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Perspectives on Emergent Financial Systems

Paper Session

Sunday, Jan. 5, 2020 8:00 AM - 10:00 AM (PST)

Manchester Grand Hyatt, Cortez Hill A
Hosted By: Association for Evolutionary Economics
  • Chair: Matías Vernengo, Bucknell University

An Institutionalist Framework for a Consistent Financial Regulation

Faruk Ülgen
,
University of Grenoble-Alpes

Abstract

From the late 1970s, major advanced economies transformed their regulatory systems into market-friendly liberalized mechanisms and removed the public power from market supervision. Such an institutional transformation led market economies towards public constraint-free dynamics and shaped private actors’ strategies in a peculiar way. System wide changes (along with banking and financial innovations) massively occurred and modified the way by which markets operated. Market as well as non-market institutions and individual actors’ decisions and strategies became closely related to financial efficiency criteria. The latter was mainly resting on self-assessment and self-regulation mechanisms without any objective extra-market supervision. The behavior of economic agents have been shaped according to speculative strategies that often resulted in social catastrophes.

Income Distribution, Household Debt and Growth in Modern Financialized Economies

Mario Seccareccia
,
University of Ottawa
Orsola Costantini
,
Institute for New Economic Thinking

Abstract

In contrast to the Commonsian era of stabilization, growth rates have slowdown over the last half century and have become associated with increasing frequency of crises but also with greater amplitudes, which characterized the interwar era of the 1920s and 1930s. While there has been much discussion about problems of secular stagnation since the global financial crisis of 2007-8, this pattern of slow growth, accompanied by a decoupling of real wages and productivity change, has become the characteristic feature of our modern financialized economies since the 1980s. It has been widely recognized that a principal instigator of these changes has been the “regressive” (rather than progressive) institutional transformations that have taken place in the banking and overall financial sectors. These changes, which impacted the pattern of household consumption spending, have generated increasing financial fragility that perhaps is not characteristically Minskyian within the household sector. However, these transformations would not have led to these growing problems of low growth and higher long-term rates of unemployment without the perverse role of macroeconomic policies, which reinforced these tendencies towards growing household indebtedness because of their impact on the functional distribution of income and the growing income disparities when measured by size distribution. The purpose of the paper is to study the macro features of these financialized economies that have fueled stagnationist tendencies in most Western industrial countries, and also to offer solutions that require policy reversals and institutional transformation generating growing real disposable income and low unemployment rates at the base of the pattern of growth of a more progressive market economy.

The Limits of “Progressive” Institutional Change: Migration and Remittance Experiences

Eugenia Correa
,
National Autonomous University of Mexico (UNAM)-Mexico City
Alicia Giron
,
National Autonomous University of Mexico (UNAM)-Mexico City

Abstract

The financial and business expansion towards both sides of the Mexico-US border, what we could call the financial diaspora that accompanies the migration of Mexicans to the United States and US Corporation to Mexico, has been process full of nuances and components with different characteristics. Beyond the governments and their migratory and investment policies, the characteristics of the different migrant groups and corporations, and the cultural gaps, the "progressive" institutional changes are subject to a dynamic of survival-assimilation-earnings. Even when powerful trials of organization are observed, a strong and imminent current of regressive institutional change (Veblen) has been gaining space. This paper is circumscribed only to analyze some of the characteristics of the financial behavior of Mexican migrants to the United States who became entrepreneurs; subsequently, the enormous limitations of financing are exposed, in the different stages that characterize it to provide credit to the businesses of residents in Mexico and to Mexican businessmen abroad. Showing how, the transformation in financing on both sides of the border has been decisive.

Public Knowledge and Financial Regulation: Two Post-Crisis Periods

Wesley Marshall
,
Metropolitan Autonomous University (UAM)-Iztapalapa
Gregorio Vidal
,
Metropolitan Autonomous University (UAM)-Iztapalapa

Abstract

The last hundred years of North Atlantic capitalism show a clear evolution. However, as we argue, this evolution is far from lineal or positive. Rather, it is more like the swing of a pendulum between two forms of capitalism. Since Adam Smith -at the latest - there has been the recognition of essentially two forms of capitalism, in their extremes one in which private companies determine the conditions of the social provisioning of credit and money, and one in which the State representing the general interest does. While it can be debated whether the term capitalism should be broad enough to encompass both systems, we will not enter into this debate here. Rather, we merely seek to show the difference in the words and the actions of central bankers in the wake of the Great Depression of the 1930s and the 'Long Depression' of today. As we argue, the zeitgeist of the 1930s was one of widespread understanding of money and banking and its relationship with society in the US, Canada, and England. In contrast, today the general population is woefully ignorant on these points. As we argue, the relationship between the financial governance and those governed hinges on the knowledge of the latter. Today, the public discourse of the three mentioned countries reflects the widespread ignorance over financial matters that must accompany a likewise extreme moment of private control over nations' money and credit. As we argue, to move the pendulum back towards a capitalism at the service of humanity and under public control, the first priority is publicly diffused knowledge.
Discussant(s)
Felipe Almeida
,
Federal University of Paraná
Matías Vernengo
,
Bucknell University
JEL Classifications
  • E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit
  • E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook