Entrepreneurship, knowledge and employment

Schumpeter vs. Minsky on the Evolution of Capitalism

SAU Lino, University of Torino

As a student of Joseph Schumpeter at Harvard University during his PhD, Hyman Minsky certainly drewed on insights acquired from him, in his late effort to explore the long-term development of capitalism and entrepreneurship. As stressed by Whalen (1999; 2001)Minsky thought that such an exploration would underscore the economic implications of postwar financial-system innovations and could encourage a broad discussion regarding the appropriate structure of the macroeconomy system to cope with endogenous instability. This paper tries to compound Schumpeter with Minsky focuses on the theory of capitalist development. After describing the purposes of Minsky's exploration, his theory of the evolution of capitalism is outlined in terms of its essential elements and as it applies to developed countries’s financial systems.As I shall try to show these aspects have relevant implications for stability, efficiency and for the distribution of market power. As Minsky argued, "where as all capitalisms are flawed, not all capitalisms are equally flawed" (Minsky 1986 p. 295). Minsky identified a transition through at least five distinct stages of capitalism: from the merchant-capitalist era to a recent period dominated by money managers. At least five stages can be identified: merchant capitalism (1607-1813), industrial capitalism (1813-1890), banker capitalism (1890-1933), managerial capitalism (1933-1982), and money-manager capitalism (1982-present).As I try to point out, we might now be on the verge of creating a sixth: the “shadow banking activity sytems” radicated on the originate and distribute principle of banking.

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Keywords: Schumpeter, Minsky, Capitalism

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