Uncertainty and the Institutional Structure of Capitalist Economies
In this new working paper, Distinguished Scholar Hyman P. Minsky points out that capitalism
in the United States is an evolving construct that recently entered a new stage: “money
manager” capitalism. In money manager capitalism, nearly all businesses are organized as
corporations, pension and mutual funds are the predominant owners of financial assets, and
managers of these funds are judged solely on the total return on fund assets (dividends and
interest plus appreciation in share value). One consequence of such a structure is the
predominance of short-run considerations in decision making.
Public tolerance for uncertainty is limited. During the New Deal era it led to the creation of
institutions and arrangements to create transparency in both financial markets and corporate
governance; for example, crop insurance set floors to farmers’ incomes and deficits run by the
federal government set floors to aggregate profit flows. However, the focus of money manager
capitalism on short-run returns and uncompromised profit margins has increased economic
uncertainty at the firm and plant levels through the chronic need to downsize overhead and
reduce variable costs. These activities have unraveled the traditional relationships between firm
and worker and increased economic insecurity among employees.
Minsky asserts that existing institutions and programs cannot contain this uncertainty, and that new
arrangements must be created to offset the effects on “losers” in the structure of money manager
capitalism. He suggests that full-employment programs
analogous to certain New Deal programs (e.g., the Work Progress Administration and the Civilian
Conservation Corps) should be considered
to meet this goal.