Ever since Schumpeter's Theory of Economic Development (Schumpeter 1934), economists have been aware of the importance of finance as the enabling agent of the creative destruction that is necessary for the dissemination of innovation and capitalist wealth creation. In Carlota Perez' explanation (Perez 2002) of the technological developments as the instigators of surges of development, it is financial capital that commands this process in the ‘installation period’, leading the way to the hyperinflation of asset values and the creation of a bubble that allows for the full exploration of the attributes of the new technological paradigm. But the resulting bubble-driven inflation of paper values relative to real values eventually becomes an obstacle to further development as financial capital resists longer-term investment and instead increasingly focuses on shortterm gains, diverting funds from production into financial speculation, ‘quasigambling’, seeking financial gains for gains sake. The full deployment of the installed paradigm thus requires the elimination of the excessive financial layering through a financial collapse, and increased regulation of the financial system through more rigorous government control in a way that does not prevent the full deployment of the new technology led by production capital reaping the full economic and social potential of the now prevailing paradigm.

There are a number of familiar features in this description of the role of finance in the development process. It resembles closely the description of financial fragility developed by another student of Schumpeter, Hyman Minsky.