One of my pet peeves in politics and policy writing is many pundits and politicians’ belief that we must have “new ideas” to fix our political problems. They like to talk all about “innovation” and “new ideas for new challenges” and “21st Century policy-making.”
This is all fine and well. It’s not incorrect. It is true that creativity in policy development is a good thing, and oftentimes, new approaches are required for new problems. This is all true. I’m not opposed to new ideas. Far from it!
But, I think that the fixation on “new ideas” overshadows a very basic fact about about American politics: many of the problems we face are, in fact, very old. Americans have been grappling with many of the same political economy issues, for, at the very least, the last 100 years. Union suppression and worker surveillance and unpredictable scheduling and too-big-to-fail banks–these are not new challenges in American politics. American policymakers have studied, analyzed, and fought many such problems before.
So, if we’re trying to build a better society and make new policy, we should first look to the past and consider the earlier eras, in which Americans faced down many of the same demons we’ve faced before. To this end, consider this passage from ‘Other Peoples’ Money,’ Louis Brandeis’ 1914 book about the financial system:
The volume of new security issues was greatly increased by huge railroad consolidations, thedevelopment of the holding companies, and particularly by the formation of industrial trusts. The rapidly accumulating savings of our peoplesought investment. The field of operations forthe dealer in securities was thus much enlarged. And, as the securities were new and untried, theservices of the investment banker were in greatdemand, and his powers and profits increased accordingly.
But this enlargement of their legitimate field of operations did not satisfy investment bankers. They were not content merely to deal in securities. They desired to manufacture them also. Theybecame promoters, or allied themselves with promoters. [Bolded text not bolded in original]
Note the bolded section. Brandeis is writing about the Wall Street of the later 1800s and early 1900s. And yet, this is exactly what happened to the investment banking industry in the 1980s. For a long while in the post-war period, banking was a boring, stable, and profitable industry. It was so safe that there existed the so-called 3-6-3 rule, whereby bankers made their living by holding money at 3% interest; lending it out at 6% interest; and getting on the golf course by 3pm. Easy, simple, safe, profitable business.
But in the 1980s, as Reagan, Congressional Republicans, and many Democrats de-regulated Wall Street, bankers and investors started getting a bit more creative. As Brandeis said about the bankers of his time: “They were not content merely to deal in securities. They desired to manufacture them also.”
And, Wall Street created derivatives (manufactured securities), and other riskier investment opportunities. And so the U.S. got the dot-com bubble–which burst–and then later, we got CDOs and Credit Default Swaps, and larger and larger bonuses for everyone on Wall Street, and then we got the Great Recession, and now we’re back to the same pattern.
We’ve seen a lot of this before. So let’s deal with it again, just like we dealt with it back then. Antitrust law; Glass Steagall; stronger regulation; pro-depositor regulations like the FDIC, and other policies of the like.
Sometimes old ideas are good ideas.