The hole in the political landscape

by John Quiggin on April 26, 2009

One way to think about the political impact of the GFC is to look at the range of political positions it’s rendered untenable. This range is large, encompassing, in the US context, everyone from Bill Clinton to Newt Gingrich. More generally, it covers anyone who embraced the claim that a US-style economic system, as of, say, 1995-2005, was the best that had ever been seen anywhere, and could only be improved by making government smaller and/or more business-like.

Minus the US-specific triumphalism, this range includes the positions held by most major political leaders in the developed world at the time the crisis erupted, notably including both George Bush and Barack Obama. It covers anyone who saw the growth of the financial sector and the explosion of global financial transactions as beneficial and who regarded with equanimity phenomena like the growth of inequality and the decline of trade unions which both resulted from and reinforced these trends. Virtually everyone holding this view downplayed or disregarded the looming crisis until it exploded in late 2008.

A critical assumption underlying these views was that the system was stable enough to maintain equilibrium without substantial government intervention and without collapsing into crisis. As far as I can tell, no one seriously argues this in relation to the current financial crisis. There are those who argue that the kind of massive intervention we’ve seen shouldn’t be undertaken and/or will only make things worse. But, AFAIK, no one seriously suggests that, without intervention the system could right itself fairly fast and return to the situation prevailing in, say, 2006.

What are the implications of the collapse of such a large section of the political landscape, both for those who formerly occupied it, and for the rest of us?

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