Economic Ideas and the Political Construction of the Financial Crash of 2008
| Author | Geoffrey R. D. Underhill,Andrew Baker |
| Published date | 01 August 2015 |
| Date | 01 August 2015 |
| DOI | http://doi.org/10.1111/1467-856X.12072 |
| Subject Matter | Article |
Economic Ideas and the Political
Construction of the Financial Crash
of 2008
Andrew Baker and Geoffrey R. D. Underhill
This article is a short introduction to a special section on economic ideas and the political construction
of the financial crash. It begins by explaining why economic ideas and the politics of appeals to certain
ideas are so integral to the historical significance of the crash of 2008 and the question of whether it
can be considered a crisis at all. The first section covers the literature on ideas and economic crisis. The
second section highlights that the contribution of the special section is to engage in a stock-taking
exercise of the empirical and conceptual patterns concerning the politics of ideational change
underway in the areas of: comparative fiscal policy; monetary policy and Euro zone debt manage-
ment; capital controls; and financial and securities market regulation and standard setting. The final
section outlines the structure and content of the contents of the section articles.
Economic crises are social and political events, as much as they are economic or
financial ones. For both empirical and conceptual reasons, the fields of political
science and political economy have come to associate periods of financial and
economic distress with far reaching change in salient economic ideas (Hall 1993;
Hay 1996; Blyth 2002) For example, ideational change during the 1930s laid the
foundations for the emergence of the Keynesian welfare state and what came to be
known as the Bretton Woods order of embedded liberalism (Ruggie 1982; Helleiner
1996; Blyth 2002; Kirshner 2014). In the 1970s more market-based policy ideas
began to dislodge Keynesian approaches to macroeconomic policy, as monetarism
became the first iteration of neoliberalism (Hall 1993). Ideational change and the
appeals to and the use of economic ideas by policy makers are integral to how
periods of crises are politically constructed and socially understood. This is the
fundamental question of how we define and understand a period of crisis and
indeed whether a period of economic and financial distress can be considered a
crisis at all (Hay 2011). Such a question relates to the etymological origins of crisis
as a critical turning point, producing a trajectory change, in accordance with the
original ancient Greek medical meaning of the term, where a patient either recovers
from a condition, or withers to death (Widmaier et al. 2007; Gamble 2009; Hay
2011). For a crisis to be considered and classified as a crisis by this reading therefore,
far-reaching ideational change which changes both the trajectory of state interven-
tion in and engagement with markets and the whole mental context of governing
and imagining the economy, would appear to be a necessity.
Economic ideas represent systems of thought consisting of a series of intercon-
nected claims and assumptions about how economies function, how their constitu-
ent parts should and do relate to one another, and the most appropriate objectives
and settings of government economic policy. Changes in these systems of thought
make a major difference in terms of policy and distributional outcomes. Economic
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doi: 10.1111/1467-856X.12072 BJPIR: 2015 VOL 17, 381–390
© 2015 The Authors. British Journal of Politics and International Relations © 2015
Political Studies Association
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