From Low to Great Expectations: Banking Crises and Partisan Survival Over the Long Run

Abstract

How have banking crises affected the survival prospects of political incumbents over the long run? Unlike existing studies, we explore how changing societal expectations concerning how incumbent governments should prevent and respond to crises have reshaped the relationship between crises, institutions, globalization, and politics. We argue that the emergence after 1945 of citizens’ “great expectations” concerning crisis mitigation sharply raised the stakes for incumbent governments in many countries. We test this argument by utilizing a new dataset of 20 developed and developing countries since the early nineteenth century, and show that the survival of political incumbents after crises became increasingly dependent on the perceived ability of governments to respond effectively to them. We also show that the emergence of great expectations was a precondition for the emergence of other factors commonly held to intermediate the political impact of banking crises, including “clarity of political responsibility” and economic openness.

Keywords: financial crisis, banking crisis, political survival

JEL Classification: P16, F30