Abstract
Kim Pernell’s Visions of Financial Order: National Institutions and the Development of Banking Regulation provides an elegant and parsimonious explanation for why three national financial systems could change so dramatically through centuries of national and global banking crises while remaining so persistently different from one another. This aesthetic commitment to what constitutes a strong causal argument may also be the book’s most contentious feature.
The book’s genesis lies in untangling the regulatory failures that led to the 2008 global financial crisis. Pernell’s tool for gaining analytical purchase on the crisis beyond existing accounts is a cultural analysis of the worldviews and perceptions of banking regulators and national elites across three national case studies over long periods of time. Her central case is where the crisis originated—the United States; Canada is a “most similar” case, and Spain serves as a “most different” case. Drawing on regulators’ texts and her own interviews, she induces “visions of financial order”—elite accounts of what causes economic prosperity and of what constitutes the public interest. She also uses primary and secondary historical material to trace back these discourses to unique national constellations of political institutions.
In each country, Pernell identifies two principles of order that predate the birth of modern chartered banking and persist to the present. In some historical periods both principles work in tandem. In other time periods they are in conflict, and one principle dominates regulatory discourse; yet the second principle is ever latent, waiting to be utilized by political and economic challengers against incumbents. At key historical junctures marked by crisis or political upheaval, rivals advocate for and organize around a formerly latent principle.
In the United States, these two “political-cultural traditions” originated in the revolutionaries’ rejection of British institutions. The principle of community sovereignty praises the virtues of local autonomy and warns of the dangers of concentrated public or private power. The principle of competition values an open competitive contest to best determine both political outcomes and private resource allocation.
In contrast, Canada’s principles were embedded in an acceptance of British institutions. The principle of elite autonomy favors enabling elite individuals to maximally pursue their own self-interests while simultaneously distrusting state interference in these prerogatives. The principle of public rights extolls the necessity to protect the rights and welfare of individuals and vulnerable populations.
In Spain, Pernell’s “most different” case, the principle of state sovereignty originated with the French absolutist monarchy in the early eighteenth century. This principle praises the benefits of centralized administration and warns of the dangers of factions pursuing their particularistic interests. Spain’s second principle is even older and includes sixteenth-century Roman Catholic corporatist traditions that viewed society as analogous to a human body, composed of God-given interdependent parts. Under this principle, the state’s ideal role is to broker and coordinate elite interest groups to promote social harmony, strategically choosing patrimonial partnerships to strengthen political order and preserve established social hierarchies.
Her argument is that in each country, across the political spectrum, and across centuries of political and financial development, national debates on financial regulatory reform were consistently made in a national grammar of two political-cultural principles per country. This grammar constrained elites’ cognition and discourse into a surprisingly persistent and narrow policy scope.
Across this long historical arc, Visions of Financial Order is filled with insights into why these three national financial systems diverged so early. Pernell describes how these cultural frames enabled regulators to interpret a situation and determine what they considered problematic, while providing a common grammar for making arguments about how to move forward. This account also provides a compelling explanation for why national financial systems remain so distinct from one another despite powerful global isomorphic forces, such as the global circulation of students in graduate and professional education programs, transnational regulatory bodies, international regulatory standards, and the hegemonic rise of neoliberal economic theorizing.
Visions provides numerous payoffs that invite a reanalysis of accepted ideas. For example, many readers are likely familiar with the argument that 1970s stagflation in the United States led to an ideological shift in the 1980s toward neoliberalism and the creation of a financialized economy. The problem with this conventional narrative is that it does not explain why the United States, relative to other countries, was so late to adopt deregulatory financial policies. Pernell’s comparative lens explains this anomaly by recasting the U.S. neoliberal project as a resurgence of a nation-specific principle of order that had been repressed since the Great Depression. The book’s parsimonious arguments are packaged in meticulously crafted chapters, paragraphs, and sentences. It would be challenging to find a paragraph in this book without a well-crafted topic sentence.
For some readers, the book’s most significant strengths are also its most significant weaknesses. True to its genre and the aesthetics of historical sociology, the book is history with a social science purpose. Its research question is retroductive (working backward from effect to cause) to better understand our contemporary era of financialization, neoliberalism, and the global financial crisis. If the research process were reversed, for example, searching for visions of financial order in the Early Republic period and then tracing them forward in time, additional potential principles may have appeared salient, such as the structuring role of racial capitalism.
Some readers may wonder whether the book’s conceptual unity—three countries, two unique principles of order per country—achieves its elegance at the cost of muting the polyphonic complexity of cultural objects such as “financial order.”
Consider, for example, the question “Why two principles?” Pernell’s theoretical apparatus does not require (or even anticipate) two principles of order; instead, it emphasizes the presence of multiple principles of order that are “broad enough to justify a range of policy stances” (p. 241). Indeed, the tables in Chapter Two summarize how these two principles of order bundle multiple sub-elements. I suggest that the most compelling reason for this packaging may be an aesthetic preference for parsimony. Two principles provide a pendulum metaphor (p. 241) that makes the within-country oscillation argument elegant: when two principles are perceived as incompatible, one principle is dominant, the other latent, and a crisis provides an opportunity to trigger a swap. If future scholars were to add a third principle, or principles that enter or leave elite discourses, the pendulum mechanism would become something causally messier. But it would also become analytically finer-grained.
Read generously, Visions of Financial Order is a model of what comparative historical sociology can accomplish with cultural analysis: a concise causal argument derived from elites’ own explanatory accounts and comparative ambition disciplined by experts’ national historiographies. Read skeptically, it invites us to search for the principles of order that may have been eclipsed by Pernell’s aesthetic commitments to her genre. Either way, it is a book that reshapes how we understand the cultural infrastructure of financial governance—and forces comparative historical sociologists to ask whether the price of parsimony is worth paying.