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This publication provides an overview of the last thirty years of Dutch policy and policy thinking in the area of privatization and market forces. - Het Nederlandse beleid en beleidsdenken van de afgelopen drie decennia op het terrein van privatisering, verzelfstandiging en marktwerking vormde een antwoord op ingrijpende veranderingen in de economie, de samenleving en de overheid. Het volgde daarnaast ontwikkelingen in de economische en bestuurskundige wetenschappen, die een herwaardering van de markt en een afwaardering van de overheid behelsden. Hoewel veelal pragmatisch en stapsgewijs doorgevoerd, was er sprake van een groot vertrouwen in de verwachte positieve effecten van het ingezette beleid en de eenvoud waarmee het beleid tot deze resultaten zou leiden. Als de praktijk anders uitpakte dan de beloftes van de theorie, werd dit doorgaans geweten aan onvolkomenheden bij het in de praktijk brengen van de theorie, niet aan de theorie zelf. En al werd het beleid in de loop der tijd zeker aangescherpt, er werd nooit sterk afgeweken van het ingeslagen pad. Mede door dit nieuwe beleid heeft zich een 'stille revolutie' voltrokken, gekenmerkt door een ingrijpende wijziging in de verhouding markt, overheid en samenleving en een significante transformatie van deze drie domeinen: meer (en andere) markt, andere overheid, andere samenleving.

AbstractAfter the global financial crisis of 2007–9, policymakers hailed macroprudential policy as the solution to financial markets' boom-bust patterns. Financial regulations would have to operate countercyclically, increasing in stringency during a boom while becoming lenient in a bust. Simultaneously, the procyclical effects of pre-crisis rules would have to be eliminated. Actual reforms, however, do not live up to these high hopes. In addition to the countercyclical policy framework's limited scope and ambition, its open-endedness is particularly striking. As policymakers have not specified when supervisors should (de)activate what instruments and how firms should measure risk, there is an inbuilt indeterminacy at macroprudential policy's core. I argue that obstacles inherent to the nature of systemic risk are key to understanding this policy outcome. As the financial system is reflexive, adaptive, and complex, there are hard limits to supervisors' ability to "read" the financial cycle. Furthermore, as macroprudential policy itself becomes "part of financial markets," countercyclical interventions may have systemically significant unintended consequences. This article empirically shows how policymakers at the global and EU level, confronted with these measurement and mitigation problems, ultimately opted for a limited and open-ended policy framework.

AbstractThe 2008 crisis made clear that credit rating agencies (CRAs) can contribute to systemic financial risk. Surprisingly, post-crisis reforms have hardly addressed the underlying problems, including rating agencies' methodologies, their ratings' homogeneity, and widespread market reliance on these signals. Current scholarship on CRA regulation blames policymakers' unwillingness to fix systemic problems. This article draws on insights from the social studies of finance literature to provide a different explanation: the key obstacle is policymakers' inability to fix these problems. The regulatory problem stems from performativity: risk assessments (including ratings) shape the risks they purport to merely describe. Adding to this literature, the article spells out how performativity limits credit rating reforms by making sweeping changes potentially harmful. Standardizing methodologies or setting up a public CRA could reinforce ratings' homogeneity. Replacing ratings in regulation with market-based indicators might create worse systemic problems. The article then empirically details how EU policymakers, confronted with these dilemmas, ultimately steered clear of bold reforms.

AbstractImplementing precautionary measures that have obvious distributional consequences today but often only invisible future benefits is politically difficult. It requires that policymakers reconcile technocratic expertise with political consent. This paper traces attempts to enact such measures, focusing on countercyclical policies to limit the systemic risks of housing booms as proposed by financial stability committees in Germany, France, and the Netherlands from 2015 onwards. These committees bring together technocrats and political authorities in order to overcome the inaction bias inherent to these measures, seeking to forge both epistemic and political consensus on the need for action. We find that the work of these committees is characterized by lengthy processes of consensus‐building, during which technocrats amass evidence and search for politically acceptable solutions. We argue that whether this leads to meaningful steps crucially depends on the committee's institutional set‐up. What particularly matters is its capacity to engage the Ministry of Finance in binding discussions and the governance arrangements for the activation of precautionary instruments, which shape whether a shared framing of the problem and appropriate response emerges.

Financial firms' valuation approaches are key to financial market functioning. The financial crisis exposed fundamental faults in pre-crisis practices and the regulations that bolstered them. Critics pointed to reflexivity: financial markets have no solid anchor outside of market participants' assessments, which makes them inherently unstable. Reflexivity implies valuation techniques are performative: they shape rather than reflect risks. Critics thus called for root and branch reform: regulators needed to regain control over these valuation practices. In spite of a flurry of changes, progress on the reforms has been limited in precisely those domains where it seemed most necessary. We argue that this lack of progress does not persist in spite of market reflexivity, but because of it. Public prescriptiveness might mandate widespread use of deficient valuation routines, exacerbating their deleterious performative effects and implicating public authorities in future financial crises. In the regulator's conundrum, neither a hands-off approach to valuation approaches, nor an interventionist stance promises to be effective. Empirically, we show how reflexivity has obstructed fundamental reforms in the European Union in three key domains: credit ratings, liquidity regulation, and accounting standards. Market reflexivity itself is, therefore, crucial to understanding the limited regulatory reforms we have witnessed since the crisis.

AbstractAccounting standards are the foundations of the financial regulatory edifice, and global financial governance is no more stable than the asset valuations that feed it. Yet for two decades and up to this day, no international accounting rule for financial instruments – the bulk of banks' balance sheets – has emerged that was more than a temporary fix, to be succeeded by further reforms. We show how banking regulators have been central to this dynamic and how their support for applying fair value accounting to financial instruments, the cornerstone of regulatory debate, has oscillated throughout the whole period. The two common international political economy approaches to global financial governance, which analyze it either as interest‐based bargaining or as ideas‐driven expert governance, fail to account for this pattern. In contrast, we show how the contingency of financial valuations itself has made it impossible for regulators to embrace or reject a stable set of accounting rules.

The credit crisis that began in the summer of 2007 has fundamentally challenged much financial regulation and the political institutions that produced it. Measured against the criticisms that have been brought forth against previous financial governance, the extent of governments' overall reform ambitions has been disappointing, generating little hope that the threat of future crises is being tackled seriously. Starting from this observation, this article asks: what explains governments' reform choices, and thus also their limited ambitions? To explore this question, this article focuses on the positions that four governments central to global financial regulation (the USA, the UK, Germany and France) have taken in advance of the G20 meetings in 2009 across four key issue areas in financial regulation: accounting standards, derivatives trading, credit ratings agencies and banking rules. It evaluates both the overlap between positions across domains and governments as well as the differences between them. Such variation, we argue, provides key clues to the overall drivers behind reforms – as well as their limits. The overall picture that emerges can be summarized as follows: governments have been staunch defenders of their national firms' competitive interests in regulatory reforms. That has not necessarily meant that they followed industry preferences across the board – new rules that might dent profits were imposed in several cases. It has been the relative impact, compared to foreign competitors, that counted in reform positions, not the absolute impact. As this article also shows, these differences of opinion have played out within the context and the limits of the overall debates about thinkable policy alternatives. In spite of fundamental criticisms of pre-crisis regulatory orthodoxy, convincing and coherent alternatives have been forthcoming slowly at best. This has made reform proposals less radical than criticisms, seen on their own, might suggest.

This Open Access book from the Netherlands Scientific Council for Government Policy explains how money creation and banking works, describes the main problems of the current monetary and financial system and discusses several reform options. This book systematically evaluates proposals for fundamental monetary reform, including ideas to separate money and credit by breaking up banks, introducing a central bank digital currency, and introducing public payment banks. By drawing on these plans, the authors suggest several concrete reforms to the current banking system with the aim to ensure that the monetary system remains stable, contributes to the Dutch economy, fairly distributes benefits, costs and risks, and enjoys public legitimacy. This systematic approach, and the accessible way in which the book is written, allows specialized and non-specialised readers to understand the intricacies of money, banking, monetary reform and financial innovation, far beyond the Dutch context.

Chapter 1 Introduction -- Chapter 2 How is money created? -- Chapter 3 The history of money creation -- Chapter 4 An appraisal of the financial monetary system -- Chapter 5 How does the sovereign money system work? -- Chapter 6 Advantages and disadvantages of the sovereign money system -- Chapter 7 Policies to restore the balance in the current system -- Chapter 8 Conclusions and recommendations -- Annex I: List of experts consulted -- Annex II: Tax regime, debt and banks' risk attitude.