An Attempt at Explaining the Present Economic Crisis: A Heterodox View

The most important economic issue for the leaders of the world's economically most powerful states is how to restore economic growth in their economies. The central point, around which the present global society circulates, a goal, for which everybody makes his effort and contributes his share (GDP growth), exactly that does not come to existence now. From the 2(nd) quarter of 2008 to the 3(rd) quarter of 2009, GDP in OECD significantly and constantly decreased (in developing countries, GDP growth has decreased significantly in 2009 compared to 2008). In 2009, international trade (exports of commodities, private capital flows and foreign direct investments) has globally decreased. Many worlds largest companies have booked huge or even record sales and profit losses, and have consequentially reduced their costs still more, dismissed many employees and put on halt parts of their production. From the end of 2007 until now, growth of real average wages has been constantly decreasing globally, the number of working poor is increasing, the number of unemployed people is globally increasing (in OECD constantly from the 1(st) quarter of 2008 until now). And finally, the number of people, living in (extreme) poverty, is globally increasing. The purpose of the paper is to propose a rather different, heterodox explanation of why GDP, trade, profits, wages, employment have been globally decreasing and why poverty has been globally increasing between the 2(nd) quarter of 2008 and the 3(rd) quarter of 2009. I try to explain these facts by deriving the present state of global economy (crisis) from the principles of the present global economy. I therefore try to prove that the crisis necessarily follows from the way the present global economy functions. I argue that the reason for the crisis is the fundamental contradiction between the purpose of companies (increasing profits) and necessary ways, in which companies try to increase profits.