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Complexity and Crisis in the Financial System

Complexity and Crisis in the Financial System

Critical Perspectives on the Evolution of American and British Banking

Edited by Matthew Hollow, Folarin Akinbami and Ranald Michie

With contributions from across the disciplines of law, history, finance, and economics, Complexity and Crisis in the Financial System offers a truly interdisciplinary study of the relationship(s) between crises and complexity in the US and UK financial markets. Taken together, the contributions in this volume not only challenge many often taken-for-granted ideas about the nature of financial crises, but also broaden our understanding of the long-term causes (and consequences) of the global financial crisis of 2007–2008.

Chapter 10: The historical development of the US government’s responses to economic and financial crises

Peter H. Bent

Subjects: business and management, critical management studies, strategic management, economics and finance, economic psychology, financial economics and regulation


This chapter analyses the historical development of the US government’s involvement in the economy. The focus is on the government’s responses to economic and financial crises in particular. Overall, it is argued that the government has assumed a more active role in managing crises over time. To frame this development, Pryor’s (1996) definition of complexity is employed. As the economy has grown increasingly complex by Pryor’s measures, so too has the government’s involvement in the economy. This is seen through the government’s reactions to economic and financial crises. For example, while protectionism was one of the only policy options available to the relatively small federal government during the 1890s depression, by the 1930s this policy tool had proved to be ineffective as the economy had developed considerably during the intervening years. The myriad policy responses to the 2007–09 financial crisis highlight the increased complexity of the economy and the government’s role in it, especially when compared to earlier crisis periods.

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