Financial Markets and Regulatory Accountability: Between Technocratic Autonomy and Democratic Direction

Abstract

This chapter is concerned with three public goods: the systemic stability of financial markets, the potential for diversity in regulatory regimes and the democratic direction of the latter. The central claim made here is that these three are related.Work on the sociology of financial markets and their governance is deployed. The approach is normatively explicit, the argument being that stronger politicization and democratic control of financial market policy and regulation – introducing a greater diversity of approaches across countries and regions – reduces market herding and counter-balance problems of Too Big To Fail and Too Connected To Fail. The analysis here is compatible with a global regulatory design of ‘cooperative decentralization’ (Helleiner and Pagliari 2011) and with a ‘refining’ of European Union integration in the interests of stability (Andenas and Chiu 2013: p. 356). Such refinement could be driven further by political parties. This perspective casts a particular light on accountability: the latter moves from being problematized on formal and normative grounds, to being criticized on the more substantive grounds that it gives cover for a regulatory architecture that is inherently destabilizing and crisis-generating.