Crisis: When finance no longer supports production - ERIK REINERT
The Bible distinguishes between productive capital and uninvested wealth (mammon). Theorist Joseph Schumpeter distinguished between the 'real economy' (production of goods and services) and what he called 'the accounting units' (capital per se). When capitalism functions well there is a healthy symbiosis between these two: the financial economy supports the expansion of the real economy. When financial capital gets too impatient it starts making money on itself, without contact with the real economy. Here is when financial crises start. In normal times, money is made by producing goods and services. In these periods money tends to be made by already existing assets (e.g real estate) increasing in value.
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Honorary Professor at the University College London Institute for Innovation and Public Purpose (IIPP), PhD, MBA