Financialization, Money and the State
Financialization has heightened the importance of finance for socio-economic life. But different groupings of economists frame the financial sector, and its relationship with the real sector and with the state, very differently. This chapter focuses on the problem financialization poses for financial stability, and the scope for a regulatory response, from a Post-Keynesian perspective. The strength of the forces for financialization pose particular challenges for the state. The chapter explores four different approaches which vary in the extent to which they see governments intervening in finance: the neo-Austrian approach, the Sovereign-Money approach, the mainstream New-Keynesian approach and the Post-Keynesian approach. The Post-Keynesian approach builds on a long-standing concern with financialization, dating from J. M. Keynes and H. P. Minsky. The Post-Keynesian approach differs from the others, not just in terms of its theory of money and finance, and the policy proposals which follow, but also in terms of their basis in the way in which the economy is understood.