The Great Unlearning
How We Dismantled What Worked
Part IV of “Why the New Deal Still Matters”
By the late 1970s, the postwar economic model had been so successful that many Americans began to forget why it existed in the first place.
For decades, growth had been steady. Financial crises were rare. A broad middle class had become the norm. The guardrails that stabilized markets faded into the background—visible mostly as costs, constraints, or inefficiencies.
That’s when a new story took hold:
that the rules were no longer necessary.
The problem, this argument went, wasn’t too little balance—it was too much restraint.
A Shift in Economic Faith
Beginning in the late 1970s and accelerating through the 1980s, policymakers increasingly embraced the idea that markets worked best when left alone. Regulation was reframed as inefficiency. Antitrust enforcement was recast as hostility to success. Labor protections were described as market distortions.
The assumption was simple:
If the guardrails came off, growth would accelerate—and everyone would benefit.
This shift wasn’t framed as radical. It was framed as modernization.
What changed wasn’t the law overnight, but the philosophy behind enforcement.
Antitrust: From Enforcement to Tolerance
Antitrust law remained on the books—but its purpose quietly narrowed.
Instead of asking whether markets were becoming too concentrated, regulators increasingly focused on a single question: Are consumer prices rising right now?
If prices stayed low, consolidation was often approved—even when it:
Eliminated competitors
Raised barriers to entry
Locked in dominant market positions
Over time, entire industries consolidated. Market power became durable. Competition was assumed rather than protected.
“Too big to compete with” replaced “too big to fail.”
Labor Power Was Deliberately Weakened
At the same time, labor’s role as a counterweight steadily eroded.
Union membership declined sharply. Enforcement of labor law weakened. Employers gained greater leverage over wages, scheduling, and job security.
Productivity continued to rise—but wages flattened.
This wasn’t an accident of globalization alone. It reflected policy choices that treated labor power as a cost to be minimized rather than a stabilizing force.
As wages stagnated, households relied more heavily on debt to maintain living standards. Demand became fragile again—just as it had in the 1920s.
Finance Relearned Risk—Badly
Nowhere was the Great Unlearning more dangerous than in finance.
Over several decades, New Deal–era safeguards were chipped away, reinterpreted, or abandoned. The most symbolic moment came with the repeal of the Glass-Steagall Act, which had separated commercial banking from investment speculation.
Financial institutions grew larger, more complex, and more interconnected. Risk migrated out of view—into shadow banking, derivatives, and off–balance sheet vehicles.
Once again, profits rose while fragility accumulated.
Just as in the 1920s, the system looked efficient—right up until it wasn’t.
The Warning Crises We Ignored
The breakdown didn’t happen all at once. There were warnings.
The Savings and Loan crisis of the 1980s followed deregulation that allowed institutions to chase higher returns without adequate oversight. Fraud spread. Hundreds of banks failed. Taxpayers absorbed the losses.
The dot-com bubble of the late 1990s showed how speculation could detach from fundamentals under lax oversight.
Each time, the lesson could have been relearned.
Instead, the response was often narrow fixes paired with renewed faith that “the market had corrected itself.”
It hadn’t.
2008: The Cost of Forgetting
The financial crisis of 2008 was not a bolt from the blue. It was the logical outcome of decades of concentrated risk, weak enforcement, and moral hazard.
Banks took on enormous leverage. Financial products grew so complex that even insiders struggled to understand them. When the system cracked, it wasn’t just investors who paid the price.
Millions lost homes. Jobs vanished. Retirement savings evaporated.
And once again, private risk was socialized.
The irony was hard to miss:
the same voices that warned against “big government” demanded massive public intervention when markets collapsed.
Political Instability Becomes Political Capture
When Economic Power Buys the Rules
Economic instability creates anger. Concentrated wealth creates leverage. When the two coexist, politics stops acting as a corrective and starts acting as an amplifier.
As inequality rose and market power reconsolidated, so did the ability of wealthy individuals and large corporations to shape the rules of the system itself. This rarely took the form of outright corruption. It happened legally, incrementally, and often quietly.
Money flowed into campaigns, lobbying, think tanks, and media ecosystems. Regulatory agencies were defunded, pressured, or staffed in ways that aligned outcomes with donor interests. Enforcement budgets shrank. Policy debates narrowed.
The result wasn’t the collapse of democracy—but the erosion of its corrective function.
From Influence to Advantage
Democratic systems are meant to counterbalance economic power. But concentrated wealth can overwhelm that safeguard.
As elections became permanent fundraising exercises, access followed money. Lawmakers grew increasingly dependent on donors with the resources to sustain campaigns. That dependence shaped priorities:
Tax policy tilted toward capital
Antitrust enforcement softened
Financial oversight narrowed
Labor protections weakened
Bailouts became acceptable while accountability faded
This didn’t require conspiracy. It required incentives.
When those with the most to lose from strong enforcement also had the most influence over policy, the system bent predictably in their favor.
Rigged Markets Breed Rigged Politics
This feedback loop matters because markets and democracy are not separate systems.
When people see that:
Profits are privatized
Losses are socialized
Rules change after crises
The same actors keep winning
They don’t just lose faith in markets. They lose faith in institutions.
That loss of trust fuels disengagement on one end and radicalization on the other. It creates demand for leaders who promise order without accountability, punishment without reform, or shortcuts around democratic process.
History has seen this pattern before.
What This Era Actually Delivered
Supporters of deregulation promised faster growth and broader prosperity. What arrived instead was:
Slower wage growth
Higher inequality
Greater market concentration
More frequent and severe financial crises
Repeated public bailouts
Markets weren’t freed. They were tilted.
And as trust eroded, instability spread from the economy into politics.
The Lesson We Chose to Forget
The New Deal generation understood something later generations unlearned:
Unchecked markets don’t just fail economically.
They fail civically.
That’s why antitrust mattered. That’s why financial regulation mattered. That’s why labor had power. Those weren’t just economic choices—they were democratic ones.
When those guardrails were dismantled, fragility returned. And as fragility grew, wealth rose—and influence followed it upward.
The system didn’t just break again.
It began protecting the breakage.
The Bridge to the Present
By the 2010s, many of the conditions that defined the pre–New Deal era had quietly re-emerged:
Concentrated power
Weak counterweights
Financial opacity
High inequality
Low institutional trust
The economy still functioned—but it was brittle.
And when the next shock arrived, the consequences would not be evenly shared.
That’s where the story turns to now.
Next: Part V — The Modern Echo: Same Dynamics, New Technology