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Minsky's Money Manager Capitalism and the Global Financial Crisis

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  • L. Randall Wray

Abstract

The world's worst economic crisis since the 1930s is now well into its third year. All sorts of explanations have been proffered for the causes of the crisis, from lax regulation and oversight to excessive global liquidity. Unfortunately, these narratives do not take into account the systemic nature of the global crisis. This is why so many observers are misled into pronouncing that recovery is on the way-or even under way already. I believe they are incorrect. We are, perhaps, in round three of a nine-round bout. It is still conceivable that Minsky's "it"-a full-fledged debt deflation with failure of most of the largest financial institutions-could happen again. Indeed, Minsky's work has enjoyed unprecedented interest, with many calling this a "Minsky moment" or "Minsky crisis." However, most of those who channel Minsky locate the beginnings of the crisis in the 2000s. I argue that we should not view this as a "moment" that can be traced to recent developments. Rather, as Minsky argued for nearly 50 years, we have seen a slow realignment of the global financial system toward "money manager capitalism." Minsky's analysis correctly links postwar developments with the prewar "finance capitalism" analyzed by Rudolf Hilferding, Thorstein Veblen, and John Maynard Keynes-and later by John Kenneth Galbraith. In an important sense, over the past quarter century we created conditions similar to those that existed in the run-up to the Great Depression, with a similar outcome. Getting out of this mess will require radical policy changes no less significant than those adopted in the New Deal.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_661.

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Date of creation: Mar 2011
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Handle: RePEc:lev:wrkpap:wp_661

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Keywords: Hyman Minsky; Hilferding; Veblen; Keynes; John Kenneth Galbraith; Financial Crisis; Minsky Crisis; Minsky Moment; Finance Capitalism; Money Manager Capitalism; Debt Deflation; Can It Happen Again?;

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  1. Dimitri Papadimitriou & L. Randall Wray, 1998. "The Economic Contributions of Hyman Minsky: varieties of capitalism and institutional reform," Review of Political Economy, Taylor & Francis Journals, vol. 10(2), pages 199-225.
  2. Marshall Auerback & L. Randall Wray, 2010. "Toward True Health Care Reform: More Care, Less Insurance," Economics Public Policy Brief Archive ppb_110, Levy Economics Institute.
  3. Eric Tymoigne & L. Randall Wray, 2009. "It Isn't Working: Time for More Radical Policies," Economics Public Policy Brief Archive ppb_105, Levy Economics Institute.
  4. Yeva Nersisyan & L. Randall Wray, 2010. "The Trouble with Pensions: Toward an Alternative Public Policy to Support Retirement," Economics Public Policy Brief Archive ppb_109, Levy Economics Institute.
  5. Jan Kregel, 2010. "No Going Back: Why We Cannot Restore Glass-Steagall's Segregation of Banking and Finance," Economics Public Policy Brief Archive ppb_107, Levy Economics Institute.
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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. La spending review e il “punto di vista del Tesoro”
    by keynesblog in Keynes Blog on 2012-08-08 07:16:36
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Cited by:
  1. William Kingston, 2014. "Schumpeter and the end of Western Capitalism," Journal of Evolutionary Economics, Springer, vol. 24(3), pages 449-477, July.
  2. Sorin Solomon & Natasa Golo, 2014. "Minsky Financial Instability, Interscale Feedback, Percolation and Marshall-Walras Disequilibrium," Papers 1402.0176, arXiv.org.
  3. Hein, Eckhard & Dodig, Nina & Budyldina, Natalia, 2014. "Financial, economic and social systems: French Regulation School, Social Structures of Accumulation and Post-Keynesian approaches compared," IPE Working Papers 34/2014, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
  4. Sorin Solomon & Natasa Golo, 2013. "Minsky Financial Instability, Interscale Feedback, Percolation and Marshall-Walras Disequilibrium," INET Research Notes 39, Institute for New Economic Thinking (INET).
  5. Suleymanov, Elchin & Alirzayev, Elvin, 2013. "Government Role During The Global Financial Crisis," MPRA Paper 51592, University Library of Munich, Germany, revised 18 Nov 2013.

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