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The global financial crisis and a new capitalism?

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  • Luiz Carlos Bresser-Pereira

Abstract

The 2008 global financial crisis was the consequence of the process of financialization, or the creation of massive fictitious financial wealth, that began in the 1980s, and of the hegemony of a reactionary ideology—namely, neoliberalism—based on self-regulated and efficient markets. Although laissezfaire capitalism is intrinsically unstable, the lessons from the stock market crash of 1929 and the Great Depression of the 1930s were transformed into theories and institutions or regulations that led to the "30 glorious years of capitalism" (1948-77) and that could have avoided a financial crisis as profound as the present one. It did not because a coalition of rentiers and "financists" achieved hegemony and, while deregulating the existing financial operations, refused to regulate the financial innovations that made these markets even more risky. Neoclassical economics played the role of a meta-ideology as it legitimized, mathematically and "scientifically," neoliberal ideology and deregulation. From this crisis a new democratic capitalist system will emerge, though its character is difficult to predict. It will not be financialized, but the tendencies present in the 30 glorious years toward global and knowledge-based capitalism, where professionals will have more say than rentier capitalists, as well as the tendency to improve democracy by making it more social and participative, will be resumed.

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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Journal of Post Keynesian Economics.

Volume (Year): 32 (2010)
Issue (Month): 4 (July)
Pages: 499-534

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Handle: RePEc:mes:postke:v:32:y:2010:i:4:p:499-534

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=109348

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Keywords: deregulation; financial crisis; financialization; neoliberalism; political coalition;

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  1. N. Gregory Mankiw, 2006. "The Macroeconomist as Scientist and Engineer," NBER Working Papers 12349, National Bureau of Economic Research, Inc.
  2. Luiz Carlos Bresser-Pereira & Paulo Gala, 2009. "Why Foreign Savings Fail to Cause Growth," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 38(3), pages 58-76, September.
  3. Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, vol. 82(325), pages 101-15, March.
  4. Pereira, Luiz Carlos Bresser, 2008. "Crises financeira nos anos 1990 e poupança externa," Textos para discussão 172, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  5. Carmen M. Reinhart & Kenneth S. Rogoff, 2008. "Banking Crises: An Equal Opportunity Menace," NBER Working Papers 14587, National Bureau of Economic Research, Inc.
  6. José Gabriel Palma, 2009. "The revenge of the market on the rentiers," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 829-869, July.
  7. Pereira, Luiz Carlos Bresser & Nakano, Yoshiaki, 2002. "Economic Growth With Foreign Saving?," Textos para discussão 118, Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  8. George A. Akerlof, 2009. "How Human Psychology Drives the Economy and Why It Matters," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(5), pages 1175-1175.
  9. Thomas Piketty & Emmanuel Saez, 2003. "Income Inequality In The United States, 1913-1998," The Quarterly Journal of Economics, MIT Press, vol. 118(1), pages 1-39, February.
  10. Bresser Pereira, Luiz Carlos, 1993. "Economic reforms and cycles of state intervention," World Development, Elsevier, vol. 21(8), pages 1337-1353, August.
  11. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "This Time Is Different: Eight Centuries of Financial Folly," Economics Books, Princeton University Press, edition 1, volume 1, number 8973.
  12. Bresser Pereira,Luiz Carlos, 2010. "Globalization and Competition," Cambridge Books, Cambridge University Press, number 9780521196352, April.
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Cited by:
  1. Suleymanov, Elchin & Alirzayev, Elvin, 2013. "Government Role During The Global Financial Crisis," MPRA Paper 51592, University Library of Munich, Germany, revised 18 Nov 2013.
  2. Fontana, Olimpia & Godin, Antoine, 2013. "Securitization, housing market and banking sector behavior in a stock-flow consistent model," Economics Discussion Papers 2013-13, Kiel Institute for the World Economy.

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