Watson Institute for International and Public Affairs

Liviu Voinea -- Illusion Economics and Illusive Solutions: Revisiting Crisis Generators in Eastern Europe

Tuesday, September 27, 2011

12 p.m. – 1 p.m.

McKinney Conference Room

"Illusion Economics and Illusive Solutions: Revisiting Crisis Generators in Eastern Europe," with Liviu Voinea.

Was it the global economic crisis or a combination between endogenous and exogenous factors that pushed the Baltic and South-East European EU member states into severe recession? This article argues that the causes of the crisis in these peripheral regions were different from those affecting Western Europe or United States. The main claim is that the main engine of the crisis was the excessive growth of the current account deficit via a combination between the rapid liberalization of the capital account, monetary polcies that invited speculative capital inflows as well as pro-cyclical tax and income policies. While it is clear that the global financial crisis triggered these peripheral crises by drying up the foreign financial flows that funded ballooning current account deficits, it is not at all clear that the crisis would have been as dramatic in the absence of structural problems generated by these domestic policies. The article also argues, for the particular case of Romania, that the IMF-induced austerity does not work; it only replaces the illusion of private consumption - led growth with the illusion of public consumption cuts – led growth.

Liviu Voinea, Ph.D., MBA, is a Senior Lecturer in EU economics at the National School for Political and Administrative Studies and an Associate Professor of international economics at the Academy of Economic Studies. He holds an MBA from Stockholm University, a Ph.D. from Academy of Economic Studies, and he worked as a post-doctoral fellow at the European Commission’s IPTS - Joint Research Center in Seville, Spain. He serves as President of the European International Business Academy (EIBA), a European organization of international business scholars. He is also a member of the board of Eximbank, the Romanian state owned export-import bank.

Liviu Voinea has published numerous articles in local and international media, and he has been a regular guest in various TV shows, becoming a public figure among Romanian economists. His recent book “The end of illusion economics. Crisis and anti-crisis: a heterodox perspective” (published by Publica) was a best-seller, while his previous book, “Transnational corporations and global capitalism” (published by Polirom) received the prestigious “Virgil Madgearu” Romanian Academy Award.

Location: McKinney Conference Room, Watson Institute, 111 Thayer Street.