The Political Economy of Financial Market Regulation

The Political Economy of Financial Market Regulation

The Dynamics of Inclusion and Exclusion

Edited by Peter Mooslechner, Helene Schuberth and Beat Weber

This book focuses on recent financial market reforms, and their implications for social, economic and political exclusion. In particular it considers the hitherto under-researched question of whose interests govern the design of regulatory mechanisms and who influences the decision-making process. This process is set out as contested terrain, in which there are winners and losers, and in which there are inevitably circles of exclusion. The authors, comprising financial authority experts and academic specialists, expand the concept of exclusion beyond its typical social dimension to incorporate all actors, be they individuals or institutions not permitted to contribute to financial market regulation as a public good. As they point out, this may take the form of political, economic or indeed cultural exclusion. The book examines the conflicts that arise between various interests and how these are managed within the process of regulation.

Financial Market Regulation and the Dynamics of Inclusion and Exclusion

Peter Mooslechner, Helene Schuberth and Beat Weber

Subjects: economics and finance, financial economics and regulation, political economy, politics and public policy, political economy


Peter Mooslechner, Helene Schuberth and Beat Weber1 1. GLOBALIZATION AND FINANCIAL GOVERNANCE Financial systems and the prevailing monetary landscape are the outcome of a cognizant political choice among a set of alternative options rather than the inevitable result of the force of economic logic that sorts out the most efficient from the less proficient arrangements in a Darwinian struggle (Kirshner 2003, p. 655). However, the latter narrative is fairly powerful. It creates the illusion that policy has no choice but to react in favor of the claims of financial capital, while controlling it is considered neither technically feasible nor desirable. This view is reasonably consistent with a recent wave of re-regulatory efforts to strengthen the stability of the financial sector. Regulatory arrangements such as Basel II or those in line with the Washington Consensus principles are – among many other available choices – the liberal response to financial crisis and to signs of unsustainability in the financial system (see Redak in this volume). In many cases, the reaction is not deregulation, but marketoriented re-regulation. The view that financial regulation inevitably converges toward a pro-market regulation model owes its vigor to the threat of exit of financial capital in globalized economies. Market-driven (re-)regulation is further supported by efficiency-related arguments. However, as pointed out by Grabel (2003), it might well be the case that the efficiency and legitimacy of policies forced by the vote of financial markets are deceptive in nature; they are more the result of a pathdependent self-fulfilling prophecy than the...