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Schumpeterian economic development and financial innovations : a conflicting evolution

Listed author(s):
  • Faruk Ülgen

    ()

    (CREG - Centre de recherche en économie de Grenoble - Grenoble 2 UPMF - Université Pierre Mendès France)

Although in the Schumpeterian process of entrepreneurial innovations money and financial markets are assumed to affect economic development, Schumpeter does not explicitly study financial evolution and its effects on real dynamics. In order to fill this gap, this article suggests a Minsky-inspired interpretation of Schumpeterian institutional dynamics in monetary terms. It then develops a specific Schumpeterian analysis of the evolution of financial institutions and regulatory mechanisms in the wake of the 2007-08 crisis and points to major consequences of financial innovations on economic stability. It appears that unlike the creative destruction process of entrepreneurial innovations, in a liberalised/deregulated environment financial innovations move banks from their crucial role of financing long-term economic evolution and lead to reckless finance. Thus, financial market dynamics put economies on a destructive path. Such an evolution calls for active and tight rational regulation in order to shape capitalist finance towards more stable and welfare-enhancing strategies.

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Paper provided by HAL in its series Post-Print with number halshs-00948288.

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Date of creation: 2014
Publication status: Published in Journal of Institutional Economics, Cambridge University Press (CUP), 2014, 10 (2), pp.257-277
Handle: RePEc:hal:journl:halshs-00948288
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00948288
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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