Riccardo Bellofiore summarizes Minsky’s financial instability hypothesis (FIH), points out some of its weaknesses and some misinterpretations by other economists, and presents a version of the FIH that is consistent with the way in which financial capitalism has evolved. In the original formulation of the FIH, “after a period of ‘tranquil’ growth and robust finance, units’ liability structures tend to shift towards fragility, so that the 2 Introduction economic system becomes prone to financial crises.” Bellofiore refines this idea by developing in more detail Minsky’s concept of “money manager capitalism,” an economy characterized by big corporations, large banks and financial institutions, and such new intermediaries as mutual and pension funds. These are dominated by money managers, whose concern is the appreciation of the investments of liability holders. In the US, a major crash was avoided after 1980 first by Reagan’s large fiscal deficits and then by the rapid growth of consumer debt. In the more recent period, the activity of the money managers resulted in an overcapitalization of productive enterprises, culminating in the collapse of the subprime bubble and the emergence of the Great Recession. For the future, Bellofiore recalls and endorses Minsky’s suggestions for the mitigation of the business cycle: “A larger, not a smaller, role for the State; a low, not a high, private investment policy; serious controls on how capital moves and investment is financed; a bias against giant financial institutions.”
Minsky as a critic of Keynesianism
BELLOFIORE, Riccardo
2015-01-01
Abstract
Riccardo Bellofiore summarizes Minsky’s financial instability hypothesis (FIH), points out some of its weaknesses and some misinterpretations by other economists, and presents a version of the FIH that is consistent with the way in which financial capitalism has evolved. In the original formulation of the FIH, “after a period of ‘tranquil’ growth and robust finance, units’ liability structures tend to shift towards fragility, so that the 2 Introduction economic system becomes prone to financial crises.” Bellofiore refines this idea by developing in more detail Minsky’s concept of “money manager capitalism,” an economy characterized by big corporations, large banks and financial institutions, and such new intermediaries as mutual and pension funds. These are dominated by money managers, whose concern is the appreciation of the investments of liability holders. In the US, a major crash was avoided after 1980 first by Reagan’s large fiscal deficits and then by the rapid growth of consumer debt. In the more recent period, the activity of the money managers resulted in an overcapitalization of productive enterprises, culminating in the collapse of the subprime bubble and the emergence of the Great Recession. For the future, Bellofiore recalls and endorses Minsky’s suggestions for the mitigation of the business cycle: “A larger, not a smaller, role for the State; a low, not a high, private investment policy; serious controls on how capital moves and investment is financed; a bias against giant financial institutions.”File | Dimensione del file | Formato | |
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