Neoliberalism is often associated with an excessive focus on the market at the expense of both the state and society. But more than some of his liberal friends he was convinced that a crisis as severe as the Great Depression required the state to support the natural correction process, as three chapters in the volume demonstrate, in particular the one by Lachezar Grudev.
The problem was not economic, it was far deeper, and it touched the organization of the state, the fabric of society and ultimately liberal and humanist culture. It is clear that many of the current discontents of our day are not simply economic, but extend to social issues immigration and free speech as well as the state the future of the EU and the rise of populism on the left and right.
But the strength of his work is precisely to be found in this integrative approach. It seems that none of the nineteen contributors to this book agrees wholeheartedly with his analysis or suggested cures, but it is the questions he raises, and the challenges he presents that make him relevant. He was skeptical that liberal institutions had much of a chance in the absence of bourgeois and Christian culture, or a social order that fostered personal responsibility and autonomy.
It was an unpopular argument in a secularizing society looking to free itself from many traditional institutions and norms, and one that does not sit easily with a liberal universalism. But it is also a point that is hard to ignore after failed Western attempts to spread democracy and markets both in post-Communist countries and other parts of the world.
It is the ethic of personal responsibility, of thrift and prudence, of self-discipline supported by the small business family capitalism. This, however, was not the capitalism of the twentieth century with its major hierarchical firms, the technological advancement and its culture of consumerism. Instead, as his close associate Hayek later would theorize, modern man lives very much in two different worlds: the small world of the family and the open society of the market and politics.
This makes him an interesting critic of his times with a sharp eye for the corrupting influence of mass movements and for the importance of civil society. He had sympathies for both European political integration and a high degree of federalism. It makes him an original critic of monopolies: they are bad not only because they harm consumers, but also because they represent an unhealthy degree of concentration in the economy, with harmful social and cultural effects.
He favored the small firm, exemplified by the independent farmer and artisan. It was an economic structure which he found in Switzerland, where he lived the latter half of his life, from to his passing in After all they were far more willing to accept interventions for social purposes, to combat unemployment for example. But this volume demonstrates the extent to which that interpretation relies on a single analytical axis that ranges from radical non-interventionism to centralized control. It is the purely economic lens through which to analyze the state.
His social program does not follow primarily from economic arguments, but instead from social ones. Such social reasons could be progressive, i. Some of the early neoliberals were more progressive and therefore more willing to allow for states to step in to secure individual autonomy, others were more conservative and therefore more willing to allow for states to step in to maintain existing social structures.
For both conservatives and progressives in favor of social policies the idea that some efficiency has to be sacrificed for other goals is a given, not a counter-argument to state intervention. To understand his work therefore, we have to understand what other values were important enough to sacrifice some economic efficiency and possibly economic freedoms. These are issues that the book grapples with, although occasionally one would have wished they were addressed more directly. Just like in his arguments against monopolies we encountered above, it is the social and cultural that take precedent not the economic.
Both men sought to prevent the advent of socialism, through the revision of the role of the state in society. And, more importantly, both believed that social order required state policies that supported this social order. One might fault him for it, but I think it makes him into a deeper thinker than some of his neoliberal contemporaries. What is the social order that fosters individual responsibility, as well as a strong civil society able to resist centralizing tendencies in the state?
If we regard this question as the most fundamental, then we should ask of economic policies to what extent they sustain and foster this particular social order. Although the book contains little explicit engagement with contemporary issues, it is not hard to realize that this challenge too is still with us: local, regional and national identities and variations in economic structures have proven incredibly resistant to the homogenizing forces of markets, and often a powerful opponent of them.
Current anti-globalist and anti-EU sentiments stem to a considerable extent from the fact that global markets are believed to endanger these identities and structures. Not because the book manages to resolve the tensions, but because it takes them seriously. He is also assistant professor in cultural economics at the Erasmus School of History, Culture and Communication. How can we understand the growth of a system of credit provisioning outside of the realm of bank regulation since the s which linked non-banks and banks in a convoluted system of market-based banking, securitization and wholesale finance which burst into the public consciousness with the crisis as the shadow banking system?
While we can observe this general trend, why do we see differences in this trend fractured according to different national legal and supervisory traditions? My recent book The Growth of Shadow Banking: A Comparative Institutional Analysis Cambridge University Press, aims to provide answers to these questions by exploiting the variance in the exposure of banking systems around the world with respect to shadow banking, using in-depth process tracing and focusing on the US, the country where modern shadow banking originated, Germany and the Netherlands as countries with high exposure, and France as a country with low exposure, despite common EU regulation.
The book is based on more than 80 expert interviews with banking regulators, bankers, auditors and accounting scholars in these 4 countries. The book seeks to explain these divergent trends without falling into the traps of a literature that explains these issues by regulatory or cognitive capture.
Not because these issues did not play a role, but because these theories employ a view of the agency of regulators which is too simplistic at best. Instead of treating regulators as either bought or dopes, I seek to place the decisions of banking regulators to not regulate these off-balance sheet activities of banks, on the one hand, into their structural context, both on the national and the transnational level and, on the other hand, to their embeddedness in the regulatory networks that determine the compliance with national banking regulation.
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Instead, I link its growth to the particular structural situation in which banking regulators found themselves, where regulatory competition with non-banks domestically and banks from other jurisdictions globally structured their behavior, as they formed a dialectical unity with the regulated, sharing common interests at the same time.
The book first traces the growth of shadow banking to the rising competition between banks and capital market activities since the s in the United States , which threatened the disintermediation of banks and the impossibility of the Fed to prudentially intervene in the behavior of non-bank actors. Being thus constrained, they instead sought to facilitate the capital market activities of their banks from the s onwards.
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Focusing on the Asset-Backed Commercial Paper market, I show however that this support was not unconditional and that it was subject to persistent reviews over what was and what was not allowed. This critical stance of the Fed, which in turn provoked industry innovations, came to a halt with the shift from Paul Volcker as the chair of the Fed, who had become increasingly critical of these activities, to Alan Greenspan, who was largely hands-off. Evidence drawn from interviews with the Fed officials shows how the Fed itself was internally riven between those who wanted to clamp down on these activities and force them back into the balance sheets of banks and those favouring a hands-off approach.
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Interestingly, this conflict would come to the fore again with Enron scandal in and would be resolved through the anticipated introduction of rules envisioned in Basel II in the US. And here is the second element I point out in the book: the attempt to pry open the global banking market, in full swing since the s leads to a difficult position for national banking regulators. Since the first Basel Accord in , banking regulators as an epistemic community have sought to level the playing field by introducing transnational rules which could and should be implemented nationally.
And yet, here is the paradox: as global rules establish a level playing field, they put a disadvantage on the national re-regulation of activities that are designed by legal engineers to circumvent these global rules. The normal delays between innovation and re-regulation are expanded on the global level from Basel I to Basel II it took 15 years to agreement and implementation and national re-regulation in the meantime is disadvantaged due to the competitive disadvantages that national banks face in a global market for banking activities when their rules are stricter than those of their competitors.
I show that both these arguments were advanced by bankers and demonstrate how they structured the agency of banking regulators. Aggravating this dynamic is the fact that global rules are placed upon national accounting rules, which by chance provide competitive advantages to banks from certain countries, as certain shadow banking activities are excluded from the purview of banking regulation by accounting definition.
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This in turn exerts pressure on other countries to adjust their rules to allow the expansion of these activities domestically. Europe is the looking glass for these trends. Since , with the first European banking directive, the competitive struggle to open national banking markets has been on the agenda. Due to the impossibility to agree to common banking rules and to install a common banking supervisor, European bureaucrats and politicians adopted the compromise of implementing Basel I on a binding European level and of enforcing it through national regulators.
This institutional set up enshrined the contradictions mentioned before and amplified them by binding the fate of national regulators and the fate of national banking champions together. In Germany , which possibly is closest to a case of regulatory capture, the banking regulator is subordinated to the ministry of finance, which follows a conscious strategy to encourage shadow banking, seeking to wean Germany off its dependence on bank credit.
Lastly, the case of France presents a case of successful pre-crisis regulation of parts of the shadow banking sector. This happened, on the one hand, due to the discretionary powers of the banking regulators to enforce its own interpretation of rules, its strong interactions with the compliance officers in the banking and auditing community which allowed for awareness of rule evasion as well as sanctioning power with respect to these agents.
Hence, it was proximity to the regulated, not distance, which allowed the French to regulate shadow banking. After the crisis, several regulations regarding the interaction between banks and crucial capital market actors have been strengthened in Europe, the US as well as globally and some of the shadow banking activities seen pre-crisis have disappeared. And yet, the structural conditions, which facilitated its growth still exist. In that sense, the book does not expect the phenomenon of growing shadow banking activities to shrink see for instance the recent developments in the leveraged loan market in the US.
And yet, it offers several insights how the regulation of shadow banking activities could function better, by encouraging more, not less contact between regulators and financial institutions and by relying on expertise of compliance officers and other intermediaries to overcome information asymmetries.
In this respect, the book opposes simple accounts of capture theory and shows that the current focus on transparency and arms-length relationships cuts regulators off from industry knowledge. He holds a PhD in Sociology from Columbia University and has published widely on financial regulation pre- and post-crisis as well as the role of European public development banks in these newly reconfigurated financial markets. Neoliberalism portrays them as a result of individual failures, masking the power relations and structural violence embedded in the political economies.
Five great short pieces on this topic published in Cultural Anthropology. These are Merit and Demerit, the qualities of deserving reward, and of deserving punishment.
In line with this argument, Smith depicts in this book the character of a virtuous person. Such a person, he suggests, would embody the qualities of prudence and self-command. I proceed along the following lines:. In part one, I reconstruct central points of Benjamin Cohen's mapping of IPE in his call for more intellectually challenging and stimulating approaches.
As part of this examination, I identify some contentious aspects of his approach, and unpack these in the context of a critical examination. In part two, I aim to historicise IPE contra the mainstream version , following on also from other critical contributions to this debate including Hobson's. In part three, I return to the bigger question of the politics of method, focusing critically on the practice of conflating methods with ideological commitments, and to some extent on the question of the contradictions of liberalism.
In the conclusion, I argue for a much more inclusive conception of political relations, one that gives an account of social relations in political terms, and overcomes the artificial distinction between politics and economics. This also means moving beyond reductionist conceptions of development associated with narrowly framed of approaches to international political economy.
Cohen's central argument is that the study of IPE is bifurcated, with two broad approaches committed to distinctively different theoretical and methodological premises located on either side of the Atlantic. By briefly reconstructing his argument, my aim is to demonstrate why his rendition of this problem is in itself contentious, engendering in turn further potential misunderstandings and misapprehensions. This critical discussion then provides the backdrop to an alternative account of historicising IPE, which I trace in part two.
Taking as his point of departure Gilpin's definition of IPE as 'the reciprocal and dynamic interaction in international relations of the pursuit of wealth and the pursuit of power' , he goes on to state the following which is worth quoting in full :. As a practical matter, such linkages have always existed. As a distinct academic field, however, IPE was born no more than a few decades ago. Prior to the s,in the English-speaking world, economics and political science were treated as entirely different disciplines, each with its own view of international affairs.
Relatively few efforts were made to bridge the gap between the two. Exceptions could be found, often quite creative, but mostly among Marxists or others outside the 'respectable' mainstream of Western scholarship. A broad-based movement to build bridges between the separate specialities of international economics and international relations IR in effect, to construct the field we know as IPE - was really of very recent origin , my emphasis.
According to Cohen, in the former, 'priority is given to the scientific method. For Krasner, IPE 'is deeply embedded in the standard methodology of the social sciences which, stripped to its bare bones, simply means stating a proposition and testing it against external evidence' In contrast, the British 'and elsewhere in the English speaking world' are more receptive to drawing from other disciplines, 'beyond mainstream economics and political science; they also evince a deeper interest in normative issues. In the British style, IPE is less wedded to scientific method and more ambitious in its agenda' Cohen goes on to supplement his account of the differences between the two schools 'in terms of their contrasting understandings about ontology and epistemology' As Cohen states, in terms of ontology, 'the American school remains determinedly state-centric, privileging sovereign governments above all other units of interest.
The British School by contrast, treats the state as just one agent among many, if states are to be included at all' For the American School, the 'core object of study [ The main purpose of theory is explanation: to identify causality ' my emphasis. This rendition of 'the American School' is problematic not least in the way in which 'causality' is associated exclusively with a very narrow set of 'ontological' and 'methodological' precepts. I expand on this point below, drawing in particular on critical work on the limits of the formal comparative method.
Cohen moves on to characterise the second broad approach. The problematique is more ecumenical, concerned with all manner of social and ethical issues.
Related Issues in Political Economy: A Critical Approach
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