Capitalizing on Crisis: The Political Origins of the Rise of Finance
Each year, the Distinguished Scholarly Publication Award Committee reads and evaluates more than sixty nominated books, a great many of them excellent works of scholarship, and quite a few worthy of significant distinction. This year, the A.S.A.’s Distinguished Scholarly Publication Award goes to Greta Krippner for Capitalizing on Crisis: The Political Origins of the Rise of Finance. Capitalizing on Crisis is a very significant, and particularly timely, book. In it, Krippner illuminates the historical and structural origins of the recent financial crisis, and she does so in an extremely economical and elegant format. In particular, she shows how and why leaders embraced financialization as a solution to the problems of inequality, and how doing so depoliticized a significant source of conflict in American society. It tells a remarkably insightful story about a remarkably complex, and exceptionally consequential process, and as such represents the best of contemporary American sociology.
Krippner begins and ends her book with Daniel Bell. Agreeing with Bell that the rise of a service economy would come to characterize a “postindustrial society,” Krippner nonetheless argues that this new economic and social structure was realized “with a slight twist: rather than the rise of services in a generic sense, the rise of a particular kind of service—finance—proved to be the dominant trend…” Her argument rests, however, on her agreement with Bell that “there is no escape from economics.”
Capitalizing on Crisis has a large number of sociological virtues. In the first place, its theoretical framing, conceptual development, and empirical documentation are meticulous. The book has been widely praised, for instance, for its chapter on “financialization,” which she defines as “the growing importance of financial activities as a source of profits in the economy.” This first chapter not only explicates the concept, but presents a nuanced quantitative analysis which leaves no doubt that the process she sets out to explain clearly happened, and had the contours she attributes to it. The main body of the book then turns to explaining why financialization occurred, and what theoretical and practical lessons can be drawn.
Krippner’s book is both a synthesis of, and advance on, a number of approaches. First, she examines those sociological approaches that criticize the economic theory that financial markets are by definition efficient by pointing out the dynamics inherent in markets that lead to manias and bubbles; the problem with these established critiques, she argues, is that they treat politics and the state as exogenous. Second, she addresses “shareholder value” approaches developed by organization theorists, which pay more attention to the state, but more as a context for firms than as something requiring explanation in its own right. Finally, Krippner examines Marxist and World-Systems perspectives, which account for financialization in terms of the goals of the state, but take such a broad historical sweep that the specific boundedness of these goals—and the limits on the ability to predict how proposed solutions will work out—is lost.
With this profound understanding of complex literatures, Krippner then delves into the details of the history, identifying the combination of three distinct processes: deregulation of financial markets, encouragement of global capital flows, and altered monetary policy. Each of these was a response to immediate problems as well as more general social and political crises. Beyond the important history Krippner thus tells, however, is the more general lesson that particular solutions pursued for particular purposes in response to particular crises produced consequences that could not possibly be predicted in advance. It thus leaves one with profound concerns not only about the course of public policy, but about its very possibility. As such, it is a powerful warning to any self-confident policy maker.
Though Krippner’s work on these issue began before the financial crisis of 2008, Captalizing on Crisis illuminates the historical and structural origins of the recent crisis, proving once again the importance of sociological work to the most pressing contemporary events. It does so, moreover, in an extremely economical and elegant format. It tells a remarkably insightful story about a remarkably complex, and exceptionally consequential process, and as such represents the best of contemporary American sociology.