A most striking fact about the global financial crisis and its aftermath is how far from striking the policy response has been. That is a change from earlier economic history. For the past century and more, the deepest political and economic crises have produced transformational reforms. This time is different.
Franklin D Roosevelt’s New Deal was the epitome of crisis turned into opportunity. Within months of taking office in 1933, Roosevelt had taken the dollar off gold to reflate the economy, shut down and reopened the banking system after equipping it with deposit insurance, launched large public works programmes, radically regulated Wall Street and introduced a minimum wage. Social security, trade liberalisation, and housing policy reform soon followed.
The New Deal was exceptional in its hyperactivity, but other crises, too, have seen large-scale efforts to recast our economic systems. In the late-19th century, endemic financial instability and increasingly concentrated wealth and market power in the US led to a permanent income tax, a central bank, and an earlier (Theodore) Roosevelt’s trustbusting. After the second world war, a consensus in all western countries created the social democratic mixed economies many now seem to long for.