Faruk Ulgen

The objective of this paper is to survey what is actually known about the finance–growth relationship based on theory and empirical work. We point out that traditional theoretical models linking financial development and economic growth do not pay sufficient attention to insights emerging from modern information economics. Markets with asymmetric information are not in general constrained Pareto efficient; and increased banking sector competition, following financial liberalization, will not necessarily induce efficient financial intermediation. Increased competition is likely to erode franchise values, which may, in turn, generate an unstable banking environment where gambling behaviour on the part of the banks is prevalent. Increased competition can also discourage relationship‐banking, and it disturbs what may actually be a constrained efficient mode of contracting in a dynamic setting characterized by asymmetric information. We argue that these problems are further aggravated by...

This article is a theoretical and conceptual exploration into the study of the dynamics of financial innovations and their consequences in market economies. Drawing upon the works of Schumpeter and Minsky in an institutionalist and evolutionary tradition, the article puts forward the monetary and financial features of the 21st century economies and the recurrent systemic financial instabilities generated within the context of the financialization process. It then calls for alternative regulatory reforms capable of leading to sustainable economic development. The originality of the analysis lies in the fact that the micro-dynamics of innovations may result in both creative and destructive outcomes since there are some crucial differences between entrepreneurial innovations à la Schumpeter as the positive force in economic development, and financial innovations à la Minsky as the source of instabilities. The article then focuses on the weaknesses and inconsistencies of loosely regulat...

Public-Owned Enterprises (POEs) are generally large economic enterprises owned and governed by state institutions. POEs generally are the sole or the main provider of the key public goods and services as water, electricity, transport, telecommunications, and postal services. If administered efficiently, the POEs are important for national development and perspective of natural economic resources. The concern is how accurately these monopolistic enterprises are organized in aspects of administrative and managerial perspectives to function as effectively as possible for the objectives they are created. Therefore an overall summary of the public-owned enterprises is presented through their process of emerging, privatization, and evolution in Albania, southeast Europe. The process was accompanied by shortcomings due to its ad-hoc nature; and associated with negative effects of bad management, governance corruption, and low efficiency of the operational activities and results.

n° 10Cette note de lecture de l'ouvrage de Jean Cartelier est convaincue par la démonstration de l'auteur, à savoir que contrairement à l’affirmation reprise par la plupart des théories économiques, le contrat de travail ne saurait être un contrat comme les autres, plus précisément ce contrat, car contrat il y a, ne saurait appartenir à l’espace des contrats marchands

International audienceThis article seeks to analyze the institutional roots of the last decades’ financial crises and in particular those of the 2007-2008 systemic failure. These instabilities seem to be mainly due to the liberalization of financial markets since the system-wide liberalization triggered the process of financialization of many sectors of the economy and gave the priority to the financial efficiency criteria within the decision process of market players. Mainly relying on speculative arbitrage, the economic engine is wheeled thanks to the attractiveness of financial innovations that have nurtured rent-seeking operations without supporting the financing of productive activities. I maintain that such an evolution is the great transformation of the New Millennium Capitalism that mainly rests on the institutional transformation of the regulatory structure that is the commodification of financial regulation. The latter has replaced public regulatory mechanisms by private self-regulation systems that rely on market price-directed contractual schemas. Such an institutional transformation has fueled the system-wide process of financialization and led market-based capitalist economies to a highly speculative and macro-economically perverse regime of accumulation. Despite recurrent downturns, speculative return-related wealth keeps increasing and widening the income inequality gap. For instance, even in the aftermath of the 2007-2008 financial turmoil and subsequent market failures, U.S. billionaire wealth almost doubled between 2010 and 2020, increasing 80.6 percent in 2020 dollars, while the median wealth of U.S. households only increased 15.1 percent between 2010 and 2016. From an institutionalist perspective, this article maintains that contrary to the usual doctrinal assertions, market-related liberal regulation prevents finance from contributing to economic development and restrains public action from supervising markets without generating social dilemmas. Without an appropriate organization and supervision, financial markets do not lead to a social optimum since they suffer several inconsistencies like the discrepancy between micro-rationality and macro-coherence, cognitive bias, and the publicness of financial stability. The viability of market economies depends on the sustainability of financial operations that requires specific public action aimed at systemic stability. In order to prevent the catastrophic consequences of financialization, financial regulation must be decommodified and financial stability must be handled as a common good

In light of the 2007-08 crisis, this article aims at studying the need for innovative alternative financial regulation in order to improve the mechanisms of social control in highly liberalized and financialized capitalist economies. From this perspective, the first section presents the foundations of the oppositions on the issue of social control and regulation and assesses the relevance of liberalized finance self-regulation process assumed to spontaneously guarantee social consistency. The second section brings to the fore the monetary and financial characteristics of capitalism and argues, in an institutionalist vein, in favor of an alternative financial regulation as a social control device consistent with the systemic stability and viability.

La situation conflictuelle entre une difficile maitrise des desequilibres financiers et des comptes publics et le besoin d'une croissance creatrice d'emplois traduit la necessite de reconsiderer certains principes fondateurs des systemes monetaires et financiers. Dans cette perspective, la premiere section rappelle les principales difficultes dans la stabilisation interne et internationale de l'euro. La deuxieme section etudie les caracteristiques du SMI et considere la possibilite d'un role positif de l'euro dans la redefinition des conditions pour une plus grande coordination/cooperation dans les relations monetaires. La conclusion presente quelques pistes de reflexion a l'aune de l'actualite de fin 2011.

Quelles que soient les differences entre Kirghizstan, l'Ouzbekistan, le Tadjikistan et le Turkmenistan, l'ensemble constitue une zone toujours soumise a de fortes tensions et contraintes, qui determinent les limites d'un processus de developpement principalement lie a des ressources rentieres. Elles viennent aujourd'hui principalement de l'instabilite politique, tant interne qu'entre les quatre pays, de l'absence d'orientation soutenue en matiere de developpement, de la forte dependance economique et/ou politique vis-a-vis de partenaires puissants comme la Russie et la Chine, des lacunes persistantes dans les systemes financiers, de la faiblesse des mecanismes publics de controle et d'orientation des activites economiques et des pratiques politiques alimentant souvent la corruption et le trafic en tout genre et a grande echelle et, enfin, des instabilites geopolitiques (interventions militaires occidentales permanentes, foyers de mouvements radica...

Cet article traite du concept d'"emergence". Celui-ci est entre dans la terminologie economique moderne au debut des annees 1980 sous le terme de marche emergent remplace rapidement par "economie emergente". L'auteur s'interesse a cette modification terminologique, puis il propose des definition de l'economie emergente et conclut sur les changements que pourraient amener le developpement des economies emergentes.

This article examines major monetary options for an independent Scotland. It then investigates what they would have meant for Scotland, the United Kingdom and Europe with regard to current concerns in the euro zone and in relation to the Scottish banking tradition.

In face of the ambiguous results of four decades of liberalization, the purpose of this chapter is to call into question the relevance of liberal finance and the related regulatory institutional environment to ensure durable and consistent economic growth. With this aim, the chapter also examines the lessons that could be drawn from the 2007-2008 crisis in order to put into a broader perspective the concern about instability of market-based financialized capitalist economies, beyond the specific cases observed in the process of transition in EMEs.

La presente contribution au debat sur le developpement prend appui sur le travail de Gilbert Blardone. Il ne s'agit toutefois pas de reprendre les elements presentes par l'auteur, mais plutot de considerer certains aspects de la problematique sous la forme de propositions qui semblent emerger a l'egard des questions qui sont toujours d'actualite tant au niveau des economies nationales qu'au niveau international, apres plus de 60 ans de la fondation de la tradition de Francois Perroux. Pour se faire, un travail intitule "Ten theses on the new developmentalism", publie en 2010 constituera le point de depart.

L'ouvrage presente les idees fondamentales de l'economie industrielle et les integre dans une perspective actuelle, dynamique et evolutive. Sa particularite est de combiner une approche classique de l'economie industrielle avec une presentation des developpements les plus recents, qui font place aux recherches menees sur les systemes d'innovation, sur les reseaux d'entreprises et les clusters, ainsi que sur l'ecologie industrielle en tant que strategie repondant aux enjeux environnementaux actuels. Tout au long de l'ouvrage, des exemples et cas pratiques recents sont presentes pour etayer les theses exposees et aider a la comprehension des modeles theoriques.

Abstract This article seeks to address one of the major pillars of the financial liberalization process from the 1980s onward, namely the commodification of financial supervision and regulation. This process can be regarded as the great transformation of the overall institutional framework of capitalist finance that resulted in the financialization of the economy. Such a transformation replaced public regulation by self-regulation and gave rise to a highly speculative and macro-economically perverse regime of accumulation that resulted in the 2007–2008 crisis. From an institutionalist perspective, this article maintains that contrary to the usual doctrinal assertions, market-related liberal regulation prevents finance from contributing to economic development and restrains public action from supervising markets without generating social dilemmas. Without an appropriate organization and supervision, financial markets do not lead to a social optimum since they suffer several inconsistencies like the discrepancy between micro-rationality and macro-coherence, cognitive bias, and the publicness of financial stability. The viability of market economies depends on the sustainability of financial operations that requires specific public action aimed at systemic stability. In order to prevent the catastrophic consequences of financialization, financial regulation must be decommodified and financial stability must be handled as a common good.

El sistema monetario y financiero internacional de Bretton Woods gobernó la economía mundial durante más de dos décadas y dejó un legado de instituciones y prácticas que todavía se utilizan ampliamente en las relaciones internacionales. Después del fin de los acuerdos de tipo de cambio fijo anclados en la convertibilidad del dólar en oro en 1971, el mundo comenzó a experimentar repetidas crisis monetarias y financieras de mucha mayor magnitud y duración que las experimentadas en las dos décadas posteriores a la Segunda Guerra Mundial. Además, con cada nueva crisis de magnitud mundial, se hizo costumbre una nueva coordinación/cooperación internacional y, desde finales de la década de 1990, de un nuevo Bretton Woods. Este artículo ofrece una revisión sintética de la evolución del sistema monetario y financiero internacional a la luz de los objetivos del Plan Keynes, cuyos aspectos revolucionarios habían sido descartados en Bretton Woods. Se sostiene que este plan contiene al menos las...

This book sheds light on some of the most recent developments in monetary analysis which offer a theoretical framework for a renewed monetary approach and related policy extensions. It points to recent research on what a consistent and broad-scope monetary theory could be based in the twenty-first century. It highlights new interpretations of monetary theory as put forth by some leading economists since the eighteenth century and new developments in the analysis of current monetary issues.

The neoclassical real-economic equilibrium mainly rests on the competitive-efficient-market hypothesis and regards money and finance as mere appendices. Monetary stability is related to price stability and neutral monetary policy, and financial stability to the allocative efficiency of financial intermediation. Subsequent policies assume that financial markets can self-regulate in case of shocks and do not aim to strengthen public control over the financial system. However, the recurrent crises of the last decades point out that liberalized/deregulated financial markets are prone to systemic crises fuelled by endogenous dynamics. New regulatory alternatives are then required to ensure systemic stability.

Institutional determinants of instability in the insurance market: A case study of the holding company American International Group, Inc. The aim of the article is to analyze the institutional conditions of instability that occurred on the insurance market during the global financial crisis (GFC) on the example of the American International Group, Inc. The global financial crisis of 2007–2008 called into question the ability of liberalized financial markets to function in a stable manner in the long term and questioned the positive contribution of financial innovation to economic development. Numerous and varied factors played a role in this process: low interest rates, easy and accessible credit, loose regulations, “toxic” mortgage loans leading to high-risk financial operations in innovative products. As a result of the crisis, attention has shifted to the banking sector as it has been the most important source of instability in the financial market. The insurance sector is usuall...

This article deals with the role and the place of the money in the process of coordination in a decentralized market economy. The equilibrium models assume that the coordination is carried out through market mechanisms. These mechanisms are mainly real and individual mechanisms but they seem to be unable to integrate money into the theoretical construction. We opt then for a noticeably different method by taking the money as the departure point of the economic analysis and we try to understand economic phenomena through the monetary prism. We show why and how a monetary approach could be envisaged as a coherent and plausible alternative theory of a market economy. This conceptual orientation brings to the fore the issues of monetary ambivalence and of permanent conflict between private/decentralized actions and the systematic viability.

One of the privileged explanations of the current crisis is the sophistication and the weak transparency of financial markets which would have allowed speculative behavior to elude authorities’ supervision. This article develops a different view by putting the emphasis on the model of organization of financial systems. This is established on the predominance of micro-prudential supervision schemes following the hypothesis of free market efficiency. From 1980-90, prudential mechanisms have worked in favor of self-regulation models and the systemic stability is mainly founded on the individual security of banking institutions. We show that this orientation suffers from the fallacy of composition; the micro-prudential model turns out to be unsuitable for the management of systemic risks because of the absence of an automatic bridge between the micro and the macroeconomic levels. The new regulatory environment feeds then successive bubbles the recurrence of which seems to require a modi...

Approaches that support the process of financial liberalization usually assume that free markets can ensure systemic adjustment in case of disequilibria without structural public interventions, and self-regulation mechanisms are more efficient than any collective regulatory mechanism. This article seeks to assess the irrelevance of these critical assumptions with regard to systemic viability in capitalist economies. These assumptions and related (de)regulatory (de)structural reforms implemented in the last decades reveal to be inconsistent with the characteristics of capitalist economies in light of the 2007-08 crisis. In the footsteps of Hyman Minsky, it maintains that financial instability and crises are endogenous phenomena in a capitalist economy and imply tight state intervention. It then argues that financial stability is a public matter and in order to reach societal efficiency and systemic viability, it is necessary to carry out a public organization of markets according to ...

This article presents an examination of the ins and outs of the liberal financial doctrine to consider the main lessons which could be drawn from the 2007-08 crisis in the aim of reconsidering the development of financial systems in our economies. Through a synthesis of the theoretical foundations of liberalization reforms, the links between the process of financial development and the crises in emerging economies and the current crisis are studied. The 2007-08 crisis points out that the monetary and financial difficulties do not lie in the economic fragilities which would be connected to the underdevelopment, but rather in the way liberalized economies work. From this point of view, it seems, relatively speaking, that financial instabilities are the result of endogenous problems of the financialized and globalized economic systems more than the natural outcome of the difficulties of transition of some economies towards a so-called efficient market economy.

This article seeks to bring out the conceptual weaknesses of the assertion that free market mechanisms and liberal financial structures are necessary conditions for economic growth and stability. In this aim, it studies the very characteristics of a capitalist economy as a monetary economy and then suggests an institutionalist analysis of the hypothesis of endogenous financial instability of Hyman P. Minsky. The main implication of such an analysis is that tough macro-prudential regulatory reforms must be implemented to tame speculative short-sighted finance in order to create public-led supervision systems in which collective-objectives based financial policies might prevent speculative banking and finance and direct markets toward system-consistent behaviour.

This article seeks to assess, in light of the 2007-2008 crisis, the relevance of the main assertions that aim to support, directly or indirectly, financial liberalization as a required structural condition for economic development. From this perspective, links among the process of development of financial markets, emerging market economies’ crises and the ongoing crisis are studied. With hindsight, it seems that the monetary and financial crises of the 1980s—2000s during the process of liberalization and opening up (international integration) in emerging economies do not obviously rest on the structural fragilities that would lie in their backwardness. Those crises could rather be related in a relevant way to the functioning of liberalized economies. This assertion is supported by the assumption that financial instabilities are the result of endogenous problems of financialized and globalized economic systems more than the natural outcome of the difficulties of transition of some ec...

Liberal finance dominated economies evolve under the burden of repeated financial crises, fuelled by bubbles-creating money manager capitalism. The upshot is economic and social disaster “as usual” and calls for robust and consistent policy response to deal with the devastating consequences of market fundamentalism. Too much financial liberalism kills economic freedom as it deteriorates conditions for a sustainable and welfare improving economic development and requires tight public interventions and constrained regulation. This article suggests a few basic principles for a relevant systemic financial regulation in the aim of keeping capitalist economies on a sustainable growth and development path. It asserts that market fundamentalism that led to the financial deregulation process from the late 1970s does ignore, by definition, the weaknesses of free market mechanisms and is not able to deal with the working of a decentralized and non-ergodic economy. The article points to the inc...

Cet article questionne le rôle et la place de la monnaie dans le processus de coordination dans une économie de marché décentralisée. Les modèles d'équilibre, qui supposent la coordination réalisée à partir des mécanismes de marché, qualifiés de réels et individuels, rencontrent des difficultés pour intégrer la monnaie dans la construction théorique. Nous suivons alors une voie sensiblement différente en mettant la monnaie au point de départ de l'analyse économique et en cherchant à comprendre les phénomènes économiques à travers le prisme monétaire. Nous montrons pourquoi et comment une approche monétaire pourrait être envisagée comme une théorie alternative cohérente et plausible d'une économie de marché. Cette orientation conceptuelle fait ressortir les questions d'ambivalence monétaire et de conflit permanent entre actions privées/décentralisées et viabilité systémique.

This article suggests an institutionalist analysis of monetary capitalism and points to the inconsistency of liberal regulation mechanisms. It leans on the characteristics of money in a capitalist economy, often ignored by the consensual wisdom but explicitly studied by institutionalist approaches as major concerns in economic evolution. The article then shows, in a Minskyian vein, the weaknesses and irrelevance of liberal financial structures with regard to the prerequisites of sustainable macroeconomic stability. The main implication is that macro-prudential regulatory reforms must be designed and implemented to tame speculative finance. Therefore, market-based self-regulation mechanisms must be replaced by public regulation processes that could be framed on two rules: preventive-constrained finance and preventive-binding funding.

One of the preferred explanations of the current crisis is the sophistication and the weak transparency of financial markets which would have allowed speculative behaviors to elude authorities‚ supervision. This article develops a different view by putting the emphasis on the model of organization of financial systems which is established, since the 1980-90s, on the predominance of micro-prudential supervision schemes following the hypothesis of free market efficiency. We show that this orientation suffers from the fallacy of composition; the micro-prudential model turns out to be unsuitable for the management of systemic risks because of the absence of an automatic bridge between the micro and the macroeconomic levels. The new regulatory environment feeds successive bubbles the recurrent crises of which seem to require a modification of the rules of organization to avoid the forced socialization of the losses of private actors.

This article draws upon institutionalist theories that focuse on the influence of institutional environment in the development of social/economic structures. From this perspective, it is argued that institutional environment played a decisive role in the process of financialisation of market economies since the 1980s. The article then suggests that the ongoing worldwide crisis is the result of a new " liberally-deregulated " institutional environment that gave rise to the finance-dominated capitalism. In light of the monetary and financial characteristics of market economies, some basic pitfalls of financialised capitalism that prevent the working of markets from reaching social optimum and often result in systemic crises in the absence of tightly organised and constrained public regulatory intervention are brought forth. Financialised economies move from economically and socially sustainable productive activities to speculative rent-generating operations that structurally...

Decentralized internal rating based models (self-regulation) which are substituted to public regulation are not able to hold a long-term macroeconomic vision or to take into account interdependencies among private units and markets. Therefore, they seem to be unable to tackle with systemic crises. Moreover, liberal supervision schemes reduce the field of action of monetary authorities and limit the systemic range of their interventions in case of large crisis. Then the absence of macro-regulatory schemes reveals to be one of the causes of the appearance and the persistency of generalized financial crises. A reappraisal of the Minskian financial instability hypothesis and the results of models of conventions, of financing by LBO and of cognitive dissonance points out that the current financial crisis casts doubt on two principles of the way of regulation of modern capitalism: 1) The capacity of market mechanisms for correcting errors of judgment of decentralized actors without struct...

This article maintains that the new institutional design of financial markets and subsequent market-friendly financial regulation generate institutional-time inconsistency. In support of such an assertion, the article draws on Minsky’s financial instability hypothesis (the endogenous nature of systemic instability) and on Veblen’s opposition between productive efficiency and the haggling of the market by the masters of financial intrigue. It is argued that financial liberalization reforms do not result in more efficient and flexible markets that would allow agents to access to more (and better) finance and risk-covering tools but rather in structurally weakened and socially wasteful black holes that involve whole sectors of society in inequality, poverty and austerity. Therefore soundness of the economic system requires alternative reforms in order to give tough institutional structure for a more relevant financial regulation in market capitalism.

Societal coherence of an economy basically relies on its institutional framework that integrates various elements within a global structure that must display consistency with systemic viability. This issue is studied with regard to the evolution of capitalism toward a speculative accumulation regime through the process of financialisation from the 1980s onwards. The Great Transformation of modern capitalism seems to be the commodification of monetary/financial rules and related regulation. Resting on the assumption that free market’s functioning would result in social optimum, financial liberalisation transformed public regulatory mechanisms into private self-regulation systems. In light of the 2007-08 crisis, this article seeks to question this faith in the market’s self-adjustment capacity and argues that individual rationality-based economic efficiency cannot result in social harmony. It maintains that financial stability should not be entrusted to the vicissitudes of markets. It then suggests the decommodification of financial supervision through alternative public regulation that seeks social stability and economic viability.

This article seeks to develop a precautionary principle-based approach to financial regulation. From an institutionalist perspective, this article puts the emphasis on the monetary characteristics of market-based capitalist economies and argues that market incentives-related financial self-regulation mechanisms often result in societally inconsistent outcomes and must be replaced by public-good-seeking regulatory structures. Indeed market-friendly regulatory structures transform financial markets into a generalised social tool of financialisation and make capitalism fall under a degenerated governance structure. A relevant alternative to such a catastrophe-provoking liberal regulation could rest on the precautionary principle provided that financial stability is a public good, required for the smooth working of market economies. The precautionary principle reveals to be a judicious regulatory guide in the cases where significant societal damage –i.e. systemic instabilities and crises- may occur as it is the case in financial crises. This would require an institutional transformation aiming at providing economies with a regulatory environment that could direct and supervise market actors’ strategies so as to ensure macro-financial stability and societal viability.

This article draws upon Polanyi’s Great Transformation and suggests an institutional framework that regards financial stability as a public good which requires an alternative design of the financial organisation of capitalist society to ensure a sustainable societal development. The article develops the major characteristics of money and finance in a market-based capitalist economy which is mainly driven by private-interests and decentralised decisions. Hence it maintains that because of those characteristics, money and finance must be regarded as the unprivatisable spine of the economy. It is argued that systemic stability basically relies on money and financial markets’ stability that cannot be ensured through liberalised market mechanisms and privatised self-regulation schemas. To deal with the “stark utopia” of market fundamentalism and related social catastrophes, capitalist finance should be reframed according to the financial needs of socially sustainable activities.