The Great 2007-2009 crisis has restated the menace of deep depressions among the current challenges while the livelihoods turned out to be subordinated to the bailout of the domestic financial systems. Looking back, in the context of the 1930 Great Depression, John Maynard Keynes pointed out that the evolution of financial markets increases the risk of speculation and instability since these markets are mostly based upon conventions whose precariousness affects the decision of entrepreneurs. Indeed, Keynes called attention to the fact that the capitalist system has endogenous mechanisms capable of destabilizing the levels of spending, income and employment. Thus, his approach enhanced a more fruitful apprehension of the real-world where the outcomes of the entrepreneurs’ decisions are not submitted to stochastic behaviour, that is to say, they are not predictable.
The Keynesian approach focuses on private expectations associated with investment decisions in a business environment where uncertainty about the future pervades the decision-making process. While the very nature of wealth management under uncertainty in a monetary economy is the cause of business instability, entrepreneurs could postpone spending decisions and search for alternatives of wealth management. As opposed to the classical economists that were defenders of laissez faire capitalism, Keynes believed that government policies and actions could play a fundamental role in shaping a business environment that could reduce uncertainty and favour investment decisions.
As a matter of fact, the capitalist process of business decision making is based on conventions. As uncertainty is inherent in all entrepreneurs’ decisions, the Keynesian approach relies on the concepts of credibility and degree of confidence on a conventional judgment that is historically built within the markets. In any specific historical scenario, the average opinion of entrepreneurs on future scenarios shapes a convention that is based on a precarious set of expectations about the behaviour of aggregate demand – consumption, investment and exports, for example. The degree of confidence on this convention could affect the expected return on investment- the so called marginal efficiency of capital, as Keynes warned.
Business conventions are influenced by a set of cultural, institutional, political and economic factors. In the attempt to re-shape the world order in the 1940s, Keynes pointed out the need of a “wide measure of agreement”, that is to say, the need to create new conventions based on trust. In his view, trust has a historical and social nature and impacts entrepreneurial development. Therefore, trust is considered a conventional concept related to the degree of confidence in the future business environment, that is to say, in the economic and political setting that turn out to shape the evolution of the markets.
Considering this background, two relevant questions arise: Which is the room for manoeuvre of nation-states to shape the markets towards sustainable economic and social growth in the context of globalization? Could domestic market regulation induce changes on business practices to promote job creation? How can the gap between public policies and the shaping of sustainable markets be bridged?