Financial stability as a global public good and relevant systemic regulation as a problem of collective action

Liberalisation-privatisation policies and public-private partnership developments in numerous economies in the last four decades gave rise to a reorganisation of public services through market mechanisms which mainly rested on market prices' movements. Most of rules and actions in markets were shaped and assessed according to economic efficiency criteria that relied on the assumption that free-market mechanisms could achieve a socially optimal situation. This process systematically moved capitalist economies from the post-World-War-II period's state-interventionism-based production/distribution schemes (the so-called Fordist era) to market-friendly and less conservative economic policies. Therefore, the social provisioning process (the production, the financing, the use and the assessment) was reformed under market efficiency criteria. In the wake of the 2007-2008 global crisis, this chapter seeks to assess the consistency of such an evolution through an institutionalist analysis on a peculiar area of the economics, the finance and financial relationships. The path of economic development is closely determined by financial markets' evolution. This makes that public action as well as private strategies are all relying on a given financial framework and on its sustainability as well. This latter is very dependent on the stability of market operations. This chapter then suggests an alternative approach to financial economics by adopting a public service and collective action view of the working of financial markets in a globalised environment. In this aim, it argues that financial stability is a peculiar (global) public good that every member of society needs, but no one can provide at individual level. Financial stability then requires a specific public service organisation that must design and manage the production and maintenance of financial activities (going from the bank credit to enterprises and households to financial intermediation activities, including pure speculative operations) through collective action in order to ensure a socially coherent working of financial markets.