Were the extensive policy responses of many governments to the financial crises
of 2007–9 and the political events that have followed them exceptional? We show
that over the course of nearly 150 years, severe banking crises have become more
consequential for policy and politics in democracies than ever before. First, governments
have become much more likely over time to opt for extensive bailouts and
other policies aimed at wealth protection during crises. Second, the inclination of
voters to punish governments that are in office when crises occur has also increased
sharply over time. We argue that the main cause of both developments is the rise
of ‘great expectations’ among large segments of society in modern democracies
regarding public responsibility for the protection of wealth in the post-1945 era.
Especially since the 1970s, severe banking crises returned and have posed a growing
threat to this wealth and thus to the prospects of many households, including large
segments of the ‘middle class’. This rising ‘mass pressure from below’ on governments
to secure household wealth has provided an important source of pressure
on policy-makers to respond with increasingly costly bailouts, with powerful and
ongoing political consequences.