If you were to go looking for one event that shaped recent American politics more than any other — fueling the anger and contention that now feels endemic, eroding the nation’s faith in its leaders, and elevating radical alternatives in their place — the 2008 financial crisis would be a strong contender. It was the point at which America broke down, political consensus went up in smoke, and long-standing assumptions about how society should be organized, and for whose benefit, came under scrutiny.
The clearest expression of this popular discontent came, of course, on the political right with the election of Donald Trump. But the 2008 financial crisis also produced a new strain of populism on the left. Or, rather, it revived an old strain of economic populism that would have been familiar to Democrats of the New Deal era but had fallen dormant in the decades before the crisis, when enthusiasm for regulating financial markets and suspicion of Wall Street banks was pushed to the margins. The crash brought it roaring back and, in so doing, raised a series of bedrock questions: How had the Democratic Party, traditionally the champion of workers, come to identify so strongly with Wall Street? Who made this happen and why? What could be done to return the party to its working-class roots? And who should lead the transition to a new era?
There is a backstory that illuminates the Democratic Party’s embrace of finance in the years leading up to the crash — a story that begins in 1978. At the time, Democrats were still reliable partisans of the New Deal, but the steady economic progress of the American middle class was coming to a turbulent end. Jimmy Carter was president. He was struggling, without much success, to manage an economy buffeted by inflation, oil shocks and recessions — problems for which his party had no answers. A conservative countermovement of business groups and Republican politicians was beginning to gather force. One of history’s critical inflection points arrived that fall, when Wall Street made its first deep incursion into the Democratic Party in a way that would have lasting significance, although it passed mostly unnoticed at the time.
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Talking Points Memo
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Jan 12, 2024 — Beginning in 1978,
Democrats, over Jimmy Carter's objection, embraced Wall Street's idea that encouraging “capital formation” was the surest way ...
