Pandemic Paradox and Polanyi: Financial Markets Rise, Economies Crash, and Regulators Toss a Coin

Abstract

In the pandemic, investors like all responsible citizens share an obligation to keep the community safe. This obligation extends to informed market decision-making which goes beyond self-interest. The current disconnect between financial markets and the economy is a story of two different realities – or perhaps one harsh reality and one expectant gamble. The disconnect cannot just be explained by the different purposes of economic and financial market analysis but rather by the information indicators on which these rely. To forewarn regulators concerned that these two worlds of global wealth generation and growth moving to polar opposite futures, this brief review has these aims:

• To reflect on a legal model for financial markets, their regulation and its limitations so that law and finance may be understood as positively relational when considering market sustainability; and then
• To suggest that the explanation for this dangerous disconnect can be found in Karl Polanyi’s understanding of fictitious commodities in self-regulating markets, dis-embedding from the social and his propositions for market correction through the double movement.

Despite the neoliberal logic to the contrary (where financial markets are deemed only for maximising investor/shareholder profit) financial market regulation should prioritise market sustainability as part of pandemic control policy.

Keywords: Financial markets; economy; disconnect; pandemic crisis; market sustainability and resilience; responsible market decision-making