In Unity, Balkinization? Banking, Crisis Governance, & Regulatory Reform in the Eurozone Crisis

The Eurozone crisis casts a harsh and disturbing light on the paradoxical character of legalism in contemporary finance capitalism. In the field of labor relations, state power has been mobilized to roll back established forms of employment and labor market regulation through processes of formal legal change. In the domain of banking and finance, however, existing regulatory provisions have been consistently unenforced in order to obscure the dire state of too-big-to-fail financial institutions and maintain their incumbent structures of ownership and managerial control. These dynamics define a variety of winner-take-all politics in which the costs of adjustment are paid by workers and consumers, while finance, senior management and large shareholders retain their historically privileged position at the apex of economic and political power, both formal and informal. Critical in this transformation of the historic settlement between capital and labor in Southern Europe is the declining power of economic elites who stand to gain by making peace with labor. The resulting distribution of income and assets in Southern Europe generates levels of economic inequality on a par with the U.S., but lacking the rule of law that provides a fig leaf to justify winner-take-all politics there. The path to elite dominance in Southern Europe has been less nuanced. Law has been selectively used – and ignored – to effect a political economic transformation across the Eurozone, rather than to legitimate it. Thus, the legal foundations of neo-liberal retrenchment in the Eurozone are likely to be far more problematic for political order.