Surviving Large Losses

The authors are highly respected economic historians whose deep command of the specialist literature shines through. Their ideas are clearly presented, and effectively harness historical example to address one of the great questions of this age: why are some economies successful, and others not? Their answer will command attention among policy makers and scholars alike. -- Stephan R. Epstein, London School of Economics The authors mobilize their impressive knowledge of economic history to examine contemporary issues of policy and theory. The result is an outstanding volume, richly rewarding to people in several different disciplines. -- Peter Gourevitch, University of California, San Diego The authors' approach is open and accessible to general readers. The text is not bogged down with economic theory or arcana, while still presenting important and fundamental economic concepts in an understandable fashion. The book also addresses head-on the challenge of providing a political economy model of the interaction of politics and economics. It is to be strongly recommended. -- John Joseph Wallis, University of Maryland Surviving Large Losses is an extremely learned book, one that draws on the authors' deep knowledge of economics and history. It ranges across the history of Western Europe, the United States, Korea, Japan, China, and Latin America--and it does so with elegance. It develops, in a language accessible to non-specialists, models about complicated topics in economic theory. -- Stephen Haber, Stanford University

When financial institutions collapse, new ones take their place, shaping markets for generations to come. This book explains why financial crises occur, why their effects last so long, and what political and economic conditions can help countries both rich and poor survive, and even prosper, in the aftermath.

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Financial disasters often have long-range institutional consequences. When financial institutions--banks, insurance companies, brokerage firms, stock exchanges--collapse, new ones take their place, and these changes shape markets for decades or even generations. Surviving Large Losses explains why such financial crises occur, why their effects last so long, and what political and economic conditions can help countries both rich and poor survive--and even prosper--in the aftermath.Looking at past and more recent financial disasters through the lens of political economy, the authors identify three factors critical to the development of financial institutions: the level of government debt, the size of the middle class, and the quality of information that is available to participants in financial transactions. They seek to find out when these factors promote financial development and mitigate the effects of financial crises and when they exacerbate them.Although there is no panacea for crises--no one set of institutions that will resolve them--it is possible, the authors argue, to strengthen existing financial institutions, to encourage economic growth, and to limit the harm that future catastrophes can do.