Academic journal article The Journal of Philosophical Economics

Global Finance in Crisis: The Politics of International Regulatory Change

Academic journal article The Journal of Philosophical Economics

Global Finance in Crisis: The Politics of International Regulatory Change

Article excerpt

Review of Eric Helleiner, Stefano Pagliari and Hubert Zimmerman (editors), Global Finance in Crisis: The Politics of International Regulatory Change, Routledge, 2010, pp. 216

How have the global financial architects responded to the 2008 crisis, the worst financial meltdown since the Great Depression of the 1930s? Could or should they have responded differently? In their multi-edited volume Global Finance in Crisis: The Politics of International Regulatory Change, Helleiner et al were among the first international political economy (IPE) scholars to provide a holistic and multifaceted answer to these challenging questions. Through contemporaneous and cutting-edge analysis of global finance regulations before and after 2008, the volume convincingly explains the causes, consequences and the reactionary nature of the institutional changes. The real question is: how fundamental and radical are these changes? Despite many disagreements, most authors seem to agree that the regulatory changes in global finance are ad hoc, incremental changes rather than complete system restructuring. Given that the volume is written in the midst of the reform itself, the readers are provided with ample opportunity to interpret and evaluate these explanations, once the outcomes become more visible.

A major strength of the book is the collective attempt of its authors to each put upfront a reflective evaluation of the changes that they witness in the financial regulatory system, in relation to what other authors say. First, according to most, these changes are at best incremental due to multiple structural and historical constraints. Or, in the words of Nolke, "the system is being tweaked rather than reformed." (280) In essence, the supposedly "new" system is actually built on the existing one, which by itself is already a reactionary response to previous crises (as discussed in chapters 2, 4, 9 and 10). Fixing the current system is much easier than building a new one from scratch, especially when it is managed by a network of righteous experts and scholars (as discussed by Tsingou in chapter 2) and when the rigidity of the system only encourages member states to stick to the status quo (as discussed by Katada and Walter in chapters 9 and 10). The technocrats' blueprints and the assumed superiority of established rules, in fact, are central to the difficulty and slowness experienced by previous institutional reforms, as discussed by the editors in the opening chapter. In the face of such a multifaceted crisis, it is hard to name any particular culprit: if everyone is to blame, no one is.

Second, many authors identify the centrality of domestic politics in leading states (US, UK) as a key driver of international finance regulatory reform. Just as the interest of Western capitalism has shaped the post-war order, dubbed the Bretton Woods system, the interest of leading states in restructuring the regulatory system also shapes the nature of this reform, for they happen to be its very victims this time. Yet the lack of a strong, integrated international coordination and the nature of economic divergence across nations hinder this process. Nolke in his analysis of financial accounting regulation makes it clear that international coordination is unrealistic, due to the different modes and phases of capitalism experienced in various states. The "weak, fragmented and relatively irrelevant" (4) system is doomed to be ever more fragmented and weak due to leading powers' shaky position and self-interests. Similarly, Zimmerman in his account of regulatory divergence argues that real change will take a lot of time due to different rates of policy formation and implementation among different states. The implication is clear: the one-size-fits-all Bretton Woods structure naturally faces enormous challenges when dealing with domestic constraints.

Despite the editors' intention stated in the introduction to divide the authors into two camps (those who believe in the possibility of fundamental changes and those who don't), most authors fall into the latter category, with the exception of Posner (chapter 7 on the European approach) and the editors Helleiner and Pagliari themselves (chapter 5 on hedge funds and derivatives). …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.