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Coping with Crisis

Government Reactions to the Great Recession

Coping with Crisis: Government Reactions to the Great Recession

Publication Year: 2012

The financial crisis that erupted on Wall Street in 2008 quickly cascaded throughout much of the advanced industrial world. Facing the specter of another Great Depression, policymakers across the globe responded in sharply different ways to avert an economic collapse. Why did the response to the crisis—and its impact on individual countries—vary so greatly among interdependent economies? How did political factors like public opinion and domestic interest groups shape policymaking in this moment of economic distress? Coping with Crisis offers a rigorous analysis of the choices societies made as a devastating global economic crisis unfolded. With an ambitiously broad range of inquiry, Coping with Crisis examines the interaction between international and domestic politics to shed new light on the inner workings of democratic politics. The volume opens with an engaging overview of the global crisis and the role played by international bodies like the G-20 and the WTO. In his survey of international initiatives in response to the recession, Eric Helleiner emphasizes the limits of multilateral crisis management, finding that domestic pressures were more important in reorienting fiscal policy. He also argues that unilateral decisions by national governments to hold large dollar reserves played the key role in preventing a dollar crisis, which would have considerably worsened the downturn. David R. Cameron discusses the fiscal responses of the European Union and its member states. He suggests that a profound coordination problem involving fiscal and economic policy impeded the E.U.’s ability to respond in a timely and effective manner. The volume also features several case studies and country comparisons. Nolan McCarty assesses the performance of the American political system during the crisis. He argues that the downturn did little to dampen elite polarization in the U.S.; divisions within the Democratic Party—as well as the influence of the financial sector—narrowed the range of policy options available to fight the crisis. Ben W. Ansell examines how fluctuations in housing prices in 30 developed countries affected the policy preferences of both citizens and political parties. His evidence shows that as housing prices increased, homeowners expressed preferences for both lower taxes and a smaller safety net. As more citizens supplement their day-to-day income with assets like stocks and housing, Ansell’s research reveals a potentially significant trend in the formation of public opinion. Five years on, the prospects for a prolonged slump in economic activity remain high, and the policy choices going forward are contentious. But the policy changes made between 2007 and 2010 will likely constrain any new initiatives in the future. Coping with Crisis offers unmatched analysis of the decisions made in the developed world during this critical period. It is an essential read for scholars of comparative politics and anyone interested in a comprehensive account of the new international politics of austerity.

Published by: Russell Sage Foundation

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Chapter 1. Coping with Crisis: An Introduction

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pp. 1-32

...image of opportunity. This makes good sense. Crises are surely periods of peril, but they also facilitate change. This simple observation is the essence of the punctuated equilibrium model in economics. It is also the foundation of the social science literature on critical junctures. Whether they take the form of wars, depressions, deep recessions, or natural disasters, crises...

Part I. International Origins, Organizations, and Constraints

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pp. 33-34

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Chapter 2. Modern Capitalism and the Advanced Nation State: Understanding the Causes of the Crisis

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pp. 35-64

...We argue in this chapter that the crisis illuminates the relationship between modern capitalism and the advanced nation state. Advanced nation states are deeply concerned—in a world in which they can no longer use protection, direct intervention, or subsidies—with promoting the interests of their high value-added sectors, which are central to their innovation...

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Chapter 3. Multilateralism Reborn?: International Cooperation and the Global Financial Crisis

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pp. 65-90

...Policymakers have congratulated themselves for the cooperative ways in which they responded to the 2007 to 2009 global financial crisis. States worked together to manage the crisis through activities such as macroeconomic stimulus programs, supporting markets and firms in distress, enhancing the lending capacity of official international financial institutions...

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Chapter [4]. [European Fiscal Responses to the Great Recession]

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pp. 91-129

...Beginning in late 2007 with the collapse of the construction, real estate, and housing booms in Ireland and Spain, in 2008 and 2009 one European country after another experienced the most severe economic contraction since the 1930s. The effects of the contractions were amplified, of course...

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Chapter 5. Policymaking in Hard Times: French and German Responses to the Eurozone Crisis

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pp. 130-161

...unprecedented scope shattered politicians’ beliefs in the received economic wisdom that had informed two decades of continuous reform. After the demise of pump-priming Keynesianism in the late 1970s, governments tried to reduce their involvement in the direct provision of goods and services...

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Chapter 6: The Sorrows of Young Euro: The Sovereign Debt Crises of Ireland and Southern Europe

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pp. 162-198

...This chapter examines the sovereign debt crisis of the so-called GIIPS countries—Greece, Ireland, Italy, Portugal, and Spain—focusing in particular on the interaction between national political economic conditions and membership in the eurozone. Ever since Peter Gourevitch’s seminal...

Part II. Cases and Comparisons

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pp. 199-200

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Chapter 7. The Politics of the Pop: The U.S. Response to the Financial Crisis and the Great Recession

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pp. 201-232

...Recent research on the American political economy has stressed the emergence of at least two salient features: The first is the increasing levels of political polarization, partisanship, and ideological rigidity (McCarty, Poole, and Rosenthal 2006; Theriault 2008). This polarization in turn has made policymaking more difficult and contributed to gridlock (McCarty...

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Chapter 8. Politics and Policies in Two Economic Crises: The Nordic Countries

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pp. 233-260

...In the Great Recession, the deep economic downturn of 2008 to 2009, European governments adopted expansionary fiscal policies quickly, and with little apparent controversy. In December 2008, the member states of the European Union agreed on a European Economic Recovery Program...

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Chapter 9. The Global Economic Crisis and the Politics of Regime Change in Japan

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pp. 261-286

...Unlike in the United States or Europe, the 2008 to 2009 crisis did not hit Japan through the banking sector. Rather, it unfolded mainly through the contraction of global trade and the collapse of its key export engine, which led to a 6.3 percentage point GDP contraction in 2009 and forced the government to rely further on fiscal stimulus and increase its overall public...

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Chapter 10. The Liberal Model in (the) Crisis: Continuity and Change in Great Britain and Ireland

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pp. 287-324

...The current crisis is a global one, but variation has been considerable across countries in the nature and scale of the economic downturn, in policy responses, and in the political impact. Why were some countries affected more than others, and what explains the varied policies implemented...

Part III. Cross-National Consequences

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pp. 325-326

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Chapter 11. Crisis as Political Opportunity?: Partisan Politics, Housing Cycles, and the Credit Crisis

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pp. 327-360

...The financial crisis of the autumn of 2008, sparking fears of a repeat of the Great Depression, produced a dramatic and choreographed set of government responses across the advanced industrial world. Policymakers faced immediate threats requiring urgent action, in particular the teetering...

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Chapter 12. West European Welfare States in Times of Crisis

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pp. 361-398

...It is well known that relative poverty has increased dramatically in a number of industrialized democracies in recent times. In a 2008 report, before the effects of the Great Recession had been realized, the Organisation for Economic Co-operation and Development (OECD) observed that the period from 2003 to 2008 had seen growing inequality and poverty in...


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pp. 399-422

E-ISBN-13: 9781610447928
Print-ISBN-13: 9780871540768

Page Count: 430
Publication Year: 2012

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Subject Headings

  • Economic policy.
  • International economic relations.
  • Financial crises.
  • Global Financial Crisis, 2008-2009.
  • Economic policy -- Case studies.
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