The faces of liberal capitalism: Anglo-Saxon banking systems in crisis?

The recent financial crisis has severely shaken confidence in the conventional wisdom of economic liberalism, giving rise to debate about the appropriate direction of theory and policy. In this context, the sharply divergent experiences of the four main Anglo-Saxon banking systems suggest that the crisis may not so much be one of liberal capitalism per se as it is of the neoclassical variety that characterises the British and American systems. Whereas these banking systems were very badly affected by the crisis, the Canadian and Australian systems were not. Our analysis suggests that this can be explained by differences in the way that economic liberalism was interpreted and translated into policy in the four countries during the period preceding the crisis. It also suggests that broad classifications of national business systems into 'liberal market' and other varieties of capitalism do not capture their inherent diversity, and that financial market liberalisation does not necessarily lead to instability, particularly when it is accompanied by appropriate supervision and prudential regulation. Copyright The Author 2012. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press.