In the end, the Great Recession was attributable to greed and negligence. Greed, of course, is always with us, and is the engine that drives the capitalist train. The negligence was on the part of risk managers, ratings agencies, and to some extent, the government and its regulatory agencies. That part was not inevitable.
The responses by the American and European governments were fundamentally different. In the US, the response of the Obama administration was based on Keynesian principles, and while you could certainly argue that it was too weak, and that Obama had his FDR in 1937 moment in 2010, the economy recovered fairly quickly, unemployment fell, and the Democrats won in 2012. The Trump victory in 2016 was accomplished with three million less votes than Clinton, and was due more to the perceived weaknesses of the Democratic candidate and the normal bored dissatisfaction with eight years of Democratic rule than the desire for a counterrevolution. In Europe, on the other hand, austerity was the order of the day, recovery was halting, and the governments paid the price for it. Even there, however, the growth of illiberal democracy was more attributable to issues with immigration from the Middle East and Africa than to slow growth.
To put it another way, unemployment was at four percent in the US at the time of the 2016 election. Do you believe the result of that election would have been different if a few bankers had gone to jail in 2010, or if a faster recovery (with more stimulus) had caused the unemployment rate in 2011 to be a point or two lower? I don’t think so; people vote based on where they are now, not five years ago.
And so, in response to my question, the bad guys don’t always have to win after a financial crisis; after all, FDR won in 1936, 1940, and 1944. The success of right-wing populists over the last few years wasn’t primarily due to the Great Recession. That said, the following things annoyed me then, and still do:
- I don’t agree with the critics of Paulsen, Bernanke, and Geithner, who complain that their successful efforts to prevent a collapse on the scale of the Great Depression just led to more inequality. That’s true, but preventing inequality was not their job; they already had plenty on their plate. That was up to the Obama administration and Congress.
- Because greed and negligence were pervasive in the system, it really doesn’t bother me that no bankers went to jail. What does piss me off, however, is that no one from Wall Street ever expressed any remorse or held himself accountable for what happened to the nation as a whole, and no one showed any gratitude for the bailouts. Practically the minute the immediate crisis was over, Wall Street was whining about overregulation and a lack of respect and working to undermine the new system even though the market was soaring. They should have considered themselves lucky under the circumstances that they weren’t nationalized in exchange for the bailouts.
- A fairly large segment of the American public permitted itself to be persuaded that the real problem in the country was with poor people and illegal immigrants, not the people who actually caused the economic mess. This, of course, was stoked by GOP propaganda. As a result, the populist anger of 2010 was, in the longer run, actually turned into a vehicle controlled by the financial institutions who created the problems in the first place for the purpose of dismantling the new regulatory system. In that sense, the bad guys truly did win, at least until the next crisis, at which time the GOP will have great difficulty swallowing its past rhetoric and supporting any bailouts, and the country as a whole will suffer for it.