Disembedded: Regulation, Crisis, and Democracy in the Age of Finance

During the last two decades, there has been much scholarly and popular interest in the financialization of the American economy--why the turn to finance has taken place, what constituted it, and what has come out of it. In Disembedded , Basak Kus draws from the theories of Karl Polanyi--one of the greatest and most influential political economists of the twentieth century--to answer these questions. Focused primarily on the state's regulatory role in a dominantly financialized economy, Kus examines how neoliberal principles influenced the evolution of American regulatory policies, shaping the financial sector's operations and practices. Her narrative traces the trajectory of these interactions, highlighting critical junctures, policy decisions, and market outcomes that culminated in the financial crisis. Offering historical insights into the financial crisis spanning 2007-2010 and its ensuing influence on American politics and democracy, Disembedded provides a broad-ranging and systemic explanation of the American political economy, especially the regulatory landscape that shaped the patterns of financialization. Cover Disembedded Copyright Dedication Contents Preface Acknowledgments Note on Sources 1. Polanyi on Wall Street Ten Years, Two Presidents Reading Polanyi in the Aftermath of the Financial Crisis The Crisis of the Early Twentieth Century and the Postwar Expansion of the Protective State Late Twentieth-​Century Economic Transformations and Political Shifts The Financial Turn in the Economy The Neoliberal Turn in Government Disembedded Financialization: American Economy and the Deficit in Risk Protection American Government and the Great Recession Outline of the Book 2. A New Creed on Regulation The Rise of the Economic Theories of Regulation in the 1970s and 1980s Regulatory Capture Regulation as a Source of Rent-​Seeking Limitations of Bureaucracy as a Technique of Government Regulatory Perspectives in the 1990s Conclusion 3. The Political Ascent of the New Creed Substantive Regulation Comes Under Scrutiny: Ford and Carter Administrations From a Pragmatic Critique to a Systematic Rejection: Reagan Administration Reinventing the Government as a Private Entity: Clinton Administration Conclusion 4. From Politics to Policy: Regulation and Finance Deregulation and Finance Regulatory Drift and Finance Micro-​Orientations in Risk Regulation Information Provision as Risk Regulation Caveat Emptor: Risk Regulation by Disclosure Rating Agencies Financial Literacy Conclusion 5. Disembeddedness in Financial Times The Regulatory Underpinnings of Disembedded Finance The Limitations of a Micro-​Oriented Approach The Limitations of an Information-​Based Approach The Fragmented Regulatory Structure of US Finance Disembeddedness as Deficit in Risk Protection Deficit in Systemic Risk Protection Deficit in Consumer Financial Protection Deficit in Social Protection in the Time of Financialization Conclusion 6. The Crisis Relief and Recovery: Technocratic Realism, Cautious Keynesianism Relief Recovery Regulatory Reform Dodd–​Frank Conclusion 7. In Search of Protection: From Disembeddedness to Populist Persuasions Takeaways A New Regulatory Creed The Political Reception of the New Creed The Translation of the New Creed into Policy American Financialization: The Regulatory Dimension Disembeddedness and “Risk Society” in Financial Times The Crisis and the Limitations of Reform From Regulation of Finance to the Crisis of Democracy Notes Index