Tamara Lothian

Crisis, Slump, Superstition and Recovery: Thinking and Acting Beyond Vulgar Keynesianism

The intellectual and practical response to the worldwide crisis of 2007-2009 has exposed the poverty of prevailing ideas about how economies work and fail. The transformative opportunity presented by the crisis has largely been squandered; but the opportunity for insight has not. Insight today can support transformation tomorrow. The present debate about the crisis and the subsequent slump has largely suppressed two themes of major importance. The first theme is the relation of finance to the productive agenda of society. The second theme is the link between redistribution and recovery. A pseudo-democratization of credit has been made to do the work of redistribution. Yet the most important form of redistribution is not retrospective and compensatory; it is the reshaping of economic and educational arrangements to broaden opportunity and enhance capabilities.Fiscal and monetary stimulus is rarely enough to redress the effects of a major economic crisis. The proper role of a stimulus is to play for time by preventing the aggravation of crisis and prefiguring a program of recovery and reconstruction.The vulgar Keynesianism embraced by many contemporary progressives fails to offer a theoretical guide to such a program of recovery. However, the fault does not lie solely in the vulgarized version of Keynes’s ideas; it lies in the ideas themselves and in the whole mainstream of economic analysis that grew out of the marginalist revolution. Law and legal thought are integral to the theoretical alternative explored in this essay, because they provide the institutional imagination with indispensable equipment.This essay takes a first step in the effort to develop an intellectual alternative. It does so by outlining an approach to our present problems of crisis, slump, and recovery.

After the Crisis: Institutional Innovation and the Alternative Futures of American Finance

The worldwide financial and economic crisis of 2007-2009 and the subsequent slump in much of the world provide an opportunity to rethink the nature of finance and its relation to the real economy. Because any reshaping of this relation requires a revision of institutional arrangements established in law, it provides an opportunity for legal analysis to contribute to the project of institutional innovation. This piece addresses the role of finance in the crisis, in the economic downturn that followed it, and in the ongoing debates about how finance should now be regulated. It deals with these issues and events in the American center of the crisis. The reinterpretation of American experiences and prospects in this area exemplifies a more general approach both to finance and to comparative law. A major element in the American genealogy of the crisis was the partial hollowing out of institutional arrangements, especially with regard to banks and to the mortgage market, that were established during the New Deal period. To redress present problems it is no longer enough to re-regulate finance in the New Deal spirit. It is necessary to innovate in the arrangements governing the relation of finance to the real economy. The innovations should be oriented to two goals: to place finance more effectively at the service of the real economy in general and of production in particular and to contribute to a broadening of economic opportunity – socially inclusive economic growth. At every point along the way, both for the understanding of what has happened and for the proposal of alternatives, legal detail is crucial. The piece seeks to exemplify a practice of national and comparative legal analysis useful to the execution of this task. KEYWORDS: Financial crisis, contagion, financial regulation and reform, Dodd-Frank, resolution authority, institutions, institutional change, globalization, development, comparative law, law and finance, structural transformation.

Democracy, Law and Global Finance: An Example of a Research Agenda for a New Practice of Law and Economics

Finance has become more a problem than a solution to what the world most wants: socially inclusive economic growth. It has become a source of crises that threaten the development of the real economy. It has escaped accountability to democratic institutions and often helped, instead, to influence and corrupt them. Its potential to contribute to broad-based opportunity-expanding growth has been largely and massively squandered. In this piece and in a developing body of writing, I seek to understand not only how this failure manifests itself in some of the major countries and regions of the world, but also, how it can be corrected. One of the positive programmatic outcomes should be a toolbox of legal-institutional arrangements to use and organize finance in the service of socially inclusive growth. These innovations do not amount to a confining, universal blueprint. They are nevertheless applicable, with suitable adjustments, to a wide range of contemporary economies. Moreover, we can develop them with conceptual and institutional materials that are already at hand, in contemporary experience. To identify these resources for legal and institutional innovation through comparative analysis, thus forms another goal of the intellectual agenda.My method of analysis gives pride of place to institutional alternatives and innovations, expressed in the detailed materials of law. It is comparative law turned into a practice of micro-institutional analysis. We expand our sense of institutional alternatives as we begin to grasp the institutional variations already at hand. From small variations, we may begin to imagine larger variations, informed and inspired by a progressive programmatic imagination.