Financial Keynesianism and Market Instability

Financial Keynesianism and Market Instability

The Economic Legacy of Hyman Minsky, Volume I

Edited by Riccardo Bellofiore and Piero Ferri

During his lifetime Hyman Minsky made a seminal contribution to the development of financial Keynesianism. In this book, leading academics celebrate his work and explore his economic legacy. Special attention is paid to his work on contemporary economic method, the Great Depression, the European single currency and the global financial system and recent banking and financial crises – in particular the crisis in Asia. An attempt is made to categorise Minsky’s brand of post Keynesianism and to compare his work with the Keynesian and Marxian traditions.

Chapter 7: Minsky's analysis of financial capitalism

Dimitri B. Papadimitriou and L. Randall Wray

Subjects: economics and finance, economic psychology, financial economics and regulation, history of economic thought, post-keynesian economics


7. Minsky’s analysis of financial capitalism Dimitri B. Papadimitriou and L. Randall Wray Hyman Minsky used to joke that there are as many varieties of capitalism as Heinz has pickles – 57 (Minsky, 1991). In this contribution, we will be analysing one of them – the general form of postwar capitalism taken in the developed countries, which can be characterized as financial capitalism. Obviously, there are differences in the specific form that financial capitalism takes at different times over the postwar period in each of these countries, as well as cross-country differences. However, Minsky’s model is applicable to all of them, at least at a general level. The term finance capital appears to come from Hilferding’s 1910 book, which proclaimed a new stage of capitalism characterized by complex financial relations and domination of industry by finance (Hilferding, 1981). Importantly, Hilferding argued The most characteristic features of ‘modern’ capitalism are those processes of concentration which, on the one hand, ‘eliminate free competition’ through the formation of cartels and trusts, and on the other, bring bank and industrial capital into an ever more intimate relationship. Through this relationship … capital assumes the form of finance capital, its supreme and most abstract expression … The progress of industrial concentration has been accompanied by an increasing coalescence between bank and industrial capital. This makes it imperative to undertake a study of the processes of concentration and the direction of their development and particularly their culmination in cartels and trusts. The hopes for the ‘regulation of production’, and...

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