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Financialized capitalism and the irrelevance of self-regulation : a Minskyian analysis of systemic viability

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  • Faruk Ülgen

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

Abstract

Approaches that support the process of financial liberalization usually assume that free markets can ensure systemic adjustment in case of disequilibria without structural public interventions, and self-regulation mechanisms are more efficient than any collective regulatory mechanism. This article seeks to assess the irrelevance of these critical assumptions with regard to systemic viability in capitalist economies. These assumptions and related (de)regulatory (de)structural reforms implemented in the last decades reveal to be inconsistent with the characteristics of capitalist economies in light of the 2007-08 crisis. In the footsteps of Hyman Minsky, it maintains that financial instability and crises are endogenous phenomena in a capitalist economy and imply tight state intervention. It then argues that financial stability is a public matter and in order to reach societal efficiency and systemic viability, it is necessary to carry out a public organization of markets according to social/collective objectives beyond macroprudential regulatory mechanisms.

Suggested Citation

  • Faruk Ülgen, 2014. "Financialized capitalism and the irrelevance of self-regulation : a Minskyian analysis of systemic viability," Post-Print halshs-01111162, HAL.
  • Handle: RePEc:hal:journl:halshs-01111162
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01111162
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    File URL: https://halshs.archives-ouvertes.fr/halshs-01111162/document
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    References listed on IDEAS

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    1. Faruk Ülgen, 2014. "How to Guide the Economy in a Socially Desirable Direction: Lessons from the 2007 Financial Turmoil," Journal of Economic Issues, Taylor & Francis Journals, vol. 48(2), pages 575-584.
    2. Barth,James R. & Caprio,Gerard & Levine,Ross, 2008. "Rethinking Bank Regulation," Cambridge Books, Cambridge University Press, number 9780521709309.
    3. Jan Kregel, 2010. "Is This the Minsky Moment for Reform of Financial Regulation?," Economics Working Paper Archive wp_586, Levy Economics Institute.
    4. Amadou N.R. Sy, 2009. "The Systemic Regulation of Credit Rating Agencies and Rated Markets," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 10(4), pages 69-108, October.
    5. Faruk Ülgen, 2013. "Institutions and Liberalized Finance: Is Financial Stability of Capitalism a Pipedream?," Journal of Economic Issues, Taylor & Francis Journals, vol. 47(2), pages 495-504.
    6. Ülgen, Faruk, 2014. "Schumpeterian economic development and financial innovations: a conflicting evolution," Journal of Institutional Economics, Cambridge University Press, vol. 10(02), pages 257-277, June.
    7. Faruk Ülgen, 2014. "How to guide the economy towards socially desirable directions ? Some institutional lessons from the 2007 financial turmoil," Post-Print halshs-00957598, HAL.
    8. Thomas I. Palley, 2011. "A Theory of Minsky Super-cycles and Financial Crises ," Contributions to Political Economy, Oxford University Press, vol. 30(1), pages 31-46.
    9. Faruk Ülgen, 2011. "Régulation monétaire et financière et viabilité des économies de marché," Post-Print halshs-00844357, HAL.
    10. James Crotty, 2009. "Structural causes of the global financial crisis: a critical assessment of the 'new financial architecture'," Cambridge Journal of Economics, Oxford University Press, vol. 33(4), pages 563-580, July.
    11. Philip Arestis, 2009. "New Consensus Macroeconomics: A Critical Appraisal," Economics Working Paper Archive wp_564, Levy Economics Institute.
    12. Thomas I. Palley, 2009. "The Limits of Minsky’s Financial Instability Hypothesis as an Explanation of the Crisis," IMK Working Paper 11-2009, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
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    Keywords

    viability; regulation; Minsky; liberalization; financial crisis; financialization;

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