Economic Governance, the Global Financial Crisis and Liberal Utopia

Transcription

1 Reshaping Markets Economic Governance, the Global Financial Crisis and Liberal Utopia Edited by Bertram Lomfeld Professor of Private Law and Legal Philosophy Free University of Berlin Alessandro Somma Professor of Comparative Law University of Ferrara, Italy Peer Zumbansen Professor of Transnational Law King's College, London CAMBRIDGE UNIVERSITY PRESS

2 List offigures List of contributors page xi Introduction: reshaping markets and the question of agency 1 PEER ZUMBANSEN Part I Crisis and normality in transnational market regulation 7 1 The central problems of Marx's economics and the nature of market regulation 9 DAVID CAMPBELL 1.1 Introduction The meaning of'regulation' Left-wing criticism of the free market Early British left-wing criticism of the labour theory of value Shaw and Keynes on Marx Wicksteed on Marx The critique of capitalism in light of the labour theory Supply and demand Competition Flanning Conclusion: the form of value 36 2 Contract law, securitization and the pre-crisis transformation ofbanking 45 JAMES 'JAY' VARELLAS III 2.1 Introduction Liberal contract law and the development of the securitization market The historical development of securitization The laissez-faire Institution of contract law Contract law and the pre-crisis speed-up of securitization markets Securitization and the rise of market-based banking Securitization and the eclipse of the post-world War II banking regime The rise of market-based banking and its consequences 53 xii v

3 VI Market-based banking and the problem of the "coordinated market economy" Conclusion 56 3 'Inside' and 'outside' the firm: corporate law and contract governance as regulatory theories 60 PEER ZUMBANSEN 3.1 Introduction Studying the Corporation The lawyer's mindset and the new twist in law and economics The promises (and pitfalls) of contract governance Coming fall circle? The corporation and contract governance The conundrum of agency in contemporary contract and corporate theory Beyond public versus private: the promise of relational contract theory for a new theory of the firm The many bases of contracts Conclusion 81 Part II Austerity woes: trials and tribulations of debt 95 4 The Greek crisis: a critical narrative 97 IANNIS MICHOS 4.1 Prologue: the biggest sovereign insolvency in history Foucault's 'tool box' Crisis and reform An event and the quest for a single cause The use of data What did really happen? The years : availability of cheap labour and profit margins Greece in the Eurozone: living with a strong currency Governance issues within Greece and the Eurozone The'inefficient'markets: eurozone or euro country? 4.4 Epilogue: The shaping of a new paradigm The biopolitics of debt-economy: market order, ascetic and hedonistic morality 115 ALESSANDRO SOMMA 5.1 Accumulation regimes, hedonism and asceticism 5.2 The emerging of a debt-economy The morality of debt relations as power relations Sovereign debt restructuring and morality: Citizens'asceticism The German experience: Hartz-reforms and invisible poverty Cooperation and workers'asceticism From consumers' hedonism to communitarianism 128

4 vii 6 Credit contracts and the political economy of debt 133 MORITZ RENNER AND ANDREAS LEIDINGER 6.1 Introduction Three stages of a decline? A historical political economy of debt The social emdeddedness of debt The Great Transformation Part I: credit contracts and the regulatory State The Great Transformation Part II: trading risks Making risk'disappear': the example of CDS trading Making the law more risk-sensitive: the example of close-out netting Ashiftfrom normative to cognitive expectation structures? Reembedding debt? The Constitution of a political economy beyond the State ISDA's development and functioning ISDA's part in the cognitivation of financial markets The evolution of ISDA's position in the derivatives market Internal centralisation - The 2009 Supplement to the Master Agreement External lobbying - the example of close-out netting Reembedding debt? Is there a reembedding of debt at all? Are ISDA's Standards democratically Iegitimate? Societal regulatory authorities and the nation-state - a complementary relationship Conclusion 154 Part III Reforming finance: systemic risk and accountability Why manager liability fails at Controlling systemic risk 161 ANDREAS ENGERT 7.1 Introduction Manager liability: not strict but fault-based Strict liability is inconsistent with managers' role as agents Incentive distortions from strict liability 7.3 Defining the Standard of care Obj ective: limiting the probability of bank insolvency Defining the Standard ex ante Defining the Standard ex post The consequences of uncertain care Standards The case for restricting manager liability Objections Conclusion 180

5 viii 8 How special are they? Targeting systemic risk by regulating shadow banking 185 TOBIAS TRÖGER Introduction The rationale underpinning current regulatory initiatives to Cover non-bank '85 credit intermediation In search of an operative definition Goals of banking regulation revisited: substance Safeguarding the supply of liquidity as the paramount end in prudential bank regulation Risk-insensitive funding as the core problern Synthesising the debates Legislators' and Supervisors' 'formalist' implementation of the policy 194 prescriptions Securitisation and off-balance sheet conduits Mutual money market funds and repo Enhancing prudential regulation's assertiveness in a normative approach The idea of an internal Solution without permanent law reform Actual and alleged limits of a normative approach Conclusion Fixing Finance JOHN M. CONLEY AND CYNTHIA A. WILLIAMS 9.1 Introduction Too big to fail banks are still a concern Why is "too big to fail" a problem? Relevant provisions ofdodd-frank Executive compensation Whythegaps? Culture, organizational psychology and regulation Project finance as a model of public/private co-regulation Dutch Central Bank psychological interventions A co-regulation model Conclusion Regulating financial markets: what we might leam from sovereign wealth funds 229 LARRY CATÄ BACKER 10.1 Introduction The operation of the Norwegian Sovereign Wealth Fund: private actor, international actor, and sovereign Organization of the NSWF Responsible investing and active ownership Juridification of Investment: the emerging jurisprudence of the ethics Council The NSWF ethical guidelines Operationalizing the Ethics Guidelines the structure and functions of the NSWF Council on Ethics 238

6 10.4 Cooperative and inter-systemic governance: its strength and fragility Conclusion 247 ix Part IV Transforming contract Sustainable contracting: how Standard terms could govern markets 257 BERTRAM LOMFELD 11.1 Two problems: limits to growth and limits to law One answer: sustainable contracts by Standard terms Why global sustainability terms could help Economic mechanism design Systemic structural coupling Deliberative passage Cultural corporate myth Constitutional fragment What adequate terms of sustainability could be Natural (ecological) sustainability Standards Social (cultural) sustainability Standards Economic sustainability Standards Procedural (political sustainability) Standards How sustainable contracting could (really) work Myth production by Classification, labelling and certification Structural couplings to domestic and international law Deliberative hubs for local and global stakeholders Economic incentives through graded interest rates and prices Constitutionalising sustainability by judicial control The vision: sustainable private self-governance Anti-discrimination law and social policy-making 283 SONJA HABERL 12.1 Old and new questions in modern anti-discrimination law Equal treatment in the construction of a common market Towards a new approach in EU anti-discrimination law? The limits and shortcomings of anti-discrimination law as an instrument of social policy-making European or American style? Cultures of contract regulation 298 DANIELA CARUSO 13.1 Introduction The American commentary in context The neo-classical critique of the CESL The CESL and behavioural law and economics The bürden of proof: origins and questions Private law, redistribution and behavioural inquiry 309

7 X Part V Conceptual Utopia: the market after the market The Truth of the market 319 MARIA ROSARIA FERRARESE 14.1 Presentation and rnain ideas The "truth" of the market and some of its implications How do markets teil the truth? Between competition and efficiency Finance and mathematical econoraics Which "free market" after the crisis? Traths and untruths Free markets and State capitalism Global markets, governance and new institutional trends 335 Epilogue: the power of law to reshape markets 347 BERTRAM LOMFELD Index 357