Schumpeter and Keynes after the financial crisis: progressive post-Keynesian opportunities?

Abstract

As a consequence of the Financial Crisis 2007–2009, the prevailing paradigm of neoliberalism is struggling for its survival. The Financial Crisis has shown that the market-system is not self-regulating. Without support from neoclassical theory central banks have been flooding liquidity into the financial markets, keeping interest rates historically low in an attempt to keep the engine of capitalism going. This has happened although Post-Keynesian alternatives in financial theory are on offer and could have saved the financial sector without such damaging effect for the real economy. Furthermore, with regard to a longer-run recovery of sustainable growth and development Post-Keynesian economics has potential. For this purpose, it is necessary to integrate digitization, IT automation and artificial intelligence in a constructive way to avoid new disruptions of the economy. This paper shows how the dynamic potential of innovative entrepreneurs, according to the ideas originally formulated by Schumpeter, could be integrated into a progressive Post-Keynesian model to support sustainable growth theory. Such an extension would give Post-Keynesian growth models a needed relevance for the challenges of the future.