Globalisation and the Institutional Re-embedding of Markets: The Political Economy of Price Formation in the Bordeaux En Primeur Market

Contemporary analyses commonly attribute the global credit crisis to faulty regulation. What have been the roots of these deficient rules, particularly in Europe, where rapid spill-over from US markets took policy makers and observers by surprise? This article focuses on regulatory liberalism as the paradigm guiding European Union (EU) regulation. It has dominated regulatory thinking for decades, but it has been implemented throughout Europe only since the mid-1990s. This shift can be traced to political institutions that have filtered policy ideas. EU financial reforms have pushed policy from pragmatism, under which it was adapted to political contingencies, to dogmatism, which adapts it to the intellectual exigencies of rigid policy paradigms. Inadvertently, reforms had created an epistemic community in which ‘professional’ rule setters systematically ignored external criticisms. The institutionalised ambition to craft ‘intellectually sound’ policy–rather than policy that simply ‘works’ –generated rules that persistently ignored the financial markets' self-reflexivity and thereby aggravated the crisis.