The Demise of Finance-dominated Capitalism

The Demise of Finance-dominated Capitalism

Explaining the Financial and Economic Crises

New Directions in Modern Economics series

Edited by Eckhard Hein, Daniel Detzer and Nina Dodig

This book provides an overview of different theoretical perspectives on the long-run transition towards finance-dominated capitalism, on the implications for macroeconomic and financial stability, and ultimately on the recent global financial and economic crisis. In the first part, the macroeconomics of finance-dominated capitalism, the theories of financial crisis and important past crises are reviewed. The second part deals with the 2007-09 financial and economic crisis in particular. The special focus is on the long-run problems and inconsistencies of finance-dominated capitalism which played a key role in the crisis and its level of severity.

Introduction

Eckhard Hein, Daniel Detzer and Nina Dodig

Subjects: economics and finance, financial economics and regulation, post-keynesian economics

Extract

This book explores and reviews the literature on the long-run transition towards finance-dominated capitalism, and the implications for macroeconomic and financial stability and, in particular, for the recent global financial and economic crises. In our view, the recent crises indicate the demise of finance-dominated capitalism. This does not mean that the dominance of finance will necessarily disappear – quite the opposite, in fact, as it seems presently. But, against the background of the analyses presented in this book, it is difficult to imagine that finance-dominated capitalism in the future will be able to generate sustainable high growth rates in the mature capitalist economies. The advanced capitalist economies have gone through two distinct regimes or stages of development since the end of the Second World War. The ‘golden age’ period of the 1950s and 1960s was characterized by relatively high growth rates, low unemployment and low inflation.