A Great Transformation?

Abstract

Abstract This concluding chapter summarizes the basic findings and arguments of the preceding chapters of the book, and examines the question of how to go about reforming the contemporary financial system, drawing on insights gained through the lens of the global financial network framework. It argues that the key to the effective and enduring reform of finance, from the local to national level, is to reorient the focus of reform away from a predominantly reactive emphasis on regulation—which seeks to stamp out the financial practices that we do not want—toward a proactive emphasis on financial institutional building, which seeks to construct the financial system that we actually do want. It argues, moreover, that the logic of this proactive financial institution-building needs to be grounded in an appreciation of the paramount centrality of liquidity production, much more than the provision or intermediation of capital, to the role and operation of the financial system. Specifically, it argues that what is needed is a financial institution-building program that prioritizes the radical “democratization of liquidity,” and lays out the general outlines of how the device of central bank digital currencies (CBDCs) might be used to help achieve this, in conjunction with a broader program of reform.