One of the things that always fascinates me is talking to folks, say, 35 years old and realizing that the USA that I grew up in doesn't even exist as a possibility for them. It hasn't existed at any time during their lives and since the teaching of contemporary history is virtually non-existent in the country, the ONLY possible way that USA could exist in a 35 y.o. mind is if they got very lucky and read some good books.
This was a nation of imagination and productivity. The 1960s are talked about as if it was only this giant party where the joys of sex, drugs, and rock-and-roll ruled. And it will always be the dominant memory of anyone who got to go to the party. But the 60s also saw the invention of Unix, construction miracles like the Gateway Arch in St. Louis, and the golden decade of aerospace that gave us the moon landing. We accomplished more out of pure whimsy than any civilization out of high purpose. The national attitude was, hell yes, we can do it! (This attitude had its downside, of course—Vietnam was only the most ugly example.)
This amazing prosperity was the product of many forces, but knitting it together was a set of ideas invented and explained by an especially enlightened group of economists. Many called themselves Keynesians but since the subject they chose to examine was nearly limitless, there was an enormous range in thought and practice. The important thing to remember is that they were the people who thought up the regulations that were deregulated starting in the 1970s.
This diary is about how the Great Prosperity touched me—and what this country did since then to destroy the accomplishments of the greatest economic thinkers in history.
My father was poor as only a small-town preacher can be. During much of my childhood, he made $300 a month. There were six of us. We did get to live in a parsonage so housing was free but there wasn't much left over in any month and it was always welcome when a farmer from church slipped some fresh food into the car. But this was not poor by any stretch of the international definition of poor. We children went to well-lit, well-heated mostly new schools that had music, art, and science departments. Our house had central heating and indoor plumbing. We had a telephone. Even though we didn't get television until I was a high-school sophomore, we had several radios and a record player. My oldest sister took music lessons on the piano, flute, double bass, and pipe organ becoming proficient in all of them.
When it came time to go to college, I had a big land-grant university waiting for me that charged $125 in tuition and $300 for a dorm room each quarter. Jobs within walking distance of campus paid at least $2.00 an hour and because I knew how to build houses, I could get $4.00 an hour working construction during the summer. Do the math. It was a lot of work but it was possible to self-finance a university education.
And about those jobs. In the fall of 1969, I got a part-time job delivering critical care medical equipment. In the winter of 1970, I got into a hassle with my draft board and wound up dropping out of school (long story). In just four months of working full time at the medical delivery service, I was able to save up enough money so I could spend the whole summer hitchhiking through Europe—one of my most profoundly significant life experiences and one only the children of the truly wealthy can afford now.
The other astonishing memory was of a house I helped build the summer I graduated from high school (1967). It was a modest affair for the times—three bedrooms, a full bath, kitchen, dining room, living room, central heating, a full basement, and a two-car garage. It would cost the new homeowner $18,400 ready to move in. Here was the interesting part—the guy we were building it for worked on the line at the local shoe factory doing things like pulling lasts and stitching soles. Sometimes he would come by after his shift to watch us build his house. He always looked very tired. I am sure he earned every cent he made at that factory twice over but he was getting a brand-new house that was literally beyond the imagination of some teenaged girl toiling endless hours making shoes for Nike in Indonesia these days.
Today these things seem to me like a fantasy and I lived through them. I grew up in a nation that went to the moon just because we could do it. I was there when the Interstate highway system was new. I remember when the Boeing 727 brought the jet age to small airports and dozens of other aviation triumphs that culminated with the 747 in 1969—still considered the best subsonic transportation plane ever designed. The optimism was so heady, my high school graduation speaker (1967) promised our class that we would be the last humans to walk solely upon planet earth.
Well obviously, that USA doesn't exist any longer and so I have decided, as a new year's project, to explain as best I can the economic, social, political, and cultural changes that destroyed the country of my childhood. None of this is new. All of the events I will describe happened in public. In fact, the only reason this isn't common knowledge is because contemporary history is not taught.
I have broken this subject down into five headings.
Did economics once work better? (video)
A video introduction to the contrast between the economics of the progressives and the wreckage today.
Of all the wrong-wing gibberish, the most annoying is the claim that we Progressives are just dreamers who don't have a track record to run on. Wrong. We have a track record that is the envy of any political movement ever. When it comes to economics, WE are the grown-ups in the room.
The foundations are laid for the Great Decline
The turning point when the Progressives lost their hold on economic thinking.
The Great Prosperity following World War II was product of many forces but was based on the material wealth churned out by the amazing productivity of the American Industrial System. As late as 1962, USA made more things than the rest of the planet combined. As a result, we were a creditor nation and had a massive trade surplus.
But the 1960s saw an explosion of overseas expenses—most notably for wars of imperial aggression. Yup, Vietnam. (I have a friend who believes the decline of USA was the direct result of the "bad karma" we earned invading Vietnam. He has a point.) As the trade balance tipped into negative territory, something very important happened to the real economy. In 1970, domestic oil production peaked. After that, the oil bill would contribute ever larger amounts to the trade deficit.
The new reality
Changing the economic zeitgeist—winning the war of ideas
Peak Oil presented the USA model of prosperity with a VERY unwelcome dilemma. In any era where energy supplies are rising and prices are falling, big sprawling projects are possible. Interstate highway system—no problem. Urban sprawl—no problem. A two-ton car for every adult in the land—a goal to be cherished. But when energy prices rise, making big heavy things for a living becomes risky indeed. Anything that was called a "heavy" industry had encountered a major roadblock.
So while major industries like steelmaking staggered under the new reality, the enterprises that made the small and light thrived—most especially those associated with the computer industry. The daily output of an automobile factory required trains to haul away—the daily output of a microchip factory could probably be packed in a van. And then there was software—a vital requirement for computers that was actually weightless.
In short, there was a real economy reason why the steel mills of Reading Pennsylvania were shut down and left to rust while companies like Microsoft became the darlings of the financial press. But these changes were about to be accelerated by that ultimate in weightless enterprise—financial "services."
Bad theory becomes law
The major accomplishments of the deregulators,
The whole point of changing the teaching of economics was to make it acceptable to trash the regulations that had been put in place during the New Deal to prevent another Great Depression. And as would become readily apparent, these regulations had been put in place to address real needs. Well written and administered regulations lead to more scientifically advanced and prosperous societies because regulations protect and permit honest entrepreneurs to thrive. The more complex the society, the more of these honest people it takes to keep all the parts working. Take away the rules and the cheaters will drive out the honest operators. The only historical outcome of "deregulation" is a rise in corruption of all forms and a destruction of industrial potential. Pretty much describes the past 35 years, huh?
The war on Producers
Highlights of the infinite war against the accomplishments of the Great Prosperity.
The whole point of deregulation was to make it possible to organize massive plunder and not go to jail. All other reasons proffered are just so many distractions. At the start of the Reagan administration, there were still a lot of heavy assets to loot. There have been books written about this era—some of them very good—and there will be a lot more. The reason is simple—the era of neoliberal plunder of real assets and the deindustrialization that followed represented a historical reversal of a national pro-industrial development strategy that goes back to those inventor founding fathers such as Jefferson, Franklin, and Tom Paine.
During the madness, it mattered little how well an industrial concern was managed. Loyal customers, good products, great research teams, whatever—didn't matter to a raider. In fact, suppose a company had set aside a nice nest egg to pay for the development of new products. In the world of Producers, this made such a company a shining example of industrial capitalism. In the mind of a raider, this nest egg was what he intended to grab during the hostile takeover. The idea that the "restructuring" specialists only destroyed the weak and deserving is utter nonsense. Lots of fine companies were destroyed. Not merely stolen—destroyed!
It was during this era that USA lost its economic muscle. I am not going to try to summarize the destruction or highlight some especially bad actors because in truth, EVERYONE got sucked into the madness. Union pension funds were used to destroy the very industries that would pay future pension costs. Environmental NGOs invested their endowments in currency swaps. City administrators bought junk bonds because the higher return meant raises down at city hall without raising taxes.
And for your viewing convenience, I have put all of the above together as one page.