Crashed: How a Decade of Financial Crises Changed the World
Paris School of Economics, 2019
Adam Tooze, a renowned economic historian, revisits here some main arguments of his latest book, 'Crashed', and focuses then on the empirical interactions between the banking/financial side of the Great Financial Crisis and the structural, socio-economic dynamics of the US-American society. On the one hand, he emphasises the implications of the decade-long stagnation of median wages for the unprecedented build-up of private debt and mortgages. On the other hand, the accessibility of the most profitable investment opportunities in today's financialised economy largely depends on high personal incomes and accumulated wealth. What is more, Tooze provides a micro-sociology of financial actors, their high-risk strategies and specific clientele by zooming in on hedge funds, mutual funds and asset managers such as BlackRock. In order to lock in ever higher rates of return, those institutions proactively and massively engaged in the buying of Collateralized Debt Obligations (CDOs), the financial asset that is said to have triggered the crisis in the first place. The segmentation of the financial industry into offers of (very) high and low profitability is thus, so the argument, both a product of the underlying economic cleavages of American society and fostering these inequalities and instabilities on its own behalf. The lecture held by Adam Tooze is followed by a panel discussion including Thomas Piketty and Agnès Bénassy-Quéré, macroeconomist and currently chief-economist of the French Treasury (Parts 2/3 and 3/3 of the video).
Comment from our editors:
Tooze delivers an eloquent and vivid assessment of the social embeddedness of modern finance and the interdependencies between the financial and the so-called 'real' economy. Within 40 minutes, he gives a detailed overview of the status quo in the US-American finance industry, the country where the 're-emergence of global finance' (Eric Helleiner) began in the course of the 1970s and still serves as an example for liberal market economies around the globe. Hence, these insights are relevant beyond the geographical boundaries of the USA as 'single innovator' because of the transnational integration of capital markets and the facility with which hedge funds etc. (dis)place their assets thereby affecting both the private and the public sector.
However, Tooze does not reflect upon the short-term fiscal advantages public authorities could derive from implementing a regime of 'Private Keynesianism' (cf. Colin Crouch, Wolfgang Streeck) based on 'easy credit' in the first place, that is partly replacing traditional aggregate demand management via deficit spending by facilitating access to credit for private households, thus consolidating public finances from the 2000s onwards. A quantitatively more sophisticated, empirically diverse pool of literature on financialisation and different forms of inequality can be found within the school of Post-Keynesian Economics, see for instance the articles in the volume 'Finance, Growth and Inequality' edited by Louis-Philippe Rochon and Virginie Monvoisin published in 2019 with Edward Elgar (see https://www.e-elgar.com/shop/gbp/finance-growth-and-inequality-9781788973687.html). On a visual side note, unfortunately the camera does not focus on the power point slides and graphs presented by Tooze but exclusively on him communicating with the audience.
Go to: Crashed: How a Decade of Financial Crises Changed the World