Contradictions of the Bailout State

Abstract

The need for bailouts is often depicted as a symptom of how incoherent neoliberalism is. However, such dismissive interpretations fail to recognize how the reliance on bailout logics has allowed policymakers to navigate dilemmas that had previously seem intractable, which is what drove the transformation of bailout policies from spectacular public rescues in the 1980s to the far more systemically significant drip-feed bailout logic of low interest rates and quantitative easing in the present. The COVID-19 crisis has made clear just how central the logic of bailouts has become to the way contemporary Western societies work—they have become the go-to option for dealing with the destabilizing effects of major shocks, even when the source is external to the economic system. At the same time, we are seeing the contradictions of this model of economic governance. Those contradictions appear as an intensification of tensions that had already become visible since the Global Financial Crisis, when financial authorities increasingly perceived the limitations of their policy toolkit. This chapter maps the trajectory of the rise of the bailout state and takes the measure of its current contradictions.