Paving the way for reconsidering the working of market economies: the Minsky perspective

Faruk Ülgen

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Abstract: This essay develops the financial instability hypothesis of Hyman Minsky through an analysis of the pitfalls of the liberal regulatory framework in order to deal with long-standing and long-lasting financial issues of capitalist economies. It argues that the roots of the 2007/08 crisis are closely related to the regulatory environment in force. Since the 1970s, major capitalist economies evolve towards a new accumulation regime resting on a deep financialisation leading into growing speculative and short-sighted economic activities that generate recurrent crises. This evolution is encouraged and accompanied by market- friendly (de )regulatory mechanisms mainly founded on the belief that liberalised markets are globally self- adjusting. To cope with the pitfalls of such beliefs, the financial instability hypothesis assumes that the functioning of financialised capitalism endogenously generates instabilities and identifies the capital development as the core issue in capitalist evolution. From this perspective, some simple policy principles are suggested to design consistent regulatory mechanisms in order to reduce systemic failures and their consequences in the capitalist economy.

Keywords: financial crisis; market economy; liberalization; regulation; financial system; système financier; crise financière; économie de marché; libéralisation (search for similar items in EconPapers)
Date: 2012-10-25
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00868521v1
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Published in 16th conference of the Research network macroeconomics and macroeconomic policies (FMM) "The state of economics after the crisis", Oct 2012, Berlin, Germany

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00868521

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