Charles Calomiris is the co-author, with Stephen H Haber, of a new book entitled “Fragile by Design: The Political Origins of Banking Crises and Scarce Credit”. It is an analysis of what Calomiris and Haber call the “systematic role of politics in the determination of banking systems’ performance”. Politics, in their view, matters when one is attempting to understand the causes of banking crises.
This is a book that wears its historicism on its sleeve—it contains accounts of systemic banking crises dating back to the 18th century which occurred in many different countries (though their focus inevitably falls on the United States). As such, it’s a work of economic history and political economy—intellectual traditions that Calomiris, who I interviewed on his recent visit to London, is happy to place himself in.
JD: This preoccupation with deep history is not something one finds very often in the mainstream economic literature.
CC: One thing that my co-author Stephen Haber have in common is that we are transgressors par excellence, and have been successful in transgressing across disciplinary boundaries for decades. I’ve never been happy to be called something at the expense of something else. Steve is a professor of political science—he used to be a professor of history at Stanford but got his PhD in economics from UCLA. If you asked him to define himself he might say he’s an economic historian. I’m a professor of finance at a business school and would say pretty much the same set of things—that I see what I do very much as a combination of things. So this book belongs to the old-fashioned tradition of political economy.
Has the crisis of 2008 and its aftermath led to a revival of that tradition would you say?
Yes. People are dissatisfied with explanations [of the crisis] that don’t have a political dimension included in them. What we try to do is think through how the logic of politics actually works. There are winning coalitions and there are losing coalitions. For example, most of the narratives that you’ll hear, even coming from political scientists, about political struggles are often defined on partisan lines. But a very robust political bargain is one that’s going to be robust to electoral outcomes. And in fact, in US history and the history of many other countries, what you’ll see is the most…