IDEAS home Printed from https://ideas.repec.org/a/taf/cnpexx/v20y2015i3p431-453.html
   My bibliography  Save this article

A Crisis of the Overcrowded Future: Shadow Banking and the Political Economy of Financial Innovation

Author

Listed:
  • Anastasia Nesvetailova

Abstract

This article focuses on the role the shadow banking system played in the financial crisis of 2007-9. Engaging with emergent theories of shadow banking, I inquire into its structural role in contemporary capitalism. My main premise here is that the crisis of 2007-9 is distinct in financial history because it did not centre on any organised market. Rather, it was crisis of the overcrowded financial channels bridging the present and the future, which have become congested because of the massive concentration of financial values generated, yet not sustained, through the shadow banking network. My analysis suggests that shadow banking has determined the nature of financial crisis of 2007-9 and continues to play a necessary role in financial capitalism based on futurity. Drawing on scholarship in financial Keynesianism, contemporary legal studies and early evolutionary political economy, I argue that shadow banking is best seen as the organic institutional infrastructure of financialised capitalism based on debt and geared towards futurity, a concept originally developed by John Commons.

Suggested Citation

  • Anastasia Nesvetailova, 2015. "A Crisis of the Overcrowded Future: Shadow Banking and the Political Economy of Financial Innovation," New Political Economy, Taylor & Francis Journals, vol. 20(3), pages 431-453, June.
    • Handle: RePEc:taf:cnpexx:v:20:y:2015:i:3:p:431-453
    DOI: 10.1080/13563467.2014.951428
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/13563467.2014.951428
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13563467.2014.951428?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Thomas Goda & Photis Lysandrou, 2014. "The contribution of wealth concentration to the subprime crisis: a quantitative estimation," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 38(2), pages 301-327.
    2. Daniel R. Sanches, 2014. "Shadow banking and the crisis of 2007-08," Business Review, Federal Reserve Bank of Philadelphia, issue Q2, pages 7-14.
    3. Giselle Datz, 2013. "The Narrative of Complexity in the Crisis of Finance: Epistemological Challenge and Macroprudential Policy Response," New Political Economy, Taylor & Francis Journals, vol. 18(4), pages 459-479, August.
    4. Sheila C. Dow, 2011. "Cognition, market sentiment and financial instability," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(2), pages 233-249.
    5. Kennedy David, 2011. "Some Caution about Property Rights as a Recipe for Economic Development," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 1(1), pages 1-64, January.
    6. Thorvald Grung Moe, 2012. "Shadow Banking and the Limits of Central Bank Liquidity Support: How to Achieve a Better Balance between Global and Official Liquidity," Economics Working Paper Archive wp_712, Levy Economics Institute.
    7. Mr. Stijn Claessens & Mr. Lev Ratnovski, 2014. "What is Shadow Banking?," IMF Working Papers 2014/025, International Monetary Fund.
    8. Paul Davidson, 1978. "Why Money Matters: Lessons from a Half-Century of Monetary Theory," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 1(1), pages 46-70, October.
    9. Andrew Hindmoor & Allan McConnell, 2013. "Why Didn't They See it Coming? Warning Signs, Acceptable Risks and the Global Financial Crisis," Political Studies, Political Studies Association, vol. 61(3), pages 543-560, October.
    10. Marc Lavoie, 2009. "Introduction to Post-Keynesian Economics," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-23548-9, December.
    11. Mr. Manmohan Singh, 2011. "Velocity of Pledged Collateral: Analysis and Implications," IMF Working Papers 2011/256, International Monetary Fund.
    12. Photis Lysandrou & Anastasia Nesvetailova, 2015. "The role of shadow banking entities in the financial crisis: a disaggregated view," Review of International Political Economy, Taylor & Francis Journals, vol. 22(2), pages 257-279, April.
    13. Paul Davidson, 1991. "Controversies in Post Keynesian Economics," Books, Edward Elgar Publishing, number 121.
    14. 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.
    15. L. Randall Wray, 2009. "The rise and fall of money manager capitalism: a Minskian approach," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(4), pages 807-828, July.
    16. Peter F. Drucker, 1959. "Long-Range Planning--Challenge to Management Science," Management Science, INFORMS, vol. 5(3), pages 238-249, April.
    17. Helleiner, Eric & Pagliari, Stefano, 2011. "The End of an Era in International Financial Regulation? A Postcrisis Research Agenda," International Organization, Cambridge University Press, vol. 65(1), pages 169-200, January.
    18. Stefano Pagliari & Kevin L. Young, 2014. "Leveraged interests: Financial industry power and the role of private sector coalitions," Review of International Political Economy, Taylor & Francis Journals, vol. 21(3), pages 575-610, June.
    19. Michael Hudson, 2010. "The Transition from Industrial Capitalism to a Financialized Bubble Economy," Economics Working Paper Archive wp_627, Levy Economics Institute.
    20. Amin Samman, 2012. "THE 1930s AS BLACK MIRROR," Journal of Cultural Economy, Taylor & Francis Journals, vol. 5(2), pages 213-229, May.
    21. Awrey, Dan, 2013. "Toward a supply-side theory of financial innovation," Journal of Comparative Economics, Elsevier, vol. 41(2), pages 401-419.
    22. Crockett, A., 2008. "Market liquidity and financial stability," Financial Stability Review, Banque de France, issue 11, pages 13-17, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ronen Palan, 2015. "Futurity, Pro-cyclicality and Financial Crises," New Political Economy, Taylor & Francis Journals, vol. 20(3), pages 367-385, June.
    2. Ridoy Deb Nath & Mohammad Ashraful Ferdous Chowdhury, 2021. "Shadow banking: a bibliometric and content analysis," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-29, December.
    3. Charles J. Whalen, 2020. "Post-Keynesian institutionalism: past, present, and future," Evolutionary and Institutional Economics Review, Springer, vol. 17(1), pages 71-92, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Thomas Goda, 2013. "The role of income inequality in crisis theories and in the subprime crisis," Working Papers PKWP1305, Post Keynesian Economics Society (PKES).
    2. Tao Sun, 2015. "The Impact of Global Liquidity on Financial Landscapes and Risks in the ASEAN-5 Countries," IMF Working Papers 2015/211, International Monetary Fund.
    3. Thomas Goda & Özlem Onaran & Engelbert Stockhammer, 2014. "A case for redistribution? Income inequality and wealth concentration in the recent crisis," Documentos de Trabajo de Valor Público 12186, Universidad EAFIT.
    4. Thomas Goda & Özlem Onaran & Engelbert Stockhammer, 2017. "Income Inequality and Wealth Concentration in the Recent Crisis," Development and Change, International Institute of Social Studies, vol. 48(1), pages 3-27, January.
    5. 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).
    6. Bill Lucarelli, 2011. "The Economics of Financial Turbulence," Books, Edward Elgar Publishing, number 14252.
    7. Mr. Derek Anderson & Mr. Benjamin L Hunt & Stephen Snudden, 2013. "Fiscal Consolidation in the Euro Area: How Much Can Structural Reforms Ease the Pain?," IMF Working Papers 2013/211, International Monetary Fund.
    8. Arora, Dhulika & Kashiramka, Smita, 2023. "What drives the growth of shadow banks? Evidence from emerging markets," Emerging Markets Review, Elsevier, vol. 54(C).
    9. Lucia Quaglia & Aneta Spendzharova, 2017. "Post‐crisis reforms in banking: Regulators at the interface between domestic and international governance," Regulation & Governance, John Wiley & Sons, vol. 11(4), pages 422-437, December.
    10. W. Robert Brazelton & Charles J. Whalen, 2011. "Towards a synthesis of Institutional and Post Keynsian economics," Chapters, in: Charles J. Whalen (ed.), Financial Instability and Economic Security after the Great Recession, chapter 2, pages 28-52, Edward Elgar Publishing.
    11. Hannes Warnecke-Berger, 2020. "Capitalism, Rents and the Transformation of Violence," International Studies, , vol. 57(2), pages 111-131, April.
    12. Baines, Joseph, 2015. "Price and Income Dynamics in the Agri-Food System: A Disaggregate Perspective," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 157992, September.
    13. Gökçer Özgür, 2021. "Shadow banking and financial intermediation," Metroeconomica, Wiley Blackwell, vol. 72(4), pages 731-757, November.
    14. Marco Missaglia & Alberto Botta, 2020. "The role of liquidity preference in a framework of endogenous money," Working Papers PKWP2015, Post Keynesian Economics Society (PKES).
    15. Eugenio Caverzasi & Daniele Tori, 2018. "The Financial Innovation Hypothesis: Schumpeter, Minsky and the sub-prime mortgage crisis," Working Papers PKWP1815, Post Keynesian Economics Society (PKES).
    16. Tuna Baskoy, 2011. "Business Competition and the 2007–08 Financial Crisis: A Post Keynesian Approach," Chapters, in: Joëlle Leclaire & Tae-Hee Jo & Jane Knodell (ed.), Heterodox Analysis of Financial Crisis and Reform, chapter 10, Edward Elgar Publishing.
    17. Fong, Tom Pak Wing & Sze, Angela Kin Wan & Ho, Edmund Ho Cheung, 2021. "Assessing cross-border interconnectedness between shadow banking systems," Journal of International Money and Finance, Elsevier, vol. 110(C).
    18. Bruno Bonizzi, 2017. "International financialisation, developing countries and the contradictions of privatised Keynesianism," Economic and Political Studies, Taylor & Francis Journals, vol. 5(1), pages 21-40, January.
    19. Alberto Botta & Eugenio Caverzasi & Daniele Tori, 2015. "Financial–Real-Side Interactions in an Extended Monetary Circuit with Shadow Banking: Loving or Dangerous Hugs?," International Journal of Political Economy, Taylor & Francis Journals, vol. 44(3), pages 196-227, July.
    20. Adam W. Chalmers, 2020. "Unity and conflict: Explaining financial industry lobbying success in European Union public consultations," Regulation & Governance, John Wiley & Sons, vol. 14(3), pages 391-408, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:cnpexx:v:20:y:2015:i:3:p:431-453. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/cnpe20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.