Governing through financial markets: Towards a critical political economy of Capital Markets Union

Abstract

Capital Markets Union is a large-scale political project to strengthen and further integrate European market-based finance. An initiative of the European Commission under Jean-Claude Juncker’s leadership, Capital Markets Union seeks to realize a long-standing goal of European policy makers: a financial system in which capital markets will absorb more of citizens’ savings and play a greater role in corporate finance. Market-based banking, too, is set to benefit from Capital Markets Union, which includes measures to revive the European securitization market. Given that market-based finance – or shadow banking – shouldered much of the blame for the financial crisis of 2007–2008, its resurgence as a policy priority of the European Union constitutes a puzzle. The present article lays the theoretical groundwork for a special issue that tackles this puzzle. It argues that rather than an end in itself, Capital Markets Union represents an exercise in ‘governing through financial markets’. Pioneered in the United States, governing through financial markets is a political strategy adopted by state actors in pursuit of policy goals that exceed their institutional capacity.

Neoliberal Europeanisation, Variegated Financialisation: Common but Divergent Economic Trajectories in the Netherlands, United Kingdom and Germany

“…Indeed, such supra‐national drivers are of central importance today as the EU generates financialising compulsions through the implementation of the capital markets union (Braun et al . ).…”

European Union financial integration, a geography perspective

“…Similar to the FSAP in 1999, optimism generated by the return to normal after the Draghi intervention seems to have invigorated financial lobbying (Engelen & Glasmacher, ; see Braun et al, , for overview), including renewed calls for lenience toward securitization (idem, Fernandez & Aalbers, ). Recent directives, MiFID2 (Directive 2014/65/EU, fully transposed 3 September 2018) and PSD2 (Directive EU 2015/2366, transposed 13 January 2018) enable further digitization and platformization of financial services (FinTech).…”

“…Uneven development allegedly results from insufficient integration rather than an effect of prior policy. This diagnosis is again indicative of an EU elite discourse of Europeanization through eradication of spatial difference, which Jensen and Richardson () describe as “monotopia.” Likewise, contemporary financial integration proposals such as banking union (Howarth & Quaglia, ) and capital markets union (Braun, Gabor, & Hübner, ) are similarly imbued with monotopia, where more integration through eradicating geographical difference is cast as solution rather than part of the problem.…”

Financial globalization as positive integration: monetary technocrats and the Eurodollar market in the 1970s

“…Monetary technocrats have agency precisely because they are situated at the boundary between the public and private spheres. While acting by transacting in private financial markets, their state-granted privileges make them dominant actors in those markets, allowing them to "govern through financial markets" (Braun et al, 2018). They manage public-private infrastructural entanglement through two types of institutional workthey regulate private banking activities to maintain domestic monetary governability, while at the same time providing backstops and other forms of protection to domestic banks in their international operations.…”