The financial crisis of 2008 drew attention to the extent to which some private actors could create enormous public risks. Banks engaged in proprietary trading (that is, for their own and not their customer’s benefit), hedge fund managers traded credit default swaps, finance companies issued dubious mortgages then bundled them into securities that ostensibly more prudent investors not only bought but used as collateral for leveraged purchases. Ironically, much of this explosion in financial activity was actually done in the name of risk management. Instruments were created for trading risk and for trading on market fluctuations. The marketization of risk actually enhanced vulnerability in certain ways, however, notably by making actors in the financial system highly interdependent, reducing the transparency of trades and asset values, and scaling up demands for liquidity. When this highly leveraged and minimally transparent financial system crashed, governments stepped in, using public funds to shore up the markets and those institutions deemed “too big to fail.”
There has been a great deal of attention to how ordinary taxpayers bore the consequences of risk-taking by large firms and wealthy individuals. But it is not only as taxpayers that individual citizens and families are vulnerable to economic upheavals, risks created by highly volatile markets or new technologies, or indeed the frauds of big investors who break the rules. They also bear the consequences through unemployment, lost health care, lost pensions, mortgage foreclosures, and escalating university costs. And, indeed, they are more vulnerable because during the same recent decades when the scale and influence of the finance industry was expanding dramatically and neoliberal governments were reducing regulations, long-standing systems of shared responsibility, mutual support, and social security were being undermined.
Privatization of risk thus has two faces. On the one hand, deregulation and concentrated control over private wealth allow some private actors to create risks that affect their many fellow citizens and also the government, as custodian of the public good. On the other hand, sharp cuts in programs to help ordinary citizens mean that more and more face risks privately, as individuals and families