Controlling, Creating and Cashing-in on Risk: The Essence of International Financial Markets

Abstract

The abiding strength of the IPE literature on finance is that it focuses so clearly on the political, social and cultural construction of financial markets. (1) It suggests that financial markets are politically constructed insofar as the pattern of regulation to which they are subjected reflects the dominant macroeconomic ideas to which political elites have adapted (e.g., Blyth 2002; Ryner 2002). Governments always have a choice about which regulatory stance to adopt, but that choice is itself mediated by the prevailing framework of ideas (e.g., Hay and Rosamond 2002; Best and Widmaier 2006). (2) It suggests that financial markets are socially constructed insofar as they could not operate without a sufficient flow of savings arising from society (e.g., Martin 1999; Clark 2003; Sinclair 2005). At heart, the ‘money’ which propels the pricing structure of financial markets is a complex social relation bound up in the practices of the credit economy, where what flows between one person and another — obligant and claimant — is nothing more real than the promise to pay (e.g., Ingham 1996; Woodruff 1999). (3) It also suggests that financial markets are culturally constructed insofar as their current operating logic is entirely dependent on societal inculcation of a particular understanding of risk and uncertainty (e.g., Baker 2002; de Goede 2005).