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Capitalizing on Crisis: The Political Origins of the Rise of Finance Hardcover – March 17, 2011


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Product Details

  • Hardcover: 240 pages
  • Publisher: Harvard University Press (March 17, 2011)
  • Language: English
  • ISBN-10: 0674050843
  • ISBN-13: 978-0674050846
  • Product Dimensions: 9.3 x 6.5 x 0.9 inches
  • Shipping Weight: 1.1 pounds (View shipping rates and policies)
  • Average Customer Review: 3.8 out of 5 stars  See all reviews (5 customer reviews)
  • Amazon Best Sellers Rank: #442,855 in Books (See Top 100 in Books)

Editorial Reviews

Review

With Capitalizing on Crisis, we finally have a persuasive account of the roots of the 2007-2008 financial disaster. While most studies focus on the proximate causes, Krippner makes sense of the dramatic expansion over decades of the financial sector of the U.S. economy. She explains brilliantly how and why government officials encouraged financialization as a way to solve the most vexing problems of our political economy. (Fred Block, University of California at Davis)

In this wonderfully researched and tightly argued book, Greta Krippner shows how the expansion of the financial sector in the United States not only helped delay the 'day of reckoning' for spendthrift American households, corporations and government, but also conveniently depoliticized the distributional conflicts that had plagued the nation since the 1960s. Nobody expected these providential outcomes, not even the policymakers who had opened up this space for finance in a rather ad hoc fashion, through repeated efforts to fend off crisis. By the end of the process however, the markets were in charge, and government officials were only too happy --and relieved-- to follow their lead. Capitalizing on Crisis is an absolute must read for anyone who cares to understand the origins of our current financial quagmire and the distributional dilemmas that policymakers inevitably and uncomfortably face. (Marion Fourcade, University of California, Berkeley)

Amidst the tsunami of books coming out in the wake of the recent financial crisis, Krippner's work stands out for its unusual approach. Rather than addressing the venality and incompetence of those with responsibility for regulating the economy, Krippner tells the history of the growth of financialization from the perspective of the regulators...In her account, the regulators were searching for ad hoc responses to what were deeper, perhaps even intractable problems. The high point of the book is her magnificent analysis of the erosion of Regulation Q, in which regulators cracked open the door to financial deregulation, unleashing the massive deregulation that came later. (M. Perelman Choice 2011-09-01)

About the Author

Greta Krippner is Associate Professor of Sociology at the University of Michigan.

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5 of 6 people found the following review helpful By Matt Stoller on February 16, 2014
Format: Paperback
The thesis behind this book is that the rise of finance in America in the 1980s, 1990s, and 2000s was a result of inadvertent missteps by policymakers who were dealing with the fiscal, political and social problems of the 1960s. Rather than claiming that deregulation and financialization were a plot of the Reagan era, or that it all started with the repeal of Glass-Steagall in 1999 or Enron in the early 2000s, and leaving it at that, Krippner did the work to figure out the political pressures under which policymakers were operating at the time the New Deal financial order was falling apart. She read every Fed Open Market Committee meeting transcript, thousands of pages of them. She read every Congressional hearing on credit over several decades. And it shows.

Krippner describes why the old system fell apart, which was necessary for today's financialized political economy to emerge. I don't buy everything she says, but this book deserves the attention of anyone who is seriously interested in what happened and how to move our culture away from the bubble and fraud prone financial order in which we find ourselves.

My full review is here: [...]
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Krippner's argument is that distributional conflict in American society during the last three decades is responsible for the emergence of the phenomenon of financialization. Krippner argues that economic and social dysfunctions arising from the Vietnam War, inflation, and the breakdown of the housing finance system provoked the state (the Congress, the presidency, and monetary authorities) to reform the financial system by deregulating interest rates, liberalizing capital flows, and through experimental and aggressive monetary policy. Her close reading of US financial history is a refreshing jolt from orthodox texts that belabor the role of speculative euphoria, irrational exuberance, and banker folly. I found much to engage with and criticize in her account; the book will advance discussions about the direction of US finance.

The case studies are unparalleled and highly original. It is obvious that Krippner read through the minutes of every Federal Reserve Board meeting over the last few decades. If you have ever read the meeting minutes of the Fed Board, then you will appreciate the author's courage in this endeavor.

The author is a university professor of sociology. The book will appeal to graduate students, like myself, who are interested in the historical development of the US economy. I think many general readers would also enjoy the counter-narrative provided here, in particular those interested in financial markets, critical economics, and political economy. It is not a long book--the core material runs roughly 200 pages. It is not a quick read either; there is quite a bit of information contained in the three main chapters, although I found that the analytical components in the introduction and conclusion were easy to follow and well-written, if not a bit repetitive (which I do not necessarily fault her for). The book is also reasonably priced at about 15 dollars on Kindle.
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Format: Paperback
Krippner defines financialization as “the growing importance of financial activities as a source of profits in the economy.” The excellent second chapter of Capitalizing on Crisis makes clear that a process of significant financialization has indeed occurred in the United States. The share of total corporate profits made by financial corporations rose from around 15% in the 1950s to about 45% (!) in 2000. At the same time, for nonfinancial corporations, the ratio of portfolio income to total cash flow increased sharply. These changes mark a structural change in the US economy, with corporations apparently channeling more of their retained earnings toward the finance of consumer credit and other unproductive activities, rather than fixed capital investment. It is also worth noting that by driving up rentier incomes, financialization has played a major role in making the distribution of income more regressive. Obviously there are a number of questions one could ask about all this. Krippner focusses on one of the most fundamental: why did financialization occur?

Krippner's answer goes essentially as follows. Starting in the late 1960s, various social movements (especially groups of women, African Americans, and unionized workers) in the United States became more powerful and demanded a larger share of national income for their members. The government responded by offering a bunch of expensive new public programs. At the same time, the government was ramping up military spending for the Vietnam war. This “guns and butter” policy, when coupled with the declining growth rate of the US economy, was highly inflationary.
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There are many books about the reentry broadly into American life of a more acute risk-and-reward financialization, starting loosely in the 1970s. Personal finance has been deeply affected, so this is quite close to home for Americans at all wealth levels.This book very helpfully presents many nuts and bolts, particulars in policy actions, showing how and why that happened, stage by stage, from the onset of inflation into the 2000s. The motives of policymakers at each stage are skillfully described. This is a narrative we are still living, in full swing, as one can see various vogues of financialization being applied, then gradually losing effectiveness, replacing the managed, redistributive society of earlier days as the latter (and the mid 20th century social contract it implied) decays, and policymakers try to satisfy voters and preserve popular illusions of the American dream.
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