Monday, September 14, 2009

Why Capitalism Fails

Hyman Minsky was a peer of many of the leading economists of the second half of the twentieth century. He differed from most of them in one imporant way, which many of those peers and their successors are only now beginning to appreciate. He was a capitalist, but he saw in capitalism the seeds of its own destruction. His theoretical work can explain what free-market fundamentalism cannot: why does unfettered growth lead to collapse? Boston Globe correspondent Steven Mihm describes the Minsky revival and its importance for navigating the current global crisis.

What does this have to do with geography? Everything. The world-space economy has been dramatically reordered at the insistance of neoclassical economists whose self-confidence belies the fact that they did not really know what they were doing. The aid and credit policies of the leading Western economies and institutions such as the World Bank and International Monetary Fund not only assume that these models are correct; they insist that developing countries gamble their own futures on the models.

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