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Great expectations, financialization and bank bailouts in democracies

Chwieroth, Jeffrey and Walter, Andrew (2020) Great expectations, financialization and bank bailouts in democracies. Comparative Political Studies, 53 (8). 1259 - 1297. ISSN 0010-4140

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Identification Number: 10.1177/0010414019897418

Abstract

Accelerating financialization and rising societal wealth have meant that democratic governments increasingly provide bailouts following banking crises. Using a new long-run data set, we show that despite frequent and virulent crises before World War II, bank bailouts to protect wealth were then exceptionally rare. In recent decades, by contrast, governments have increasingly opted for extensive bailouts—well before the major interventions of 2007–2009. We argue that this policy shift is the consequence of the “great expectations” of middle-class voters overlooked in existing accounts. Associated with the growing financialization of wealth, rising leverage, and accumulating ex ante financial stabilization commitments by governments, these expectations are suggestive of substantially altered policy preferences and political cleavages. Since the 1970s, when severe banking crises returned as an important threat to middle-class wealth, this “pressure from below” has led elected governments to provide increasingly costly bailouts with no historical precedent.

Item Type: Article
Official URL: https://journals.sagepub.com/home/cps
Additional Information: © 2020 The Authors
Divisions: International Relations
Subjects: H Social Sciences > HC Economic History and Conditions
Date Deposited: 03 Dec 2019 12:06
Last Modified: 28 Jul 2020 10:09
URI: http://eprints.lse.ac.uk/id/eprint/102749

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