Masters of the Universe: Hayek, Friedman, and the Birth of Neoliberal Politics by Daniel Stedman Jones is the most comprehensive history of the rise of neoliberalism in both the US and the UK. It starts with the an in depth account of the early origins that I discussed in the first diary in this series and goes through the Reagan - Thatcher period.
I also have a video to offer from the London School of Economics. It is a presentation that was done at the beginning of this year. First Jones makes a presentation about his book. That is followed by two reactors. Mark Pennington is a belligerent neoliberal whose talk consist mostly of flippant remarks. Then comes Robert Skidelsky, the well known biographer of Keynes. He presently flies under the august title of Professor Lord Skidelsky. While engaging in mortal combat with his Ipad he demonstrates what a delightful old curmudgeon he is. I found it highly entertaining.
The pop version of history is that Reagan caused the neoliberal revolution when he became president. The reality is that many of the trends and developments that we now term neoliberal were already underway. America's post war economic dominance began to slip as the nations that had been devastated by war recovered and became fully competitive. Japan was very notable for the competition it posed for the US in such basic industries as shipping, steel and automotive. The decline in US manufacturing accompanied by the loss of jobs and decreased leverage for unions was already well under way when Ronnie rode into town on his horse and declared "It's morning in America.".
Deregulation had already become a buzzword. Jimmy Carter devoted considerable energy in promoting various deregulation measures in the transportation industry. The Arab oil crisis had prompted various measures deregulating energy policies. The trend toward the deregulation of public utilities was clearly established in the 70s. This article provides a list of the major pieces of deregulation legislation that became law prior to the Reagan administration.
1976 - Hart-Scott-Rodino Antitrust Improvements Act PL 94-435
1977 - Emergency Natural Gas Act PL 95-2
1978 - Airline Deregulation Act PL 95-50
1978 - National Gas Policy Act PL 95-621
1980 - Depository Institutions Deregulation and Monetary Control Act PL 96-221
1980 - Motor Carrier Act PL 96-296
1980 - Regulatory Flexibility Act PL 96-354
1980 - Staggers Rail Act PL 96-448
Union membership began its decline in 1954. It was already well down the slide when Reagan staged his dramatic confrontation with the air traffic controllers and decertified to the PATCO union. What was new was that a US president could treat organized labor in such a manner and actually benefit politically from the effort. Maggie Thatcher was engaged in the same tactics across the pond. One of the really amazing political developments was Reagan's ability to attack unions and then recruit a sizable number of union members as Democrats for Reagan. Much of his success was based on clever use of divide and conquer tactics that played various groups off against each other.
Reagan's economic policies became known as Reaganomics. They were presented and justified with strong neoliberal rhetoric of returning the country to free enterprise and offering free markets as the solution to all problems. One of the most significant changes was in the revisions to the tax code. He provided substantial tax reductions to the upper income brackets. The notion of supply side economics was concocted to justify this. On the face of it, this could pass for a return to pre-new deal conservatism. However, that would have required not just cutting taxes but also cutting spending and government programs. What actually happened is that government spending expanded under Reagan. It's emphasis was shifted from social programs to defense. What did change was the source of revenue to fund it. It was financed by a huge increase in the national debt. This is basically what made Reagan a neoliberal rather than a traditional conservative. They are quite willing to have government play a large role in the economy as long as it is in service to business and financial interests.
Bush I continued Reagan policies and programs without any major changes. He had the misfortune to get hit with a serious recession that among other things revealed that the employment trends that had been cutting into blue collar jobs for 25 years had now landed on the doorstep of the white collar middle class. This triggered a strange three way election with Bush, Clinton and Ross Perot as an independent who couldn't make up his mind. Clinton wound up in the white house. He was a product of the Democratic Leadership Council which was the initial platform of third way Democratic politics that is still with us today.
When the Eisenhower administration came to power the new deal style of government was firmly established national policy. While the Republicans did nothing to expand its scope, they didn't dare to do anything to seriously rock the boat. That waited for Reagan. In 1993 neoliberalism had achieved a similar level of firm entrenchment. Bill Clinton's only real political ideology is probably triangulation. In practice he not only left most of Reagan's program intact, but he actively expended it in terms of welfare and trade policies. He did make some modest increases in taxes and with the help of a stock market bubble was able to bring off a budgetary surplus. The trench warfare style of politics that was waged between him and the Republican controlled congress inaugurated the era of yelling and screaming over relative minor differences in policy issues in an effort to convince the voters that they are engaged in an epic battle for the soul of the nation.
Today the American economy and government is dominated by a neoliberal elite. Income inequality presents an ever widening gap. It is now apparent that this regime survived the crisis of the great recession without a serious threat to its control. In the next installment we will attempt to take a more in depth look at how it manages to hold onto and expand its power.