Capitalizing on Crisis: The Political Origins of the Rise of Finance: [1]

Capitalizing on Crisis: The Political Origins of the Rise of Finance, by Greta R. Krippner. Cambridge, MA: Harvard University Press, 2011. 222pp. $39.95 cloth. ISBN: 9780674050846.

Capitalizing on Crisis is not another recitation of the proximate causes of the speculative bubble that burst to wreak the 2008 Great Recession. Nor is the book a meeting-bymeeting account of elite bailout decisions. Rather than focusing on 2008 at all, the book makes a more profound contribution through its historical and sociological explanation of the familiar events that have so affected our time.

Other scholars have sought to explain the collapse, yet Greta Krippner finds their attempts narrow because of the disciplinary and theoretical limitations of the analytical tools that they use. Robert Schiller articulates an economic model of how speculation can accelerate, providing a useful corrective to conventional models claiming that investment markets are rational. Nevertheless, Krippner argues that economic modeling, even Schiller's, cannot provide a complete explanation, because it downplays the social and political preconditions for economic phenomena. Structural and critical theories of capitalism and neo-liberalism (David Harvey) provide the historical context needed to situate a social and political analysis. But according to Krippner, broad theories have not yet been applied to the detailed mechanisms of how economic interests are translated, sometimes less than rationally, into public policy. Theorists of investor capitalism (Michael Useem, Neil Fligstein) and Krippner share a home domain of institutional analysis that seeks to understand how corporations turn to financialization, away from production to financial transactions. To these institutional theories that focus on the governance and incentive systems within corporations, Krippner adds a welcome focus on the role of the government.

Krippner's explanation of the rise of finance begins with a spotlight on three policies of the 1970s and 1980s, which at...