Most analyses of the 2008 financial crisis advocate various technocratic solutions but say little about the politics of putting them in place. That’s not the case with this pathbreaking book, which focuses on the political questions that really matter: Who ends up paying to clean up a crisis, and why? Woll asks why some governments have been much better than others at bailing out their banks. Some countries, such as France and Denmark, have kept the costs of bailouts low and have distributed the costs fairly between the public and the private sector, thereby shortening and softening the economic effects of the crisis. Others, such as Germany, the United Kingdom, and most notably Ireland, have let bailout costs balloon and have imposed them on the public sector alone, with disastrous consequences. The United States is somewhere in the middle. One might think that the key to success would be to have a strong government and state bureaucracy. In fact, the crucial factor is the nature of a country’s financial sector: the more coherent and organized it is, the more efficient and fair a bailout will be. Private-sector coordination permits banks to spread costs evenly; without it, banks start to duck paying their fair share, and ultimately no one is left to pay except the state. Woll’s original analysis is a must-read for anyone who seeks the deeper economic lessons of the past five years.
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