Businesses fail constantly. Internal or external factors can cause a private business to eventually go bankrupt and cease to function. And the American public knows this, and has a general knowledge of how the capitalist system works. This is why when the large banks failed in 2008, much of the public was confused by the ensuing TARP bailout. Why do certain businesses get a free pass when they fail (in this case by their own doing) and others do not? The phrase “too big to fail” arose as a soundbite explanation, and was instantly attacked and mocked by large sections of the public. Many thought the phrase was untrue, and the bailout was simply the government exercising too much power. In fact, the government did not have enough power.
Susan Strange in her article lays out how governments are decreasingly powerful. The government control of the market is waning, and the consolidation and increasing complexity of market tools make regulation difficult. The banks that failed in 2008 had such influence in the global market that their survival was directly tied to the existence of the market as a whole. A total bank failure would have shut down the entire global economy (it almost did anyway) without any action from the government. The government had to step in at the last second and save the banks, it had no choice. The government had been neutered by lax regulation and an economic system that was integrated entirely into the banks. Strange stated in 1996 that “the diffusion of authority from national governments has left a yawning hole of non-authority”, in 2008 we saw the consequences.