Dubnick, Melvin J. and Justin P. O’Brien, “Rethinking the Obsession: Accountability and the Financial Crisis.” In Melvin J. Dubnick and H. George Frederickson (eds.), Accountable Governance: Promises And Problems (M.E. Sharpe, 2011), chapter 18; pp. 282-301.
AI-Generated Summary:
This document explores the obsession with accountability in governance, its underlying reasons, and its impact on policy-making, especially during financial crises.
The Obsession with Accountability in Governance
- Accountability is a pervasive standard that legitimizes modern governance and influences political discourse.
- Its power stems from its rhetorical and symbolic role, often treated as an icon of good governance.
Reasons Behind the Focus on Accountability
- The obsession reflects complex realities of modern governance, including multiple accountabilities and legitimacy concerns.
- It is reinforced by collective beliefs, social constructionism, and folk psychology, which explain its emotional and cognitive power.
Historical Role of Keywords in Politics
- Words like “accountability” serve as keywords shaping policy and power relationships.
- Their ambiguity allows for creative use, masking divisions and transforming symbols into substantive policy.
Accountability in the Financial Crisis
- The 2007–2010 financial meltdown highlighted accountability as both a cause and a solution.
- Discourse distinguishes accountability as a mechanism (control) and as a normative ideal (trustworthiness).
Discourse on Blame and Systemic Failures
- The crisis prompted blame games focusing on internal failures, external oversight, or systemic flaws.
- Many analysts see the crisis as rooted in collective misjudgment and degraded norms within the banking sector.
Reform and the Role of Accountability
- Calls for reform emphasize strengthening accountability mechanisms to promote responsible behavior.
- Political rhetoric links reforms to restoring moral standards and ethical commitments in financial markets.
U.S. Financial Regulatory Reform Proposals
- The Obama administration launched a major overhaul of U.S. financial regulation in 2009, claiming it would transform global financial practices.
- The reform aimed to address the broken regulatory system exposed by the 2007-2008 financial crisis, with structural and jurisdictional changes, though few details tackled corporate governance norms.
Global Coordination and International Initiatives
- International efforts included G20 foundations for regulating systemically important financial institutions and markets, including hedge funds and derivatives.
- The EU proposed the European Systemic Risk Council and European System of Financial Supervisors, but concerns remained about effectiveness and past failures in global coordination.
Accountability in Policy Discourse
- Accountability is central in reform rhetoric, seen as instrumental (resource control, proper behavior, performance) or intrinsic (trustworthiness, legitimacy).
- There is a bias toward mechanistic reforms, often reducing accountability to questions of whom and for what, which may overlook broader governance functions.
Types of Accountability Strategies
- Four strategic reform types include performative (regulatory oversight with sanctions), managerial (discretion within standards), regulative (external oversight within normative spaces), and constitutive (norms and institutional design fostering trust).
- Performative reforms are common post-scandal but limited in duration; managerial reforms allow discretion but risk control transfer failures; regulative relies on external oversight but faces issues like agency capture; constitutive emphasizes norms and legal frameworks.
Failures of Regulatory and Normative Approaches
- Regulatory agencies often relied on narrow, performative, or managerial strategies, which failed during the crisis due to overconfidence in market self-correction.
- The 2007 crisis revealed flaws in models and oversight, exemplified by Greenspan’s admission of market flaws and the collapse of risk management paradigms.
Constitutive and Legal Reforms
- Constitutive reforms focus on designing institutional arrangements and legal frameworks to promote integrity without heavy oversight.
- Laws like Sarbanes-Oxley aimed to hold corporate officers accountable, emphasizing legal responsibility over regulatory control.
Lessons from the Financial Crisis
- The crisis highlighted the power of accountability as a keyword shaping policy and discourse, driven by promises rooted in folk psychology and belief systems.
- The influence of accountability underscores the importance of understanding its symbolic and practical roles in governance and reform debates.
Broader Implications and Future Directions
- The crisis demonstrated the limits of self-regulating markets and the need for normative, institutional, and legal reforms.
- Governments shifted toward managerial and performative strategies during emergencies, raising questions about returning to regulative approaches and addressing normative failures.