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date: 26 February 2021

Abstract and Keywords

The sociology of fraud is inseparable from the sociology of trust and confidence. Indeed, the history of finance tells us that confidence is the common underpinning of both ‘legitimate’ capitalism and fraudulent activity. Reviewing the nearly 300 years that have elapsed between the first large-scale financial fraud in history — the British South Sea Bubble of 1720 — and the contemporary financial crisis, we can appreciate how one historian concluded that ‘At its core, capitalism was little more than a confidence game’, a known fraud tolerated because ‘as long as confidence flourished, even the most far-fetched speculations could get off the ground, [and] wealth would increase’. In this system, fraud and faith flourish together. As a result, the lines between legal and illegal acts, criminals and honest dealers, become dangerously blurred, raising troubling questions about the foundations of capitalism itself. In contemporary capitalist societies, this inevitably leads to further questions about social structure, from institutions, through interactions, and the very nature of identity itself. This article deals with the role and place of financial frauds in times of crisis and beyond. It begins with a definition of financial fraud. It then discusses the three facets of fraud and the future of fraud.

Keywords: financial fraud, capitalism, trust, confidence

Brooke Harrington

Brooke Harrington is Associate Professor of Economic Sociology at the Copenhagen Business School in Denmark. Her books include Pop Finance: Investment Clubs and the New Investor Populism (2008), as well as the edited volume Deception: From Ancient Empires to Internet Dating (2009). After receiving a doctorate in Sociology from Harvard University, Harrington earned research prizes and grants from organizations such as the National Science Foundation, the Russell Sage Foundation, the Alexander von Humboldt Foundation, the American Sociological Association, and the Academy of Management. Her current project is a qualitative study of the wealth management profession, offshore banking, and cross-national patterns of inheritance and inequality.

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