I found my thoughts this week returning to Hyman Minsky, financial evolution and Capitalism. Updating my 2013 Government Finance Quasi-Capitalism thesis seemed overdue.
‘Minsky saw the evolution Capitalist finance as having developed in four stages: Commercial Capitalism, Finance Capitalism, Managerial Capitalism and Money Manager Capitalism. ‘These stages are related to what is financed and who does the proximate financing – the structure of relations among businesses, households, the government and finance’…’
Money Manager Capitalism: ‘The emergence of return and capital-gains-oriented block of managed money resulted in financial markets once again being a major influence in determining the performance of the economy… Unlike the earlier epoch of finance capitalism, the emphasis was not upon the capital development of the economy but rather upon the quick turn of the speculator, upon trading profits… A peculiar regime emerged in which the main business in the financial markets became far removed from the financing of the capital development of the country. Furthermore, the main purpose of those who controlled corporations was no longer making profits from production and trade but rather to assure that the liabilities of the corporations were fully priced in the financial market…’
Late in life (1993) Minsky wrote: ‘Today’s financial structure is more akin to Keynes’ characterization of the financial arrangements of advanced capitalism as a casino.’ More and more concerned by the proclivity of ‘Money Manager Capitalism’ to foment instability and crises prior to his death in 1996, Minsky would have been absolutely appalled by the late-nineties ‘Asian Tiger’ collapse, the Russia implosion, LTCM and the ‘tech’ Bubble fiasco. Minsky was no inflationist. His focus would have been to rectify the institutional and policy deficiencies that were responsible for progressively destructive mayhem.
This post was published at Wall Street Examiner on August 6, 2016.
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