Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

If one compares American and European policy discussion in the early 2000s, one sees that they shared many preoccupations. Policy experts on both continents were focused on fiscal discipline and international competitiveness, supply side incentives, efficient government spending, deficits, evidence-based welfare policy, education reform and flexible labor markets. These were the shibboleths of the watered-down, supply-side market economics inherited from the days of Reagan and Thatcher and the Washington Consensus of the 1990s. The policy communities on both sides of the Atlantic also shared blind spots. Sharing a deep faith in markets, neither realized the threat posed by the new, market-based model of banking. On both sides of the Atlantic they were oblivious to the risks accumulating in overleveraged banks, relying on vast quantities of wholesale funding. Why, then, did both sides find it so hard to recognize the risks that they shared? And why have crisis narratives on either side of the Atlantic diverged so sharply since 2008?