A lecture hosted by Political Economy Research Group (PERG).

Bank bailouts in the aftermath of the collapse of Lehman Brothers and the onset of the Great Recession brought into sharp relief the power that the global financial sector holds over national politics, and provoked widespread public outrage. In The Power of Inaction, Cornelia Woll details the varying relationships between financial institutions and national governments by comparing national bank rescue schemes in the United States and Europe. Woll starts with a broad overview of bank bailouts in more than twenty countries. Using extensive interviews conducted with bankers, lawmakers, and other key players, she then examines three pairs of countries where similar outcomes might be expected: the United States and United Kingdom, France and Germany, Ireland and Denmark. She finds, however, substantial variation within these pairs. In some cases the financial sector is intimately involved in the design of bailout packages; elsewhere it chooses to remain at arm’s length…(read more)

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In a world where the expectation is for leaders to take quick and decisive actions, it may seem counterintuitive to advocate for inaction. However, this is precisely what Professor Cornelia Woll does in her book, “The Power of Inaction: Bank Bailouts in Comparison.”

Woll’s book explores how different countries have responded to financial crises, specifically the 2008 global financial crisis, and how their inaction has shaped their economies. Inaction, according to Woll, can be a powerful tool in preventing financial crises from occurring in the first place.

One of the main examples that Woll uses to illustrate her argument is the different approaches taken by the United States and Europe in responding to the 2008 financial crisis. The US government quickly implemented a series of measures to bail out the banks, while European governments took a slower and more cautious approach.

Woll argues that the European approach, which involved inaction to a certain extent, actually led to better long-term outcomes for the economy. European governments were able to use the threat of inaction to put pressure on banks and force them to take responsibility for their actions. In contrast, the US government’s quick bailout only helped to perpetuate the same risky behavior that led to the crisis in the first place.

Inaction, according to Woll, can also be a valuable tool in preventing politicians and policymakers from making hasty and ill-informed decisions. By taking a step back, policymakers can better assess the situation and make more deliberate choices that benefit the economy in the long run.

Overall, Woll’s book serves as a insightful exploration of the power of inaction and how it can be used as a valuable tool in responding to financial crises. By taking a more cautious and thoughtful approach, policymakers can create a more stable and sustainable economy that benefits everyone in the long run.