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The financial sector and the future of capitalism


  • Pomfret, Richard


Financial sector innovation and development since the 1970s contributed to global prosperity, but increased the probability of bank failures. The post-2007 financial crisis was one of many crises with idiosyncratic catalysts but common underlying causes. Public policies, such as deposit insurance, with moral hazard implications increased the likelihood of crises, and cheap money exacerbated the situation by encouraging highly leveraged investments. The policy challenge is to address moral hazard without repressing the financial sector. This is not the end of capitalism, but a reminder of the difficulty in policing the financial sector which is at the heart of capitalist economies.

Suggested Citation

  • Pomfret, Richard, 2010. "The financial sector and the future of capitalism," Economic Systems, Elsevier, vol. 34(1), pages 22-37, March.
  • Handle: RePEc:eee:ecosys:v:34:y:2010:i:1:p:22-37

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    References listed on IDEAS

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    Cited by:

    1. Besancenot, Damien & Vranceanu, Radu, 2011. "Banks' risk race: A signaling explanation," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 784-791, October.
    2. Richard Pomfret, 2011. "Global Crises, Fiscal Imbalances and Global Instability: Interests and Reactions of Asian Economies," School of Economics Working Papers 2011-33, University of Adelaide, School of Economics.
    3. Pomfret, Richard, 2014. "European crises and the Asian economies," Journal of Asian Economics, Elsevier, vol. 31, pages 71-81.
    4. Richard Pomfret, 2012. "The Post-2007 Crises and Europe's Place in the Global Economy," CASE Network Studies and Analyses 439, CASE-Center for Social and Economic Research.

    More about this item


    Financial development Moral hazard;

    JEL classification:

    • G0 - Financial Economics - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies


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