IDEAS home Printed from https://ideas.repec.org/p/tth/wpaper/39.html
   My bibliography  Save this paper

Mechanisms of Financial Crises in Growth and Collapse: Hammurabi, Schumpeter, Perez, and Minsky

Author

Listed:
  • Erik S. Reinert

Abstract

This paper provides a historical and theoretical overview of the mechanisms leading up to financial crises and financial bubbles. It suggests that the potentially explosive growth of the financial sector at the expense of the real economy fed by compound interest has . since before Ancient Mesopotamia under the rule of Hammurabi . represented a real threat for such crises. A more modern and additional factor that builds up crises is Joseph Schumpeterÿs observation of the clustering of innovations. Carlota Perez has more recently developed Schumpeterÿs vision into a theory of techno-economic paradigms which . about midway in their trajectory . produce the build-up to financial crises. The theories of Schumpeterian economist Hyman Minsky, describing the mechanisms producing the collapse of financial bubbles complete the overview. The paper ends with recommendations to bring the West out of the present crisis by .once again . putting the real economy rather than the financial economy in the driverÿs seat of capitalism.

Suggested Citation

  • Erik S. Reinert, 2012. "Mechanisms of Financial Crises in Growth and Collapse: Hammurabi, Schumpeter, Perez, and Minsky," The Other Canon Foundation and Tallinn University of Technology Working Papers in Technology Governance and Economic Dynamics 39, TUT Ragnar Nurkse Department of Innovation and Governance.
  • Handle: RePEc:tth:wpaper:39
    as

    Download full text from publisher

    File URL: http://hum.ttu.ee/wp/paper39.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Erik Reinert & Arno Daastøl, 1997. "Exploring the Genesis of Economic Innovations: The Religious Gestalt-Switch and the Duty to Invent as Preconditions for Economic Growth," European Journal of Law and Economics, Springer, vol. 4(2), pages 233-283, May.
    2. Erik S. Reinert, 2012. "Economics and the Public Sphere," The Other Canon Foundation and Tallinn University of Technology Working Papers in Technology Governance and Economic Dynamics 40, TUT Ragnar Nurkse Department of Innovation and Governance.
    3. Dimitri B. Papadimitriou & L. Randall Wray (ed.), 2010. "The Elgar Companion to Hyman Minsky," Books, Edward Elgar Publishing, number 13122.
    4. José Gabriel Palma, 2009. "The revenge of the market on the rentiers," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 33(4), pages 829-869, July.
    5. Rainer Kattel & Erik S. Reinert, 2010. "Modernizing Russia: Round III. Russia and the other BRIC countries: forging ahead, catching up or falling behind?," The Other Canon Foundation and Tallinn University of Technology Working Papers in Technology Governance and Economic Dynamics 32, TUT Ragnar Nurkse Department of Innovation and Governance.
    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. Abdul Bahri, Elya Nabila & Mohd Nor, Abu Hassan Shaari & Sarmidi, Tamat & Haji Mohd Nor, Nor Hakimah, 2018. "Nonlinear Relationship between Financial Development and Economic Growth: Evidence from Post Global Financial Crisis Panel Data," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 52(1), pages 15-30.
    2. Reinert, Erik S., 2013. "Civilizing capitalism: “good” and “bad” greed from the enlightenment to Thorstein Veblen (1857-1929)," MPRA Paper 47931, University Library of Munich, Germany.
    3. Reinert, Erik S., 2012. "Neo-classical economics: A trail of economic destruction since the 1970s," MPRA Paper 47910, University Library of Munich, Germany.

    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. Alex Izurieta, 2009. "Forum 2009," Development and Change, International Institute of Social Studies, vol. 40(6), pages 1153-1190, November.
    2. Hein, Eckhard, 2011. "Distribution, ‘Financialisation’ and the Financial and Economic Crisis – Implications for Post-crisis Economic Policies," MPRA Paper 31180, University Library of Munich, Germany.
    3. José Gabriel Palma, 2016. "Why are developing country corporations more susceptible to the vicissitudes of international finance?," The Economic and Labour Relations Review, , vol. 27(3), pages 281-292, September.
    4. Almeida, Renan P. & Hungaro, Lucas, 2021. "Water and sanitation governance between austerity and financialization," Utilities Policy, Elsevier, vol. 71(C).
    5. Robert Vergeer & Alfred Kleinknecht, 2012. "Do Flexible Labor Markets Indeed Reduce Unemployment? A Robustness Check," Review of Social Economy, Taylor & Francis Journals, vol. 70(4), pages 451-467, December.
    6. Panico, Carlo & Pinto, Antonio, 2015. "Income distribution and the size of the financial sector," Centro Sraffa Working Papers CSWP15, Centro di Ricerche e Documentazione "Piero Sraffa".
    7. Michalis Nikiforos, 2015. "A Nonbehavioral Theory of Saving," Economics Working Paper Archive wp_844, Levy Economics Institute.
    8. José Gabriel Palma, 2014. "Has the income share of the middle and upper-middle been stable over time, or is its current homogeneity across the world the outcome of a process of convergence? The 'Palma Ratio' revisited," Cambridge Working Papers in Economics 1437, Faculty of Economics, University of Cambridge.
    9. Ítalo Pedrosa & Dany Lang, 2018. "Heterogeneity, distribution and financial fragility of non-financial firms: an agent-based stock-flow consistent (AB-SFC) model," Working Papers hal-01937186, HAL.
    10. Ajit Singh, 2012. "Financial Globalization and Human Development," Journal of Human Development and Capabilities, Taylor & Francis Journals, vol. 13(1), pages 135-151, February.
    11. Bruno Bonizzi, 2013. "Capital Flows to Emerging Markets: An alternative Theoretical Framework," Working Papers 186, Department of Economics, SOAS University of London, UK.
    12. Kim, Hyoungjong & Rhee, Dong-Eun, 2022. "The effects of asset prices on income inequality: Redistribution policy does matter," Economic Modelling, Elsevier, vol. 113(C).
    13. Rodolfo Signorino, 2011. "Economics in the Mirror of the Financial Crisis," Chapters, in: Steven Kates (ed.), The Global Financial Crisis, chapter 11, Edward Elgar Publishing.
    14. Jon Wisman, 2013. "Government Is Whose Problem?," Journal of Economic Issues, Taylor & Francis Journals, vol. 47(4), pages 911-938.
    15. Erik Reinert, 2005. "A Brief Introduction to Veit Ludwig von Seckendorff (1626–1692)," European Journal of Law and Economics, Springer, vol. 19(3), pages 221-230, May.
    16. 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.
    17. 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.
    18. Palma, J. G., 2022. "Financialisation as a (it's-not-meant-to-make-sense) gigantic global joke," Cambridge Working Papers in Economics 2211, Faculty of Economics, University of Cambridge.
    19. Eckhard Hein, 2012. "Finance-dominated capitalism, re-distribution, household debt and financial fragility in a Kaleckian distribution and growth model," PSL Quarterly Review, Economia civile, vol. 65(260), pages 11-51.
    20. Palma, J. G., 2019. "Why is inequality so unequal across the world? Part 2 The diversity of inequality in market income - and the increasing asymmetry between the distribution of income before and after taxes and transfer," Cambridge Working Papers in Economics 19100, Faculty of Economics, University of Cambridge.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:tth:wpaper:39. 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: Shobhit Shakya (email available below). General contact details of provider: https://edirc.repec.org/data/ahittee.html .

    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.