Financialization and Vested Interests: Self-Regulation vs. Financial Stability as a Public Good

Faruk Ülgen

Journal of Economic Issues, 2017, vol. 51, issue 2, 332-340

Abstract: I propose an institutionalist analysis of financialization through the lens of Thorstein Veblen, built on some peculiar characteristics of money and related financial instruments in a market-based capitalist economy. Following the case of the overcapitalization of farmlands, studied by Veblen (1919), I argue that modern capitalism is a financialized society dominated by vested interests that rely on financial liberalization-led speculative overcapitalization, often leading to a perverse accumulation process and resulting in systemic catastrophes. Consequently, one of the major constituent institutions of liberal finance, market-dependent selfregulation, proves unable to deal with society-level issues like financial stability. This latter issue must be handled at a systemic level, as a public good. Therefore, specific public regulation and action mechanisms must be designed to maintain society (and dominant vested-interests) within some viability limits to ensure a smooth functioning of the economy.

Date: 2017
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DOI: 10.1080/00213624.2017.1320512

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