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Lost in Temptation of Risk Print
Financial Market Liberalization, Financial Market Meltdown and Regulatory Reforms
Brown Bag Seminar by
Brigitte Young, Professor for Political Science and International/Comparative Political Economy at the University of Münster, Germany.
27 November 2009, 12.15-13.45, Anna Nussbaum Auditorium, World Trade Institute, Berne, Switzerland


The current meltdown of the financial markets in the US, which triggered a world-wide financial crisis and staggering declines in global growth rates, challenges the assumptions of fast capital market liberalization (CML). Whereas the discussion in previous years has concentrated on the benefits of financial market liberalization, the focus has now shifted to the cost of fast and excessive financial liberalization. In contrast to the theory of perfect capital markets, the paper starts from the more realistic assumption of imperfect capital markets. We deal with the benefits but also the potential shortcomings of CML. Capital markets liberalized too fast, with risk assessments left solely to the market, can trigger boom–bust cycles, the busts precipitated by financial instability, entailing contagion effects and having strong negative effects on the real side of the economy.

The financial meltdown has created not only new challenges for the Central Banks around the globe, but has also produced initiatives on new financial regulations. We discuss here the most important recommendations put forward by the G20, the US, UK and EU in their policy proposals for the financial market reforms triggered by the recent financial market meltdown. No final verdict is possible at this time, since the proposals and recommendations issued by the various bodies have to go through the political process. Nevertheless, the fragmentation of regulatory policy is already evident between liberal market economies and their tendency to rely more on market modes of coordination and the European countries with coordinated market economies and their trust in non-market coordination. The challenge for the multilevel governance system of finance is to find a way to regulate without refragmentation, both at the European and the global level.

For Brigitte Young’s CV, please see:

For a printable version of this article, please click here.

For information on Prof Young's presentation at the IFZG in Berne, please click here.

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