From The Great Piggy Bank Robbery, Warner Brothers Pictures, 1946
“You never want a serious crisis to go to waste,” Rahm Emanuel, then chief of staff to President-elect Obama, said in November 2008, describing the opportunities for reform presented by the financial meltdown. The day of believing in the unchecked rule of markets was over. Since the convulsions triggered by the collapse of Lehman Brothers on 15th September that year, everything had changed, we were told.
But three years later, very little has changed. Not only are investment banks back to business as usual, they have successfully transferred most of the consequences of their own failure to governments and the rest of the economy. Governments have assumed public and private debt. Three years ago the mortgage market seemed to be the source of the problem; today’s crisis is perceived as originating in sovereign debt. Europe and the United States both suffer from a continuing malaise, in which problems with their roots in the financial sector overshadow the activities of ordinary businesses. If the 2008 crisis was an opportunity for fundamental reform of the system, as Emanuel suggested, it did indeed go to waste.
When the crisis first hit, the political right initially floundered. Free market ideologues struggled to rationalise the public subsidy of capitalism’s most aggressive institutions. Only later did they devise an explanation: events that superficially appeared to be the fault of greedy bankers and market dysfunction were, of course, the fault of government. They were the result of negligent regulation, the promotion of home ownership, and loose monetary and credit policies. The public, not convinced by this account, remains bemused and angry.
The political left offered no diagnosis or new ideas, and it gained no electoral advantage. Instead, across Europe, the parties that had waited a century for capitalism to collapse under its own contradictions congratulated themselves that such collapse had been averted by the injection of incredible amounts—trillions of dollars—of taxpayer funds into the banking system.