Introduction

Abstract

The upbeat mood in the Indian economy that characterised the 5 years preceding 2007–2008 received a jolt as a consequence of the subprime crisis in the USA. To counter the negative fallout of the global slowdown on the economy both monetary and fiscal instruments have been deployed. Given this context, this chapter addresses the broad issue of interlinkages between money, finance and macroeconomics, with an analytical perspective that has commonality with the Post-Keynesians. The global financial crisis seems to have vindicated the Post-Keynesians’ position as the neoclassical macroeconomists miserably failed in anticipating the crisis. Although the Post-Keynesians differ with respect to the origin and the processes underlying the subprime crisis, they broadly agree on the prediction of Hyman P. Minsky about the long-term transformation of the economy towards a stage, called “Money Manager Capitalism.” In this form of capitalism, the financial sector has to claim an ever-rising proportion of national income, as the financial system evolved from hedge to speculative and finally to a Ponzi scheme. This phenomenon is called “financialization” and most Post-Keynesian economists have pointed to this phenomenon as an important contributor to the global financial crisis. The chapter in this volume put forward arguments largely from the Post-Keynesian perspective, while addressing different issues relating to the global financial crisis and effects of reforms in India. The rest of this chapter summarises the chapters included in this volume.