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      World Review of Political Economy

      Volume 2, Issue 1
       
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      OVER-INVESTMENT AND THE ECONOMIC CRISIS OF 2008

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      Journal: World Review of Political Economy
      Publisher: Pluto Journals
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            Abstract

            This article criticizes the view that the financial sector crisis of 2008 was the primary cause of the real sector crisis. It argues that the real sector economic crisis in the US can be understood as a crisis of over-investment. The over-investment crisis tendency is explained and a method of empirically identifying an over-investment crisis is proposed. The article analyzes the decline in the rate of profit in the US prior to the crisis, from 2004 to 2007, and the movements of the determinants of the rate of profit during that period, to show which underlying factors led to the profit rate decline. The article also examines the components of aggregate demand for the period 2001-10. The results of the analysis suggest that this crisis should be considered as a case of asset-bubble induced over-investment, which both depressed the rate of profit and eventually caused a sharp fall in aggregate demand.

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            Journal
            Journal ID (jstor): worlrevipoliecon
            Journal ID (doi): 10.2307/j50005553
            Title: World Review of Political Economy
            Publisher: Pluto Journals
            ISSN (Print): 2042891X
            Publication date (Print): 1 April 2011
            Volume: 2
            Issue: 1
            Pages: 5-25
            Article
            DOI: 10.2307/41931914
            SO-VID: a5305ddc-ae8e-461f-9148-6e833eb2a3d4
            Copyright © © WORLD ASSOCIATION FOR POLITICAL ECONOMY 2011
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            All content is freely available without charge to users or their institutions. Users are allowed to read, download, copy, distribute, print, search, or link to the full texts of the articles in this journal without asking prior permission of the publisher or the author. Articles published in the journal are distributed under a http://creativecommons.org/licenses/by/4.0/.

            History
            Related

            ScienceOpen disciplines: Political economics

            Notes

            1. Brenner (2002)

            2. Kotz 2009b

            3. Weisskopf (1979)

            4. Kotz (2009b) Kotz (2009b)

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