The Crash That Failed

The historian G.M. Trevelyan said that the democratic revolutions of 1848, all of which were quickly crushed, represented “a turning point at which modern history failed to turn.” The same can be said of the financial collapse of 2008. The crash demonstrated the emptiness of the claim that markets could regulate themselves. It should have led to the disgrace of neoliberalism—the belief that unregulated markets produce and distribute goods and services more efficiently than regulated ones. Instead, the old order reasserted itself, and with calamitous consequences. Gross economic imbalances of power and wealth persisted. We are still experiencing the reverberations.
In the United States, the bipartisan financial elite escaped largely unscathed. Barack Obama, whose campaign benefited from the timing of the collapse, hired the architects of the Clinton-era deregulation who had created the conditions that led to the crisis. Far from breaking up the big banks or removing their executives, Obama’s team bailed them out. None of the leading bankers whose fraudulent products caused the economy to crash went to jail; criminal prosecution took a back seat to the stability of the system. Obama’s tepid program provided just enough stimulus, via a modest public-spending program and cheap unlimited credit for bankers, for a slow recovery. But the economic security of most Americans dwindled, and the legitimacy of the system was called into question. One consequence has been the rise of the far right; another is Donald Trump.