Renewal of Public Action: Co-Production and Financial Regulation

In the face of the global systemic crisis of 2007-2008, coupled with the current Covid pandemic, questions arise about the capacity of the invisible hand of the market to self-adjust in the event of systemic instabilities and about the need for a visible regulatory public hand. This is also closely related to the effectiveness of monetary and financial operations, since the viability of a capitalist economy relies mainly on the sustainability of these operations. This chapter seeks to contribute to the development of a paradigm for public action and financial regulation that can strengthen the stability of financial systems in the face of economic and social complexity. From an institutionalist perspective and drawing upon Polanyi's Great Transformation, the chapter analyses the monetary and financial characteristics of capitalism and maintains that effective monetary and financial frameworks are crucial for a consistent organisation of the economy. The analysis shows that the monetary and financial system might be considered as a public service activity that requires a specific public action, whereas in the literature, public services and public action are usually studied in relation to the energy, transport, health and education sectors. The chapter argues that the stability of financial markets cannot be ensured through market-self-regulation schemas. Although capitalist finance is a profit-seeking business, it should be framed as a public facility, and financial stability should be considered as a public good. This calls for a public action directed toward two major aims: systemic stability and financing of sustainable activities. The chapter assesses the feasibility of co-regulation as a possible alternative and maintains that whatever the degree of inclusion of private actors, financial regulation must be organized under the supervision of independent public authorities, far from the conflict of interest between public and private players.