ABSTRACT
Architects of a financial regulatory framework seeking to compel finance to act as “servant” within a pro-investment agenda for economic reform face a number of challenging considerations. The regulatory framework cannot unambiguously disadvantage finance, as an undialectical usage of the term “servant” might suggest. If a financial regulatory framework attempts to promote investment via policies that disadvantage finance, the regulatory framework must also be accompanied by measures that are sufficiently beneficial to finance that the financial sector will acquiesce to these arrangements. If finance does not consider itself to be satisfactorily compensated for its role as “servant,” finance may “rebel” from its servitude, in the sense of taking actions to support its interests that undermine the financial regulatory framework. Such actions on the part of finance could provoke consequences that are antithetical to the pro-investment agenda. Thus the “finance-as-servant” proposition implies contradictory tensions: the design of financial regulation must consider the possiblity that the promotion of a propitious climate for investment (via downward pressure on the price of investment capital) may also provoke conditions that are deleterious to investment (in the event that finance “rebels” from this arrangement in a manner that undermines the pro-investment agenda).
