The Resilience of Neoliberal Ideas in EU Financial Regulation

In the eyes of many observers, the financial crisis that has been ongoing for half a decade has wrought intellectual defeat on the ideas guiding pre-crisis financial governance. In contrast to their expectation, however, neoliberal regulatory views continue to dominate the debate in Europe, and there has not been the fundamental shift in policy many had expected in the wake of the crisis. What explains this resilience of neoliberal ideas in European financial regulation?

This paper highlights two factors: first, pro-market thought in financial regulation is a broad church, reaching from laissez-fair and doctrinaire non-intervention to a market-enhancing liberalism, under which public agencies seek to fine-tune markets to boost efficiency. For this reason, actual policy failures can rarely be pinned on neoliberalism as a whole. The vagueness of neoliberal ideas – apparently a sign of weakness – is ultimately a source of strength. Second, in spite of widespread criticism of neoliberal ideas, no coherent contending paradigm has emerged. Critics have exposed the intellectual weaknesses of market-enhancing financial regulation. They have failed, however, to table an alternative that could take neoliberalism’s place.