Introduction

The New Deal reconstitution of the American state in the wake of the Great Depression was an important episode in the making of modern American finance. IPE scholarship tends to depict the New Deal reforms in terms of a Polanyian reembedding of the financial system. From such a perspective, the laissez-faire ethos of the early decades of the twentieth century had, with disastrous consequences, permitted financial markets to become disembedded from social and political institutions, and the New Deal was motivated by the aim to prevent this from reoccurring by restoring regulation and constraining the growth of markets. The present chapter argues that this is a problematic interpretation. The early twentieth century had seen a proliferation of financial connections and their penetration into new layers of social life, and the New Deal reforms did not reverse this process but precisely promoted its continuation: Their effect was to further integrate the American population into the financial system. If New Deal policy makers were acutely aware of the volatility and contradictions that such financial expansion had entailed, they discerned ample opportunity to manage this through modern policies of macroeconomic stabilization. That is, regulation was not viewed as something externally imposed on and constraining markets, but as organically allied to and facilitating their expansion. The real significance of the New Deal was not to be found in the reassertion of government against markets, but rather in the emergence of an awareness that the pursuit of public objectives could be leveraged by enlisting those market forces (Hyman 2007). In this way, the New Deal represented a significant step in the direction of a more developed conception of infrastructural state capacity. This orientation evolved through the further alignment of the Progressive reform agenda with business interests: If before the Depression corporate and financial elites had already been able to use the Progressive reform ethos to defuse the radical potential of social and industrial resistance (Bernstein 1968; Weinstein 1968; Gordon 1994), from the New Deal onward it would allow them to make the aspirations of the working classes positively serviceable to the exigencies of capital accumulation.