Skip to main content Accessibility help

Political Economy and Political Power: The American State and Finance in the Neoliberal Era

Published online by Cambridge University Press:  22 May 2014


Understanding the role of the American state in the era of neoliberal finance requires a scale of analysis that can identify not only the domestic but also the international role of the informal empire the US established in the middle of the twentieth century for superintending capitalism on a world scale. This article demonstrates that it was not so much neoliberal ideology that broke the old system of financial regulations, as it was the latter’s increasingly dysfunctional effects as finance outgrew the New Deal incubator through the post-war decades. Through the Bretton Woods crisis and the stagflation of the 1970s, institutional reform in the financial sector became a key dimension of broader competitive capitalist strategies for innovation and expansion. While this certainly involved extensive leveraging and speculation, it met the hedging needs not only of financial institutions but also of the many corporations seeking protection from the rapidly evolving vulnerabilities associated with global trade and investment. Yet the financial volatility that inevitably resulted from those very transformations meant that the Federal Reserve’s function as lender of last resort was increasingly called upon, just as the Treasury came to define its role as that of ‘failure containment’ on a global scale. On the basis of this theoretical and historical perspective, the article analyses the causes and consequences of the 2007–8 financial crisis and the ‘old/new practice of failure containment’ that has characterized the American state’s response to it.

Copyright © Government and Opposition Ltd 2014 

Access options

Get access to the full version of this content by using one of the access options below.



Leo Panitch is Canada Research Chair in Comparative Political Economy at York University, Ontario. Contact email:

Sam Gindin is Adjunct Professor in the Department of Political Science at York University, Ontario. Contact email:


Aquanno, S. (2009), ‘US Power in the International Bond Market: Financial Flows and the Construction of Risk Value’, in L. Panitch and M. Konings (eds), American Empire and the Political Economy of Global Finance (London: Palgrave Macmillan): 119134.CrossRefGoogle Scholar
Aronowitz, S. and Bratsis, P. (2002) (eds), Paradigm Lost: State Theory Reconsidered (Minneapolis: University of Minnesota Press).CrossRefGoogle Scholar
Augar, P. (2005), The Greed Merchants: How the Investment Banks Played the Free Market Game (London: Penguin).Google Scholar
Bajaj, V. (2007), ‘Central Banks Intervene to Calm Volatile Markets’, New York Times, 1 August.Google Scholar
Baker, P. (2008), ‘A Professor and a Banker Bury Old Dogma on Markets’, New York Times, 20 September.Google Scholar
Barker, A. and Speigel, P. (2011), ‘Geithner Set to Join European Meeting’, Financial Times, 13 September.Google Scholar
BBC News (2011), ‘China State Media Agency Xinhua Criticises US on Debt’, 29 July, Scholar
Bernanke, B. (2011), ‘The Near- and Longer-term Prospects for the U.S. Economy’, speech at the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, 26 August, Scholar
Bryan, D. and Rafferty, M. (2006), Capitalism with Derivatives (London: Palgrave).CrossRefGoogle Scholar
Buiter, W. (2008), ‘The Fed as the Market Maker of Last Resort: Better Late than Never’, Financial Times, 12 March, Scholar
Cox, R. (1987), Production, Power and World Order (New York: Columbia University Press).Google Scholar
Ellis, C.D. (2008), The Partnership: The Making of Goldman Sachs (New York: Penguin).Google Scholar
Federal Reserve Bank of New York (1986), Annual Report, Scholar
Fifield, A. (2009), ‘Obama in Tough Talk to “Fat Cat” Bankers’, Financial Times, 15 December.Google Scholar
Financial Crisis Inquiry Commission (2011), The Financial Crisis Inquiry Report: Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States (Washington, DC: Public Affairs), 27 January 2011.Google Scholar
Fink, L.D. (1976), ‘The Role of Pension Funds and Other Investors in Securitized Debt Markets’, in L.T. Kendall and M.J. Fishman (eds), A Primer on Securitization (Cambridge, MA: MIT Press): 117128.Google Scholar
Geithner, T. (2011), ‘Remarks by Treasury Secretary Tim Geithner to the International Monetary Conference’ (Atlanta: US Treasury Press Center), 6 June, Scholar
Goldberg, L. and Skeie, D. (2011), ‘Why Did U.S. Branches of Foreign Banks Borrow at the Discount Window?’, Liberty Street Economics blog, 13 April, Scholar
Goodfriend, M. (1997), ‘Monetary Policy Comes of Age: A Twentieth Century Odyssey’, Federal Reserve Bank of Richmond, Economic Quarterly, 83(1): 122.Google Scholar
Hampton, P. and Kingman, J. (2008), ‘Mandate to Protect Taxpayers’ Investment’, Financial Times, 13 November.Google Scholar
Harvey, D. (2003), The New Imperialism (New York: Oxford University Press).Google Scholar
Helleiner, E. and Pagliari, S. (2010), ‘The End of Self-regulation?’, in E. Helleiner, S. Pagliari and H. Zimmermann (eds), Global Finance in Crisis: The Politics of International Regulatory Change (London: Routledge): 7490.Google Scholar
Hunt Commission (1971), The Report of the President’s Commission on Financial Structures and Regulation (Washington, DC).Google Scholar
Krippner, G.R. (2007), ‘The Making of US Monetary Policy’, Theory and Society, 36(6): 417513.Google Scholar
Lewis, M. (1989), Liar’s Poker (New York: Penguin).Google Scholar
Litan, R. (1998), American Finance for the 21 st Century (Washington, DC: Brookings Institute).Google Scholar
Lucchetti, A. (2011), ‘The Regulator Down the Hall’, Wall Street Journal, 20 June.Google Scholar
Melamed, L. (1992), Leo Melamed on the Markets (New York: John Wiley & Sons).Google Scholar
Meltzer, A. (2009), A History of the Federal Reserve Vol. 2 (Chicago: Chicago University Press).Google Scholar
Mishkin, F.S. (2011), ‘Over the Cliff: From the Subprime to the Global Financial Crisis’, Journal of Economic Perspectives, 25(1): 4970.CrossRefGoogle Scholar
Moran, M. (1990), The Politics of the Financial Services Revolution (New York: Palgrave Macmillan).Google Scholar
Morgenson, G. (2011), ‘The Bank Run we Knew so Little About’, New York Times, 3 April.Google Scholar
Panitch, L. (1994), ‘Globalization and the State’, in R. Miliband and L. Panitch (eds), Socialist Register 1994: Between Globalism and Nationalism (London: Merlin): 6093.Google Scholar
Paulson, H.M. Jr. (2010), On the Brink: Inside the Race to Stop the Collapse of the Global Financial System (New York: Business Plus).Google Scholar
Poulantzas, N. (1974), Classes in Contemporary Capitalism (London: New Left Books).Google Scholar
Reinhart, C.M. and Rogoff, K.S. (2008), This Time is Different: A Panoramic View of Eight Centuries of Financial Crises, Working Paper 13882 (Washington: National Bureau of Economic Research).Google Scholar
Rey, H. (2013), ‘Dilemma not Trilemma: The Global Financial Cycle and Monetary Policy Independence’, paper presented at the 25th Jackson Hole Symposium, Wyoming, August 2013, Scholar
Rubin, R. (2003), In an Uncertain World (New York: Random House).Google Scholar
Seeger, C.M. (1985), ‘The Development of Congressional Concern about Financial Futures Markets’, in A. Peck (ed.), Futures Markets: Regulatory Issues (Washington, DC: American Enterprise Institute for Public Policy Research): 418.Google Scholar
Solomon, D. (2008), ‘Questions for Paul O’Neill: Market Leader’, New York Times, 30 March.Google Scholar
Stewart, J. and Hertzberg, D. (1987), ‘How the Stock Market Almost Disintegrated a Day After the Crash’, Wall Street Journal, 20 November.Google Scholar
Story, L. (2010), ‘A Secretive Banking Elite Rules Trading in Derivatives’, New York Times, 11 December.Google Scholar
Stout, D. (2008), ‘Paulson Gives Way on CEO Pay’, New York Times, 24 September.Google Scholar
Sylla, R. (2002), ‘United States Banks and Europe: Strategy and Attitudes’, in S. Battilossi and Y. Cassis (eds), European Banks and the American Challenge (Oxford: Oxford University Press): 5373.Google Scholar
Tett, G. (2009), Fool’s Gold (London: Little, Brown).Google Scholar
US Department of the Treasury (2011), ‘Fact Sheet: Notice of Proposed Determination on Foreign Exchange Swaps and Forwards’, 29 April, Scholar
US Federal Reserve (2011), press release, Banking and Consumer Regulatory Policy Division, 10 June, Scholar
US General Accounting Office (1994), Financial Derivatives: Action Needed to Protect the Financial System (Washington, DC).Google Scholar
US General Accounting Office (1997), Financial Crisis Management: Four Financial Crises in 1980s (Washington, DC).Google Scholar
Vogel, S.K. (1996), Freer Markets, More Rules: Regulatory Reform in Advanced Industrial Countries (Ithaca, NY: Cornell University Press).Google Scholar
Ward, A. (2009), ‘Obama Urges Restraint over Bonus Penalties’, Financial Times, 24 March.Google Scholar
Weltzman, H. (2011), ‘Caterpillar Chief Attacks US’, Financial Times, 29 August.Google Scholar
Wetherly, P., Barrow, C.W. and Burnham, P. (2008), Class, Power and the State in Capitalist Society (London: Palgrave Macmillan).CrossRefGoogle Scholar
White, E. (1992), The Comptroller and the Transformation of American Banking 1960–1990 (Washington, DC: Comptroller of the Currency).Google Scholar
Wolf, M. (2009), ‘Why a Successful US Bank Rescue is Still so Far Away’, Financial Times, 24 March.Google Scholar

Full text views

Full text views reflects PDF downloads, PDFs sent to Google Drive, Dropbox and Kindle and HTML full text views.

Total number of HTML views: 16
Total number of PDF views: 215 *
View data table for this chart

* Views captured on Cambridge Core between September 2016 - 5th December 2020. This data will be updated every 24 hours.

Hostname: page-component-b4dcdd7-pwkpp Total loading time: 0.542 Render date: 2020-12-05T12:36:18.081Z Query parameters: { "hasAccess": "0", "openAccess": "0", "isLogged": "0", "lang": "en" } Feature Flags last update: Sat Dec 05 2020 12:00:43 GMT+0000 (Coordinated Universal Time) Feature Flags: { "metrics": true, "metricsAbstractViews": false, "peerReview": true, "crossMark": true, "comments": true, "relatedCommentaries": true, "subject": true, "clr": false, "languageSwitch": true }

Send article to Kindle

To send this article to your Kindle, first ensure is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

Note you can select to send to either the or variations. ‘’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

Find out more about the Kindle Personal Document Service.

Political Economy and Political Power: The American State and Finance in the Neoliberal Era
Available formats

Send article to Dropbox

To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

Political Economy and Political Power: The American State and Finance in the Neoliberal Era
Available formats

Send article to Google Drive

To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

Political Economy and Political Power: The American State and Finance in the Neoliberal Era
Available formats

Reply to: Submit a response

Your details

Conflicting interests

Do you have any conflicting interests? *