In the rhetoric that has accompanied the economic troubles of recent years, “corporate accountability” has emerged as an all-purpose phrase, serving to explain how we got into the current global financial mess as well as offering the means for getting us back on track.  Thus, corporate accountability became central to two narratives, one focused on the lack of sufficient accountability as a primary cause of the problems we face and the other on enhanced accountability as the solution or cure.

As first look, the cause-cure narratives make a good deal of sense. For one thing, history seems to fit the explanation of why we found ourselves on the precipice of a global financial meltdown in 2008.  Fostered by major retreats from the regulatory state and its capacity to set and enforce limits on corporate behavior, corporate accountability became re-centered in the expanding global marketplace where the lack of authority and competitive norms bordering on the glorification of “greed” meant deterioration in corporate self-restraint – especially in the financial services market. Released from the responsibilities and requirements of national government regulations and rules, corporations creatively and enthusiastically took advantage of the opportunities presented by the deregulated environment at home and abroad, and in the process overextended themselves and the global economy.

If it was the retreat from the regulatory state that generated the economic crisis, the solution seems as obvious – reestablish the ex ante corporate accountability that proved so successful in pre-deregulation days. For the financial markets in the United States, this called for re-regulation in banking through Dodd-Frank and the Volcker Rule. As if to signal that past misfeasance and malfeasance will not go unpunished, prosecutorial initiatives suddenly came to life, as have many previously dormant and new enforcement mechanisms at the federal and state levels.

There are a number of problems with this simplistic cause-cure scenario, but two stand out. First is the credibility of the causal narrative itself – that it was the emasculation of strong regulatory regimes from the mid-1970s onward that unleashed the forces of economic ruin. But while the regulatory and monetary policies that inflated the housing bubble were certainly proximate causes leading to the Great Recession, there were other factors already in play by 2007-2008 that created the conditions ripe for the coming crisis. For Joseph Stiglitz,* among others, the economy was already in a “fundamentally weak” condition, and in fact the bubble was providing “life support” for the unsustainable consumption that drove us toward the inevitable collapse.

Which brings me to the second problem of the cause-cure narrative: the widespread belief in policy responses that involved little more than a nostalgic return to the pre-deregulation era when government provided a much needed set of constraints on corporate behavior by holding them (again, especially banks) accountable. Again, Stiglitz on this approach: “It was absurd to think that fixing the banking system could by itself restore the economy to health. Bringing the economy back to ‘where it w’s” does nothing to address the underlying problems.“

Thus we have in the dominant cause-cure narrative a beautifully simple yet highly suspect policy logic requiring not only a critical rethinking of what brought about the current malaise, but also a de-coupling of the powerful cause-cure link that is leading nowhere. Whether and to what extent the lack of corporate accountability played a central role in the economic crisis is an empirical question, and at this point the evidence indicates that it was certainly a factor in fostering and triggering the financial collapse. But even if we had definitive proof that corporate accountability did play a significant role in the crisis, the solution might not lie in a return to what we now imagine to be the glory days of the regulatory state when the only thing standing between responsible behavior and corporate malfeasance was the strong threat of government action. Upon closer examination, the history of corporate regulation does not necessarily support that view; rather, the historical record highlights many instances of regulatory “capture” and the manipulation of oversight and enforcement on behalf of corporate interests.

If enhanced corporate accountability of the sort that serves the general good is our objective, we need to think outside the regulatory box and explore alternative means to achieve that ends.

*Jospeh E. Stiglitz, “The Book of Jobs,” Vanity Fair, January 2012, http://www.vanityfair.com/politics/2012/01/stiglitz-depression-201201