The Political Consequences of the Crash

The financial crash of 2008 precipitated a major recession. It shattered the financial growth model that had dominated the previous twenty years and plunged the international economy into a period of economic and political restructuring of uncertain duration. The immediate origins of the crash lay in the lending practices associated with the sub‐prime mortgages in the United States which produced the credit crunch in 2007, but the wider causes were the unbalanced character of growth in the international economy and the particular role played by finance. The crisis has been explained in a number of different ways, focusing on the behaviour of the financial markets, the institutional and policy conditions that made the boom possible and then undermined it, longer‐term economic and policy cycles and the nature of uncertainty and risk in complex social systems. The political impact of the crash and the recession has not been uniform; it has been highly uneven, depending on the position of particular states in the international economy. The rapid interventions by governments to stave off financial collapse at the end of 2008 were successful, but at the cost of creating serious problems of adjustment for the future. The political debate around what were the causes, who should be blamed and what should be done is only just beginning, and the way this crisis comes to be understood will play a major part in determining how it is eventually resolved and how far‐reaching will be the changes to the international economy and to domestic politics.