Global Finance in Crisis: The Politics of International Regulatory Change

Abstract

Review of Eric Helleiner, Stefano Pagliari and Hubert Zimmerman (editors), Global Finance in Crisis: The Politics of International Regulatory Change, Routledge, 2010, pp. 216How have global financial architects responded to 2008 crisis, worst financial meltdown since Great Depression of 1930s? Could or should they have responded differently? In their multi-edited volume Global Finance in Crisis: The Politics of International Regulatory Change, Helleiner et al were among first international political economy (IPE) scholars to provide a holistic and multifaceted answer to these challenging questions. Through contemporaneous and cutting-edge analysis of global finance regulations before and after 2008, volume convincingly explains causes, consequences and reactionary nature of institutional changes. The real question is: how fundamental and radical are these changes? Despite many disagreements, most authors seem to agree that regulatory changes in global finance are ad hoc, incremental changes rather than complete system restructuring. Given that volume is written in midst of reform itself, readers are provided with ample opportunity to interpret and evaluate these explanations, once outcomes become more visible.A major strength of book is collective attempt of its authors to each put upfront a reflective evaluation of changes that they witness in financial regulatory system, in relation to what other authors say. First, according to most, these changes are at best incremental due to multiple structural and historical constraints. Or, in words of Nolke, the system is being tweaked rather than reformed. (280) In essence, supposedly system is actually built on existing one, which by itself is already a reactionary response to previous crises (as discussed in chapters 2, 4, 9 and 10). Fixing current system is much easier than building a new one from scratch, especially when it is managed by a network of righteous experts and scholars (as discussed by Tsingou in chapter 2) and when rigidity of system only encourages member states to stick to status quo (as discussed by Katada and Walter in chapters 9 and 10). The technocrats' blueprints and assumed superiority of established rules, in fact, are central to difficulty and slowness experienced by previous institutional reforms, as discussed by editors in opening chapter. In face of such a multifaceted crisis, it is hard to name any particular culprit: if everyone is to blame, no one is.Second, many authors identify centrality of domestic politics in leading states (US, UK) as a key driver of international finance regulatory reform. Just as interest of Western capitalism has shaped post-war order, dubbed Bretton Woods system, interest of leading states in restructuring regulatory system also shapes nature of this reform, for they happen to be its very victims this time. Yet lack of a strong, integrated international coordination and nature of economic divergence across nations hinder this process. Nolke in his analysis of financial accounting regulation makes it clear that international coordination is unrealistic, due to different modes and phases of capitalism experienced in various states. The weak, fragmented and relatively irrelevant (4) system is doomed to be ever more fragmented and weak due to leading powers' shaky position and self-interests. Similarly, Zimmerman in his account of regulatory divergence argues that real change will take a lot of time due to different rates of policy formation and implementation among different states. The implication is clear: one-size-fits-all Bretton Woods structure naturally faces enormous challenges when dealing with domestic constraints.Despite editors' intention stated in introduction to divide authors into two camps (those who believe in possibility of fundamental changes and those who don't), most authors fall into latter category, with exception of Posner (chapter 7 on European approach) and editors Helleiner and Pagliari themselves (chapter 5 on hedge funds and derivatives). …

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