Too big to fail: On a systemic injustice of modern finance

This article argues that the existence of financial institutions considered ‘too big to fail’ (TBTF) represents a systemic injustice requiring fundamental reform of the existing financial system. Drawing on and extending recent work on structural domination in republican political theory, the article develops the concept of ‘systemic institutional domination’ to capture the distinctive form of unfreedom that TBTF engenders. Systemic institutional domination is a reflexive form of domination, where the democratic state is subjected to uncontrolled power vested in identifiable financial institutions but grounded in the norms, rules and regulations of the financial system that the state itself enacts and upholds. Because the dominated public institution is at once the constitutive author of the system and the only agent capable of reforming it, TBTF confronts republican theory with a case of second-order domination: domination of the institution charged with securing nondomination. The article identifies four dimensions of systemic domination: effective compulsion to bail out failing megabanks; de facto legal impunity; the systematic subversion of tax enforcement; and background consolidatory pressure on public finances. The article concludes by discussing the democratic paradox involved in abolishing TBTF: namely, that the dominated institution – the democratic state – is the only institution that could reform the dominating system.