Financialization and Financial Crisis: Revisiting Keynesianism
13 September 2010 4:00 pm
Amit Bhaduri, Jawaharlal Nehru University, Indian Council of Social Development and Pavia University
wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (entrance from the ground floor)
The lecture is concerned with a deeper understanding of Keynesian analysis and its relevance for understanding the current crisis. It goes beyond the usual view that consists of 'stimulus package' and 'financial solvency' for financial institutions through injection of liquidity. and 'stricter regulations' of finance. We show how to combine three principles of Keynesian economics: (1) management of demand through stimulus; (2) price determination in relation to money wages; and (3) liquidity holding as a measure of economic uncertainty, with a fourth principle not in Keynes, but introduced partly by Minsky: (4) the endogeneity of the money and evolution of financial positions. We modify the fourth principle to show how these four principles together provide an adequate explanation of the economics and politics of the current crisis in sophisticated financial systems that differs from many earlier other crises.