Financialization, wealth and the changing political aftermaths of banking crises

Bibliographic Data

ID4237407
AuthorsJeffrey M Chwieroth (0000-0001-8965-0621, London School of Economics and Political Science), Andrew Walter (0000-0003-1538-7896, The University of Melbourne, corresponding author)
Year2022
Volume20
Issue1
Pages55-84
Publication date2022-05-02
Peer ReviewedYes
Open AccessNo
TypeARTICLE
VenueSocio-Economic Review (JOURNAL)
Journal identifiersISSN: 1475-1461 • E-ISSN: 1475-147X
DOI10.1093/ser/mwaa017
OpenAlexW3010810597
LanguageEN
Citations received2
References cited56

Households face two politically salient risks associated with financial instability. The first risk, which has existed for perhaps centuries, is associated with the indirect effect of systemic banking crises on employment and income flows. The second risk arises from the direct effects of crises on asset prices and thus household wealth stocks. Historically, the second risk mainly affected only a narrow wealthy elite. We argue that the rapid expansion and financialization of middle-class wealth since the mid-20th century mean that many voters now have 'great expectations' regarding government responsibility to protect their wealth. The political risks of financial instability for incumbent governments have thus increased sharply, especially when institutional constraints hamper their ability to respond to voters' new expectations. We show that the probability of incumbent governments facing significant institutional constraints retaining office after systemic banking crises has indeed fallen sharply in recent decades compared to the pre-1945 period

Asset (computer security · Economic policy · Economics · Elite · Financial system · Financialization · Government (linguistics · Market economy · Monetary economics · Political instability · Political science · Politics · Banking stability, regulation, efficiency · Economic Theory and Policy · Housing, Finance, and Neoliberalism

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