Theoretical Models of Economic Recovery in Recession and Depression Phases

• Author: Gina Ioan
• Position: PhD in progress, Danubius University of Galati, Faculty of Economic Sciences, Romania
• Pages: 636-641

European Integration - Realities and Perspectives 2012

636

Theoretical Models of Economic Recovery in Recession and

Depression Phases

Gina Ioan

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Abstract. In recent years, specialists from many fields (economists, historians, sociologists) discuss intensely

the phenomenon of global economic crisis. Discussions are diverse, c ontradictory and often with strong

political charge. The debates generated by this phenomenon mainly focus on two themes: the causes of

economic crisis and the correct solutions out of them.

Keywords: crises; free market; invisible hand; neoliberalism; liberalism

JEL Classification: E0

1 Introduction

Views regarding the causes of economic are different among specialists. Thus, those who sought and

still seek answers and explanations to what is happening today in the economic world can be divided

into two groups: the defenders of free market and another, supporters of state intervention in the

economy. Defenders of the free market consider that the market can function freely allowed to self-

regulate and the State can only make things worse.

The contrary, supporters of interventionism believes that the free market has failed and sees the state

the only tool that can revive the economy.

Events affecting the world economy since 2007, revealed imbalances in the system occurred long time

before the onset of economic and financial crisis.

One view, widely shared, is that the U.S. mortgage market turmoil was those that generated the crisis,

but such causes are both macroeconomic and microeconomic nature. Excess liquidity, deregulation

massive financial deleveraging, all these combined lead to a major crisis. The degree, to which

countries, developed and emerging, have been affected economically, depends largely on the

weaknesses of each economy and how they are exposed to toxic assets and how they respond to the

crisis affected economies depends on macroeconomic policies and the levers that are used.

Specialists in all fields, economists, sociologists, historians and sometimes even people with little

economic knowledge for living conditions are becoming more difficult, they ask whether these

economic shocks can be avoided or at least reduced in intensity.

The causes of economic crises, how these crisis manifest and the undesirable effects of these events

have raised several theories by followers of different doctrines such as Keynesian, Marxist,

prekeynesiste, liberal. We talk a lot now about Minsky moment and financial instability theory. Even

if economic crises, unwantedevents, accompanied, historically, capitalist system we cannot agree with

the view held by Marx and his followers who support the idea that the occurrence ofcrisis is specific

just this type of system. Experience shows that planned economies have experienced economic shocks

which often were hidden.

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PhD in progress, Danubius University of Galati, Faculty of Economic Sciences, Romania, Address: 3 Galati Blvd, Galati,

Romania, tel: +40372 361 102, fax: +40372 361 290, Corresponding author: gina_ioan@univ-danubius.ro.