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Simon Johnson is a Professor of Entrepreneurship at MIT Sloan School of Management. He is a co-founder of the economic blog, and the former Chief Economist at the International[…]

The economist remembers a famous Theodore Roosevelt quote: “Fear the emergence of a financial aristocracy.”

Question: What keeps you up at night? 

Simon rnJohnson: I worry about the financial system and worry that people rnare going to forget. Attention is hard to sustain, particularly these rndays. You get a lot of focused attention, that’s an advantage of the rnInternet, and people grab onto issues and I think people have been very rnworried about these massive banks. But it will pass. Other things come rnup. The baseball season is just starting, always a great distraction. rnMany other issues will come to the fore and people will forget. And of rncourse that is exactly what these masters of the universe and the rnfascists are counting on. As long as they can keep their positions and rnhold onto what they have, the public anger and the frustration will rndrift away and they can go back to doing what they were doing before.

Andrn that is really very dangerous. That is dangerous toward democracy, rnfrankly. That’s what Thomas Jefferson said, correctly, at the beginning rnof the Republic. He said, “Fear the emergence of a financial rnaristocracy,” and we’ve had a few episodes, we’ve had some fights with rnthem along the way. And Andrew Jackson won, Teddy Roosevelt won, FDR rnwon. Now we have to do it again, but we have to do a modern version, rnright? The world is more complex, attention is more fleeting, politics rnare different, campaign contributions are massive. The Supreme Court rnsays they can give as much money as they want. This is going to be quitern a fight. 

Question: Are you an optimist or a rnpessimist? 

Simon Johnson: I’m an immigrant. I’ve beenrn here 25 years. I became an American citizen. I thought about it long rnand hard and I studied for the test and I did well on the test, the rncitizenship test... and I believe in this American project. I think it rnhas survived for 200 years for a reason. I think it’s a Republic that rnwas well designed and while some of its structures and some of the rninitial language might seem anachronistic, it is actually a framework rnwithin which you can deal with big problems that come up and one of the rnbiggest problems is because we’re very innovative people, because we’re rnvery dynamic, we build new things fast and we allow new people to come rnto the fore, we also allow massive wealth to develop and a great deal ofrn capture. At the end of the 19th century, the so-called gilded age, rnthere was enormous income inequality in the United States. There were rnhuge monopolies and Teddy Roosevelt said it was out of control. He rndecided to take JP Morgan’s railroad monopolies called Northern rnSecurities to the Supreme Court. J.P. Morgan came to see him at the rnWhite House and he said, “If we’ve done anything wrong, send your men torn see my men and we’ll fix it up.” And Roosevelt said, “No. We’re going rnto go to the Supreme Court. We’re going to see this through,” and he wonrn five to four and from that came the anti-trust movement and from that rncame the breakup of Standard Oil and all the other massive companies. 

Thern consensus, the view we have—big is beautiful, big is high quality, big rnis great—does not apply to the financial sector. We need a new Teddy rnRoosevelt. We need political leadership that can take that message, rnbuild an alliance, seize the moment and put us all on a path to a betterrn century.
Recorded on March 31, 2010