ABSTRACT
The financialization of the world economy poses a major challenge for democratic legitimacy. Given the increased importance and instability of financial markets, democratic decision-making is regularly subjected to considerable pressure due to short-term decision-making, for example, with regard to rescue packages for banks. Such a process leads to a shrinking of the policy space, a shift in decision-making power from elected to non-elected actors, and, finally, to outcomes that are considered inadequate by the electorate at large. These problems, though well known in the public debate after the global financial crisis (GFC) of 2008, have hardly been analyzed in a systematic manner. Moreover, we neither know whether financialization is compatible at all with the perspective of a legitimate and well-working democratic system, nor how we could reduce the problematic aspects of financialization on democratic legitimacy. Similarly, we do not know how political systems should be restructured in order to regain their legitimacy in the face of financialized economies.
