Post-Keynesian Institutionalism and the Failure of Neoliberalism: Returning Realism to Economics by Highlighting Economic Insecurity as the Flip Side of Financialization

Abstract

Post-Keynesian institutionalism (PKI) has always been about starting with the reality of human experience and working to fashion a better world rooted in broadly shared prosperity. In contrast, a decades-long pursuit of the neoliberal agenda has failed to deliver such prosperity and, in many ways, has actually moved the United States further from PKI’s conception of a better world. In an effort to bring economics back in touch with reality, this article describes the economic insecurity that has been a central problem confronting Americans for more than a generation. It then shows how PKI explains that insecurity as a consequence (in fact, the flip side) of a key aim of neoliberalism: financialization. PKI accounts for these trends with a theory of capitalist development that draws on the work of Hyman Minsky. Contributors to PKI also offer more than just theory and analyses: they also propose policy recommendations and institutional changes designed to bolster democratic decision-making, community vitality, economic opportunity, environmental sustainability, and individual wellbeing. The COVID-19 pandemic underscores the need for such changes.

Keywords:

• post-Keynesian institutionalism
• neoliberalism
• economic insecurity
• financialization

JEL Classification Codes:

• B52
• N12
• N22
• N32
• P16

Notes

1 To highlight the long-term trend toward U.S. economic insecurity, this article looks first at the economy prior to 2020 and then closes with a brief discussion of the economic consequences of the COVID-19 pandemic.

2 The app-driven “gig economy” is the latest phase of the era of money manager capitalism; it preys upon and fuels the spread of worker insecurity and contingent work.

3 For a look at the public sector’s transformation in the era of money manager capitalism, see James Galbraith (2008).

4 For an overview with many references, see Whalen (2020); for a broad strategy that remains relevant, see Minsky and Whalen (1996–1997).

Additional information

Notes on contributors

Charles J. Whalen

Charles J. Whalen is a research fellow at the Baldy Center for Law and Social Policy, University at Buffalo. This is an abbreviated version of the paper he prepared for the annual meeting of the Association for Evolutionary Economics, January 4, 2021. The author thanks Alicia Girón, Robert Scott, Faruk Ülgen, and John Watkins for reviewing a draft; Kim Kowalewski for patiently fielding various data questions; and Linda Whalen for constructive input. The article is dedicated to the memory of Eugenia Correa and John Henry.