Management Papers

Document Type

Book Chapter

Date of this Version

2010

Publication Source

Research in the Sociology of Organizations

Volume

30

Issue

A

Start Page

257

Last Page

279

DOI

10.1108/S0733-558X(2010)000030A012

Abstract

In this article, we examine the different causal chains leading to the crisis in the United States and around the world, emphasizing the market developments, political decisions, and organizational factors that led to the financial and economic meltdown. We argue that a series of political, regulatory, and organizational decisions and events prepared the ground for a major breakdown of financial and economic institutions, a “normal accident” that produced systemic reverberations across markets around the world. In the United States, political, regulatory, and organizational decisions made during the 1990s led to a situation of simultaneously high complexity and tight coupling in the financial system. The global economy also became more complex and tightly coupled during the 1990s, contributing to the rapid spread of the crisis across countries. We propose that solutions to the crisis will need to be tailored to the specific ways in which countries experienced the meltdown and the political preferences of interest groups and citizens. For the United States, the best approach would be to allow for a complex and innovative financial system but with a much reduced degree of coupling so as to avoid another financial normal accident.

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Date Posted: 27 November 2017