The "free market" was supposed to solve all our problems. Has it?
By
Thom Hartmann, Independent Media Institute
The smaller “bipartisan” bill represents the neoliberal worldview, including public-private partnerships and huge subsidies to for-profit companies, whereas the larger “reconciliation”
Democratic Party-only bill hearkens back to the FDR/LBJ classic progressive way of doing things.
Milton
Friedman began selling neoliberalism to America in the 1950s, and we
fully bought into it in the 1980s. Most Americans had no idea, really,
what this new political/economic ideology meant; they just knew it involved free
trade, economic austerity/tax cuts and deregulation/privatization.
The
free trade part, we were told, would bring about the end of great-power wars because
countries that were economically interdependent wouldn’t dare ruin their own
economies by going to war with a significant trading partner.
The
“McDonald’s Theory”
hatched by Thomas Friedman was argued on TV and in the newspapers: no two
nations that had McDonald’s fast-food restaurants, we were told (falsely),
had ever gone to war with each other.
Free
trade was also going to eliminate poverty in the world by giving every
country an “even playing field” to compete for manufacturing jobs.
High-wage
countries like the US and the UK would have to stop protecting their laborers
with unions, whose wage and benefit demands were merely “drags on the economy”
and prevented the “magic of markets” from working.
Low-wage
countries would pick up much of that work, but over time their people would
rise into the middle class, too, and everything would even out.
And, indeed, trillions of dollars of wealth were sucked out of the American working class as union membership plunged from around a third of workers to about 6% in the private marketplace today, all while China saw the fastest and strongest rise of a middle class in the history of the world.
There are now more
middle-class Chinese than the entire population of the US, as the American
middle class sank below being half our population for the first time since the
postwar era got seriously underway.
Austerity was supposed to end ghettos, crime and poverty in America by withdrawing the supports “lazy” people used to get by without having to work.
In
the neoliberal story, Black people weren’t isolated in their neighborhoods by
redlining and racist designs for highways, power-plants and other polluting
industries; they lived in “public housing” on “welfare” and made more and more
money, the neoliberal story went, as they had more and more babies out of
wedlock.
Reagan
told the story of the “strapping young buck”
in line at the supermarket upsetting all the hard-working white people when he
whipped out his food stamps to pay for his steak and beer; it was the male
complement to Reagan’s Black “welfare queen” myth. Cut off his food
stamps, the logic went, and he’ll be forced to look for gainful employment…even
if there were no jobs within miles and white employers wouldn’t then hire Black
people.
The
occasional Black rags-to-riches stories, like Herman Cain or Ben Carson, were
celebrated and held up as an example of how neoliberal austerity policies would
“transform the ‘hood” and bring about both racial and economic integration
nationwide. Meanwhile, harsh prison sentences, mandatory minimums and
three-strikes laws would end the scourge of “super-predators” on our
streets.
And
neoliberalism’s tax cuts for the morbidly rich would incentivize them to start
new businesses and “create jobs.” Everybody would win!
Deregulation,
we were told, would enable all of this “free market magic” to happen quickly, because businesses
were more nimble and knew better what they needed to do to make their products
than did “government bureaucrats.”
Even
regulations that most people agreed with, like pollution controls, were
unnecessary, the neoliberalism advocates told us, because businesses that
polluted would be “shamed in the marketplace.”
If
they refused to clean things up and their pollution was harming people, we were
told, they’d be “held accountable in the courts” by the families of the people
they’d damaged or killed.
Deregulation
would also end economic depressions, because no banker or stockbroker in
his right mind would take such big chances that a misstep could wipe out large
sectors of the nation’s economy.
Republican
Senator Phil Gramm made this very point
on the floor of the Senate in 1999 when selling the end of the 1933
Glass-Steagall law that prevented checkbook banks from using their depositors’
money to gamble in the stock, bond and real estate markets.
Everybody
applauded and banksters started gambling and became billionaires. And, of
course, it led us straight to the Bush Crash of 2008 when the entire system
seized up and you and I bailed out Wall Street with trillions of dollars,
hundreds of billions of which the banksters simply pocketed.
Privatization
was a subset of deregulation, moving control over essential services like
water, power and schools out of the public/governmental arena and into the hands
of the rich and their allies. Privatization was supposed to make
water cleaner, electricity cheaper and schools better.
Tragically,
as Americans are now realizing as we wake up from our neoliberal dream, all
were lies.
Flint,
Michigan was a disastrous water privatization scheme pushed by the Republican
administration of that state that has destroyed the lives of thousands of
now-brain-damaged children.
California
and Texas suffer from regular blackouts while the stockholders and executives
of their power companies stash billions in their money bins.
Public
schools around the country have been kneecapped as their resources are
reallocated to corporate, for-profit charter schools.
Reagan
installs Neoliberalism
From
the 1930s to 1981, a period of time spanning more than two full generations,
the American political and economic system was run under a “well-regulated
capitalism” system conceived
by economist John Maynard Keynes and put into place in 1933 by President
Franklin D. Roosevelt.
A
top income tax bracket of 91% that kicked in at around $3 million a year in
today’s money guaranteed that nobody became obscenely rich, while strong
protections for workers and their right to unionize ensured a good chunk of corporate
profits went to the workers who created that revenue.
Anti-trust
laws were so vigorously enforced that in the 1962 antitrust case of
Brown Shoe Co. v United States,
the Supreme Court blocked the merger of Brown and GR Kinney, two shoe
manufacturers, because the combination of the two would have captured about 5
percent of the US shoe market. (For comparison, Nike today has 18 percent of
the US shoe market.)
Throughout
that period America became steadily safer and cleaner as worker protections
became law (and got their own agency with OSHA), pollution and dangerous
products were regulated (and the EPA was created), and government stepped in
proactively to reforest America (with the Civilian Conservation Corps) and
provide American families with low-cost clean electricity (the Hoover and
Bonneville Dams and the Tennessee Valley Authority, among others).
But
starting in a big way in the 1950s a number of front men for big money
industries and dynastic fortunes stepped forward to argue that all of this
regulation and taxation was not a benefit or economic stabilizer but, instead,
a certain road to economic doom and social perdition.
Milton
Friedman argued (in his book Capitalism And
Freedom) that high wages, taxes and regulation were stifling the
economy in a way that would surely lead to hyperinflation and ruin, predicting
a disaster far worse even than the Black Tuesday stock market crash and ensuing
Republican Great Depression that Herbert Hoover kicked off in 1929.
Russell
Kirk argued (in The Conservative Mind)
that if the American working class became sufficiently wealthy then minorities
would rise up, wives would want to have careers and young people would become
libertines, flouting the rules of society.
The
result, Kirk predicted in
1951, would be a Civil Rights movement that could overthrow white
control of America; a women’s movement that would sweep away
socially-stabilizing patriarchy; and a student movement that defied authority,
law and the draft, all leading to social chaos and our inability to fight wars.
Inflation
gives neoliberals the lever they needed
Inflation
had always been the thing that Friedman and his acolytes most loudly warned
against, but when it came to America its cause wasn’t what Friedman had
predicted.
In
1973 several Arab states went to war with Israel and the US openly took
Israel’s side in the conflict. Enraged, the oil-rich states — led by Saudi
Arabia — cut off the supply of oil to America in what is now known as the Arab
Oil Embargo of 1973-1974.
There
are two main ways inflation happens: a country debases its currency (as
happened in Germany in the 1920s and Zimbabwe
in this century) or a commodity that’s at the core of an economy becomes scarce
(in the case of Zimbabwe it was both: food became scarce at the same time the
government went on a money-printing binge).
The
US has never had a serious problem with debasing our currency (although that’s
what Friedman was hysterically warning against), but everything in our economy
— from manufactured goods to travel to food production and distribution — runs
on oil.
The
oil shock so shook our economy that Richard Nixon, no fan of government
intervention in markets, resorted to wage and price controls while people
formed mile-long lines to get gas on the odd- or even-days they could do so,
based on the last digit of their license plate.
The
result of that oil shortage was a subsequent shortage of pretty much everything
else, and when things are scarce their price gets bid up. Inflation hit 12% in 1974
and stayed high while oil slowly worked its way back through the economy until
1981 when it dropped down to “mere” 8.9%.
Friedman,
Reagan and the wealthy funders of the Republican Party saw this inflation,
which was devastating the Jerry Ford and Jimmy Carter one-term presidencies, as
a political gift. To a man, they insisted it was caused by FDR’s and
LBJ’s “welfare state” policies and the “big spending” associated with them,
even though that was a complete lie.
Reagan
was sworn into office just as inflation was beginning to abate (it dropped to
3.8% in 1982) and he told America that we needed to embrace an entirely new
economic theory if we were to avoid another era of 15% mortgage rates and
wage-eroding price increases.
America,
shook by that decade of seemingly intractable inflation, bought his sales pitch
and Reaganomics — AKA neoliberalism — became the operational economic
and political system of America in 1981. Everything from trickle-down to
busting unions to “ending welfare as we know it” and “tough on crime policing”
fell under this single rubric.
Democrats
buy into neoliberalism
As
the oil shock wore off and the American economy entered a period of strong rebound
in 1982, it seemed that Reaganomics/neoliberalism was working.
Expanding
on the idea, Reagan and Bush the Elder negotiated what Bush called a “New World
Order” of “free trade.” While people would still be constrained by national
borders, there would no longer be borders or barriers for the flow of money and
corporate goods.
They
rolled out the General Agreement on Tariffs and Trade (GATT) which later
birthed the World Trade Organization (WTO) and negotiated the North American
Free Trade Agreement (NAFTA) that was later signed by President
Clinton.
Bill
Clinton had become a believer, in part because it was good politics;
Reaganomics was getting credit for the end of the oil-shock-caused inflation
and subsequent hard times and was popular.
Reagan’s
destruction of American unions had also dried up the Democratic Party’s main
revenue source, so by 1992 jumping into bed with giant corporations and the
super-rich had become a political survival strategy for Democrats.
Embracing
multinational corporations that wanted to move their expensive-labor
manufacturing facilities overseas meant overflowing campaign coffers for the
newly-neoliberal Democratic Party and Clinton’s political arm, the Democratic
Leadership Council (DLC).
It
was time, Clinton told us, to consign the policies of Roosevelt and Keynes to
the dustbin of history. There was a “New Democrat” Party (there’s still a
“New Democrat Caucus” in Congress for neoliberal
hangers-on) and a new, young, vigorous president was taking the reins of
government.
It
worked for a while, but by the early 2000s Americans were starting to see
through the entire neoliberal façade, as over 50,000 factories had
moved from the US to Mexico, China and other developing countries while wages
in the US had collapsed. The middle class was going backwards, or staying
flat at best, and discontent roiled the country.
After
a brief feelgood period of punitive war after 9/11, Americans were again ready
to shake things up; they did so in an historic move by electing our country’s
first Black president, Barack Obama.
While
Obama, like Clinton, had campaigned on themes that made it seem he was
rejecting neoliberalism, in fact he was as deeply in its camp as were Reagan,
Bush, Clinton and Bush.
By
the time of his presidency neoliberalism was simply conventional wisdom in
political circles, having been adopted in the UK in 1978 by Margaret Thatcher
and large parts of it adopted by much of the rest of Europe in the 1990s and early
2000s. Onward to Davos to party with the neoliberal billionaires!
But,
still, as noble and soaring as Obama’s rhetoric was, and as good and decent a
man as he was (in contrast to the war criminal and torturer Bush, horny
Clinton, or the evil Nixon), neoliberalism still wasn’t working for anybody
except America’s biggest corporations and richest individuals. And American
workers knew it.
Enter
Donald Trump,
the political equivalent of The Little Boy Who Said The Emperor Has No
Clothes. Trump attacked neoliberal policies of both parties,
although never directly using the word “neoliberal.”
Free
trade, he said, had been a disaster for American workers. And voters knew
he was right.
Rich
people were gaming the tax system — he knew, he told us, because he did it, too
— and he was going to put an end to that. Americans wanted tax fairness,
and when Trump said his rich friends “will hate me” because he was going to
raise their taxes so much, voters believed him.
And
austerity had not only not ended crime but was driving working class
people into the poorhouse. Nobody, Trump proclaimed, would be a better
friend to Social Security, Medicare, housing supports and other entitlement
programs that supported the poor and middle class alike than him.
Most
of his solutions were lies, of course, but the American people wanted to
believe that this reality TV star and billionaire was just the savior America
needed.
To
top it off, Trump spoke what many white people considered “politically
incorrect truths” about race and immigration. “They” were stealing your
job and threatening to rape your wives and daughters, Trump told white
Americans, and he was just the guy tough enough to deal with “them.”
Outside
of tearing a few thousand brown-skinned children away from their parents and
symbolic tariffs on Chinese products that backfired badly, Trump couldn’t pull
any of it off. He was as much a follower of neoliberal ideology as any
American president since Reagan, his rhetoric aside.
So
Americans, still wanting to get rid of neoliberalism, decided to try the
Democrats again in 2020, giving that party control of the House, Senate and
White House. Joe Biden, a canny politician sensing the mood of the
country, openly denounced many of the tenets of neoliberalism and, in the first
six months of his presidency, accomplished Keynesian stimulus programs that
would have left Clinton, Bush or Obama in shock.
Now
the Democrats and the Biden Administration face a choice.
Do
they finish the job and end neoliberalism altogether, bringing our
manufacturing back home, rebuilding the power of organized labor, and raising
taxes and regulations? Or do they declare “mission accomplished” and
revert back to neoliberal policies?
Turning
back neoliberalism would be an accomplishment for the ages, something
impossible even five years ago.
Bringing
American manufacturing back home, raising top income tax rates to the above-50%
level that stabilizes the explosion of great wealth, and building a 21st
century social safety net with free college and Medicare For All would
guarantee the Democratic Party — like it did from the 1930s to 1980 — would
control most of the US government for generations.
It
would also strengthen democracy itself in America, leading us towards the
multiracial, multiethnic all-in society promised in our Founding documents but
not yet fully realized.
However,
there are powerful forces arrayed in defense of neoliberalism, including the
Supreme Court, massive transnational corporations and an activist billionaire
class the Court empowered with rulings like Citizens United.
If
the neoliberals win and Biden and the Democrats back down, it’s unlikely
America will simply slide back into a “friendly neoliberalism” like we had
before the Trump presidency.
Instead,
we will almost certainly follow the path that Russia and Hungary have trod,
embracing Friedman’s economic policies and the authoritarian strongman politics
of oligarchy necessary to enforce them. It will be the end of the largest and
most noble parts of the American Experiment.
America
has arrived at one of history’s great crossroads.
Thom
Hartmann is a talk-show host and the author of The Hidden History of American Healthcare
and more than 30 other books in
print. He is a writing fellow at the Independent Media Institute and his writings
are archived at hartmannreport.com.
This article was produced by Economy
for All, a project of the Independent Media Institute.