Galbraith on the Great Depression and the 'Great Recession'

A new interview with Jamie Galbraith (and also Leo Panitch), on the possibilities of a New 'New Deal' (part II here). Not much of chance, by the way. Part of the story is that the New Deal was fundamental in institution building, and these very institutions saved us from a crisis similar to the Depression, creating less of a perceived need for continuous reform.

In Jamie's words:

"So an entire system was built that had never previously existed and gave us an economy with a very strong presence of the federal government. And ultimately, as the New Deal progressed, that was extended to very large social insurance programs, which also had never previously existed, Social Security on a continental scale being the lead thing in the 1930s. And then added to that in the 1960s we had the work of the New Frontier, and especially of the Great Society, which extended this especially into health care, where we got Medicare, we got Medicaid, we got a major public presence in what became an increasingly important part of the economy, particularly as the older population grew relative to the rest. So that was the situation that we faced in 2008--a very different climate of expectations and a much stronger frame of public institutions to deal with the problems, and capable of dealing with them often in ways which were practically automatic, in the sense that tax revenues dropped, public spending went up, and people's incomes were not going to collapse the way they did in between 1930 and 1933. So all of that was very much to the benefit of the world in which we live today.

The problem that we have, I think, is that it also deprived us of a sense of urgency and a sense of the possibility of need for major reforms. So we in effect fooled ourselves into believing that the economy would recover in full, returning us to the pre-2008 levels of prosperity, even pre-2000 levels of prosperity, without or with very minor or temporary interventions. We did in fact face a system-threatening--in many ways system-destroying crisis, but we faced it without the sense that it was such. And so we did much less, and what we did in the last five years was designed to be temporary. It was in anticipation of a return to normal which hasn't occurred. And so we have many people who are now becoming to realize a bit late that their expectations are going to be very badly disappointed.

And now we have a rather difficult moment in which we, I think, recognize that we didn't do what we should have done, and yet we obviously do not have the political--we're not in a moment where the political mobilization exists or the climate of crisis exists that permits us actually to move in the right direction--quite the contrary, where it looks as though we're moving distinctly in the wrong direction and will continue to do so for the indefinite future."

In other words, we can expect the slow recovery to continue, and even if we avoid the worst in terms of dismantling of the New Deal institutions (something the GOP continues to push), there is very little, if any, chance of a New New Deal.