In his recent book The Bailout State: Why Governments Rescue Banks, Not People, political economist Martijn Konings argues that the contemporary state has become a standing source of guarantees, subsidies and backstops for capital. Government is no longer capitalist in the sense that it protects property rights or is easily infiltrated by moneyed interests (two logics long recognized by Marxists). Instead, public financial management itself has become deeply interwoven with the production of private wealth. Tracing the origins of the bailout state back to the era of welfare capitalism, Konings depicts the neoliberal period not primarily as a sharp reversal of or decisive break with Keynesianism but as a moment in the longer evolution of institutional mechanisms that socialize the downside risk of asset ownership and manage the resulting inflationary pressure with austerity policies.
Mona Khneisser spoke with Martijn Konings about the book:
Your book develops a new analytical history of American capitalism since the New Deal. To start, could you take us through the main elements of that narrative, including the distinctive periodization and turning points it suggests?
When it came to money and credit, the mid-twentieth century Keynesian revolution was incomplete: it did not establish public control over credit creation or disable the central bank’s deflationary policy levers. That greatly complicated attempts to use public spending to promote growth and employment – supposedly the centerpiece of the Keynesian program. From early on in the postwar period, therefore, Keynesians turned to supply-side policies, using public guarantees and tax breaks to influence private investment. Such programs gradually shifted the financial structure of the state from welfare towards wealthfare, but they were never effective in delivering inflation-free growth.
That of course became the rationale for the policy shifts of the late seventies and early eighties. The tendency of left-wing critics to engage the anti-state rhetoric of neoliberalism has often made it difficult to recognize what those policy shifts really did: they put the bailout-austerity dialectic on steroids, dramatically expanding the public safety net for asset ownership. The notion of neoliberal backlash has also made it hard to see that one kind of middle-class politics gave way to another (nowithstanding, or, perhaps more accurately, facilitated by rapidly growing inequality). The tide of capital gains that washed over the American economy enabled an asset-centered politics that experienced its heyday in the nineties and gave credence to the Clinton administration’s claims about the efficacy of its supply-side progressivism.
Since then, progressives have tried – and failed – to recapture the magic of the Clinton years. Following the bank bailouts during the Global Financial Crisis, the Obama administration turned to severe budgetary austerity, mistakenly believing that it held the key to a repeat of the roaring nineties. To prevent the American and global economy from sliding into a Second Great Depression, the Federal Reserve constructed a permanent edifice of financial backstops. Another asset boom ensued, but it could no longer drive generalized growth as property ownership had become too concentrated. Recognizing how austerity policies had contributed to economic stagnation, the Biden administration briefly experimented with a pre-neoliberal version of Keynesianism, but when that predictably gave rise to conflicts over institutional arrangements, it was unable to break out of the technocratic mold.
The Trump administration is not constrained by considerations of financial probity or personal integrity, so it is currently putting the bailout state to the political uses that it so obviously invites. Democrats, meanwhile, are trying to restore the ideological façade of that state by campaigning for central bank independence (from direct political interference, not from financial institutions) and supporting the backstopping of investment in growth technologies like AI. What they are studiously ignoring is something that MAGA has had much less difficulty intuiting: that financial sovereignty (whether authoritarian or democratic) requires control over the monetary architecture of contemporary capitalism.
A central provocation of the book is that the bailout state is not a break from Keynesianism but in important ways grows out of postwar Keynesian governance itself. What do you most want skeptical readers to understand about that claim, especially those on the left who still treat Keynesianism and neoliberalism as neat opposites?
The neoliberalism debate has gone through a few phases. Two decades ago, it was a concept to refer to a historical era shaped by free-market politics. Then there was a somewhat pedantic backlash, with scholars arguing that the world is too complex to be captured by such neat labels. In my own previous work, I have criticized such dismissal of the neoliberalism concept: ruling out that there is more at play than path-dependent complexity makes it impossible to put one’s finger on the deeper transformation.
But there has also been a stronger response that has bent the stick too far in the other direction. It has had a strong focus on the anti-Keynesian convictions of leading thinkers, the reactionary organizations that incubate them, and the stealthy way these ideas and actors have captured public institutions. It has also set up an overly stylized contrast between the oppressions of the neoliberal era and the relative democratic harmony of the early postwar period.
To my mind, an equally important transformation has to do with how mainstream actors have adjusted their thinking and operations, often in the full light of day. Taking just some of the most obvious challenges to any literal understanding of neoliberalism (i.e., the state is no smaller than it was, and principles of tight money and austere budgeting are applied in highly selective ways), you can understand much of that by tracing the evolution of practices and conceptions of macro-economic management. The key actors here are not necessarily neoliberals with a developed understanding of their political mission, but pragmatists and centrists who were managing problems like inflation in real time.
How Keynesianism remade itself in the face of the neoliberal challenge has in many ways been more consequential than any literal belief in free markets or the influence of neoliberals in government. That shift can be characterized in broad terms as the transition from neo-Keynesianism (the postwar synthesis of Keynes and neoclassical economics) to New Keynesianism, which is packaged in sophisticated economic models but at its core involves a belief in finance and tech as the drivers of growth and the need to configure government policy around them. Some would reject the idea that New Keynesianism is still Keynesianism, but the red thread here is the recognition of the stabilization imperative, i.e. the commitment to using fiscal, monetary and regulatory instruments to keep growth going and to prevent the economy from entering into the kind of deflationary spiral that caused the Great Depression.
In The Bailout State I try to show how that logic of macro-economic governance meant different things at different points. The defeat of attempts to legally bind the economic role of the state to social objectives (e.g., through a full employment guarantee) meant that stabilization policies came to revolve around subsidizing property and deflating wages. That tends to reproduce the artificial scarcity of capital that Keynes attacked, and over time the welfare state morphed into a wealthfare state. To the extent that the repurposing of public resources has been overseen by a bipartisan coalition, the problem is deeper than suggested by perspectives that focus on neoliberalism as a right-wing impulse. That is why Larry Summers plays an important role in the book: a politically middle-of-the-road character who has endless mainstream credentials, he has been one of the main architects of a regime of public generosity towards capital and austerity for the rest of the population.
Several reviewers suggest that one of the book’s strongest insights is also one of its most controversial ones: the concept of “bailout” may be doing a lot of work across very different mechanisms—backstops, guarantees, subsidies, tax breaks, lender-of-last-resort actions, and so on. How do you define a bailout analytically, and why is it useful to group these different practices together rather than distinguish them more sharply?
In the book I use the term “bailout” metonymically, i.e. as a way to refer to the broader configuration of guarantees, subsidies and backstops that governments offer business and asset owners. All of those mechanisms work in different ways, and I could certainly see the value in an analysis that carefully distinguishes among them. The reason I nevertheless group them together is that we often find it difficult to understand regressive risk-shifting as a core government activity. Instead, we tend to see discrete policy instruments and we assess their effects. That makes it easy to miss the bigger picture, i.e. how these different instruments and techniques are part of a pattern whereby the state reduces the risk exposure of some individuals and organizations and shifts it to others.
This is what Minsky’s model of capitalism allows us to understand with some degree of clarity: capitalism is not primarily a system of commodity exchange, but a network of debt connections that allows property to lead an abstract financial life while continuing to enjoy extensive political protections. So, I define “bailout” as the institutional immunization of property: allowing asset owners to enjoy the upside of risk exposure while shielding them from downside risk, essentially guaranteeing a minimum market value and return.
Your reading of Minsky seems to be doing major theoretical work in the book, particularly against both standard economics and parts of the post-Keynesian/MMT camp. What does Minsky let us see about bank money, state power, and capitalist stabilization that other frameworks miss?
During the Global Financial Crisis, mainstream commentators started referring to the “Minsky moment” as the point at which an over-leveraged pyramid of speculative debt comes apart. It aligns with the post-Keynesian perspective on Minsky’s contribution. Emphasizing the instability created by over-indebtedness works fine as an argument against fantasies of perfect equilibrium, but otherwise it’s a somewhat limited idea.
When I started reading Minsky himself (initially for my 2018 book Capital and Time), I realized that his key insights related not just to the build-up of market risk, but more importantly to how such risk is managed and socialized. Of course, such policies become themselves factors in encouraging market actors to pursue destabilizing strategies (“moral hazard”), which then require further stabilization. But these are not just objectionable policies – it’s how the system works and evolves at its most basic level. Minsky understood this so well because he did not think of finance in normative terms, i.e. how it is “supposed” to work separate from what it actually does.
Modern Monetary Theory (MMT) has gone beyond the somewhat mournful tone of the post-Keynesian critique of speculation and debt. It discerns clearly that economic policy is capable of violating its austerity tenets when too-big-to-fail interests are at stake, and it sees this as evidence that there are no technical reasons why governments cannot finance projects based on social and democratic, rather than economic, value. Minsky was very sympathetic to the MMT version of Keynes (i.e., “anything we can actually do, we can afford”). But he also understood that making value creation a public matter requires broader transformation, not a simple policy fix.
Minsky considered chartalism (i.e., “money as a creature of the state”, in Lerner’s words) as oddly analogous to orthodox conceptions of money. As much as the former defines itself in opposition to the latter, both subscribe to the notion that a monetary standard can be defined from outside the system of economic interaction. In the book I argue that it was Keynes’ earlier affinity with chartalism that made him receptive to more orthodox conceptions of money (leading to neo-Keynesianism). Both perspectives struggle to understand money as arising out of the interaction of balance sheet units and the way banks intermediate that dynamic.
Instability will inevitably arise in a system where private property and finance are allowed to mix freely, and beyond a certain point that will need to be managed by public risk socialization. The liquidity-producing role of banks (often performed by institutions that we don’t think of as “banks”) is crucial here – without their extremely leveraged balance sheets and ability to create money ex nihilo, volatility could not be so pronounced. As long as we don’t take aim at that system, we are bound to get caught in the pernicious dialectic of bailout and austerity. Minsky already saw it at work during the 1950s, and the neoliberal era is not comprehensible unless we see it through that lens: a dramatic expansion of the bailout state, with the inflationary pressure that this inevitably creates managed with monetary and fiscal austerity.
In the current moment, heterodox economists seem to be losing sight of that logic. The claim that inflation is driven by specific supply-side shocks that we need to analyze empirically has become very prominent in short order. That is of course a legitimate argument to use against the orthodox insistence on wholesale deflation, but it risks losing sight of the systemic dimension. Deflationary policies never target what caused the problem, but that’s the point: they serve to shift the burden of adjustment onto constituencies that have neither caused nor benefitted from inflationary pressure.
Where would you situate The Bailout State in relation to the longstanding Marxist instrumentalist–structuralist debate on the nature of the capitalist state? Is the bailout state mainly a case of finance capturing the state, or of the state doing what it has to do to keep financial capitalism alive?
This is an old but important debate that got sidelined rather than resolved. In one sense, The Bailout State argues strongly against the notion that we can understand the state’s tendency to act on behalf of capital as a result of its “capture” by specific groups of interests. However, the structuralist approach to state theory has a tendency to become too abstract: if the state is bound to the reproduction of capitalist social relations or the promotion of accumulation in “organic” ways that that do not require constant enforcing, the structuralist approach (e.g. as formulated by Poulantzas) does not really provide that.
As a way out of this stand-off, I have often relied on the “form-theory” or “state derivation” approach, which tries to understand how the institutional forms of the liberal state are themselves constituted by and constitutive of capitalist social relations. But that approach too can be highly formalistic: how is such “form-determinism” to be understood exactly in a way that does not reproduce the problem of more conventional, causal ways of thinking? There are two ways out of that conundrum: abstracting the problem further (“Open Marxism” does this) or pursuing the idea in historical terms (as done by “Political Marxism”). The former has had limited pay-off. The latter has mostly ignored the theoretical problem, taking too literally the idea of a separation of politics and economics – so that the reality of the bailout state poses a major conceptual challenge.
Again, this is where Minsky’s thinking offers a vantage point that prevents one from having to be constantly surprised by history’s refusal to follow particular laws of capitalist development. But, to keep it a little closer to the terms used by state theory: more recently, I have come to realize that similar ideas were already articulated in Simon Clarke’s work (in particular his book in Keynesianism, Monetarism and the Crisis of the State), even if not always in a systematic or consistent way (and even though, in 1988, and much like Minsky, he had difficulty seeing beyond the rhetoric of neoliberalism). He never was fully on board with Open Marxism or Political Marxism, and instead his work is a very profound analysis of how the state operates to shield property – no longer according to a feudal logic, but in a world where property becomes a legal abstraction and can shape-shift to take advantage of financial opportunities. Without the state, Piketty’s “r>g” law cannot exist.
Classical political economy provided the state with a guide for producing such immunity, at the same time as it obscures that is what happens. At the very moment that capitalist property breaches its premodern constraints, the fear of capital as an irrational phenomenon gives way to Adam Smith’s image of the market, an impersonal mechanism that translates, without grace or favor, contribution into reward – a republican understanding of the economy that neoliberalism has revitalized. More clearly than others, Clarke saw that Marx’s Capital was not a critique of the market as such, but of the institutions that underwrote, materially and ideologically, the expansion of capital.
One of the most provocative aspects of the book is the idea that the bailout state is sustained not only by elite interests but also by broader middle-class implication through housing, pensions, and asset ownership. How should we think politically about that implication? Does it make opposition to the bailout state more difficult than a simple Wall Street-versus-Main Street story suggests?
I appreciate the term “provocative”, because I occasionally have to defend myself against allegations of credulity: as billionaires are rampaging through the government with impunity and the administrative state is being demolished before our eyes, how much sense does it make to say there is a middle-class politics to any of this? At a time when mainstream liberal-democratic institutions are under pressure, it is understandably tempting to overlook their flaws and limitations and to focus on defending them against the fascist far right. But such unthinking defense of institutions that are responsible for escalating inequality is of course what has allowed MAGA to flourish in the first place.
It seems likely that, before MAGA is in a position to truly de-activate democratic institutions, Democrats will get a few more chances to turn the ship around. But the party mainstream seems only interested in rehabilitating a middle-class supply-side politics that acquired some plausibility during the nineties but has since consistently failed to deliver. That program was central to the Obama administration’s understanding of its task, but it was not able to start another cycle of capital gains – asset ownership had become too concentrated. However, the fact that we can now see fairly clearly what happened during that decade – i.e., the Federal Reserve’s attempts to prevent a second Great Depression was responsible for the growth of the billionaire class – does not point to a clear political strategy. The more the bailout state fails to deliver broad-based prosperity and the more its circle of beneficiaries contracts, the more anxiously middle-class politics clings to what few benefits remain on offer.
Here too, I think that the neoliberalism literature has become too focused on identifying the people who did this to us, decoding their plans, and exposing how they benefitted. That diverts attention from the more important question of what kind of political fantasies and imaginaries have allowed this to happen. One of the key strengths of neoliberalism has always been its promise to rehabilitate republican values of fairness and institutional neutrality. Left-wing critics have long had difficulty recognizing the affective purchase of that promise and the legitimacy and longevity that neoliberalism has derived from it. Now that the right has turned on the institutions of liberal democracy, that approach may finally seem vindicated – but I think that would be the wrong lesson to draw. Instead, we need to think about the contradictions of democracy in a critical, non-reactionary way.
Notions of neo-feudalism are enjoying considerable currency right now, but (to the extent that they have analytical ambition) they tend to be rooted in the misconception that capitalist property ever was or could be part of the market system in the same way as a regular commodity is, its value principally determined by the market logic of demand and supply. That’s the fantasy that The Bailout State is pushing back against: the differentia specifica of capitalism consists not in a transition from feudal to economic property, but in a financialization of property that is as thoroughly politically constituted as it ever was. That is the only way you can understand the existence of a risk-free return and its role as the cornerstone of the system – it’s not excess but foundational to how capitalism works. Feudalism did not offer such an institutional facility.
When you look at capitalism as a global system (as we should), the Western propertied class appears as a key part of the rentier class. Many people merely looking for a modest retirement are driving a capitalist system that has always been savage outside the West but is increasingly predatory there as well. What does one do with that element of structural implication? And what can you do inside a tightening net of complicity that is not just anxiously self-protective? Probably the greatest victory of neoliberalism as a system of thought is that we have almost no vocabulary anymore to think about these issues.
The book points toward the “democratization of banking,” as both the horizon of the project and an unresolved question. What would democratization mean in institutional terms? And where do you see the real political openings for such a project today?
I think we’re seeing an interest in “real utopias” and “feasible socialisms” coming back, and there are many plans circulating that outline protocols to make the financial system more transparent, egalitarian or democratic. The important contribution of MMT has been to point out what needs socializing: not just “private property” or “investment”, but specifically public capacities for influencing credit creation and selectively stabilizing leveraged balance sheets. The problem is that it trivializes the politics that emerges from that insight and ends up looking for technical fixes – which reproduces a very common problem in left-wing thinking about alternatives.
Many progressive proposals only become actionable if we get past some deeper blockages. In terms of political strategy, the reliance on artificial scarcity as a way to maintain a middle class is that it erodes rather than builds solidarity – problems are solved constantly by tightening the in-group. That over time inevitably leads to some variety of authoritarianism or fascism.
That is visible in an almost farcical way in the affordability crisis: as much as its distinctiveness is widely acknowledged (i.e., budget pressures are not limited to households without assets or income but go to the heart of the middle-class experience), mainstream proposals continue to center on the possibility of propping up the very kind of supply-side politics that has stopped working. Democrats rallying around the “abundance” agenda is probably the most prominent example of that. It’s a jargon that serves to preemptively rule out any measures that could make more than a superficial difference: by its logic, nothing can be done unless it is actively endorsed and financed by those constituencies whose interests are most tightly bound up with the perpetuation of the existing state of affairs.
The way I read Minsky, he was in favor of the idea of a full employment guarantee not because it was a policy that would fix the system, but precisely because it could not be accommodated by the system. It would strain the existing framework, bring to light how key institutional parameters constrain our options, and so empower the public to make new choices.
The Mamdani agenda is exciting for similar reasons. His administration is implementing measures against which the mainstream has a thousand perfectly valid counterarguments. So, at some point, the tensions generated by Mamdani’s policies will reach a crisis point – he will either need to retreat or effect a broader transformation. What his administration seems to be banking on is that, by that time, his policies will have broadened support for a progressive program and built the kind of solidarity that is needed to win battles over key institutions.
An earlier version of this interview appeared in the Spring 2026 Newsletter of the Economic Sociology Section of the American Sociological Association.
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