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Calming Speculative Traffic: An Infrastructural Theory of Financial Markets

abstract This article argues that the concept of infrastructure offers geographers a useful framework to understand the resilient influence of financial markets on the socioeconomy. An infrastructural perspective reframes the politics of financial markets by considering them as vital systems that are deeply integrated with the real economy. This helps explain the successful reframing of regulatory debates away from action that might shrink financial markets, and instead toward incremental change and technical fixes that end up supporting the growth of the system. The infrastructural perspective also allows us to consider financial markets as technical systems that are inherently limited in their capacity to process financial transactions, which in turn helps explain their tendency to fail. Comparing the flow of speculative trades through financial markets to the flow of traffic through congested roads, the article employs a case study of the 1987 US stock market crash and its regulatory aftermath. It suggests that in the wake of the 1987 crash, which was caused by an inability to process trades fast enough, US regulators found it politically impossible to impose any significant limits on speculative trading. Wary of market congestion contributing to another financial accident, regulators instead expanded the speculative capacity of the markets. But just as expanded road systems attract more autos and produce an array of externalities, enhanced market capacity only attracts more speculation and related externalities, not least a deepening of speculative financialization.