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book spotlight: american bonds – how credit markets shaped a nation by sarah l. quinn

Schumpeter, in an essay on fiscal sociology, once said that if you want to know what a society really values, look it spends in the budget and who it taxes. Sarah Quinn would add, “sure, but you have to pay for it somehow.” American Bonds is a very interesting historical sociology of how the American state used credit markets to manage economic and political problems. The book examines multiple cases of how credit markets were made, and unmade, in the 19th and 20th centuries. If the book has a core argument, it might be that where ever you see political development, credit markets are not far behind.

The book itself is fiscal sociology. It examines things like the history of credit expansion after the 1873 crash, mortgage bundling before the Great Depression, and the rise of securitization in the late 20th and early 21st century. The lesson is an important one: credit markets are a tool for state making, in good and bad ways. When you read 19th American history, you see this out of the corner of your eye – all that home building was financed by someone. Of course, in the Great Depression, credit markets take center stage, and they also did in the Great Recession of 2007. In this way, Quinn’s book is an important to economic and political sociology. You can’t understand American political development unless you understand how credit is made and distributed.

I am not an economic historian, so I can’t assess whether Quinn reads the evidence right or wrong on a specific historical episode. Instead, I’d like conclude by stepping back and thinking about the sorts of things she describes from a political economy perspective and tease out some normative points. Theoretically, she relies on a Polanyi style frame. Markets uncontaminated by politics are not reasonable, instead the history of markets is the history of politics. This leads her in the concluding chapter to side step the issue that state actors may have bad effects. She is odd since earlier chapters describe how state managed lenders enforced racial inequality and may have laid the groundwork for the Great Recession. My intuition is that she doesn’t want to lay the blame on state institutions because she doesn’t to align her self with laissez-faire defenders, which she critiques at various points in the book.

Instead, I would probably borrow a few ideas from outside economic sociology to think about bad faith state actors. First, I’d appeal to the Madisonian idea that states are just normally populated by bad actors, like lenders with anti-Black prejudice. That’s why we need checks and balances in a constitutional framework. Similarly, I think economic sociologists might think what checks and balances exist to counter credit markets and state run agencies. Second, if the issue is that cheapening credit leads to over investment and busts, then might there be a technocratic solution, in the same way the Fed tries to hit certain inflation targets or to be “neutral” in terms of the money supply? It’s an interesting thing to consider.

So overall, very good book and strongly recommended for anyone interested in economic sociology.

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Written by fabiorojas

July 3, 2020 at 12:19 am

Posted in uncategorized

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