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How the financial crisis eroded public trust

Wall Street bull statue
Photo: Erik McGregor/Pacific Press/LightRocket via Getty Images

Back in September, Axios published a special report on the 2008 financial crash. As part of it, we asked nine U.S. economic and financial experts to name the greatest fallout.

Their most frequent answer: The loss of public trust and the conspiratorial and paranoid thinking that has surged into politics since. Adam Tooze, author of “Crashed: How a Decade of Financial Crises Changed the World,” agrees. When Tooze, a Columbia history professor, observes the political upheaval in the U.S. and Europe, he sees the continuing reverberations of the crash and the oblivious financial elite that was supposed to have policed the system, writes Christopher Leonard, author of the forthcoming "Kochland."

In a scathing, 706-page autopsy, Tooze urges people to stop fretting over the possibility of another 2008. The economic crisis never really ended, he says. Instead, after smoldering for a decade, it’s now the “comprehensive political and geopolitical crisis of the post-Cold War order."

  • Tooze bracingly compares the causes and impacts of 2008 with those of 1914, when European leaders sleepwalked into World War I. "There is a striking similarity between the questions we ask about 1914 and 2008,” Tooze writes.
  • “How does a great moderation end? How do huge risks build up that are little understood and barely controllable? How do great tectonic shifts in the global order unload in sudden earthquakes?"

One of Tooze’s answers is that big banks are to blame. His thesis is that, when it comes to the global economy, nations matter much less than 20 or 30 intertwined financial behemoths that continue to run the show.

  • In Ireland, for example, the 2008 losses of three big banks equalled 700% of the nation’s GDP. Somehow, the Irish government still decided to bail them out — “for fear of dying [Ireland] would commit suicide,” Tooze writes. This effectively bankrupted the state. The same story played out around the world to varying degrees of severity.

Tooze warns that potential calamity still lurks just around the corner, and he worries that current politics won't allow governments to do the right thing if one arises. The U.S., he says, managed to stop another Great Depression but has no long game.

  • Even if they don't know the details, voters can sense something is wrong. It’s no wonder that around the world they are throwing the bums out.
Book cover for "Crashed: How a Decade of Financial Crises Changed the World.”