Strange was right. In August 2008 a black swan moment arrived: Wall Street stood on the precipice of financial meltdown, fuelled by subprime mortgages ladled out to ‘ninjas’ (No Income. No Job). These ‘liar loans’ would never be repaid; in some cases, the mortgagors failed to make a single repayment. Even doyens of the free market like former Federal Reserve chairman Alan Greenspan began to speak of nationalising major US banks to effect an ‘orderly restructuring’. The vicious web of interdependence meant that Europe, at first protesting immunity from the subprime chaos, could not escape the crisis of contagion.

Worse still, briefly – terrifyingly ­– global credit markets froze. Banks recognised, belatedly, that they were all operating under the same assumptions, built on a hugely flawed model. As the 160-year-old Lehman Brothers sank under the weight of US$800 billion in debt and went into liquidation, even the bankers began to wonder: was Armageddon finally here?

As late as January 2008, the US Federal Reserve had not seen it coming. ‘The Federal Reserve is not currently forecasting a recession,’ chairman Ben Bernanke intoned, with his telescope firmly fixed to the blind eye. This was not for want of warnings. Between 2001 and 2008 the Bush White House called on Congress to reform Freddie Mac and Fannie Mae (government-sponsored enterprises) on twenty-eight occasions. Democrats and the GOP shared the blame for their inactivity. But it was President George W. Bush who fought congressional Republicans, joined with the Democrats, and authorised the US$700 billion Troubled Asset Relief Program (TARP) in October 2008, in consultation with presidential candidates Barack Obama and John McCain.

Europe sniffed condescendingly with a touch of Schadenfreude. This was a North Atlantic crisis, the product of Anglo-Saxon financial stupidity. By October the United Kingdom had virtually nationalised and bailed out a large part of its financial sector with over £130 billion in taxpayers’ money and £1 trillion in commitments. Swiss banks like UBS had admitted subprime exposure earlier in the year. In December 2009 the Greek government entered the confessional, forced to admit its published debt and deficit figures were pure bunkum that had been bastardised for a decade. The Eurozone crisis had begun: it would engulf Portugal, Ireland, Italy, Greece, and Spain (the so-called ‘PIIGS’). The reality of imprudent German and French lending to peripheral Europe became clear: giants like BNP Paribas and Deutsche Bank, together with the German state banks, had bad loans with leverage worse than Bear Stearns. Worse than Lehman’s. Angela Merkel and Nicolas Sarkozy ordered a rescue; the banks took a haircut, but the PIIGS paid the price. Austerity was the cost of bailing out the Westphalian capitalists.

Naturally, in Crashed the Greek tragedy takes centre stage, with Adam Tooze’s Columbia colleague, former finance minister Yanis Varoufakis, cast as the Sisyphus of this particular melodrama. Varoufakis sought a nuclear option – €30 billion in Greek bonds held by the European Central Bank (ECB) – that could be used as leverage by Athens during Greece’s turbulent IMF default in June 2015. Varoufakis engaged in a last-ditch game of chicken with the ECB. Did it work? It raised hackles and the alarm in Brussels and Frankfurt, but Merkel did not blink. By July, Greek Prime Minister Alexis Tsipras had lost his nerve, Varoufakis had lost his job. Months later, Merkel became Time’s Person of the Year.

Yanis Varoufakisin Moscow, 2015 (photograph via Flickr)

The 2008 crash swept Obama to power, but the new president did not expend his considerable political capital. Instead, Obama consolidated Bush’s TARP program and pumped further fiscal stimuli into the economy. Meanwhile, the GOP sought to restore the pre-2008 system, or at least obstructed its reform, watering down the Dodd–Frank Act, which was designed to separate commercial and retail banking. Obama, the harbinger of ‘change’, metastasised into capitalism’s saviour. Obama had been elected by Main Street to discipline Wall Street, but the deep irony was that while the ninjas lost their homes, the bankers lived to lend another day.

In 2008, Bernie Sanders’ lonely voice in the wilderness called for the bankers to be jailed. Sanders would make a dramatic run against Hillary Clinton in 2016, but by then it was too late; Trump had usurped critical fragments of Sanders’ base, with twelve per cent of Sanders voters switching to Trump. The similarities were obvious: Sanders and Trump were singing the same song in different keys. However, the weapon the Democrats chose to wield against Trump – Hillary Clinton – was the polite face of brutal globalisation. The Clintons and Obama had endorsed, not merely evangelised, free trade, NAFTA and China’s integration into the World Trade Organisation. Hillary Clinton’s belated disendorsement of her own initiative – the Trans-Pacific Partnership – did not only appear unconvincing; it looked desperate. Effectively, both Trump and Sanders had won by transforming America’s political discourse.

Tooze’s thesis is clear: complacent Democrats viewed Obama’s 2012 electoral triumph as the consolidation of their ethical and managerial superiority over the GOP, which was the author of the economic catastrophe. But this thin veneer of victory masked the separation of the Obama–Clinton Democrats from their political base. In 2006, in a little-known speech, a prescient Obama had warned the Senate of a ‘dangerous and growing inequality’. A decade later, as Trump swept the electoral college over a hapless Hillary Clinton, Obama had learned little and understood even less; although US employment recovered rapidly during his second term and exports (2009–13) grew by almost seventy per cent, large fragments of the white working class – the ‘shy voters’ – silently, inevitably, deserted the Democratic Party. Seven million who had voted for Obama quietly switched to Trump. They credulously lapped up the Tea Party’s rhetoric, the trailblazers for the Trump campaign. Obama and Clinton may have spoken endlessly about working-class voters; it was unlikely they actually knew any.

President Obama at a campaign rally for Hillary Clinton in Cleveland, October 2016 (photograph by Erik Drost/Flickr)

How the United Kingdom and EU confronted the subprime and Greek crises, respectively, stood in stark contrast. Bush, Obama, and Bernanke recognised that the lessons of 1929 and 1987 were to ensure massive amounts of stimuli in the form of liquidity for the banks to prevent a meltdown of the financial system. Only TARP, Federal Reserve purchases of Treasury debt, plus three rounds of quantitative easing (QE, the Fed’s bond-buying program) would reflate the stock market and the US economy. Throughout 2009–14, the economy binged on a dollar glut, as US$4.5 trillion in QE flooded the market. But in the Eurozone, austerity drained the PIIGS, bludgeoned growth, and sent unemployment into the stratosphere. Finally, Merkel’s arm was twisted; the ECB commenced its own QE program in 2015 to boost EU growth. Some €2.4 trillion later, it remains in place.

‘Why save the bankers?’ asked Thomas Piketty, France’s best-selling theorist on inequality. Tooze shows that the great neoliberal experiment, co-authored by Margaret Thatcher and Ronald Reagan, and consolidated by Bill Clinton, was rescued from almost certain collapse by unlikely bedfellows, comprising Bush, Merkel, Obama, and Gordon Brown. Despite his manifest illiberalism, Trump turned out to be no different; within weeks of the 2016 election, he had nominated half a dozen Goldman Sachs alumni to his administration. Déjà vu all over again.\