evaluate other opinions concerning the crisis.

If you are not used to reading such articles, before reading this article go to the youtube link i provided, which explains the Credit crisis in illustration. Then go back and try to make sense of the first part “How and Why” (p.82-84). Then on page 89 read the last paragraph. That conclusion is essential in understanding what happened in general, i.e the transformation of mortgages into financial products .Then re-read p.89’s last three paragraphs- that is how you connect the first part with the general picture. Then, go to p. 91 and read the intro of “The crisis goes global”. Lastly, you may go to p.96 and read the part “From US recession to World crisis” -some things happened others didn’t (Greece instead of Spain was hit in Europe). For those who want to see the arguments comparing this crisis to the 1929 crisis, go to the last part of the paper. I will try to explain it in detail (if needed) as much as I can.

(1 page)The crisis in the Eurozone (J.K. Galbraith (the son) – Nov 3 2011) – An article with a brief overview of things that happened and a critique of current actions.

(half page) Euro Trap (Krugman): (Short analysis) Short analysis of the Eurozone strategies and possible traps  -It connects with the P. de Grauwe article below, by showing what are the general internal disagreements of EU authorities (de Grauwe 1.3). Also other articles show, how EU governments’ judgments (Germany, France basically) are insinuated by (almost bankrupt) big european banks, thus making disagreements and delays more intense.(

(7 pages) The crisis and what to do about it (Soros -Nov 2008) (attached – More analysis) : This article provides a scope of what was described in Sapir above and also gives another view of the financial institution’s workings + Soros’s own view of the roots and problems of the crisis . Read parts 1&2 definitely. I suggest to read the whole article,though, so that you can get another perspective -which is good to have in mind- no matter that Soros has his own (open society) agenda. It will also be helpful in our second session.

(7 pages) Crisis in the Eurozone and How to deal with it (P. de Grauwe -Feb 2010) (attached- More analysis): In this article we can see how three major players in the Eurozone crisis are connected– also we find an analysis of root problems of the Eurozone, for which the author provides (doubtful) answers (also good for our second session). (I have concerns about the paragraph concerning Greece, yet since it was the first player hit, the analysis in part 2 is quite reasonable.) (Of course it remains as a discussion issue on whether fiscal policy (namely CUTS) is the only appropriate way to overcome this crisis within a pegged currency economic system, especially when taking into account the effects on society (labor, spending, social relations, political turmoil).)

(50 pages(optional) I suggest 5 pages) Eurozone crisis: beggar thyself and thy neighbour (Lapavitsas et al.) (attached – Huge analysis) It is a big article, so basically I will just point to specific parts. Main idea: The crisis in Europe is an effect from the US credit crisis and structural problems of the Eurozone. Moreover bad effects came from the wrong way peripheral countries were integrated in the Eurozone. Here the author talks about the problems Germany created to other countries’ labor markets. Basic disagreement with de Grauwe above is thatGreece was not an important player. but It became one as “Greece represented potentially the start of speculative attacks on other peripherals—and even on countries beyond the eurozone, such as the UK—that faced expanding public debt“. Read pages 321-325 for a general overview of the US/EU crisis. Important: This article, despite being rather big, is essential for our understanding of the EUROZONE and its problems. If you read it, you will understand and evaluate every newspaper article or discussion on Eurozone politics.

4) Videos and Movies

a)  Credit crisis visualized

b) Inside Job (2010) I recommend that everyone sees this documentary. It gives a general, yet precise view of the mechanisms within the financial system, that pushed the workings of this crisis.

c) GS Trader talking in BBC.  Seriously check the words of this trader! Look beyond the fear that he wants to spread and basically zoom into how neutral they are in evaluating state measures, since their only task is to make money from short sales!

Week 2 – Crisis theory

The following two texts are mandatory for everyone to read:

1. Shaikh, Anwar. An introduction to the history of crisis theories.

In this article Shaikh gives an overview of various theories about how and why the capitalist system is crisis prone. Three main currents (from bourgeois to Marxist) are explained:Laissez-Faire theory, underconsumption (overproduction), and the internal contradiction theory: the falling rate of profit.

2. Easterling, Stuart. Marx’s theory of economic crisis. In this article Easterling explains Marx’s theory of capitalist crisis and the clarifies the concept of the falling rate of profit. The reason to select this article is that most of the theories about capitalist crisis stem from Marxist thinkers and many (if not all) of them have something to do with the abovementioned concept. Easterling also explains some basic notions of the Marxist analysis which will greatly help to understand where Marx is aiming at when he talks about the falling rate of profit.

The following text is optional:

– Clarke, Simon. The Marxist Theory of Overaccumulation and Crisis. This is one for those of you who want to read some more about the various Marxist theories about crisis.


– David Harvey: Some ideas on the crisis.

– The falling rate of profit: a visual explanaition of this core idea in two parts (20 min in total), which could maybe help you to understand it.

part 1:

part 2:

Week 3 – The role of (central banks) in the crisis

Hahnel; ABC’s of economy Chapter 7: Money, Banks and Finance (15 pages)

In this chapter Hahnel explains in plain easy language, written for non-economists, why money is useful, why banks are useful, but why the financial sector often fails to do what it should do and causes bubbles and crises.”Once finance is understood, the Savings and Loan crisis of the 1980s, international financial crises of the 1990s and early twenty-first century, and the logic of monetary policy all fall quickly into place”, he says. Hahnel is a leftist economist (and very undogmatic) and also explains a bit what we should judge the financial sector on: not on whether the stockmarket is doing good but whether it creates wealth and increases efficiency in production in an equitable way. Anyway, it’s a good introduction and provides a nice framework to start thinking about the role of banks in the crisis.

De Grauwe; Lessons from the Banking Crisis: A Return to Narrow Banking (12 pages)

After the crisis of the 1930s a set of regulations was set up for the financial sector.These regulations gave the central bank a role as lender of last resort, made deposit insurance mechanisms possible and made a division between commercial and investment banks. This division is known as the Glass-Steagal Act. Tight regulation was also set up to counter the moral hazard coming from the new role of the central bank and the insurance mechanisms. From the beginning the financial sector lobbied for the repeal of the Glass-Steagal Act and in 1999 it was finally repealed. This deregulation made the market again sensitive for bubbles and crashes. De Grauwe argues that a return to a Glass-Steagal like regulation is necesarry.

Wade & Sigurgeirsdottir: Iceland’s Meltdown: The Rise and Fall of International Banking in the North Atlantic (14 pages)

A casestudy of what happened in Iceland and what went wrong.

Baker: Occupy the European Central Bank (2 pages)

Dean Baker explains why we should occupy the ECB out of protest to it’s policies. “Insofar as the ECB gets its way, most of Europe’s population will be much worse off. Of course, European business leaders might still be happy, since higher unemployment rates and weaker protections will give employers much more power over their workers. It is important that the European people recognise that the ECB is not operating as a neutral institution”.


Dos Santos: At the Heart of the Matter: Household Debt in Contemporary Banking and the International Crisis (24 pages)

A marxist analysis of the mistakes that banks made.

Crawford: The Repeal of the Glass-Steagall Act and the Current Financial Crisis (8 pages)

Crawford gives a quick overview of the history of the Glass-Steagall act and some different opinions about the role of repealing the act for the current crisis.


Week 4 – Breaking out of the economic framework

Article 1: David Graeber – “On the invention of money: notes on sex, adventure, monomaniacal sociopathy and the true function of economics”

Anthropologist David Graeber lays out the basic arguments of his book “Debt: The Fist 5000 Years” and responds to critics who insist that money evolved from barter, a claim with important implications for the discipline of economics, ‘human nature’, and the possibility of societies without commodities or market exchange.

Every economics textbook says the same thing: Money was invented to replace onerous and complicated barter systems—to relieve ancient people from having to haul their goods to market. The problem with this version of history? There’s not a shred of evidence to support it. Debt: The First 5,000 Years is a fascinating chronicle of this little known history—as well as how it has defined human history, and what it means for the credit crisis of the present day and the future of our economy.

David Graeber – Anthropologist, anarchist, and by the way one on the organisers / initiators of the September 17th New York Occupy Wall Street

Article 2: Interpretations of CEO public apologies for the banking crisis: attributions of blame and avoidance of responsibility
This article analyses the public testimony of four banking CEOs to the Banking Crisis Inquiry of the Treasury Committee of the UK House of Commons in 2009. Utilizing a discursive and interpretive approach, we explore how they attributed responsibility and blame for the crisis through the medium of public apologies. A number of taxonomies of apology are employed to provide an interpretive framework for the analysis. We conclude that the CEO discourse is characterized by expressions of regret, attempts to articulate alignment with others affected by the crisis and dissociation from the events being scrutinized, in order to avoid direct culpability for the crisis and invoke instead the spectre of impersonal global events which mitigates personal responsibility. We therefore characterize the discourse studied as an example of apology avoidance, and consider the constraints on apology which senior CEOs evidently feel they face.

Article 3:  Ellen Meiksins Wood – “Contradictions: only in capitalism?”
In the article the writer compares the vision of G.E.M de Ste. Croix ( “The Class Struggle in the Ancient Greek World”)  with that of Marx and looks if contradictions really exist within capitalism, which leads to ever severe convulsion (= economic crisis) of the system.

According to the writer (E. M. Wood) Ste. Croix’ distinguishes three forms of contradiction. The second contradiction he describes, which is in line with what Marx, is just another aspect of the contradiction between capital’s need to develop the productive forces and the obstacles its own self-expansion puts in the way of that development.

The imperatives of self-expansion and the development of productive forces to meet the requirements of competition and profit-maximization have transformed ‘the conditions of production into general, common, social conditions’. Capitalist production tends to be a collective, cooperative process with a highly refined and interdependent division of labour, creating the most socialized system of production the world has ever known.

Paradoxically, the disunity of capitalism, its fragmentation into competing capitals, capitalist enterprises, in an integrated competitive market, obliged to act independently of one another, have to adapt to the social average of labour productivity that set the conditions of each of the capitals’ survival and profitability.

Thus capitalism is a system of private appropriation, in which the needs of individual capitals for relentless selfexpansion are constantly thwarted by other capitals, as well as by their own exploitation of labour. So the contradiction between the general social power into which capital develops, on the one hand, and the private power of the individual capitalist over these social conditions of production, on the other, becomes ever more irreconcilable. And this makes capitalism a permanent crisis-potential society.

Week 5 – Solutions

Here’s a reading list for the last reading group meeting, when we’re going to think about some alternatives to existing system. We’ve chosen a few texts that don’t offer solutions but rather possibilities, and might be a useful starting point for further discussion. Let me briefly explain why those texts were selected and which ones would be recommendable to read:

1. TNI brochure “Governing the EU” (Nov 2011) on Eurozone crisis covers the topics we have already discussed on reading groups. Nevertheless, maybe it would be convenient to start our meeting with the last article in brochure, an ultrashort (1 page!) D. Plihon’s “Five policy proposals for a progressive exit to the Eurozone crisis”, since it summarizes some short term solutions to the Eurozone crisis we have talked about.

2. E. O. Wright’s “Envisioning Real Utopias” (2010) gives very systematical and plain overview on typology of economic structures, which – combined with improved democratic models – lead to possible alternatives to capitalism, getting us closer to economic democracy (or not). In Chapter 5 Wright sets terminology and principles (I think scrolling down should be enough for people who are generally familiar with the topic). So, chapter 6 and 7 are reading recommendations.

 3. Cockshott, Cottrell and Dieterich in their article “Transition to 21st Century Socialism” (2010) elaborate idea of fixing euro in terms of hour of labor and describe institutional and social changes that would have to precede that measure. The book “Towards a New Socialism” deals more thoroughly with the same topic.

4. M. Lebowitz – “Seven Difficult Questions” (2006), excerpt from the book “Build It Now: Socialism for the Twenty-First Century”. One of preconditions for achieving economic democracy is building more democratic working places, so this chapter analyses the weak spots of Yugoslav self-management in order to provide better insights for Venezuelan workers going through the similar process.

Final Closing session: Basta Debate! Rethinking economics

The financial crisis has made a rethinking of economics more urgent than ever. KSU/Basta! aims to contribute to the discussion about the direction of economics both within academia and in the public debate. Guestspeaker: Irene van Staveren.

To that effect it started organizing a series of reading groups, the first of which, titled ‘Roots of the Crisis & Cuts‘, culminated in this evening of discussion.

First guestspeaker Irene van Staveren will set forth her views on how academic economics should change in response to its failure in predicting and coping with the financial crisis, followed by a debate with the audience. Then there will be a discussion between organizers from all over the country (and the audience) on how to educate the broader public on economical and political issues and, more importantly, how to draw the public into a more active participation, both in debate and in action.


Irene van Staveren 
Professor Development Economics
Launch Committee World Economics Association
Member of the Utrecht Sustainable Finance Lab thinktank

Read a report of this Basta! event!