The Wealth Effect: how the great expectations of the middle class have changed the politics of banking crises

Hosted by the Systemic Risk Centre

Shaw Library, Old Building, LSE


Jeffrey Chwieroth

Jeffrey Chwieroth

Professor of International Political Economy, Department of International Relations, LSE

Andrew Walter

Andrew Walter

Professor of International Relations, School of Social and Political Sciences, Melbourne


Jon Danielsson

Jon Danielsson

Associate Professor of Finance, SRC, LSE

The rising wealth of middle class households and voters has transformed the politics of banking crises.

In this lecture, Jeffrey Chwieroth and Andrew Walter explain how mass political demand has contributed to rising financial fragility and political instability and discontent in contemporary democracies. In their new book, The Wealth Effect: How the Great Expectations of the Middle Class Have Changed the Politics of Banking Crises, Jeffrey Chwieroth and Andrew Walter use extensive historical and contemporary evidence to demonstrate that the politics of major banking crises have been transformed by the “wealth effect”: rising middle class wealth has generated “great expectations” regarding government responsibilities for the protection of this wealth. They show that crisis policy interventions have become more extensive and costly – and their political aftermaths far more fraught – because of democratic governance, not in spite of it. Using data from a large number of democracies over two centuries, and detailed longitudinal studies of Brazil, the United Kingdom and the United States, the book breaks new ground in exploring the consequences of the emergence of mass political demand for financial stabilization.

Jeffrey Chwieroth is Professor of International Political Economy in the Department of International Relations at LSE, where he is also co-investigator of the Systemic Risk Centre. Previously, he served as director of the MSc in International Political Economy programme. His research interests are in the international political economy of money and finance, specifically the political consequences of financial crises, sovereign wealth funds, financial globalisation, the International Monetary Fund, emerging markets, and economic norms and ideas.

Andrew Walter is Professor of International Relations in the School of Social and Political Sciences, University of Melbourne. He specialises in the political economy of international money and finance, including their governance among and within countries. Prior to joining UoM in 2012, he was Reader in International Political Economy at the London School of Economics and Political Science, where he was also Academic Director of the TRIUM Global Executive MBA Programme.

Jon Danielsson is Co-Director of the Systemic Risk Centre and Associate Professor of Finance at LSE.

The Systemic Risk Centre (@LSE_SRC) was set up to study the risks that may trigger the next financial crisis and to develop tools to help policymakers and financial institutions become better prepared. 

Twitter hashtag: #LSETheWealthEffect

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