Abstract
Official accounts of the 2007–8 financial crisis have recurrently referred to ‘complexity’ in the nature of the securities transacted and in the structure of the financial industry as a way to convey difficulty to understand or apprehend, and thus to predict financial dynamics and regulate financial institutions. On the one hand, the complexity metaphor – as other crisis metaphors commonly do – naturalised turmoil and obscured agency as it subjectified complexity itself as a key driver of instability. On the other hand, it marked a departure from narratives of recent crises insofar as it has pointed explicitly to an epistemological crisis underlying financial turmoil. Such framing of the crisis yielded a powerful theoretical challenge to classical neoliberal assumptions about the exogenous nature of financial turmoil and helped shape a new consensus around the imperative of macroprudential regulation. However, the embrace of the complexity lens may remain relatively ambiguous. Though highlighting properties that render the financial system ‘complex’ and hence unpredictable, it ambitions to ‘manage’ complexity with better methodological tools.
Notes
I am grateful to Ronen Palan, Colin Hay and two anonymous reviewers for their helpful comments and suggestions. 1. This is reminiscent of James Kenneth Galbraith's take on the crash of 1929: ‘Between human beings there is a type of intercourse which proceeds not from knowledge, or even from lack of knowledge, but from failure to know what isn't known. This was true of much of the discourse on the market’ (Galbraith Citation1997: 75).
Suttles's analysis focused on coverage by The Chicago Tribune.
Yet that was something Roosevelt did not embrace. His ‘planned economy’ was a departure from the notion of the economy as a ‘primordial ritual’ in response to the political pressures of the time (Suttles Citation2010: 37).
In her detailed account of the financial turmoil, Gillian Tett (Citation2009: 99) quotes a financial manager at JP Morgan acknowledging that ‘many different investment banks will provide significantly different prices on the same CDO tranche because they are using different models of correlation’.
As Jones Citation(2011) explains, macroprudential policy is not entirely new; the phrase was coined by the Cooke Committee (the predecessor of the Basel committee) in the 1970s.
The Financial Stability Forum was created in 1999 by the G7 Finance Ministers and Central Bank Governors following recommendations expressed in the Tietmeyer report (named after Hans Tietmeyer, President of the Deutsche Bundesbank). The report was commissioned ‘to recommend new structures for enhancing cooperation among the various national and international supervisory bodies and international financial institutions so as to promote stability in the international financial system’ (http://www.financialstabilityboard.org/about/history.htm).