Introduction:

In his chapter "What went wrong? Alternative interpretations of the global financial crisis", Jan Priewe argues that the financial and economic crisis of 2008-9 is not well understood in the media, in politics and in academic discourse. The author proposes to distinguish between proximate and more structural or ultimate causes that made the financial crisis possible. Global imbalances in trade and capital flows, globalisation of financial markets, the trend towards a new finance-led capitalism and the related income distribution form the set of ultimate causes. Against the backdrop of his analysis, the author suggests that policy conclusions have to go in three directions: Coordinated financial sector reforms in the leading OECD countries are necessary that re-regulate banks and non-banks, tighten microeconomic prudential supervision as well as establish some kind of prudential macroeconomic supervision. Furthermore, the global currency system needs fundamental reforms that guarantee less global imbalances and orderly adjustments of exchange rates which support sustainable economic development and growth. Finally, the road to ever more financialisation should be abandoned, giving priority to revitalisation of the real economy, supported by a downsized financial sector better prepared to serve the needs of non-financial enterprises. This includes the departure from excessive export-led or debt-led macroeconomic regimes, and depending more than in the past on sustainable domestic demand dynamics, based on a more equal distribution of income.