From the Subprime to the Sovereign Crisis: Why Keynesianism Does Not Work

This article analyzes the recent global economic crisis in the central capitalist economies
from the viewpoint of Marxian political economy. In the first section, it examines the so-called
sovereign crisis concerning the deepening fiscal crisis of the states, particularly serious now in
the Euro zone. Although there is a structural problem causing the sovereign crisis in peripheral
countries in the Euro zone, the menace of the sovereign crisis is not limited to this region. Both
the US and Japanese governments also suffer from cumulative state debt in all its features. In the
second section, it emphasizes the significance of the continuity of economic disaster from the
subprime to the sovereign crisis as a structured debt crisis in the financialized capitalism of our
age. This encompasses structural debt crises of labor power, financial institutions, and the states.
In the third section, the article shows why renewed Keynesian and social democratic policies in
2009–10 could not be maintained, after restoring economic growth in major economies, but
were shifted back to neo-liberal austerity policies.