Mechanisms of financial crises in growth and collapse;Hammurabi,Schumpeter,Perez, and Minsky

Erik S.Reinert, (2012) Mechanisms of financial crises in growth and collapse;Hammurabi,Schumpeter,Perez, and Minsky. Jurnal Ekonomi Malaysia, 46 (1). pp. 85-100. ISSN 0127-1962

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This article provides a historical and theoretical overview of the mechanism 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 Schumpeters observation of the clustering of innovations.Carlota Perez has more recently developed Schumpeters vision into a theory of techno-economic paradigms which - about midway in their trajectory-produce a build-up to financial crises. The theories of Schumpeterian economist Hyman Minsky, which describe the mechanisms leading to the collapse of financial bubbles, complete the overview. The article 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 drivers seat of capitalism.

Item Type:Article
Keywords:Carlota Perez; financial crises; Hammurabi; Hyman minsky: innovations; John Maynard Keynes; Joseph Schumpeter.
Journal:Jurnal Ekonomi Malaysia
ID Code:5833
Deposited By: Mr Azam
Deposited On:10 Jan 2013 05:03
Last Modified:14 Jan 2013 01:41

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