"And they blew it."
by Tom Sullivan
Ryan Cooper has embarked on a series examining fissures in the Democratic Party for The Week, beginning with its embrace of neoliberal policies.
After three decades of New Deal programs that gave the country "the greatest economic boom in American history" and broadly shared prosperity, the 1970s began a slow return to the kind of economics that dominated the decades ahead of the Great Depression. That model, which functioned instead "on behalf of a tiny elite," focused on "deregulation, tax and spending cuts, union busting, and free trade." New Deal regulatory structures, Chicago School economists insisted, were "a drag on economic growth."
That in itself is a curious formulation, and an even more curious response to decades of boom that produced the largest middle class in the history of the world. A drag how? It is the came response that has produced the insistence over the last year of soaring corporate profits that large corporate tax cuts were necessary to kick-start an economy that for titans of industry was already performing brilliantly. After building the largest, most evenly distributed wealth in the world (African Americans would disagree),
returning to rule by an oligarchy wasn't happening fast enough?
Nevertheless, after the oil and political shocks of the 1970s, neoliberalism became the governing economic philosophy by the Reagan years, Cooper writes, as "both parties conspired to break the New Deal."
And during the Clinton years, it seemed to be working, Cooper notes:
The spectacular late-'90s boom was, in retrospect, the first and last time the U.S. saw full employment under neoliberalism. It was followed immediately by a financial crisis and a prolonged "jobless recovery," where growth returned reasonably quickly but employment and wages lagged far behind. (Only in 2017 did the median household income finally surpass the 1999 peak — despite the economy being 18 percent larger.)Taking the governor off the the economic engine once again caused the "self-regulating" market to race out of control. Within a decade of Clintonian deregulation, the result was a series of financial crises, bailouts for the richest, and the "the worst financial panic since 1929." And what we now call The Great Recession.
Most damning of all, neoliberalism under Obama turned in the worst economic performance since the 1930s. Despite the fact that the 2008 crash left obvious excess capacity, there was no catch-up growth — on the contrary, growth was about two-thirds the 1945-2007 average, with no sign of speeding up on the horizon. Even 10 years after the start of the recession, there is every sign that the economy is still depressed.All of this, one hopes (as Cooper does), leaves neoliberal economics discredited within the Democratic Party. What replaces it is still a developing narrative. Cooper plans to take that up in future installments.
So despite the confident predictions of the Chicago School, the political economy created by neoliberalism turned out to be identical to 1920s laissez-faire economics in every important respect. The United States is once again a country which functions mostly on behalf of a tiny capitalist elite. It has the same extreme inequality, the same bloated, crisis-prone financial sector, the same corruption, and the same political backlash to the status quo and rising extremist factions.