(2025-02-07) Davies La Systeme Financiere Nexiste Pas Parte Deux

Dan Davies: la systeme financiere n'existe pas, parte deux. Thinking about cultures of regulation reminded me of an argument I made in “The Unaccountability Machine”, that the “financial system” is a good example of how under a cybernetic analysis, you can often end up wanting to analyse things in a way that pays absolutely no respect at all to org charts.

you can’t assume that an organisational boundary is going to contain a system; rather, it’s quite likely to be an information-reducing filter placed somewhere in the middle of a system.

for the purposes of answering questions about political economy that are usually described with words like “financialisation”, you have a big problem. Which is that in these contexts, “the financial system”, as it’s normally conceived, doesn’t really exist. (In the sense that one of the criteria for identifying a viable system is whether it could maintain viability on its own, which finance obviously couldn’t).

I’ll talk about the case in point, and start with a simple statement which everyone will disagree with – the compliance officers and the regulators are, despite everything, working on the same team.

the regulatory system and the anti-money-laundering system, to the extent that their purpose is to prevent breaches of the regulations, cross and recross a lot of organisational boundaries, including the very big and important boundary between the state and the private sector.

In particular, I think the thing which causes the problems here is that in law enforcement cultures, the “future regarding perception” part of the system (System 4, for people who have read the book) is located on the private sector side of the boundary. If the world is changing so as to introduce new ways of committing the criminal offence of money laundering, it’s your job as a compliance officer to find out about them and spot them – the public sector’s role is to spot them when they arrive, and then punish you if you didn’t do your job.

On the other hand, if the world is changing in such a way as to facilitate new ways of issuing securities (say, ICOs), then it’s the job of the securities regulators to know about this, and to make regulations

That’s why people got annoyed – I picked the ICO example for a reason – when the SEC decided to act like a law enforcer.

What actually needed to happen was a renegotiation of the resource bargain, because the SEC had identified a new threat, but lacked the internal capacity (including resources of the valuable commodity of “political cover”) to pick up its end of the bargain and respond with new regulations.