Slaves to the Market: A Response to Bell and Hindmoor
| Author | Andrew Gamble |
| Date | 01 February 2015 |
| Published date | 01 February 2015 |
| DOI | 10.1111/1467-856X.12048 |
| Subject Matter | Article |
Slaves to the Market: A Response to
Bell and Hindmoor
Andrew Gamble
The 2008 financial crash has been explained in many ways. It has been seen as the
result of both too much and too little regulation, a product of political interference
with markets, or as evidence of what happens when controls on markets are
removed. As Bell and Hindmoor note, this was the greatest financial crisis in the
history of capitalism, and its causes and consequences will be debated for a long
time to come. Their article provides a detailed account of the behaviour of bankers
in the period before the financial crash, seeking to understand how the dynamics of
the financial markets meant that far from being masers of the universe they became
‘slaves to the market’, victims of the structures they had done so much to create.
Other explanations of the crash, among which they list ‘plentiful credit, imprudent
mortgage lending, the collapse of the US housing market, and lax bank regulation’
are all considered important but are treated as permissive causal factors rather than
fundamental ones. Bell and Hindmoor seek to put the spotlight firmly back on the
banks, and on the new structural context of banking which emerged after the
changes made to financial markets in the 1980s, such as the ‘Big Bang’ in the City
of London and the reinforcement of those changes by the regulatory changes in the
1990s symbolised by the repeal of the Glass Steagall Act in 1999. They are careful
not to argue however that changes in banking structures made the crash inevitable.
Agency was centrally involved as well. Bankers (and regulators) at all times had
choices. Bell and Hindmoor point out that some banks such as J.P. Morgan and
Wells Fargo did maintain a relatively prudent stance and did not get heavily
involved in the types of lending which brought down many others. Executives at
J.P. Morgan famously had misgivings about the sub-prime market, and pulled out
of it just before the credit crunch took hold. Bell and Hindmoor also rightly insist
that the impact of the global financial crisis was very uneven, and this was in part
because a number of jurisdictions firmly embedded in the international market
order, including Canada, Australia, Singapore and Israel, were able to shield their
financial systems from the kind of collapse which happened in the US and the UK.
Bell and Hindmoor show how a new structured context for the operation of finance
emerged in the financial nerve centre of the international economy in New York
and London and a number of other linked financial centres. The pressures to
compete became so compelling that very few financial institutions were able to
resist them. The competition took the form of forever chasing the highest returns,
which were achieved not through increasing the productivity of assets, but by
increasing leveraging and trading volumes, and running down financial buffers. In
retrospect the increase in risk was massive, but as Bell and Hindmoor note, during
the build-up to the financial crash most traders and regulators did not recognise
that their risks were increasing. This is often explained as over confidence, or
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doi: 10.1111/1467-856X.12048 BJPIR: 2015 VOL 17, 27–30
© 2014 The Author.British Journal of Politics and International Relations © 2014
Political Studies Association
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