Persistence and Perversity: The Global Financial Crisis, the Failure of Reform, and the Legitimacy Crisis of Finance Capitalism
Year: 2010
Type: preprint
Abstract: A year after the collapse of the global financial system we can begin to see the consequences of what should constitute a critical juncture leading to substantial political economic change. The results: despite world-wide public fury and much official debate, economic governance and financial regulation have changed little, while the surviving major financial institutions have become even larger and more powerful. This paper proposes three reasons for this outcome to date. First, modern finance capitalism is dependent on the core institutions of the financial sector to prop up and drive the economy in the advanced industrial countries and in export-driven developing countries, which privileges the financial sector so long as no alternative growth model is in prospect. Second, major financial institutions, including those in the shadow banking system, form a powerful and pivotal interest group with strong ties to parties on both the left and right that have helped insulate it from political attack and regulatory reform. Third, the international scope of financial firms and markets has made them far more difficult to regulate, owing to the potential mobility of capital and financial business, and the difficulty of securing multilateral consensus on financial regulation and capital flows. The result has been political paralysis, the pre-conditions for future crises, and a looming political economic legitimacy crisis.
Source: SSRN Electronic Journal
Author: John W. Cioffi
Institution: University of California System
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2291293904