Why Minsky matters : An Introduction to the Work of a Maverick Economist by Randall Wray.
My thoughts after reading this nice clear book are that Hyman Minsky, with his yearning for full employment, more equality and a stable financial system, would have revelled in the books of two non-economists – Henry George 1879 and Silvio Gesell 1906. Henry George’s writings would have given him answers to the eternal social justice conundrum and satisfied his curiosity about why Keynesian solutions tend to be inflationary. The route to full employment and more equality would then be staring him in the face. He wouldn’t have had to struggle round arguing against a payroll tax when George had argued for a logical tax system so well. Minsky doesn’t quite get there. Wray merely implies he approached it when he said Minsky ‘did not see public purpose in discouraging work.’ And while he knew that boom and bust were inevitable, with exposure to Fred Harrison’s writings or those of Bernard Lietaer he would have understood the underlying causes.
Nor did Minsky get currency design, though he did say, ‘Anyone can create a currency. The problem is to get it accepted.’ Silvio Gesell would have provided a fundamental understanding of the importance of currency design. The idea that people can design currencies for different purposes is new to most people and, given Minsky’s mainstream education, he was probably never exposed to that. I think he would have been excited to read Gesell as it would have turned his knowledge of capital formation, interest rates, risk and banking upside down. But Minsky had to earn a living and couldn’t afford to stray this far from orthodox economic thinking. It was enough to argue against mainstream beliefs of macroeconomics like that the economy is naturally stable because the market moves it back to equilibrium. That was a life’s work.
Minsky is a clever mainstream economist, educated in universities that didn’t expose their students to Henry George or Silvio Gesell or even Bernard Lietaer. But within those limitations Minsky in 1987 predicted the explosion of home mortgage securitisation that eventually led to the Global Financial Crisis. He leaves us with a legacy of sentences and phrases like ‘Stability is destabilising’, ‘that which can be securitised will be securitised’, ’money manager capitalism’ and prescribes clear methods of reintroducing bank regulation. He explained debt on debt on debt layering, leveraged buyouts and many other otherwise obscure terms.
Well done Randall Wray for explaining the work of Hyman Minsky to the general public in such readable form. I am conscious that I have not read the original Minsky so hope I will not have been mistaken.