Dealing with the banks: populism and the public interest in the global financial crisis

Abstract

Political protest in Europe and the problematic politics surrounding bank recapitalization in the US have raised growing concerns about the rise of populist politics. Populist politics is problematic in its search for simplistic solutions to complex problems, its disdain for institutions and its political ambiguity. Nonetheless, the rise of populist mobilization also points to genuine concerns about the functioning of democracy. The politics of financial regulation has been dominated by a narrow, utilitarian and technocratic mode of policy‐making that has tried to limit public debate, favouring an expert discourse which privileges questions of efficiency over questions of distribution. This article explores the distributional issues at stake in banking recapitalization (particularly questions about the returns governments receive for their investment) and regulation (through an exploration of the financialization literature). It argues that, while populist appeals to ‘the people’ are too ambiguous to be helpful, given the complexity of the interests at stake in financial regulation, there is a need for a wider and more democratic debate about financial regulation that pays greater attention to distributional issues. Populist mobilization can create pressure for debate, even if it presents few solutions. As a result, we should be wary of moves to shift too much regulation to the international level where populist mobilization is less effective.

Restraining regulatory capture? Anglo-America, crisis politics and trajectories of change in global financial governance

“…Generally, during financial booms the wider public has little interest in financial regulation-the distributional consequences remain highly technical, and therefore unclear to the general public-and so the issue has little political salience. 21 Of course, the one group to whom the distributional consequences are most clear and who have the greatest incentives to seek to influence regulation are the banks and their concentrated industry lobbies. In this context, during booms bank interests find themselves relatively unopposed because countervailing societal interests are largely absent.…”

Neo-liberalism at a Time of Crisis: the Case of Taxation

“…As Thirkell-White has pointed out, public anger over the credit crisis and large-scale protests have increased the politicisation of the global financial reform process to a considerable degree, 'triggering the rise of a populist politics seeking punishment for the banking sector' (Ref. 13, p. 689). Politicians are searching for measures that will force the financial sector (and possibly the speculators) to pay, for instance by curbing and/or taxing excessive remuneration of cadres and traders.…”

The interest ecology of financial regulation: interest group plurality in the design of financial regulatory policies

“…Mattli and Woods have argued that crises may favor the mobilization of societal actors besides the targeted actors by producing a 'demonstration effect' and reveal the distributional implications of regulatory policies and opening new channels of access to the regulatory process (Mattli & Woods, 2009). The recent global financial crisis clearly changed the salience of financial regulation, increasing the level of media coverage of the media around financial regulatory policies and affecting the ways that both everyday citizens and organized interest groups dealt with financial regulatory issues (Thirkell-Whitle, 2009;Woll, 2013;Kastner, 2014). However, the impact of a crisis in increasing the level of salience of financial regulatory policymaking is not permanent but it is likely to wax and wane in accordance with the "issue attention cycle" whereas issues that leaps into prominence inevitably fades from the center of the public attention (Downs, 1972;Knecht & Weatherford, 2006, p. 710).…”