Macro-economic crisis and policy revolution

The financial crisis triggered (though not caused by) the collapse of Lehman Brothers in September 2008 was frightening in its intensity. Indeed, at its nadir the very survival of modern capitalism appeared to be in question. The response of governments, not least the response of the UK government, to both these crises was rapid and intense (much more so than most critics acknowledge), and in many ways it was surprising. Does this rapid change in the language of international political economy presage a major change in the framework of macro-economic policymaking? This article examines successively historical parallels to be found in the ‘Keynesian’ and the ‘monetarist’ revolutions before considering developments in the year after September 2008. It argues that, though some of the conditions necessary for a ‘paradigm shift’ are in place, as things stand at the moment that shift is unlikely to occur. Much, however, will depend on what happens to the economy over the next year or so.