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 macrofinancial and thus political developments, and moves beyond approaches in which these developments are treated as exogenous shocks.

Citation

Dafermos, Y., Gabor, D., & Michell, J. (in press). Institutional supercycles: an evolutionary macro-finance approach. New Political Economy, 28(5), 693-712. https://doi.org/10.1080/13563467.2022.2161497

• Journal Article Type: Article
• Acceptance Date: Dec 16, 2022
• Online Publication Date: Feb 18, 2023
• Deposit Date: Feb 25, 2023
• Publicly Available Date: Feb 25, 2023
• Journal: New Political Economy
• Print ISSN: 1356-3467
• Electronic ISSN: 1469-9923
• Publisher: Taylor and Francis Group
• Peer Reviewed: Peer Reviewed
• Volume: 28
• Issue: 5
• Pages: 693-712
• DOI: https://doi.org/10.1080/13563467.2022.2161497
• Publisher URL: https://www.tandfonline.com/doi/full/10.1080/13563467.2022.2161497
• Additional Information: Data Access Statement : Minsky; thwarting mechanisms; supercycles; shadow banking; macrofinancial stability