The Crisis of Finance Capitalism and the Exhaustion of Neoliberalism

The report “Changing Banking for Good” attempts to make bankers personally responsible, to reform bank governance and strengthen the powers of regulators. Some think that if the report’s recommendations are implemented, it will destroy London as a global financial center. Others believe that the report does not go far enough and are skeptical whether the recommendations can or will be implemented. While proposing new rules and legislation and practical changes to the way in which banks are regulated in the UK is designed to enhance individual accountability and standards of governance, the report, rather than taking the opportunity to fully nationalize the RBS, makes practical recommendations of how to return partly state-owned banks to private ownership, naively believing that its recommendations can change banking culture and regulate it, despite banking’s global and increasingly technological nature.

This problem-set concerns an essentially fraudulent culture that is a symptom only of a larger transformation that some commentators call “financialization,” where the finance sector overshadows the real productive economy and takes control of it. It is naïve in the extreme to think that a new set of prudential standards can change the finance culture when politicians themselves created it, starting with deregulation policies in the Reagan years, and when financiers hold the highest public office. In one sense, the real power and influence is anchored in a set of beliefs about markets and finance, especially given its demonstrated immense profits in the 2000s with the invention of new financial products and the new information technologies exploiting the speed of transactions. Under these circumstances the financial moguls hardly needed to buy favors or to exercise pressure: It was done for them by politicians and policy-makers. Banks use the latest mathematical modeling to demonstrate risk profiles that popularized the belief that unregulated markets are virtually foolproof. These attitudes still persist today, despite the crisis and the dangers of further crashes, constituting the greatest single stumbling block to genuine reform.

via The Crisis of Finance Capitalism and the Exhaustion of Neoliberalism.

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