Simon Johnson is an economist, but he's also, as Tim Fernholz writes, a pretty committed political economist. The core of his approach to the financial crisis has been an analysis of power relations, not mere capital inflows. Some folks argue that the financial crisis is a simple story of bad decisions by poorly incentivized bankers. Johnson believes that the crisis is fundamentally a story of financial elites capturing the political system, convincing it to deregulate their sector, turning deregulation into an ideology of sorts, and then, once it all went sour, using their political power to obstruct needed policy corrections.In other words, power caused the crisis and power prevents a solution to the crisis. But it's not clear where that leaves us. The implication of Johnson's argument is that we should make rich people a lot poorer in order to diminish their capacity to capture the political system. But he has not, to my knowledge, said that. Indeed, I've read a lot from Johnson -- and others who tell a story similar to Johnson's -- on how you solve the financial crisis (nationalize the banks, clean them out, cap their size to reduce future system-level threats), but not a lot on how you solve the political economy crisis. Maybe they don't know. But if the problem is in the political system, then you can't fix it by simply reforming Wall Street.Elsehwere: Noam Scheiber cops to some Johnson-skepticism. WHERE ARE THE POLITICAL ECONOMISTS?
Simon Johnson is an economist, but he's also, as Tim Fernholz writes, a pretty committed political economist. The core of his approach to the financial crisis has been an analysis of power relations, not mere capital inflows. Some folks argue that the financial crisis is a simple story of bad decisions by poorly incentivized bankers. Johnson believes that the crisis is fundamentally a story of financial elites capturing the political system, convincing it to deregulate their sector, turning deregulation into an ideology of sorts, and then, once it all went sour, using their political power to obstruct needed policy corrections.In other words, power caused the crisis and power prevents a solution to the crisis. But it's not clear where that leaves us. The implication of Johnson's argument is that we should make rich people a lot poorer in order to diminish their capacity to capture the political system. But he has not, to my knowledge, said that. Indeed, I've read a lot from Johnson -- and others who tell a story similar to Johnson's -- on how you solve the financial crisis (nationalize the banks, clean them out, cap their size to reduce future system-level threats), but not a lot on how you solve the political economy crisis. Maybe they don't know. But if the problem is in the political system, then you can't fix it by simply reforming Wall Street.Elsehwere: Noam Scheiber cops to some Johnson-skepticism. 
