Why did the Great Recession Fail to Produce a New New Deal in the USA?

Abstract

In a manner remarkably similar to the decade of the 1920s, inequality soared for over three decades prior to the crisis of 2008, provoking in both instances financial crises and severe macroeconomic dysfunction. The 1930s depression witnessed a strong egalitarian political reaction to the laissez-faire ideology that had justified the inequality-generating institutional changes of the 1920s, resulting in a New Deal that launched four decades of institutional change that considerably improved general welfare and lessened inequality. The Grand Recession and its wake, by contrast, has not put that same ideology seriously into question, malaise becoming expressed predominantly in a form of rightwing populism, behind which inequality continues to explode. Why such radically divergent reactions to severe hardship? This chapter explores three foremost reasons for why ideology legitimating inequality survived practically unscathed during the later crisis: First, the crisis beginning in 2008 proved to be less severe, in part due to wiser public policy responses. Second, the welfare net that developed in the wake of the earlier crisis softened the degree of hardship accompanying the later crisis. And third, the elite’s command over ideology had become more sophisticated and thus capable of surviving the later crisis essentially intact.