Guest Post: Market ideology and financial crime

Prof. Vincenzo Ruggiero, who is Professor of Sociology at Middlesex University in London and author of several inspiring volumes focused on financial delinquency such as “The Crimes of the Economy,” “Power and Crime,” and “Dirty Money,” contributes to today’s guest post:

The 2007-2008 crash defied the ideology of market self-regulation, proving that the doctrines around the efficient distribution of goods can cause calamitous consequences. And yet financial business carried on as usual. This article examines the aftermath of the crisis, it attempts to identify a range of causes that determined it and are likely to trigger similar events in the future. The analytical tradition established by the study of white-collar crime provides the background for such an examination, which also avails itself of some conceptualizations derived from classical economic thought.

Before and after Sutherland

Before Edwin Sutherland established the study of white-collar offenders within the remit of criminology, Gabriel Tarde discussed ‘the brigandage of the nobility’, suggesting that criminal careers could easily lead to business and politics, and vice-versa (see “The Science of Passionate Interests” and “The Birth of Criminology“). Financial criminals, in the analytical framework provided by Tarde, are perfect incarnations of homo economicus, namely individuals with ‘nothing human in their heart.’ Only a few years later, Edward Alsworth Ross approached a definition of white-collar crime when he described as criminaloid those individuals who adopt illegal practices but do not deem themselves culpable, nor do they appear such in the eyes of the public (see “Sin and Society“). He focused on the high social status of perpetrators, their respectability, and the impersonality of their relationships with those they victimised (see “Dirty Money“).

A manifestation of the weakening of altruism, caused by the prevailing economic arrangements, crime epitomizes egoism, which in the subaltern classes is stigmatized and punished, while among the dominant classes is condoned and rewarded. This is the opinion of Willem Bonger, who included ‘greedy bankers’ among the class of people manifesting unfettered egoism. According to Bonger, the misdeeds of the wealthy are more serious than the crimes of the excluded, in that they spread raw self-interest and infinite material hunger.

Later, Sutherland’s celebrated theory of differential association provided an analytical framework which was destined to survive to our days. He noted that ‘more important crime news may be found on the financial pages of newspapers than on the front pages’ (see “White-Collar Criminality“). Many subsequent formulations tend to encompass several, if not all, illicit conducts adopted by while-collar and powerful offenders, thus at times deflecting attention from the specificities of financial crime. It is instead this specific form of criminality that the following pages address. It does so by identifying a cluster of causation variables that are located somewhere within the wide theoretical backdrop offered by traditional and contemporary conceptualizations.


Official comments on the 2007-2008 crash included admissions that the financial world had to deepen its own understanding of the mechanisms governing it. The Executive Director for Financial Stability at the Bank of England, Andrew Haldane, for instance, argued that it was nobody’s fault and that even experts have imperfect information, being surrounded by uncertainty. It is worth recalling that uncertainty within the financial world was associated by John Maynard Keynes to ignorance (see “Essays in Persuasion“), when he stated that the ‘colossal muddle’ of the 1929 crisis showed how easy it was to lose control of a ‘delicate machine, the working of which we do not understand’.


Economic actors are often led to offend by their own assessment of their immediate financial circumstance, by the forecast of future economic development, and by the perception that their acts will be met with impunity Surely, financial crime entails a well developed risk-taking attitude, but also requires inhabiting specific generative worlds guided by key cultural elements facilitating criminality: unbridled competition, a pervasive sense of arrogance, and an ethic of entitlement. ‘Entitlement’ implies the offenders’ belief that external forces interfere with their just desert, namely their right to pursue wealth without external restraint.

Reversing Keynes?

As already noted, the crisis shattered the conventional narrative claiming that markets thrive when external authorities refrain from regulating them. The crisis also brought back to mind Keynes’s well-known proposals centred on schemes of ‘greatness and magnificence’ in the area of public works and on the increase of demand through income support for consumers. None of this was considered. In fact, ‘reverse Keynesianism’ was implemented, in the sense that support was offered to those who manifested their ability and willingness to take advantage of others.


The availability of reverse Keynesianism plays an important role in encouraging recklessness in the financial sphere. Criminology lists such variable among the characteristics of offenders, with control theory, for instance, positing that recklessness may explain all types of crimes, be these committed by powerful or powerless individuals. However, recklessness in the financial arena is ultimately rewarded, as it is equated to the ‘animal spirit’ of enterprise and the necessary risk-taking attitude of economic innovators.


Another causative variable emerges when we observe the trajectory of banks, which came to be operated by people who live for the next bonus. Inefficiencies were replaced by the ruthless pursuit of profit, prudence gave way to opportunism, while honesty was superseded by efficiency. This was possible because strict codes of behaviour gave way to a logic of ‘anything goes’. The overwhelming emphasis on efficiency triggers new perceptions so that causal relations are obscured and narrative linearity is lost. One’s conduct ceases to be precisely linked to the effects it causes, while the ensuing disorientation prevents from grasping the importance of events. Efficiency aided by haste, moreover, does not allow for our moral imagination to keep pace, increasing the fragmentation of our experience and the depersonalization of our relations.

The finance curse

Not always countries possessing natural resources manage to turn them into earnings useful for their national development. The paradox of ‘poverty from plenty’ also affects some countries with large financial sectors. Oversized finance, despite propelling massive and rapid circulation of funds, has no effect on human development indicators. Inequality, absolute poverty, life expectancy, education and health are not affected by the growth of the financial sector. In fact, the reverse may be the case, in the sense that oversized finance displaces resources from productive and service activities and directs them towards abstract accumulation. The ‘finance curse’ is one supplementary variable that may explain financial crime.


Financial distress during the 2007-2008 crisis led to fraud, a strategy to dump the burden of losses on others, a strategy that characterizes most bubbles, manias, and crashes. Explanations of financial crime can posit the existence of criminaloids, namely individuals who indulge in illegal practices, or ‘honest fraud’, while not deeming themselves culpable. Unfettered egoism is often cited as a characteristic trait of offenders of high reputation and social status, a trait shaped by a learning process undergone by individuals within their specific occupational niche. This paper has attempted to identify a range of discrete variables that can be termed interstitial, in the sense that they can accompany a variety of theoretical hypotheses, locate themselves in the space left in between the different approaches, while providing supplementary analytical foci. Ignorance, entitlement, reverse Keynesianism, recklessness, efficiency and the finance curse may offer additional angles from which the causation of financial crime can be observed.

This post represents a concise version of and is inspired by the following article: Ruggiero, V. (2019), ‘Hypotheses on the Causes of Financial Crime’, Journal of Financial Crime, DOI 10.1108/JFC-02-2019-0021.


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3 thoughts on “Guest Post: Market ideology and financial crime

  1. Fantastic post Prof. Ruggiero! Welcome to our #csrblog. Really fascinating how you have linked to the 1929-1932 crisis, identified the weakening of altruism and also used the quote of ‘how easy it was to lose control of a ‘delicate machine, the working of which we do not understand’. You stated, ‘Efficiency aided by haste, moreover, does not allow for our moral imagination to keep pace, increasing the fragmentation of our experience and the depersonalization of our relations.’ These are clearly very important issues of business ethics, corporate governance and social responsibility in the financial services industry particularly if another financial crash is to be avoided. If I may ask, what do you think the impact of what you have elucidated above will be, if and when Artificial Intelligence is thrown in the mix in the financial sector? With AI, pace is expected to get even faster, experience fragmentation and depersonalization of relations may also be more pronounced to state a few. Would you advocate more regulations? Laurence Kotlikoff in his 2010 book ‘Jimmy Stewart Is Dead’ argued that ‘limited-purpose’ banking should be implemented when he wrote, “Both the good-guy and the bad-guy bankers are working in a regulatory system designed in the 1930s for Bailey Savings & Loan, not for today’s world of global finance, exotic financial securities, computerized electronic trading, and enormous trade volume that George Bailey could not begin to fathom.” AI may expose some of these further. What do you think?Finally, how would you discuss reverse Keynesianism and diversity in the assumption that women may be less reckless than men?

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