Financialization and Power Regulation: Is Purposeful Capitalism Possible?

Institutional economics concerns the governance of society linked to a given economic/social order ruled by specific control mechanisms. The latter is the regulatory framework that runs the economy and determines its evolutionary path. From a Schumpeter/Minsky perspective, this article questions the extent to which capitalism can be transformed into a purposeful, and sustainable society through appropriate regulation. I then argue that the financial structure is a central determinant of economic evolution and focus on the financial system and regulation. I then assess the relevance of an institutional transformation of financial regulation for a radical change in the economic system, aimed at achieving a sustainable society in the face of growing global conflicts and imbalances. The article develops on financialization as the ultimate economic power over life, as it directly links all major economic decisions to financial efficiency criteria. This evolution obviously calls for collective action, in the very tradition of institutional economics, to devise sustainable transition solutions by reframing market behavior in a socially consistent way. I then maintain that financial regulation should aim to enable markets to design and implement stable financing opportunities for long-term sustainable transformation that respects the constraints of environmental, economic, and social sustainability.