Financial Fragility and the Kalecki Principle under Expanded Reproduction

Abstract

Since the outbreak of the 2008 financial crisis that has beset the world economy, the economic establishment has belatedly turned its attention to the prophetic warnings of Hyman Minsky. Numerous contributors to the Financial Times, for example, have in recent years championed the ‘long forgotten, and recently rediscovered, financial instability hypothesis’ (Münchau, 2008). As critically appraised by Keen (2011), mainstream economists, such as the Nobel prize winner Paul Krugman, have also started to recognise the insights provided by Minsky’s claim that capitalism has an in-built tendency to create unsustainable volumes of debt.