Institutional supercycles: An evolutionary macro-finance approach

Dafermos, Yannis; Gabor, Daniela; Michell, Jo

Abstract

We build upon the Minskyan concepts of ‘thwarting mechanisms’ and ‘supercycles’ to develop a framework for analysing the dynamic evolutionary interactions between macrofinancial, institutional and political processes. Thwarting mechanisms are institutional structures that aim to stabilise the macrofinancial system. The effectiveness of these structures changes over time as a result of profit-seeking innovations and long-run destabilising processes. New institutional structures emerge in response, influenced by political and ideological conflicts. This generates a secular cyclical pattern in capitalism, the ‘supercycle’, with a longer duration than standard business and financial cycles. To illustrate this, we develop a macrofinancial stability index which we use to identify two supercycles in the G7 countries in the post-war period. We label these the industrial capitalism supercycle and the financial globalisation supercycle. For each, we apply a four-phase classification system, based on the effectiveness of institutions, customs and political structures for stabilising the macrofinancial system. The supercycles framework can be used to explain and anticipate macro financial and thus political developments, and moves beyond approaches in which these developments are treated as exogenous shocks.

• Journal Article Type: Article
• Acceptance Date: Dec 16, 2022
• Online Publication Date: Feb 18, 2023
• Publication Date: Sep 3, 2023
• Deposit Date: Feb 22, 2023
• Publicly Available Date: Sep 27, 2023
• Journal: New Political Economy
• Print ISSN: 1356-3467
• Electronic ISSN: 1469-9923
• Publisher: Taylor & Francis (Routledge)
• Peer Reviewed: Peer Reviewed
• Volume: 28
• Issue: 5
• Pages: 693-712
• DOI: https://doi.org/10.1080/13563467.2022.2161497
• Keywords: Minsky; thwarting mechanisms; supercycles; shadow banking; macrofinancial stability
• Public URL: https://uwe-repository.worktribe.com/output/10477910
• Publisher URL: https://www.tandfonline.com/doi/full/10.1080/13563467.2022.2161497
• Additional Information: Peer Review Statement: The publishing and review policy for this title is described in its Aims & Scope.; Aim & Scope: http://www.tandfonline.com/action/journalInformation?show=aimsScope&journalCode=cnpe20; Received: 2022-11-07; Accepted: 2022-12-16; Published: 2023-02-18