Hostname: page-component-78c5997874-xbtfd Total loading time: 0 Render date: 2024-11-11T07:33:22.154Z Has data issue: false hasContentIssue false
  • English
  • Français

Re-conceptualizing the political economy of finance in the post-crisis era

Published online by Cambridge University Press:  06 June 2017

W. Travis Selmier II  and
W. Kindred Winecoff
Get access Rights & Permissions [Opens in a new window]

Abstract

This article introduces a special issue of Business and Politics on Property Rights, Financial Risk, and the Politics of a Networked Global Financial System. We introduce aspects of the articles in the issue and situate them within existing literatures in financial economics, public policy, political economy, regulation and governance, and network science. We do this through examining four key contributions in the special issue. First, we show that common conceptualizations of property rights in financial markets ignore the multidimensional nature of financial goods; examples of all goods types can be found in modern finance, and this fact has important implications for the politics and regulation of these markets. Second, we argue that models of financial actors as independent, atomistic agents neglect the relational nature of financial markets, and argue that theory and methodology from network science, financial economics and political economy provide useful ways to analyze these interdependent systems. Third, we discuss how the relational nature of risk leads to hierarchical patterns of financial interdependence, which bequeaths substantial amounts of power—within both market and political systems—to those actors that occupy core positions within the structure of interdependence. Fourth, we integrate ideas from papers in this special issue and related literature with concepts from the Ostrom School of political economy to consider how monitoring, self-governance, and polycentric applications might improve financial market governance. This issue's papers thus constitute one of the first combined attempts to bring the Ostrom School into substantive conversation with financial market governance and risk analysis through comparative and international political economy disciplines.

Type
Research Article
Information
Business and Politics , Volume 19 , Special Issue 2: Property Rights, Financial Risk, and the Politics of a Networked Global Financial System , June 2017 , pp. 167 - 190
Copyright
Copyright © V.K. Aggarwal 2017 and published under exclusive license to Cambridge University Press 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Abdelal, Rawi. 2007. Capital Rules: The Construction of Global Finance. Cambridge, MA: Harvard University Press.Google Scholar
Admati, Anat and Hellwig, Martin. 2013. The Bankers' New Clothes: What's Wrong with Banking and What to Do about It. Princeton, NJ: Princeton University Press.CrossRefGoogle Scholar
Alessandri, Piergiorgio and Haldane, Andrew G.. 2009. “Banking on the State.” Bank of England working paper.Google Scholar
Aliber, Ron Z. and Kindleberger, Charles P.. 2015. Manias, panics and crashes: a history of financial crises, seventh edition. New York: Palgrave Macmillan.Google Scholar
Aligicia, Paul D. 2014. Institutional diversity and political economy: the Ostroms and beyond. New York: Oxford University Press.Google Scholar
Allen, Franklin and Santomero, Anthony M.. 1998. “The Theory of Financial Intermediation.” Journal of Banking and Finance 21(11–12): 1461–1486.CrossRefGoogle Scholar
Allen, Franklin and Babus, Ana. 2009. “Networks in Finance.” In The Network Challenge, edited by Kleindorfer, Paul and Wind, Jerry. Upper Saddle River, Prentice Hall Publishing, 367–382.Google Scholar
Bagehot, Walter. 1873. Lombard Street: A Description of the Money Market. London: Henry S. King and Co. Google Scholar
Basel Committee on Banking Supervision. 2011. “Global systemically important banks: assessment methodology and the additional loss absorbency requirement.” Bank for International Settlements. Accessed on 8 June, 2013 at http://www.bis.org/publ/bcbs207.pdf.Google Scholar
Bhidé, A. 2009. “An Accident Waiting to Happen.” Critical Review 21(2–3): 211–47.Google Scholar
Brewer, Elijah and Jagtiani, Julapa. 2013. “How Much Did Banks Pay to Become Too-Big-To-Fail and to Become Systemically Important?” Journal of Financial Services Research 43(1): 1–35.CrossRefGoogle Scholar
Brunnermeier, Markus K., Gary, Gorton and Arvind, Krishnamurthy 2012. “Risk Topography.” NBER Macroeconomics Annual 2011 26: 149–176.Google Scholar
Bryce, Herrington J. 2012. “Review Essay: Polycentric Governance, Capital Markets, and NGOs as Regulatory Bodies: Expanding the Scope of Ostrom's Understanding Institutional Diversity.” Politics & Policy 40(3): 519–35.CrossRefGoogle Scholar
Büthe, Tim. 2010. “Private regulation in the global economy: A (p)review.” Business and Politics 12(3): 1–38.Google Scholar
Calomiris, Charles. 2011. “An Incentive-Robust Programme for Financial Reform.” Manchester School 79(S2): 39–72.Google Scholar
Carruthers, Bruce. G. and Chul Kim, Jeong. 2011. “The sociology of finance.” Annual Review of Sociology 37: 239–59.Google Scholar
Cerny, Philip. 2014. “Rethinking Financial Regulation: Risk, Club Goods, and Regulatory Fatigue.” In Handbook of the International Political Economy of Monetary Relations, edited by Oatley, Thomas and Winecoff, W. Kindred. Cheltenham, U.K.: Edward Elgar Publishing, 343–63.Google Scholar
Chwieroth, Jeffrey M. and Sinclair, Timothy J.. 2013. “How you stand depends on how we see: International capital mobility as social fact.” Review of International Political Economy 20(3): 457–85.CrossRefGoogle Scholar
Chapman, Stanley D. 1984. The Rise of Merchant Banking. London, U.K.: George Allen & Unwin.Google Scholar
Cohen, Benjamin J. 1998. The Geography of Money. Ithaca, NY: Cornell University Press.Google Scholar
Congleton, Roger D. 2012. “On the political economy and limits of crisis insurance: The case of the 2008–2011 bailouts.” Public Choice 150(3–4): 399–423.Google Scholar
Culpepper, Pepper D. and Reinke, Raphael. 2014. “Structural power and bank bailouts in the United Kingdom and the United States.” Politics & Society 42(4): 427–454.Google Scholar
Diamond, Douglas W. 1984. “Financial intermediation and delegated monitoring.” Review of Economic Studies 51(3): 393–414.Google Scholar
Dowd, Kevin. 1994. “Competitive Banking, Bankers' Clubs, and Bank Regulation.” Journal of Money, Credit and Banking 26(2): 289–308.CrossRefGoogle Scholar
Drezner, Daniel W. 2007. All Politics Is Global: Explaining International Regulatory Regimes. Princeton, NJ: Princeton University Press.Google Scholar
Eccles, Robert G. and Crane, Dwight B.. 1988. Doing Deals: Investment Banks at Work. Cambridge, MA: Harvard Business Press.Google Scholar
Emmenegger, Patrick. 2015. “The Long Arm of Justice: U.S. Structural Power and International Banking.” Business and Politics 17(3): 473–93.Google Scholar
Fichtner, Jan, Heemskerk, Eelke M., and Garcia-Bernardo, Javier 2017. “Hidden Power of the Big Three? Passive Index Funds, Re-concentration of Corporate Ownership, and New Financial Risk.” Business and Politics 19(2): 298–326.Google Scholar
Goodhart, Charles A.E. 1987. “Why Do Banks Need a Central Bank?” Oxford Economic Papers, 39.CrossRefGoogle Scholar
Gorton, Gary. 2014. “The Development of Opacity in U.S. Banking.” Yale Journal on Regulation 31(3): 825–54.Google Scholar
Heemskerk, Eelke M. and Takes, Frank W.. 2016. “The corporate elite community structure of global capitalism.” New Political Economy 21(1): 90–118.Google Scholar
Helleiner, Eric. 2002. The Making of National Money: Territorial Currencies in Historical Perspective. Ithaca, NY: Cornell University Press.Google Scholar
Helleiner, Eric. 2011. “Understanding the 2007–2008 Global Financial Crisis: Lessons for Scholars of International Political Economy.” Annual Review of Political Science 14: 67–87.CrossRefGoogle Scholar
Holmström, Bengt. 1999. “The Firm as a Subeconomy.” Journal of Law, Economics, and Organization 15(1): 74–102.Google Scholar
Houben, Arendt. 2013. “Aligning Macro- and Microprudential Supervision.” In Financial Supervision in the 21st Century, edited by Kellermann, A.J.. Heidelberg, Germany: Springer-Verlag Berlin.Google Scholar
Hu, Henry T.C. 2012. “Too Complex to Depict? Innovation, ‘Pure Information,’ and the SEC Disclosure Paradigm.” Texas Law Review 90(7): 1601–715.Google Scholar
Hughes, Joseph P. and Mester, Loretta J.. 1993. “A Quality and Risk-Adjusted Cost Function for Banks: Evidence on the ‘Too-Big-To-Fail’ Doctrine.” Journal of Productivity Analysis 4(3): 293–315.Google Scholar
Kapstein, Ethan B. 1994. Governing the Global Economy: International Finance and the State. Cambridge, MA: Harvard University Press.Google Scholar
Knight, Frank H. 1921. Risk, Uncertainty, and Profit. Boston, MA: Hart, Schaffner & Marx; Houghton Mifflin. Available online from Library of Economics and Liberty, http://www.econlib.org/library/Knight/knRUP10.html (accessed 8 March 2017).Google Scholar
Krippner, Greta R. 2011. Capitalizing on Crisis: The Political Origins of the Rise of Finance. Cambridge, MA: Harvard University Press.Google Scholar
Lo, Andrew W. 2012. “Reading about the financial crisis: A twenty-one-book review.” Journal of Economic Literature 50(1): 151–178.Google Scholar
Loriaux, Michael. 1997. Capital Ungoverned: The Dismantling of Activist Credit Policies in Interventionist States. Ithaca, NY: Cornell University Press.Google Scholar
Mackenzie, Donald. 2006. An Engine, Not a Camera: How Financial Models Shape Markets. Cambridge, MA: MIT Press.CrossRefGoogle Scholar
Maxfield, S., Winecoff, W. Kindred, and Young, Kevin. 2017. “Is There Still Room for Patience? An Empirical Investigation of the Financialization Convergence Hypothesis.” Review of International Political Economy forthcoming.Google Scholar
May, Robert M., Levin, Simon A., and Sugihara, George. 2008. “Complex systems: Ecology for bankers.” Nature 451: 893–895.Google Scholar
McGinnis, Michael D. 1999. “Introduction.” In Polycentricity and Local Public Economies: Readings form the Workshop in Political Theory and Policy Analysis, edited by D, Michael. McGinnis, . Ann Arbor, MI: University of Michigan Press.Google Scholar
McGinnis, Michael D. 2007. “Missing Institutions and Polycentric Governance.” Working paper, Indiana University. http://mypage.iu.edu/~mcginnis/vita.htm#Res (Accessed on 3 April, 2010).Google Scholar
McGinnis, Michael D. 2010. “An Introduction to IAD and the Language of the Ostrom Workshop: A Simple Guide to a Complex Framework for the Analysis of Institutions and their Development,” Version 1b. Institutional Analysis and Development Symposium, University of Colorado Denver, 9–10 April 2010.Google Scholar
McGinnis, Michael D. and Elinor, Ostrom 2014. “Social-ecological System Framework: Initial Changes and Continuing Challenges.” Ecology and Society 19(2): 30. http://dx.doi.org/10.5751/ES-06387-190230 Google Scholar
Mishkin, Fredrik S. 2006. “How Big a Problem is Too Big to Fail? A Review of Gary Stern and Ron Feldman's Too Big to Fail: The Hazards of Bank Bailouts.” Journal of Economic Literature 44(4): 988–1004.Google Scholar
Mügge, Daniel. 2011. “Limits of legitimacy and the primacy of politics in financial governance.” Review of International Political Economy 18(1): 52–74.Google Scholar
Nair, Malavika. 2016. “Caste as self-regulatory club: evidence from a private banking system in nineteenth century India.” Journal of Institutional Economics 12(3): 677–698.Google Scholar
Nelson, Stephen C. and Katzenstein, Peter J.. 2014. “Uncertainty, Risk, and the Financial Crisis of 2008.” International Organization 68(2): 361–392.CrossRefGoogle Scholar
Oatley, Thomas and Nabors, Robert. 1998. Redistributive Cooperation: Market Failure, Wealth Transfers, and the Basle Accord. International Organization 52(1): 35–54.Google Scholar
Oatley, Thomas, Winecoff, W. Kindred, Pennock, Andrew and Danzman, Sarah Bauerle. 2013. “The Political Economy of Global Finance: A Network Model.” Perspectives on Politics 11(1): 133–153.Google Scholar
Ostrom, Elinor. 1999. “Polycentricity, Complexity, and the Commons.” The Good Society 9(2): 37–41.Google Scholar
Ostrom, Elinor. 2005. Understanding institutional diversity. Princeton, NJ: Princeton University Press.Google Scholar
Ostrom, Elinor. 2010. “Beyond Markets and States: Polycentric Governance of Complex Economic Systems.” American Economic Review 100(3): 641–72.CrossRefGoogle Scholar
Ostrom, Elinor and Ostrom, Vincent. 1977. “Public Goods and Public Choices.” In Alternatives for Delivering Public Services: Toward Improved Performance, edited by Savas, E. S.. Boulder, CO: Westview Press.Google Scholar
Ostrom, Vincent. 1953. “State Administration of Natural Resources in the West.” American Political Science Review 47(2): 478–93.Google Scholar
Ostrom, Vincent. 1999 [1972]. “Polycentricity [Part 1].” In Polycentricity and Local Public Economies: Readings form the Workshop in Political Theory and Policy Analysis: edited by McGinnis, Michael D.. Ann Arbor, MI: University of Michigan Press.Google Scholar
Ostrom, Vincent, Tiebout, Charles M., and Warren, Robert. 1961. “The organization of government in metropolitan areas: a theoretical inquiry.” American Political Science Review 55(4): 831–842.CrossRefGoogle Scholar
Peters, B. Guy, Pierre, Jon, and Randma-Liiv, Tiina. 2011. “Global Financial Crisis, Public Administration and Governance: Do New Problems Require New Solutions?” Public Organization Review 11(1): 13–27.Google Scholar
Posner, Elliot. 2009. “Making Rules for Global Finance: Transatlantic Regulatory Cooperation at the Turn of the Millennium.” International Organization 63(4): 665–99.Google Scholar
Potoski, Matthew and Prakash, Aseem. 2009. “A Club Theory Approach to Voluntary Programs.” In Voluntary Programs: A Club Theory Perspective, edited by Potoski, Matthew and Prakash, Aseem. Cambridge, MA: MIT Press.Google Scholar
Quaglia, Lucia. 2017. “Regulatory Power, Post-crisis Transatlantic Disputes and the Network Structure of the Financial Industry.” Business and Politics 19(2): 241–266.Google Scholar
Rajan, Raghuram G. 2006. “Has financial development made the world riskier?” European Financial Management 12(4):499–533.Google Scholar
Rajan, Raghuram G. and Winton, Andrew. 1995. “Covenants and collateral as incentives to monitor.” Journal of Finance 50(4): 1113–46.CrossRefGoogle Scholar
Rosas, Guillermo 2009. Curbing Bailouts: Bank Crises and Democratic Accountability in Comparative Perspective. Ann Arbor, MI: University of Michigan Press.Google Scholar
Salter, Alexander. W. and Tarko, Vlad. 2017. “Polycentric Banking and Macroeconomic Stability.” Business and Politics 19(2): 365–395.Google Scholar
Schwartz, Herman Mark. 2009. “Structured finance for financed structures: American economic power before and after the global financial crisis.” In Beyond the Subprime Headlines: Critical Perspectives on the Financial Crisis, edited by Konings, Martijn. London, U.K.: Verso.Google Scholar
Schwartz, Herman Mark. 2017. “Club Goods, Intellectual Property Rights, and Profitability in the Information Economy.” Business and Politics 19(2): 191–214.Google Scholar
Selmier II, W. Travis. 2014. “Why Club Goods Proliferated in Investment Finance.” In Handbook of the International Political Economy of Monetary Relations, edited by Oatley, Thomas and Winecoff, W. Kindred. Cheltenham, U.K.: Edward Elgar Publishing.Google Scholar
Selmier II, W. Travis. 2017a. “An Institutional Perspective on Governance, Power, and Politics of Financial Risk.” Business and Politics 19(2): 215–240.Google Scholar
Selmier II, W. Travis. 2017b. “The Power and International Politics of Money.” In Oxford Research Encyclopedia of International Studies (formerly International Studies Online), edited by Marlin-Bennett, Renée. Web address forthcoming.Google Scholar
Selmier II, W. Travis and Frasher, Michelle. 2013. “The cross-Atlantic tussle over financial data and privacy rights.” Business Horizons 56(6): 767–78.Google Scholar
Selmier II, W. Travis, Penikas, Henry and Vasilyeva, Kseniya. 2014. “Financial Risk as a Good.” Procedia Computer Science 31: 115–123.Google Scholar
Singer, David A. 2007. Regulating Capital: Setting Standards for the International Financial System. Ithaca, NY: Cornell University Press.Google Scholar
Strange, Susan. 1994. States and Markets, 2nd edition. London: Pinter Publishers.Google Scholar
Taleb, Nassim N. 2007. The Black Swan: The Impact of the Highly Improbable. New York: Random House.Google Scholar
Tsingou, Eleni. 2015. “Club governance and the making of global financial rules.” Review of International Political Economy 22(2): 225–56.Google Scholar
Weimer, D. and Vining, A.R.. 2005. Policy Analysis: Concepts and Practice, 4th edition. Englewood Cliffs, NJ: Prentice Hall.Google Scholar
Winecoff, W. Kindred. 2014. “Bank Regulation, Macroeconomic Management, and Monetary Incentives in OECD Economies.” International Studies Quarterly 58(3): 448–61.Google Scholar
Winecoff, W. Kindred. 2015. “Structural power and the global financial crisis: a network analytical approach.” Business and Politics 17(3): 495–525.Google Scholar
Winecoff, W. Kindred. 2017. “Global Finance as a Politicized Habitat.” Business and Politics 19(2): 267–297.Google Scholar
Woll, Cornelia. 2014. The Power of Inaction: Bank Bailouts in Comparison. Ithaca, NY: Cornell University Press.Google Scholar
Woolley, Paul. 2010. “Why Are Financial Markets So Inefficient and Exploitative – And a Suggested Remedy.” chapter 4. The Future of Finance: The LSE Report. London: London School of Economics and Political Science. Accessed on July 15, 2010 at http://www.futureoffinance.org.uk Google Scholar
Young, Kevin. 2014. “The Complex and Covert Web of Financial Protectionism.” Business and Politics 16(4): 579–613.Google Scholar
Young, Kevin, Marple, Tim, and Heilman, James. 2017. “Beyond the Revolving Door: Advocacy Behavior and Social Distance to Financial Regulators.” Business and Politics 19(2): 327–364.Google Scholar
Young, Kevin and Pagliari, Stefano. 2017. “Capital united? Business unity in regulatory politics and the special place of finance.” Regulation and Governance 11(1): 3–23.Google Scholar