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Beyond Ideological Battles: A Strategic Analysis of Hedge Fund Regulation in Europe

  • Cornelia Woll
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    The highly politicized debate about the recent Alternative Investment Fund Manager (AIFM) Directive of the European Union led many observers to suspect an ideological battle between countries seeking to impose transnational regulation on financial service industries such as hedge funds and liberal market economies insisting on the benefits of market discipline in order to protect their financial centers. The battle that appeared to particularly pit France against the United Kingdom can thus be interpreted as an example of a regulatory paradigm shift in the aftermath of the crisis. This article cautions against such an ideas-centered account of financial regulation and points to the economic interests that drove the French and German agendas. However, contrary to the assumptions of traditional political economy approaches, national preferences were not simply defined by the aggregate of a country’s economic interests. Rather, industry success in shaping government positions on alternative investment regulation crucially depended on how a given industry fit into the government’s overarching geo-political agenda. By highlighting this feedback loop between government strategy and industry lobbying, the paper proposes a strategic analysis of financial regulation, as opposed to accounts that consider positions to be pre-determined by ideas or socio-economic structures.

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    Paper provided by Centre d'études européennes (CEE) at Sciences Po, Paris in its series Les Cahiers européens de Sciences Po with number 2.

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    Date of creation: 22 Jul 2011
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    Handle: RePEc:erp:scpoxx:p0047
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    1. Renée Marlin-Bennett, 2007. "Daniel W. Drezner: All politics is global: Explaining international regulatory regimes," The Review of International Organizations, Springer, vol. 2(3), pages 301-303, September.
    2. Ray Barrell & E. Philip Davis, 2011. "Financial Regulation," National Institute Economic Review, National Institute of Economic and Social Research, vol. 216(1), pages F4-F9, April.
    3. Hall, Peter A. & Soskice, David (ed.), 2001. "Varieties of Capitalism: The Institutional Foundations of Comparative Advantage," OUP Catalogue, Oxford University Press, number 9780199247752.
    4. Lütz, Susanne, 2000. "From managed to market capitalism? German finance in transition," MPIfG Discussion Paper 00/2, Max Planck Institute for the Study of Societies.
    5. Streeck, Wolfgang & Thelen, Kathleen (ed.), 2005. "Beyond Continuity: Institutional Change in Advanced Political Economies," OUP Catalogue, Oxford University Press, number 9780199280469.
    6. Frieden, Jeffry A., 1991. "Invested interests: the politics of national economic policies in a world of global finance," International Organization, Cambridge University Press, vol. 45(04), pages 425-451, September.
    7. Daniel W. Drezner, 2007. "Bringing the Great Powers Back In, from All Politics Is Global: Explaining International Regulatory Regimes
      [All Politics Is Global: Explaining International Regulatory Regimes]
      ," Introductory Chapters, Princeton University Press.
    8. Franklin R. Edward, 1999. "Hedge Funds and the Collapse of Long-Term Capital Management," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 189-210, Spring.
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