Kindleberger and Financial Crises

This paper aims to assess to what extent the contributions of Kindleberger to the explanation and control of financial crises may still be a source of valuable insights for the present. Kindleberger had the great merit, to be shared with Minsky, of having resumed in the early 1970s, after an eclipses of more than two decades, the investigation on the intrinsic instability of credit and its impact on financial crises. Though his pure model may be considered less pregnant than that of Minsky, it extends its scope to the international and political aspects of financial crises. In addition Kindleberger provides a powerful support to the model by rooting it in the empirical evidence systematically investigated since the early 18th century. The application of Kindleberger’s model has been successfully extended, with the collaboration of Aliber, also to the financial crises occurred after the publication of his major book (Kindleberger, 1978). This paper argues that Kindleberger’s insights are still invaluable to understand the subprime crisis and the ensuing Great recession and to design the institutions and policies necessary to resume a sustainable path of economic progress.