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Type: Journal article
Title: The financial sector and the future of capitalism
Author: Pomfret, R.
Citation: Economic Systems, 2010; 34(1):22-37
Publisher: Elsevier BV, North Holland
Issue Date: 2010
ISSN: 0939-3625
Statement of
Richard Pomfret
Abstract: Financial sector innovation and development since the 1970s contributed to global prosperity, but increased the probability of bank failures. The post-2007 financial crisis was one of many crises with idiosyncratic catalysts but common underlying causes. Public policies, such as deposit insurance, with moral hazard implications increased the likelihood of crises, and cheap money exacerbated the situation by encouraging highly leveraged investments. The policy challenge is to address moral hazard without repressing the financial sector. This is not the end of capitalism, but a reminder of the difficulty in policing the financial sector which is at the heart of capitalist economies.
Keywords: Financial development; Moral hazard
RMID: 0020094372
DOI: 10.1016/j.ecosys.2009.11.001
Appears in Collections:Economics publications

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