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      THE GLOBAL CRISIS AND THE GOVERNANCE OF POWER IN FINANCE

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      World Review of Political Economy
      Pluto Journals
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            Abstract

            This article examines why the global financial crisis that began in 2007 has intensified policy debate about financial regulation and governance, and brought about the end of polite discourse in economics. Coming into the crisis, the received view on financial regulation regarded power in finance as a matter of market concentration alone, and understood concentration as stabilizing and an indication that competitively fit firms were dominating the market. This article argues that the current crisis necessitates a refraining of our understanding regarding the governance—not simply regulation—of finance. At the core of this reframing must be a much richer, multi-dimensional conception of power and its implications in financial systems. This article argues that the locus of power in finance has shifted with the rise of the "originate-and-distribute" model in the 2000s. This shift created new possibilities for rent-extraction and speculation, to which the existing model of regulation was not prepared to react. The subprime crisis emerged precisely, in the view developed here, in the context of this crisis in the governance of power in finance. So restoring effective financial regulation will require a deep rethinking of what finance has become, and what it should be. The challenge is profound, for resolving the nearly global crisis of financial systems—and, by extension, of macroeconomic stagnation—depends on recognizing and responding to the considerable, multi-dimensional power accumulated by the very financial firms whose dysfunctionality helped create that crisis in the first place.

            Content

            Author and article information

            Journal
            worlrevipoliecon
            10.2307/j50005553
            World Review of Political Economy
            Pluto Journals
            2042891X
            1 December 2011
            : 2
            : 4
            : 581-602
            Article
            10.2307/41931946
            825e929c-26a1-421e-87c5-f8f059064d35
            © WORLD ASSOCIATION FOR POLITICAL ECONOMY 2011

            All content is freely available without charge to users or their institutions. Users are allowed to read, download, copy, distribute, print, search, or link to the full texts of the articles in this journal without asking prior permission of the publisher or the author. Articles published in the journal are distributed under a http://creativecommons.org/licenses/by/4.0/.

            History

            Political economics

            Notes

            1. Chapter 4 ("The Global Crisis and the Governance of Power in Finance") in the volume The Financial Crisis, edited by Philip Arestis, Rogério Sobreira and José Luis Oreiro (Palgrave Macmillan, 2011). "Central Banking after the Crisis/La Banque Centrale après la Crise," Toronto, May 21-22, 2010.

            2. Fox (2009)

            3. Wall (1991).

            4. Eaton, Gersovitz, and Stiglitz (1986).

            5. Dymski 1999

            6. Reinhart and Rogoff (2009).

            7. Greider (2010) Epstein (1992)

            8. Shadow Financial Regulatory Committee (2010).

            9. Dymski (2010)

            10. Minsky (1986),

            11. Dymski (2009).

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