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“Financial” vs. “Real”: An Overview of the Contradictory Role of Finance

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  • Özgür Orhangazi

Abstract

This paper discusses the contradictory role and place of finance within the post-1980 U.S. economy. A central argument advanced is that the relationship between the real and financial sides of the economy has become increasingly more complicated and contradictory. Therefore, the distinction made between “real” and “financial” problems of the economy needs to be better qualified by taking into account the dynamics between the two. The contradictory relationship is analyzed through a discussion of finance in relation to labor and households, nonfinancial corporations, speculative asset bubbles, and global imbalances. This analysis shows that finance has been in a contradictory unity with the rest of the economy. It has contributed to some of the problems in the economy, while providing solutions to them at other instances, and in the process it shaped and in turn was shaped by the rest of the economy.

Suggested Citation

  • Özgür Orhangazi, 2011. "“Financial” vs. “Real”: An Overview of the Contradictory Role of Finance," Working Papers wp274, Political Economy Research Institute, University of Massachusetts at Amherst.
  • Handle: RePEc:uma:periwp:wp274
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    1. Ozgür Orhangazi, 2008. "Financialisation and capital accumulation in the non-financial corporate sector:," Cambridge Journal of Economics, Oxford University Press, vol. 32(6), pages 863-886, November.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 1065-1188, November.
    3. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters,in: This Time Is Different: Eight Centuries of Financial Folly Princeton University Press.
    4. James Crotty, 2000. "Structural Contradictions of the Global Neoliberal Regime," Review of Radical Political Economics, Union for Radical Political Economics, vol. 32(3), pages 361-368, September.
    5. 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.
    6. Andrea Terzi, 2010. "Keynes's uncertainty is not about white or black swans," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(4), pages 559-566, July.
    7. Mathieu Dufour & Özgür Orhangazi, 2007. "International Financial Crises: Scourge or Blessings in Disguise?," Review of Radical Political Economics, Union for Radical Political Economics, vol. 39(3), pages 342-350, September.
    8. L. Wray, 2008. "Lessons from the Subprime Meltdown," Challenge, Taylor & Francis Journals, vol. 51(2), pages 40-68.
    9. Paul Davidson, 2010. "Black swans and Knight's epistemological uncertainty: are these concepts also underlying behavioral and post-Walrasian theory?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(4), pages 567-570, July.
    10. Özgür Orhangazi, 2008. "Financialization and the US Economy," Books, Edward Elgar Publishing, number 12927.
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    Cited by:

    1. 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.
    2. Paolo Piacentini, 2017. "Functional “reversal” and dimensional “decoupling” of “finance” and “the real economy”: a reflection on the “Kaleckian” and “Minskian” limits to over-financialization," Working Papers 7/17, Sapienza University of Rome, DISS.
    3. Giampaolo Gabbi & Elisa Ticci, 2014. "Implications of financialisation for sustainability," Working papers wpaper47, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    4. Gerald Epstein, 2014. "Restructuring finance to promote productive employment," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 11(2), pages 161-170, September.
    5. repec:agr:journl:v:1(614):y:2018:i:1(614):p:95-112 is not listed on IDEAS

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