The bank bailout of 2008 is often taken as evidence of the domination of the American political system by large financial institutions. In fact, the bailout demonstrated the vulnerability of American banks to government pressure, a fact which is difficult to observe without examining the United States in comparative perspective. Large banks in the United States could not defy regulators, because their future income depended on the American market. In Britain, by contrast, one bank succeeded in scuttling the preferred governmental solution of an industry-wide recapitalization, because most of its revenue came from outside the United Kingdom; the same dynamic was also on display in Germany. In both cases these were exercises of structural power. Yet most contemporary scholarship on business power ignores or misclassifies such instances, since it limits structural power to the automatic adjustment of policy to the possibility of disinvestment. This paper shows that structural power based on ability of the state to credibly threaten a future income stream is theoretically and empirically distinct from instrumental power based on lobbying, and that structural power explains consequential variations in bailout design in the UK, US, France, and Germany.
Pepper Culpepper has served as professor of political science at the European University Institute in Florence, Italy, since 2010. Previously, he was an associate professor of public policy at Harvard University’s John F. Kennedy School of Government. His current research investigates how companies and governments interact in responding to governance challenges posed by the changing international economy. He is particularly interested in understanding how business organizes and exercises influence in politics and public policy. Dr. Culpepper’s most recent book, Quiet Politics and Business Power, explores the capacity of different interest groups to shape policy outcomes and political debates. He received his Ph.D. in political science from Harvard University, M.Litt. in politics from Oxford University, and B.A. in political science from Duke University.
Part of the lecture series, "New Challenges Facing Europe," which will focus on the critical developments and challenges facing Europe, such as the resurgence of the far Right, the ongoing financial crisis, and nationalist and separatist movements. The series was made possible by a generous donation from Rodger Young.
Sponsors: WCED, CES.
Pepper Culpepper, professor of political science, European University Institute