Democratic Diversity in Financial Market Regulation: banalisation, difference and the global public good

  • N Dorn (Speaker)

Activity: Talk or presentationOral presentationAcademic

Description

Presentation summary: This paper claims that three global public goods – systemic stability, regulatory diversity and democracy – are related. Democratic steering of public policy on financial markets would result in greater diversity of regulatory regimes. That would induce greater variety within markets, reducing similarity of business models and bank/non-bank/sovereign connectedness. Such reforms would reduce common vulnerabilities, trans-border shock-transmission, and the propensity to bail out creditors at the cost of public budgets. Within that perspective on the robustness of the international system as an ensemble, regulatory arbitrage should be positively valued. There are however powerful countervailing forces. Democratic steering and diversity directly contradict the current (indeed increasing) international drive for greater convergence of regulatory regimes. That agenda is understandable, in terms of presentational needs to show regulatory activism, to distance regulators from so-called ‘light touch’ regulation prior to the crisis and to cooperate with peers. Furthermore, and germane to the EU and the COST project, convergence within the single market remains a strong, overarching agenda for the European Commission. Finally, coming to citizens, an extension of democracy to policy-making on financial markets opens up questions of political responsibility which remain quite challenging: so leaving things ‘to the experts’ may still the default mood, even as the crisis deepens. Thus, technocratic governance holds sway and the continuing institutionalisation of elite networking deepens regulatory convergence, exacerbating market connectedness and hence instability. This paper explores these themes with reference to tendencies in financial regulation: its tendency to act as representative of certain interests; its independence, indeed autonomy (constructing a single level game); and its (currently weak) democratic side. The present, ongoing shift – from representation to greater autonomy – is operationalised as replacement of discredited, backward-looking models (borrowed from the market), by a precautionary, prudential modem of regulation (a judgement-led approach). Unfortunately, increasing the cultural and political detachment of regulation further stimulates convergence, market connectedness and systemic instability. The paper draws on ongoing work on banalisation of financial markets as a policy goal (see Economy and Society 41(3); Law and Financial Markets Review 6(4); Journal of European Integration 34(3); and Cruz, et al, eds, in press).
Period1 Feb 2013
Event titleShadow Banking: A European Perspective, (1-2 February, 2013)
Event typeOther
LocationCity Political Economy Research Centre (CITYPERC), City University, LondonShow on map

Research programs

  • SAI 2005-04 MSS