There’s been quite a strong response to Paul Krugman’s column last week blaming the financial crisis on Ronald Reagan. William Greider from the left and Richard Posner from the right both made the case that it was actually Jimmy Carter who’s to blame. But I think Andrew Leonard in Salon has the best take on the whole meta-debate over the debate:
The continuing influence of the banking industry on Congress, on which point we witness new revelations nearly every day, should be enough to underline how both parties succumb all too willingly to the financial blandishments lavished by Wall Street. I’m sure Krugman would acknowledge that. Despite Posner’s dismissal of Krugman as a Democratic partisan, it is well worth noting that Krugman has been far harder on the Obama administration’s economic policy moves than your typical Republican partisan was on George Bush until late in his second term.
But there’s a different, perhaps more profound sense in which Reagan really did do it. Momentum for deregulation may have gotten started during the Carter administration, but the ideological case for it didn’t crystallize until the election of Reagan in 1980. From that point on, the predisposition to loosen the reins on the financial industry became explicit. Both parties helped get us where we are today, but one party in particular identified itself with the all-knowing wisdom of the markets. And that party is paying the price.
I still like the formulation I used – that does not lay the blame directly on Reagan or his advisors – but indirectly:
To some degree, these changes had positive effects – as the market was freer, as the economy grew, as corporations thrived, as the overall wealth of America grew.
But they spelled trouble down the road. The stimulus spending and tax cutting, the informal Bretton Woods II agreement, and concentration of wealth created an unstable system. Internally, the society was imbalanced as extremes of wealth and power were accumulated by a small minority. This eventually undermined the very free market and democratic discourse that is essential to the American tradition. A course correction later might have saved the Reagan vision – and for a time it seemed as if Bill Clinton’s moderate presidency had, as middle class wages finally began to grow again – but Bush doubled down on Reaganism when he should have pared back, and we are left with this mess.
Is this collapse Reagan’s fault? I wouldn’t say so. But he set the initial course towards this iceberg, even if the iceberg was out of sight at the time he set the course. He – and the 1980s revolutions in finance, economics, and government that his administration supported and enabled – are the true authors of this economic collapse, even if they cannot be blamed for not forseeing it.