Democracy and Productivity : The Glass-Steagall Act and the Shifting Discourse of Financial Regulation

Regulatory reforms are not only the product of policy innovations; they are also shaped by the particular narratives, discourses, and arguments advanced in favor of or against reform. This paper examines the discourse of banking reform around the Glass-Steagall Act of 1933. The debate around the Act exemplifies a broader shift in discourses of financial regulatory reform, away from a previous era emphasizing the need to make concentrations of economic and political power democratically accountable, towards a new discourse grounding regulatory reform in the need to promote productive economic activity by preventing conflicts of interest and excess speculation. After exploring this shift in the rhetoric of reform around Glass-Steagall, this paper concludes by suggesting that this shift had lasting repercussions for the politics of financial regulation, conducing more readily to deregulation in the 1980s and 1990s, and undermining more aggressive attempts at financial reform in 2009