Did we trade freedom for credit? Finance, domination, and the political economy of freedom

Abstract

This article concerns freedom and financial markets. First, I consider the republican case for liberalization, extending Robert Taylor’s economic model of republicanism to financial markets. This case adopts what I call a “philosopher-king” approach to political theory, arguing by reference an ideal or first-best set of policies or reforms. Then, I investigate the negative externalities of several decades of financial market liberalization, including the erosion of political accountability and the growing concentration of political and economic power in the hands of those best suited to profit from the rise of finance. From this “political economy” perspective, the impact of liberalization is clear: we paid for greater access to credit with political and economic domination. In republican terms, we traded freedom for credit. My analysis, moreover, has implications for republican debates on freedom and the market. In second-best worlds, where reforms will almost certainly be incremental, shaping the balance of power in ways that impact future policy, judging reforms by reference to a vision of domination-free markets will often suggest policies that make individuals less free. The political economy approach is far more relevant to debates about which economic institutions further or hinder freedom as non-domination.

Why economic agency matters: An account of structural domination in the economic realm

“…12. On this topic, in the context of the dependence on financial institutions, see recently Preiss (2018). Preiss argues that the wide availability of cheap loans came at the cost of a concentration of political and economic power that is worrisome from a republican perspective.…”

“…15. On the danger of neglecting the political dimensions of economic agency -in the case of the financial industry -see Preiss (2018).…”

Self-fulfilling crises in the Eurozone and the institutional preconditions of republican sovereignty

“…Given republican scholars' belief in the usefulness and feasibility of implementing the republican institutional program at the international level (Laborde & Ronzoni, 2016;Pettit, 2015), this analysis attempts to flesh out more precisely how republican principles can be used to evaluate current events. While this conception of unfreedom and injustice (Pettit, 2014, xxii) is epitomised by the relationship between a master and his slave, it is probably harder to appreciate how it materialises at the international level and in the world of finance (Herzog, 2019;Preiss, 2018 offer interesting applications of the republican vocabulary to global finance). Nevertheless, in analysing the position of Eurozone countries, the argument builds on the characteristically republican intuition that freedom corresponds to the capacity to control the terms of the social relationships one is part of, rather than to the availability of options to choose from.…”

“…In turn, the attitude republican scholars should have with regard to competitive markets in general (Taylor, 2013) and international finance in particular (Preiss, 2018) should be reconsidered. Political theorists in this tradition have focused too narrowly on individual market power as evidence of domination and too little on how markets are structured and which institutions sustain them.…”

Creditor domination in the eurozone: a republican view

“… 1 For recent exceptions, see Casassas and De Wispelaere ( 2016 ) and Preiss ( 2021 ). However, none of these contributions offer or develop a systematic account of creditor domination, which is the purpose of this article.…”