'More Heat than Light': On the Regulation of International Finance

Short essay by Jakob Vestergaard

There has of been a huge outpouring of analysis and commentary on the global financial crisis. Yet there has been very little attention specifically to the regulatory crisis that lies behind it. Apart from a change in the scope of financial regulation, proposed reforms of international financial regulation are marginal. There is, in brief, a severe underestimation, if not neglect, of the regulation crisis underlying the current global predicament. This paper seeks to counter this tendency. It is argued that the approach to international financial regulation that has predominated since the late 1990s is predicated upon three key presumptions about financial risk and how to govern it, all of which are fundamentally flawed. As a consequence, this regulatory regime has undermined rather than increased the stability and resilience of the international financial system. On the basis of this analysis, the paper identifies a number of principles for a more effective approach to international financial regulation.

Link to the article:
http://econsoc.mpifg.de/newsletter/newsletter_current.asp

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