Unsatisfactory Musings on þe Rise of þe Neoliberal Order
Trying to come to grips with the fact that post-World War II Global North social democracy failed its sustainability test...
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FIRST: Unsatisfactory Musings on the Rise of the Neoliberal Order
One of my friends last week at coffee said that the biggest problem with my forthcoming Slouching Towards Utopia <bit.ly/3pP3Krk> was that it lost coherence when it reached the late 1970s, and I had to write about how post-World War II social democracy had failed its own sustainability test and was replaced by neoliberalism, and its three “left”, “right”, and “outside” flavors.
My problem, he said, was that I really could not believe that it had happened, and hence no real policy to propose other than to once again double-down on social democracy.
But, back in the 1980s and 1990s, that was a non-starter. Left-of-center movements had to figure out in real time other than to die, electorally, on that same hill. They had to figure out how to construct a framework in which, as Bill Clinton wanted to say in his 1995 SoTU, although “the era of Big Government is over, the age of every man for himself must never begin.”
Widen the scope, and the problem is even larger. Leave to one side the global south, where the balance sheet for neoliberalism is, I think, very different. In the Global North neoliberalism has failed to accomplish any of its goals: it has not reinvigorated and restored the pace of economic growth, it has not reinforced a moral order of “good behavior”, and it has not created a peaceful world led by the U.S. as hegemon. Advocates of neoliberalism are reduced to claiming that it has not failed, but rather that it was failed by unworthy standard-bearers. That trick never works.
No. That is not quite right. Neoliberalism has accomplished one thing: It has made the rich much richer, and the non-rich somewhat poorer. This was supposed to incentivize the job-creating rich to work harder and create more jobs, and incentivize the non-rich to work harder to avoid penury and buckle down to live more moral lives. In fact it has only made the rich richer, and somewhat more corrupt: plutocracy creates more opportunities for kleptocracy, after all.
And yet neoliberalism continues to hold on, with lots of complaints about its failure to satisfy, yet the orders mooted as its replacements—authoritarian state surveillance capitalism with some egalitarian aspirations, out-and-out kleptocracy, etho-nationalist developmental-state mercantilism, neo-fascist ethno-nationalism—do not seem at all attractive.
I have been thinking about this, because the highly estimable Gary Gerstle has written a very good and interesting book on The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era <https://www.amazon.com/Rise-Fall-Neoliberal-Order-America/dp/0197519644/>.
I am still digesting his book.
But this morninig I see that the high-minded, well-intentioned, and smart Robert Kuttner has a review of Gary—a review I find unsatisfying.
Bob Kuttner has, I think, the same problem responding to Gary that I had in writing Slouching: that he cannot really believe in his heart that social democracy failed its sustainability test in the late-1970s, wants to go through the motions again in the hope that, this time, the trick will work, and cannot acknowledge the world we have lived in since the 1980s—the world of the stubborn persistence of neoliberalism, one in which “Big Government” is no longer a trusted institution, and one in which we are fighting desperately to try to keep the era of every man for himself from becoming further entrenched.
I understand.
I share the feeling.
But that does not lead to a clear-sighted view of the political-economy roads forward in the 1990s, the 2000s, the 2010s, or today.
Thus in Robert Kuttner’s telling (not in Gary Gerstle’s!) it is Ralph Nader’s embrace of deregulation, Bill Clinton’s opportunism, and Barack Obama’s inexperience and caution that are to blame. While I agree that Ralph Nader’s influence on the American left and on America has been hugely disastrous in so many ways, I do not think that position of Kuttner’s can be sustained—and not (or not just) because I was on the side at the time of thinking that Clinton and Obama had very little room for maneuver, and were doing a pretty good job of maneuvering:
Robert Kuttner: Free Markets, Besieged Citizens: ‘Gary Gerstle: The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era…. The neoliberal credo claims that markets work efficiently and that government attempts to constrain them via regulation and public spending invariably fail, backfire, or are corrupted…. Neoliberalism has relied on deregulation, privatization, weakened trade unions, less progressive taxation, and new trade rules…. [producing] widening inequality, diminished economic security, and reduced confidence in the ability of government to aid its citizens. The Republican embrace of this doctrine is hardly surprising… [but] the allure of neoliberalism to many Democrats is a puzzle worth exploring…. The New Deal model faltered in the 1970s with the improbable combination of inflation and stagnation… the cultural left also found the libertarian and antibureaucratic aspects of neoliberalism appealing…. Was it a success or a failure? That depends on who you are. For economic elites and the Republican Party, it has been a splendid success. For the Democratic Party, the neoliberal order has been a catastrophe…
LINK: <https://www.nybooks.com/articles/2022/07/21/free-markets-besieged-citizens-gerstle-kuttner/>
And I object where Kuttner says things like:
Politically, the consequence [of the Clintonite embrace of left-neoliberalism] was a broad loss of confidence in Democrats as the party that championed the interests of working people, and in government as an instrument of broad public benefit…. As late as the 1996 presidential election, counties that were at least 85 percent white and earned less than the national median income split about evenly between Democrat Bill Clinton and Republican Robert Dole. In the 2016 election, such counties went 658 for Donald Trump and two for Hillary Clinton…
But the Clintonite embrace was consequence, not cause. And the definition of working-class counties as “counties that were at least 85 percent white and earned less than the national median income” —it would have been much wiser, I think, for Kuttner to write “a broad loss of confidence in Democrats as their representatives by the white segment of the working class, a segment torn between their class interest in reinforcing social democracy and their status interest in maintaining white supremacy”.
And the Clintonite position was always… more nuanced than Kuttner allows. Kuttner talks about how Biden is “closer to the New Deal, with greater public investment, more regulation, progressive taxation…” And I object again. Biden’s pushes for more public investment have run into the congressional mire, just as Clinton’s did. It was the Clinton administration that launched U.S. v. Microsoft—and, by restraining Microsoft via litigation and threat, kept it from casting devastating shade on rising Google and Apple. And as for progressive taxation—the 1993 Clinton Reconcilation Bill’s EITC expansion and higher top rates moved the tax system more in a progressive direction than anything Biden has done. Now don’t get me wrong: I think Biden’s policies are good, and his proposals that have run into congressional mire in the form of the filibuster, Manchin, and Sinema are better. But you need to place huge weight on small differences in nuance—differences that run in both directions—to see a big policy swing from Clinton to Biden, in most issue areas.
There is a difference in rhetoric—the Biden team is not on the defensive against a then-attractive right-neoliberalism, as Clinton was. There is definitely a difference in the attitude towards labor unions: Clinton was a southern Democrat from a “right-to-work” state, with many southern Democratic senators and some southern Democrative representatives in his coalition; Biden’s coalition is very different.
Clinton was gung-ho on expanding free trade, seeing exports as a powerful source of American prosperity (correctly, I would think). Biden, by contrast, is continuing Trump’s failed trade war against China—which was, I think, one of the very stupidest of the many stupid moves of the Trump administration. The Obama plan was to establish the TPP to gain substantial leverage, and then have all the TPP partners negotiate as a block with China. Trump blows up the TPP. Then, without leverage— having disarmed himself—launches his “popular and easy to win” idiocy. I genuinely cannot see this as a win for social democracy.
As I said, I am still digesting Gary’s latest. But earlier, with Steve Fraser, Gary Gerstle edited the brilliant <https://archive.org/details/risefallofnewdea1980unse>. It sets the stage for the analysis of the rise and fall of the neoliberal order, and implicitly the tasks of anyone who needs to understand why neoliberalism seemed attractive in the late 1970s and what any order that seeks to replace it will have to do:
Decay began to set in as a result of growing gaps between what the New Deal order promised its constituents… and what it actually delivered. A gap emerged first in the early 1960s in regard to the disenfranchised and poverty-stricken status of American blacks; another appeared in the moral turbulence and growing drain of international military commitments on domestic prosperity occasioned by the Vietnam War; and a third and related gap appeared in middle-class youth’s alienation from the highly organized, bureaucratized character of the New Deal order that… stifled… authenticity and individuality…. Tensions were aggravated by the often vacillating and halfhearted efforts of Democratic party elites…. Eeach smoldering tension would trigger a political explosion. The cumulative effects of such explosions would shatter the Democratic party as a majority party and discredit its liberal doctrines. By the mid-1970s, as a result, the New Deal political order had ceased to exist…
This was the environment in which Democratic political leaders starting in the 1980s had to operate. Yet Kuttner does not seem to recognize that.
Kuttner dismisses Democratic political leaders as “embrac[ing] an economic credo that annihilated their own public philosophy and its appeal to the electorate”. And why? All because of Bill Clinton’s “opportunis[m]” and Barack Obama’s “‘captiv[ity] to his own inexperience and resulting caution’. An important aspect of the neoliberal capture of Obama was his reliance on the Clinton economic team.” Kuttner then requotes a passage from Gerstle: Larry Summers’s comment in a 2006 obituary for Milton Friedman that “any honest Democrat will admit that we are now all Friedmanites”. Kuttner—and Gerstle—see this as guiding policy views in the very different situation of 2010.
And once again, I object. This is simply not in context. 2006 was not 2010. An obituary comment is not a policy brief. And here it matters. Neither Kuttner—nor Gerstle—tells their readers that the initial Obama-appointed “Clinton economic team” was, with the exception of non-economist Tim Geithner, trying hard to pull Obama to the right against very strong resistance from the spinmaster and Obama himself. The center-of-gravity of the economists on Obama’s initial team was, I think, well captured by Larry Summers (and my) call for the federal government to speed recovery by pushing the government purchases pedal to the metal, on the grounds that when interest rates were at the zero lower bound you could rely on the faster growth generated to keep government finances in long-run balance <https://www.brookings.edu/bpea-articles/fiscal-policy-in-a-depressed-economy/>.
This has turned into more of a rant against Kuttner than I wanted it to be. And, as I said, I have not yet managed to digest Gerstle.
But hold tight to this. This is the main point: Kuttner fumbles the football here. The reason policy in the United States since 1980 has not been the social democracy that Kuttner (and I) would prefer. But it is not because of Clinton’s opportunism, Obama’s inexperience and caution, and the appointment in 2009 of some economic-policy staffers who turned out to be on the left wing of the administration (and far left of the congressional median) in 2009-2012. It is not that simple.
Why has policy in the United States since 1980 has not been the social democracy that Kuttner (and I) would prefer? That is the question. I have some ideas that I set out in my Slouching. But so far, the verdict on them has not been great. My coffee partner finds them problematic. Paul Krugman says that they are “interesting but not wholly persuasive”. And Bob Reich says: “you may disagree (I don’t buy all of it)”.
So I will think some more…
Don’t blame Obama or Clinton, or Nader. (Well, you can blame Nader.) Don’t blame the players: blame the game. The question is: Why was this the game?
The only failure of social democracy was in not being able to respond to a well orchestrated and well financed propaganda effort to install a corporate republic that uses authoritarianism, religion and strategic poverty to discipline the masses. Clinton thought co-opting the gentler parts could blunt these conservative efforts and hold off the deluge, Obama thought that breaking the color barrier would help form a new coalition and have knock on effects but they never materialized. Meanwhile we see that the constant upward trend in blood and soil conservatism, forged by the twisted beliefs of the Republican party, have finally found their standard bearer in trump and their sword in the Supreme Court. A court that no longer feels the need for justification or even logical consistency in their edicts.
I wish I saw way out of this, but I don't. The problem at this point in time is that not dealing with actual threatening issues like global warming and ocean acidification will lead to the unmaking of modern civilization and the unneeded deaths of billions. By the time we have the heads of the fascists and the malevolent wealthy on pikes it will be too late.
The New Deal and post-war order began to break down when the Democrats began losing the white blue-collar workers in the late '60s and '70s over issues like Vietnam and busing, and the parties abandonment of working-class economic issues in favor of focusing almost entirely on expanding rights for different groups. I think court-ordered busing was especially pernicious. Imagine you're a high-school graduate with a good job in a factory. You and your wife do without luxuries, drive an older car, live in a cramped apartment to save for a down payment on a house in a neighborhood with a good school. The quality of the school was the biggest factor in your decision about where to buy and how much to pay. You probably paid just a bit more than you could really afford at the time, but it would be worth it for your kids. Then, the government comes along and takes your child out of the good school you sacrificed to get them into so that a young African American child could attend it.
I've gone back through Gallup polls from the time, and about three-quarters of white people were against busing, as well as about half of African-Americans, whose kids were being put in bad situations in schools in white neighborhoods where they were resented and the teachers didn't relate to them as well as at their old schools. The goal was good, but the means were short-sighted.
As this was going on, Christian schools began to pop up, and those who could took their children out of public schools and put them into the Christian schools, where they were subject to anti-government propaganda. Then we go into stagflation, and a recession, and many of those good jobs went away, some never to return, as foreign products began to displace domestic production. These blue-collar workers were a major part of the Democrats' governing majority, and most of them became Reagan Democrats, and then Republicans. The Republicans had a narrative to explain why all their problems were a result of liberal Democrats, and the Democrats were largely ignoring them.
We can look at all the -isms we want, but the fact on the ground, where I work, is that to protect rights and enact change, you have to have a legislative majorities in Congress and state legislatures. To get majorities in those bodies, you have to appeal to the broadest swath of the population possible. Democrats have to try to get non-college-educated white voters back by focusing on issues relevant to them. That does not mean giving up on civil rights or abortion rights or enviromental concerns. Most of those voters support these issues. But Dems need to broaden their message and appeal, or we're in deep trouble as a nation.