A different sort of crisis

Nearly a decade on from what was initially framed as a ‘credit crunch’ or a problem confined to the financial markets, it is abundantly clear that the great financial crash was no ordinary ‘boom and bust’, but a more profound crisis of capitalism, with the potential to bring about new policies, political alignments and ideologies (Gamble, 2009). If we are to understand what is new and distinctive about the 2008 crash and its aftershocks, compared to other more run-of-the-mill financial crises, we need to set the complex and often dramatic events outlined in Chapters One and Two in their wider historical and ideological context. This is the purpose of this present chapter, which outlines a number of distinct stages of capitalist growth and development since 1945.

This entails a switch of focus away from ‘finance’ to political economy, with this chapter becoming, in effect, a guide to the wider political and economic context in which the global financial crisis should be understood. It also means engaging with some ‘big picture’ theorising about how and why capitalist economies evolve across time and space. The ‘big picture’ analysis set out in this chapter draws on the ideas and concepts of the ‘regulation school’, a group of academic writers on political economy whose work, in my view, provides real insight into both the crisis-prone nature of modern capitalist democracies and the breakdown of a particular mode of ordering or stabilising the current era of finance-led capitalism in the US and the UK – ‘privatised Keynesianism’ (reliance on the private, credit-financed debt of low- to middle-income households to stimulate economic growth rather than public debt) – without which an understanding of the 2008 crash is incomplete.

There is a flipside to big picture theorising, which is that it requires generalisation and abstraction. So let’s start with a word of warning. In seeking to present a simplified, if highly abstract picture of reality, regulationists, along with many other social scientists, make use of ‘ideal types’ as a way of conceptualising or describing something – for example, the transition from Fordism to neo- or post-Fordism – that is derived from observable reality but does not conform to it in detail because of deliberate simplification and exaggeration.