Crashed: How a decade of financial crises changed the world. Adam Tooze. New York, Viking, 2018

Abstract

Whatever it takes" were the words that saved the euro in the summer of 2012, almost 4 years after the Lehman Brothers' collapse that triggered a chain reaction, putting the worldwide financial system, and thereby the global capitalist economy, on the brink of collapse. Mario Draghi, head of the European Central Bank's (ECB) made this notorious promise in London. It would have the effect of funneling the Bank's one trillion euros in liquidity to eurozone banks and the purchase of over two trillion eurozone government bonds. The statement itself appears more than 400 pages into Adam Tooze's Crashed: How a Decade of Financial Crisis Changed the World, with another 200 more pages to go. By the time you reach this point you wonder why it took so long for the EU to react. Yet Tooze offers an answer to this question a couple of hundred pages earlier. In the late 1990s, before the introduction of the euro, Larry Summers asked European financial representatives what would happen if a bank was close to failing in Spain: which responsibilities would the national and supranational regulatory agencies have, respectively, and what would be the roles of the Spanish Central Bank, the ECB, and the EU Commission? No one knew the answer, no one had imagined such a scenario. Most reviews of Toozes's book have focused on the intricacies of the financial collapse, its repercussions, and the different policies that the USA, the EU, and countries such as China and Russia adopted in order to mitigate economic downturn. All rightfully praise his monumental achievement of tracing the origins of the 2008 great recession to the different Global South sovereign crises starting in 1997; the repeal of the Glass-Steagall Act in 1999, allowing financial institutions to act as a combination of investment bank, commercial bank, and insurance company, and leading to the massive trading of collateralized debt obligations and credit default swaps derivatives; and the excessive lending produced by extremely low interest rates on both sides of the Atlantic. Yet Tooze's book is not about the crisis itself and he does not try to describe the last 20 years by exclusively prioritizing economic or financial trends. In fact, he is much more interested in framing the 2008 financial collapse as a critical juncture that sparked a chain of repercussions, bringing us to the political landscape we inhabit today. His analysis could be framed as following path-dependency theory with a stress on self-reinforcing sequences and critical junctures. In other words, Tooze characterizes historical processes where contingent events trigger deterministic institutional patterns. He aims to trace a given outcome-namely, populist governments with strong anti-technocratic and anti-cosmopolitan tendencies-back to a particular set of historical events. These are contingent because they cannot be explained by relying on prior historical conditions. Once those contingent events are set into motion, they foreshadow the future outcomes. Tooze needs to rely on self-reinforcing sequences...