Simon Johnson: Wall Street's Stranglehold on Our Democracy Must Be Broken
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Simon Johnson is the former chief economist for the International Monetary Fund, and co-founder of the Baseline Scenario, a blog about the financial crisis and financial reform. He is a professor at the MIT Sloan School of Management and a senior fellow at the Peterson Institute for International Economics. Johnson's latest book, 13 Bankers(co-authored with Baseline Scenario co-founder James Kwak) is a detailed examination of Wall Street's political and ideological power and the devastating economic results. AlterNet's economics editor Zach Carter recently talked with Johnson about the U.S. banking system.
Zach Carter: Your push to break up the largest banks into smaller banks that can actually fail without wreaking havoc on the economy has been very well-received by progressives. But historically, the IMF and the Federal Reserve are not exactly hotbeds of progressive thought. How did you and Paul Volcker become the vanguard of the economic left?Simon Johnson: The ideas that we're advancing both in Baseline Scenario and in the book should appeal to people on the right, the center and the left. There's an article by Arnold Kling that we wrote about on Baseline Scenario. He's a libertarian, which I am not, but he's come around to our way of thinking about the banks. If you think about it from the right, our financial system is just monstrously unfair. It's not in any way a market economy to have these banks who are so big that the government can't let them fail. They have funding advantages over other banks, and those advantages only encourage them to get bigger. That's just not reasonable. The left—which coincides more with my own views than the right—is very uncomfortable with the power structure that is inherent in that imbalance. And the center--which I would also say characterizes my own views, I'm a center-left person—the center is very concerned about the effects of giant banks on efficiency and the interworkings of the economy. You can see the spectrum of appeal from the blurbs on our book. ZC: Sen. Jim Bunning, R-Kentucky, is a fan.
SJ: I thought we just had to include Jim Bunning, because what else would these people agree on? You can't list five other words in the entire English language that Bunning and Alan Grayson would agree on outside of financial reform.
ZC: But doesn't the broad appeal of your argument run counter to the basic idea? Your point is that Wall Street has taken over the economic ideology in
We are in the fight, at least, and we have some people on our side, but it is very, very lopsided. Did you see Chris Dodd told Don Imus that he's reading 13 Bankers ? I was quite amazed by that. So we're at the table, but it's going to be an uphill battle for some time.
ZC: You've been making this argument for more than a year now, that there's no way to fix our financial system without breaking up the big banks. But watching the debate over financial reform, Congress really hasn't seriously considered the idea. Is this something we can hope to enact with this reform bill, or are you geared up for a longer fight?