I saw this tweet by Alex Imas, who’s a great follow for all things economics and behavioral finance.
For some reason, I’ve been utterly fascinated by the 2008 financial crisis. It was the first serious economic crisis of my lifetime, and while it mostly applies to Western economies, if you look closely at many of today’s problems, you can still see the fingerprints of 2008 everywhere. It’s not the root cause of everything, but it’s certainly a contributing factor to many of the issues Western societies are grappling with today.
It’s something I’ve been thinking about for years, and my interest was further deepened by Adam Tooze’s Crashed—a phenomenal book that I think is a must-read.
The Bailout Asymmetry
Coming back to Alex’s tweet, it sparked a lively back-and-forth on Twitter. I highly recommend checking out the replies and quote tweets. One of the most thoughtful responses came from Philippe Lemoine, who pointed out that there are other contributing factors beyond the financial crisis. I completely agree—monocausal reasoning is always dangerous, especially when it comes to an epochal event like 2008.
Here’s what Alex Imas wrote:
A key principle of capitalism is that firms/individuals are rewarded for bearing risk by obtaining a higher reward. In 2008, we saw firms who had taken completely irresponsible levels of risk be bailed out with taxpayer money. For years they profited from their investments, but to (even not so careful) observers, it became obvious that they did not actually bear the costs of the risk.
But what about the people who were sold the increasingly complex products, what happened when they couldn’t pay? They were not bailed out. Some could re-negotiate terms, but many just simply lost their livelihoods.
Slowly but surely, as this sank in, I think this caused a fundamental shift in how people perceived “capitalism” in this country. Commentators and influencers exploited this shift, writing essays and op-eds on how much better socialism—which has been a disaster everywhere it’s been tried—as an economic system.
The Broader Context
Philippe Lemoine’s response adds important nuance:
I agree with the diagnosis of why people have soured on capitalism, at least I think it’s a plausible hypothesis though I doubt it’s the whole story and I suspect there are other factors like the erosion of gatekeeping by social media that allowed anti-capitalist arguments to get more exposure, but it’s not obvious what a practical solution could be.
This is exactly right. The 2008 crisis didn’t happen in a vacuum, and its effects didn’t unfold in isolation. The rise of social media, the erosion of traditional gatekeeping, the growing wealth inequality, the stagnation of wages—all of these factors compound and interact with the perception that capitalism became “socialism for the rich, capitalism for the poor.”
Why This Matters
What makes this conversation valuable is that it refuses easy answers. Alex identifies a real shift in perception. Philippe acknowledges it while pointing to complexity. Neither pretends there’s a simple fix.
That honesty is rare in economic discourse, especially on social media where everything gets flattened into hot takes and tribal signaling.
A Historian’s Perspective (ChatGPT)
I asked ChatGPT for its opinion on Alex’s thread, and here’s what it said:
Short answer: I think Alex is mostly right about 2008 as a psychological break, but as a historian I’d say it’s only one piece of a larger legitimacy crisis for capitalism, and his “solution” (just stop bailing out firms) is necessary but nowhere near sufficient.
Was 2008 the break in how people see capitalism?
For a big chunk of the West, especially younger people, yes, 2008 is a watershed.
Before 2008, you had the post–Cold War “end of history” mood and a relatively strong belief that market capitalism was the winning model. After 2008, people watched huge financial institutions get bailed out with public money while the same system did not bail out ordinary households losing homes, jobs, and savings.
The “deal” of capitalism — take risk, get reward; fail, bear the cost — suddenly looked like a lie. It looked more like: Profits are private, losses are socialized.
That’s devastating to legitimacy. 2008 made it brutally obvious that the game was rigged at the top. The bailouts created a moral fracture between what capitalism says it is and how it behaved in practice.
But as a historian, I’d add: 2008 didn’t create discontent from scratch; it crystallized and amplified trends already in motion: wage stagnation, deindustrialization, rising costs of housing/healthcare/education, and a sense of precarity. In that context, 2008 felt like the mask coming off.
On “people turned to socialism”
Alex says commentators exploited the disillusionment, selling socialism, which has “been a disaster everywhere it’s been tried.”
As a historian, I’d nuance that: Soviet-style central planning? Yes, disaster. Social democracy / mixed economies? These are also capitalist systems, just with stronger social insurance and regulation.
A lot of the “souring on capitalism” is not people wanting to abolish markets; it’s people wanting less cronyism and capture, more social safety nets, fairer distribution, and limits on corporate power. People use “socialism” lazily, but what many actually want looks closer to regulated capitalism with robust welfare.
The historian’s verdict
If I put on my “long-view historian” hat:
- Alex is right that 2008 was a turning point in how people view capitalism. It exposed a gap between ideology and practice.
- He is right that capitalism’s core claim—risk and reward—was visibly violated in a morally corrosive way.
- He is also right that capitalism remains extraordinarily good at innovation and growth.
But the “souring on capitalism” is not just about bailouts; it’s about decades of rising inequality, insecurity, and perceived unfairness. His fix—no public backstopping of firms—is necessary for legitimacy, but nowhere near enough. Without addressing power, inequality, and safety nets, you still have a system people experience as rigged.
In one line: 2008 didn’t kill faith in capitalism; it revealed that what many people lived under wasn’t really the textbook capitalism they’d been sold, but an elite-insulating variant — and unless that gap is addressed at the level of institutions, rhetoric about “free markets” will keep ringing hollow.
I’ve linked the relevant tweets above. Do check them out. The thread and responses are worth your time.