The political economy of financial exuberance

Greta R. Krippner

doi:10.1108/S0733-558X(2010)000030B009

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Research in the Sociology of Organizations

ISSN: 0733-558X
Series editor(s): Professor Michael Lounsbury

Subject Area: Organization Studies

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The political economy of financial exuberance

Document Information:
Title:	The political economy of financial exuberance
Author(s):	Greta R. Krippner
Volume:	30 Editor(s): Michael Lounsbury, Paul M. Hirsch ISBN: 978-0-85724-207-5 eISBN: 978-0-85724-208-2
Citation:	Greta R. Krippner (2010), The political economy of financial exuberance, in Michael Lounsbury, Paul M. Hirsch (ed.) Markets on Trial: The Economic Sociology of the U.S. Financial Crisis: Part B (Research in the Sociology of Organizations, Volume 30), Emerald Group Publishing Limited, pp.141-173
DOI:	10.1108/S0733-558X(2010)000030B009 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
Article type:	Chapter Item
Abstract:	This article argues that the financial crisis has brought to the surface a series of dilemmas that have their origins in the declining affluence of the U.S. economy in the late 1960s and 1970s. When growth faltered beginning in the late 1960s, policymakers confronted difficult political choices about how to allocate scarce resources between competing social priorities. Inflation offered a means of avoiding these trade-offs for a time, disguising distributional conflicts and financing an expansive state. But the “solutions” that inflation offered to the end of growth became increasingly dysfunctional over the course of the 1970s, setting the stage for the turn to finance in the U.S. economy. Paradoxically, the turn to finance operated as the functional equivalent of inflation, similarly allowing policymakers to avoid difficult political choices as limits on the nation's prosperity became more constraining. But the turn to finance no more resolved these underlying issues than did inflation, and as a result the recent financial crisis likely augurs the return of distributional politics to center stage in American political and social life.