Risk Markets and the Landscape of Social Change

With the critical derivatives and financialization literatures as background, I argue in this essay that risk markets (i.e., derivatives and insurance markets) play an integral role in insulating global neoliberalism from popular and elite demands for reform, as well as from the related imposition of new forms of government intervention. Inspired by Polanyi’s “double movement” and Bryan and Rafferty’s (2006) notion of “blending” in derivatives markets, the argument rests upon the insight that risk markets transform social risk into individual cost, resulting in potentially large but subtle implications for global prospects for social change. After providing a taxonomy of risk instruments that emphasizes their growing role in managing important social risks, I describe and provide brief case studies of two pathways through which risk markets help to protect the neoliberal order from political threats. The first involves the political positioning of insurance and derivatives instruments and markets as “solutions” to global social problems. The second involves the manner in which insurance and derivatives products generate “political moral hazards” that discourage support for new kinds of global policies and structures. As such, this essay contributes to the growing body of critical political economy literature on financialization, financial innovation, and derivatives and insurance markets.