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Structural power and bank bailouts in the United Kingdom and the United States


Culpepper, Pepper D; Reinke, Raphael (2014). Structural power and bank bailouts in the United Kingdom and the United States. Politics & Society, 42(4):427-454.

Abstract

The 2008 bailout is often taken as evidence of the domination of the US political system by large financial institutions. In fact, the bailout demonstrated the vulnerability of US banks to government pressure. Large banks in the United States could not defy regulators, because their future income depended on the US market. In Britain, by contrast, one bank succeeded in scuttling the preferred governmental solution of an industry-wide recapitalization, because most of its revenue came from outside the United Kingdom. This was an exercise of structural power, but one that most contemporary scholarship on business power ignores or misclassifies, since it limits structural power to the automatic adjustment of policy to the possibility of disinvestment. We show that structural power can be exercised strategically, that it is distinct from instrumental power based on lobbying, and that it explains consequential variations in bailout design in the United Kingdom, the United States, France, and Germany.

Abstract

The 2008 bailout is often taken as evidence of the domination of the US political system by large financial institutions. In fact, the bailout demonstrated the vulnerability of US banks to government pressure. Large banks in the United States could not defy regulators, because their future income depended on the US market. In Britain, by contrast, one bank succeeded in scuttling the preferred governmental solution of an industry-wide recapitalization, because most of its revenue came from outside the United Kingdom. This was an exercise of structural power, but one that most contemporary scholarship on business power ignores or misclassifies, since it limits structural power to the automatic adjustment of policy to the possibility of disinvestment. We show that structural power can be exercised strategically, that it is distinct from instrumental power based on lobbying, and that it explains consequential variations in bailout design in the United Kingdom, the United States, France, and Germany.

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22 citations in Web of Science®
33 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:06 Faculty of Arts > Institute of Political Science
Dewey Decimal Classification:320 Political science
Uncontrolled Keywords:political economy, structural power, business, financial crisis, bailouts
Language:English
Date:December 2014
Deposited On:19 Dec 2014 21:58
Last Modified:08 Dec 2017 09:09
Publisher:Sage Publications, Inc.
ISSN:1552-7514
Publisher DOI:https://doi.org/10.1177/0032329214547342

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