Globalisation, deregulation and financial services reform in Canada: Legislating Canada’s "Superbanks"

When analyses of globalisation first emerged, it was argued that globalisation would expand a "democratic deficit" by reducing the power of public officials to regulate economic activities. The pressures of global economic competition would constrain the range of available public policies. In the case of financial services, both international political economy approaches to globalisation and public policy scholarship argued that the sector produced a unique "esoteric politics" in which there would be little scope for public accountability. Global competitive pressures, the technical complexity of the sector, and the close relationship between large financial services companies and policymakers, isolated the sector from domestic political pressures. Despite these assumptions, the Canadian financial services sector has gone through a period of "re-politicisation" and re-regulation over the last decade. Sectoral policy outcomes are now more clearly driven by domestic political struggles than was the case in the past. This thesis argues that this "re-politicisation" is the direct long-tem consequence of the deregulatory changes of the 1980s initiated, ironically, in response to "globalisation" and the policy demands of Canada’s "big banks." Deregulation "opened" the policymaking environment to a wider array of organized interests. By collapsing the banking, insurance and securities policy subsystems into a single federal financial services policy sector, and by expanding the responsibility of Parliament in an environment of weak state capacity, deregulation unintentionally created an environment in which groups pursuing new regulatory policy goals have been able to influence government policy. While globalisation might have further curtailed the importance of domestic politics in this sector, the institutional changes associated with deregulation ultimately opened a traditionally-closed policy network. This evidence requires that we change our traditional analysis of the "closed" financial services policy network in Canada. It also suggests the utility of "mid level" theories, like policy networks analysis in explaining state responses to globalisation. The policy networks approach offers significant insights, overlooked in much conventional analysis of globalisation, regarding the importance of sectoral-specific domestic institutional arrangements in guiding how states will ultimately respond to the challenges and opportunities of globalisation.