Elliot Posner

Making Rules for Global Finance: Transatlantic Regulatory Cooperation at the Turn of the Millennium

This article explains a shift in the way transatlantic authorities managed conflicts over the cross-border regulation of securities markets: from cooperation skewed heavily toward the preferences of U.S. officials and accepted grudgingly by European counterparts; to a Euro-American regulatory condominium characterized by close interactions among decision makers and mutual accommodation. In the final decades of the twentieth century, the asymmetric influence wielded by U.S. securities market authorities had few parallels in other regulatory areas. Why, then, did U.S. officials become more accommodating and European authorities more influential, and why did the turning point occur in 2002 and 2003, an unlikely moment for intensified transatlantic sovereignty sharing? My study shows that institutional change inside the EU recast the North Atlantic balance of regulatory leverage and thereby was the primary factor behind the reshaping of transatlantic cooperation. Internal EU regulatory centralization changed the expectations of U.S. and European firms and authorities and generated new incentives in Washington, D.C., for accommodation and closer transatlantic coordination. My explanation differs from models that, accepting U.S. financial pre-eminence as a given, attribute variance in cross-border regulatory cooperation to factors such as incentives derived from the particularities of issue areas or preferences rooted in domestic politics. While resonating with a well-established theme from the realist branch of IPE, my findings have broad theoretical significance, and open new avenues for dialogue between realists and constructivists about the social, political, and institutional foundations of power in global economic affairs. The transatlantic political process set off by financial transformation in Europe reveals contemporary sources of systemic change and raises questions about what the EUs ascendance as a global financial regulator will mean in the aftermath of the late-2000s crisis.

The EU and financial regulation: power without purpose?

If the European Union (EU) has been an effective bulwark against ad hoc globalization in any economic domain, we may well find evidence from finance, the engine of cross-border economic activity. Yet our study revealed little indication of a distinctive EU approach for regulating financial services industries. Our findings suggest that European decision-makers tried mainly to secure full market integration inside the EU rather than shape regulation to meet a common public purpose, whether at the EU or global level. The policy framework adopted by the EU was essentially modeled on pre-existing United States (US) examples, and does not reflect a transatlantic difference in underlying values. We put forth several hypotheses about why the EU did not seek to manage globalization in the financial services area.

Sequence as explanation: The international politics of accounting standards

ABSTRACT The gravitational pull of US capital markets in the early 1990s created incentives for foreign multinational companies and governments to adopt or converge to American accounting standards, US Generally Accepted Accounting Standards (US GAAP). Fifteen years later, more than a hundred countries had accepted (or planned to accept) a single set of accounting standards – yet not the American ones. Instead, a London-based private body had become the worlds standard setter, and even in the US there was serious discussion about phasing out national standards for multinational companies. My explanation for change in the international politics of accounting standards emphasizes two conceptual tools featured in this special issue: cross-border sequencing effects and internal institutional configurations and capacity building. Unlike previous work that centers on the rise of private or technical authority or gives pride of place to either EU regional reform and capacity building or US developments, this article attributes the change in the politics of accounting standards to a sequence of developments that took place in the transatlantic political arena, inside and between these two large polities. The order and timing by which the US created and the EU emulated institutional configurations and regulatory capacities determined the particular set of transatlantic interactions. If the US or the EU had never developed these arrangements and capacities or had developed them in a different sequence or at different historical moments, transatlantic interactions would likely have followed an alternate path and generated different types of international politics.

Sources of Institutional Change: The Supranational Origins of Europe's New Stock Markets

The article explains a curious turn in European political economies. Between 1995 and 2005 national financial elites in twelve Western European countries created almost twenty competing new stock markets designed to improve financing alternatives for entrepreneurial companies. For a region supposedly averse to risk and U.S.-style capitalism, it is surprising that most of the new markets were modeled on the U.S.-based Nasdaq Stock Market, an iconic American institution. The authors structured comparisons of the new markets to one another, to previous ones, and to proposals that never saw the light of day reveal that the primary causes behind the creation, form, and timing of Europes new markets lie in the political skills, motivations, and actions of supranational European Union bureaucrats. Challenging leading social science explanations for the cross-border convergence of domestic institutions, these findings show that the accumulated effects of day-to-day action by these supranational bureaucrats are potential causes of institutional innovation. The argument adds to a growing body of detailed empirical research on the domestic and global impact of the European regional polity and contributes to scholarly debates about market formation.

International interdependence and regulatory power: Authority, mobility, and markets

This article revisits a fundamental question of international political economy: when does cross-border economic interdependence become a source of power. The view that economic interdependence is a source of potential power, not just mutual benefits, has a long lineage traceable to political realism, organizational economics, Ricardian trade theory, and structural Marxism, and researchers typically focus on preferred causal variables in isolation. Despite important contributions, little attention has been paid to understanding the interactions of multiple perspectives on asymmetric interdependence, or to making sense of contradictory expectations of the various models. As a consequence scholars engaged in globalization debates, such as those about policy convergence or private actor governance, frequently talk past one another. To deduce expectations about the relationship between power and interdependence, we build a model synthesizing standard approaches that analyze the effects of market size and market scope separately, and then add the critical variable of jurisdictional boundaries. By decoupling geography and authority, our analysis produces a respecification of classic interdependence models and advances core international political economy debates concerning power dynamics in a globalized economy.

Transnational feedback, soft law, and preferences in global financial regulation

ABSTRACT Pre-crisis global governance of finance was marked by considerable preference alignment between the two regulatory great powers, the US and the EU. The articles explanation of this surprising pattern in regulatory preferences takes the institutional context of global finance seriously. It highlights the endogenous, temporal effects of inter-national institutions at the core of global economic governance: transnational regulatory networks and the soft law they produce. Transnational soft law is not simply an articulation of a focal point, we demonstrate, but also a political resource that may be employed by reform-minded agents dissatisfied with their domestic policy status quo. We label such feedback processes ‘templates-as-disruptors,’ meaning that the establishment of transnational soft law by regulatory networks at t1 creates policy templates that disrupt pre-existing internal (e.g. domestic) political contests at t2. In addition to improving an understanding of historical events and great power preference alignment, the paper highlights the temporal effects of informal cooperation and domestic--international interaction in global governance.

Putting the EU in its place: policy strategies and the global regulatory context

ABSTRACT On the one hand, research has trumpeted the European Unions (EUs) influence over international regulation. On the other hand, a significant literature details the limits of EU efforts. How can we reconcile these conflicting findings? This contributions answer turns on the global regulatory context, two dimensions of which (the distribution of regulatory capacity across the major economies and institutional density at the global level) are used to deduce scope conditions under which the EU can (or cannot) be expected to adopt different policy strategies. The study posits that variation along these dimensions is likely to result in four strategies: regulatory export; first-mover agenda-setting; mutual recognition; and coalition-building. The analytic exercise helps identify sources of and constraints on potential EU behavior as the polity engages in the politics of global regulation. The framework could in principle be extended to explain the strategies of other regulatory great powers; it unifies existing theoretical arguments, contributes to a growing literature in international relations, comparative politics, and European studies on the role of context in conditioning causal relationships, and offers a nuanced and tractable set of expectations about the EU as a global actor.

Structuring transnational interests: the second-order effects of soft law in the politics of global finance

ABSTRACT International soft law has become a hallmark of global economic governance: networks of official and private ‘governors’ create standards, best practices and norms. Research often frames these efforts as solutions to perceived problems arising from globalization. Yet the narrow focus on the rulemaking process – coordination, distributive implications and implementation – misses second-order political repercussions. Giving special attention to the interaction between international soft law and the political landscape of business advocacy, this article offers an alternative account of the relationship between transnational rules and powerful actors. We argue that transnational informal institutions are not only sites of cooperation that resolve the economic policy concerns of the day, but are also sources of policy feedback that can transform the political landscape. To illustrate the potential empirical traction of these arguments, we examine the critical case of the Basel Committee on Banking Supervision and the Institute of International Finance (IIF). The IIF went from being a struggling organization with no regulatory agenda or lobbying skills to the worlds most influential financial industry advocate directly engaging transnational forums. We find that second-order effects of soft law were a primary cause of the IIFs transformation. Our study has major implications for research on global governance as we highlight the political ramifications and temporal effects of informal institutions for business representation.

Agenda for Africa's economic renewal

Ten experts from Africa, Europe, and the United States look beyond structural adjustment and identify the strategic elements that are needed to engineer Africas economic recovery in the coming years in this important book.