Edited by Jesper Jespersen and Mogens Ove Madsen
Chapter 9: The General Theory after the subprime crisis: a Minskyan perspective
Opposing the mainstream’s blind faith in the efficiency of the free market, throughout his life H.P. Minsky constantly warned ‘that the capitalist market mechanism is flawed, in the sense that it does not lead to a stable price-full employment equilibrium and that the basis of the flaw resides in the financial system’ (1974: 267). In Minsky’s view, the economy follows a cyclical path that involves recurrent financial crises. Historical evidence in fact testifies that financial crises are systemic and not idiosyncratic (Minsky 1991). Minsky’s central question – the title of Minsky (1963, 1982a) – thus becomes: can ‘It’ happen again?. ‘It’ is the Great Depression and Minsky’s answer is affirmative. If this is true, however, the return to laissez faire actively promoted by the profession in recent decades represents ‘a prescription for economic disaster’ (Minsky and Whalen, 1996–97: 161). That foretold disaster is now before our eyes. The world economy is experiencing one of the most devastating financial crises within human memory.
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