The apparent arbitrariness and irrationality of financial markets do not inspire the admiration of liberal-inclined people. But many professionals in the financial markets also accept that there are structural failings in the system. Financial capitalism needs reform if it is to have popular legitimacy, but it needs the right kind of reform. Tighter regulation to constrain footloose capital is mainly a chimera.
Recent events have intensified popular suspicion of financial markets. Since the collapse of the bull market of the late 1990s, the most newsworthy financial stories have concerned corporate scandal and market abuse. The failures of Enron and WorldCom amid huge fraud are notorious. A few weeks ago a large US broker, Refco, filed for bankruptcy as news emerged that its chief executive had been charged with concealing a $430m debt.
The charge sheet against the US/ British model of shareholder capitalism is longer than the issue of malpractice. Commentators such as the Financial Times columnist John Plender, in his book Going Off the Rails, argue that the debacle of the dotcoms merely served to emphasise structural weaknesses in the system.
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