By Ferdinand Folland
The financial crisis that hit the European Monetary Union (EMU) is a case which illustrates both the benefits of Historical Institutionalism (HI) and its limitations. Since its inception the EMU has strived for a more interconnected European economy. In attempting this through the EMU and various other treaties that followed, both before, during and after the crisis, it has also created limitations for political actors in terms of fiscal and monetary policy. With sunk costs going into such interstate institutions and continued belief in the ideals of the EU and EMU this severely limited the actions of political actors. Verdun shows this in her paper by going through the actions that were committed, in particular the rise of new institutions, in the wake of the financial crisis.
Verdun's paper highlights the benefits of looking at problems through the theoretical lens of HI. By looking at the design of the EMU it provides insight into some of the origin of the problems Europe experienced and the nearly path dependent sequence of events that follows. Thus she highlights the importance of historical and institutional context, and the value in viewing history not as a series of independent events. One aspect which is not covered extensively enough is the political process which occurred in affected countries. The unfortunate result of focusing too much on institutions is that it becomes easy to neglect the societal explanations when embedded political actors, such as politicians, and interest groups ranging from bottom-up populist movements to powerful actors from the financial sector interact. It is possible for HI to incorporate a societal framework into its focus on institutions, however it is a regrettable outcome that a tradition relying on institutional explanations at times forget to analyse the actors within them.