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This article argues that the financial crisis has brought to the surface a series of dilemmas that have their origins in the declining affluence of the U.S. economy in the late 1960s and 1970s. When growth faltered beginning in the late 1960s, policymakers confronted difficult political choices about how to allocate scarce resources between competing social priorities. Inflation offered a means of avoiding these trade-offs for a time, disguising distributional conflicts and financing an expansive state. But the “solutions” that inflation offered to the end of growth became increasingly dysfunctional over the course of the 1970s, setting the stage for the turn to finance in the U.S. economy. Paradoxically, the turn to finance operated as the functional equivalent of inflation, similarly allowing policymakers to avoid difficult political choices as limits on the nation's prosperity became more constraining. But the turn to finance no more resolved these underlying issues than did inflation, and as a result the recent financial crisis likely augurs the return of distributional politics to center stage in American political and social life.

Julia Balogun is the Professor Sir Roland Smith Chair in strategic management at Lancaster University Management School (UK) and a fellow of the Advanced Institute for Management (AIM). Julia's research and consulting centers on strategy development, strategic change and transformation. She has a particular interest in how large corporations transform themselves to both retain and regain competitive advantage in the face of declining performance and is increasingly interested in how this achieved in multinational corporations. She adopts a sociological perspective to explore strategizing in organizations, and is convenor of the EGOS standing working group on Strategy as Practice and one of the founder members of the new Strategizing, Activities and Practice Interest Group at the Academy. Her research has been published in journals such as Academy of Management Journal, Journal of Management Studies, Organization Studies and Long Range Planning. Julia serves on the editorial boards of several leading journals, including Academy of Management Journal, Organization Science, Journal of Management Studies, and Long Range Planning.