If a single root cause has predominated in explanations of the current global financial crisis, it is ‘deregulation’. Lack of state oversight of financial markets is widely cited—not only in the opinion columns of the financial press, but by left-wing commentators, too—as having permitted the perilous over-leveraging of financial institutions, based on weakly securitized debt, that has brought about the present debacle. This diagnosis of the cause of the crisis also steers towards a particular solution: if deregulation allowed markets to get out of control, then we must look to re-regulation as the way out. Thus Will Hutton sees the subprime crisis as the result of decades of laissez-faire policies, resulting in excessive financial growth and instability; now that ‘Anglo-Saxon financial capitalism has suffered a fundamental reverse’, he looks forward to the return of Keynesian regulatory policies. Eric Helleiner also hopes that ‘the crisis may be pushing us toward a more decentralized and re-regulated global financial order . . . more compatible with diverse forms of capitalism’ that would ‘sit less comfortably with an entirely liberal set of rules for the movement of capital and financial services’. By contrast, Robin Blackburn’s analysis of the crisis makes the point that ‘financialization was born in a quite heavily regulated world’, and he questions whether ‘more and better regulation’, even while needed, will ‘be enough’. But his account of the crisis mainly emphasizes rampant financial innovation in an unregulated shadow banking system.
For many authors, this focus on ‘deregulation’ in explaining the current crisis is closely associated with a Polanyian understanding of the shifting boundaries between state and market, which would see markets as having become 'disembedded’ from the state. From this perspective, we may now be witnessing the start of a movement whereby the market will be re-embedded in public norms and regulatory institutions. As Robert Wade recently wrote in these pages:
Governmental responses to the crisis suggest that we have entered the second leg of Polanyi’s ‘double movement’, the recurrent pattern in capitalism whereby (to oversimplify) a regime of free markets and increasing commodification generates such suffering and displacement as to prompt attempts to impose closer regulation of markets and de-commodification.
The central problem with this perspective is the tendency to analyse the financial dynamics of the past decades within the terms of that era’s hegemonic self-representation—that is, through the key tenets of neoliberal ideology: the retreat of public institutions from social and economic life, and the return to a pre-Keynesian era of non-intervention. But it was only on the most stylized and superficial reading that the state could be seen to have withdrawn. Neoliberal practices did not entail institutional retreat so much as the expansion and consolidation of the networks of institutional linkages that sustained the imperial power of American finance. Of course it has become commonplace to assert that states and markets should not be seen as really counter-posed; but such claims have tended to remain rather perfunctory, and most research has remained guided by the notion that financial expansion has been accompanied by the attenuation of the state. A concrete account of the many ways in which the us state and financial markets are mutually constituted must necessarily involve an awareness that the practical effects of neoliberal ideologies are not well represented in those discourses themselves. Neoliberalism and financial expansion did not lift the market out of its social context; rather, they embedded financial forms and principles more deeply in the fabric of American society.
This is not to deny that changes in the mode of regulation played an important role in the developments that led to the crisis, but rather to argue that these should be situated within a wider context of financialized class relations. [pages 67-8]
2 comments:
A friend just emailed this article to me. Thanks for including a portion of it. Thinking of neoliberal governmentality rather than ideology may get us out of the deregulation problem. Hayek and the others realized the market had to be created. What was the logic of this market? How was this logic in turn flipped back on state? A related set of questions connect this process to the financialization of capital....
It just bears repeating over and over, that because one mode of regulation ends it doesn't mean that regulation as such has ended.
I've only read a couple of secondary, fairly critical sources on Hayek, but from what I read doesn't he differ from the so-called ordo-Liberals (the West German post-war Neo-Liberals) in arguing that markets are catallaxies: culturally created associations made totally outside the control of the state? Of course, I think he's wrong, but I think this is his position.
I'll have to think some more on your questions, but the links between the Neoliberal governmentalisation of the state and finance capital are where I think the real action is. What I'm particularly interested in is how the logics of financial 'instruments' become embedded as cultural forms into everyday life.
You've probably seen it but there's another recent essay on Neoliberalism in the latest Public Culture journal by Michel Feher. Feher argues that Foucault is onto how the Chicago School critique of labor-power -- which they recast as human capital -- is a fundamental break from the Marxist understanding of labor-power. The notions of the self as enterprise, and entrepreneur arise out of this rationality. Feher argues that we on the Left can use the Neoliberal condition to redefine what self-appreciation means. In other words, I think what he's arguing is that the ideas of and formations around labor are becoming residual and that the Left should refocus its late-1960s radicalism on are the concepts and practices that traverse 'human capital'. The Left need to challenge moeds of Neoliberal self-appreciation and ask what constitutes an appreciable life?
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