| This is part 2 of a two-part diary on two new articles that provide insight into the newly visible weakness of Obama's politics. Although I have serious disagreements with some of their content, their main thrusts are both accurate, they complement one another, and though they reinforce arguments from the left, they both primarily grounded in pragmatist arguments. In part one, I examined "The Character of Barack Obama", by David Bromwich, which was really more about the process side of Obama's politics. In this part, I turn to Michael Lind's critique of Obama's cult-like faith in neoliberalim, asking, "Can Obama be deprogrammed?".
The main thrust of Lind's piece is unassailable: New Deal liberalism worked. Neoliberalism does not. New Deal liberalism produced the broadest prosperity, the largest and most affluent middle class in the history of humanity. Neoliberalism produced a bubble economy in the 1990s that briefly balanced our federal budget, but utterly failed to stop the erosion of our manufacturing base and our rising trade imbalances.
By neoliberalism I mean the ideology that replaced New Deal liberalism as the dominant force in the Democratic Party between the Carter and Clinton presidencies. In the Clinton years, this was called the "Third Way." The term was misleading, because New Deal liberalism between 1932 and 1968 and its equivalents in social democratic Europe were considered the original "third way" between democratic socialism and libertarian capitalism, whose failure had caused the Depression. According to New Deal liberals, the United States was not a "capitalist society" or a "market democracy" but rather a democratic republic with a "mixed economy," in which the state provided both social insurance and infrastructure like electric grids, hydropower and highways, while the private sector engaged in mass production....
The transition from New Deal liberalism to neoliberalism began with Carter, but it was not complete until the Clinton years. Clinton, like Carter, ran as a populist and was elected on the basis of his New Deal-ish "Putting People First" program, which emphasized public investment and a tough policy toward Japanese industrial mercantilism. But early in the first term, the Clinton administration was captured by neoliberals, of whom the most important was Treasury Secretary Robert Rubin. Under Rubin's influence, Clinton sacrificed public investment to the misguided goal of balancing the budget, a dubious accomplishment made possible only by the short-lived tech bubble. And Rubin helped to wreck American manufacturing, by pursuing a strong dollar policy that helped Wall Street but hurt American exporters and encouraged American companies to transfer production for the U.S. domestic market to China and other Asian countries that deliberately undervalued their currencies to help their exports.
Lind is also very astute in capturing how Obama's agenda seeks to elide the deeper economic problems that neoliberalism is not prepared to tackle, and how it seeks to rationalize doing so:
Instead of the updated Rooseveltonomics that America needs, Obama's team offers warmed-over Rubinomics from the 1990s. Consider the priorities of the Obama administration: the environment, healthcare and education. Why these priorities, as opposed to others, like employment, high wages and manufacturing? The answer is that these three goals co-opt the activist left while fitting neatly into a neoliberal narrative that could as easily have been told in 1999 as in 2009. The story is this: New Dealers and Keynesians are wrong to think that industrial capitalism is permanently and inherently prone to self-destruction, if left to itself. Except in hundred-year disasters, the market economy is basically sound and self-correcting. Government can, however, help the market indirectly, by providing these three public goods, which, thanks to "market failures," the private sector will not provide.
But there is another layer that Lind gets wrong-a layer dealing with race from the New Deal forward on the one hand, and the nature of post-50s progressive politics on the other. I'll first review what Lind gets right, and why it's important to advance this perspective, then I'll look at what he gets wrong, and what its significance is. |
The New Deal Worked, Neoliberalism Doesn't
Lind on the success of the New Deal:
When it came to the private sector, the New Dealers, with some exceptions, approved of Big Business, Big Unions and Big Government, which formed the system of checks and balances that John Kenneth Galbraith called "countervailing power." But most New Dealers dreaded and distrusted bankers. They thought that finance should be strictly regulated and subordinated to the real economy of factories and home ownership. They were economic internationalists because they wanted to open foreign markets to U.S. factory products, not because they hoped that the Asian masses some day would pay high overdraft fees to U.S. multinational banks.
New Dealers approved of social insurance systems like Social Security and Medicare, which were rights (entitlements) not charity and which mostly redistributed income within the middle class, from workers to nonworkers (the retired and the temporarily unemployed). But contrary to conservative propaganda, New Deal liberals disliked means-tested antipoverty programs and despised what Franklin Roosevelt called "the dole." Roosevelt and his most important protégé, Lyndon Johnson, preferred workfare to welfare. They preferred a high-wage, low-welfare society to a low-wage, high-welfare society. To maintain the high-wage system that would minimize welfare payments to able-bodied adults, New Deal liberals did not hesitate to regulate the labor market, by means of pro-union legislation, a high minimum wage, and low levels of immigration (which were raised only at the end of the New Deal period, beginning in 1965). It was only in the 1960s that Democrats became identified with redistributionist welfarism -- and then only because of the influence of the New Left, which denounced the New Deal as "corporate liberalism."
Between the 1940s and the 1970s, the New Deal system -- large-scale public investment and R&D, regulated monopolies and oligopolies, the subordination of banking to productive industry, high wages and universal social insurance -- created the world's first mass middle class. The system was far from perfect. Southern segregationist Democrats crippled many of its progressive features and the industrial unions were afflicted by complacency and corruption. But for all its flaws, the New Deal era is still remembered as the Golden Age of the American economy.
This description is fairly accurate, but has three flaws that I'll pick up on later: First, the "influence of the New Left", which was virtually non-existent, had nothing to do with the Democrats suddenly becoming identified with redistributionist welfarism out of the blue. Republicans-particularly conservatives-had been making similar charges almost from the beginning of FDR's time in office. Second, Southern segregationists didn't just "cripple many of its progressive features", they virtually excluded blacks from the mainstream of its provisions, and perverted aspects of the system to subsidize and reinforce their neo-feudal system of racial apartheid. Third, Lind's account glosses over the fact that New Deal Liberalism's failures on race, and vulnerability to racial and ideological demonization contributed to a larger over-all failure to create a self-reproducing political order.
Still, given how much unprecedented broad prosperity the New Deal system created, it's understandable how those who created it could not imagine that people would ever want to throw it all away. The vastly underestimated the power of the dark side of human nature-something that Richard M. Nixon understood all too well. Which is why I can let Lind's description stand for purposes of contrasting the New Deal's record with that of neo-liberalism. In addition to the paragraph already quoted above, Lind has this to say:
Beginning in the Carter years, the Democrats later called neoliberals supported the deregulation of infrastructure industries that the New Deal had regulated, like airlines, trucking and electricity, a sector in which deregulation resulted in California blackouts and the Enron scandal. Neoliberals teamed up with conservatives to persuade Bill Clinton to go along with the Republican Congress's dismantling of New Deal-era financial regulations, a move that contributed to the cancerous growth of Wall Street and the resulting global economic collapse. As Asian mercantilist nations like Japan and then China rigged their domestic markets while enjoying free access to the U.S. market, neoliberal Democrats either turned a blind eye to the foreign mercantilist assault on American manufacturing or claimed that it marked the beneficial transition from an industrial economy to a "knowledge economy." While Congress allowed inflation to slash the minimum wage and while corporations smashed unions, neoliberals chattered about sending everybody to college so they could work in the high-wage "knowledge jobs" of the future. Finally, many (not all) neoliberals agreed with conservatives that entitlements like Social Security were too expensive, and that it was more efficient to cut benefits for the middle class in order to expand benefits for the very poor.
What's more, lest their be any doubt about where Obama's sympathies lie, Lind points out:
By the time Barack Obama was inaugurated, the neoliberal capture of the presidential branch of the Democratic Party was complete. Instead of presiding over an administration with diverse economic views, Obama froze out progressives, except for Jared Bernstein in the vice-president's office, and surrounded himself with neoliberal protégés of Robert Rubin like Larry Summers and Tim Geithner. The fact that Robert Rubin's son James helped select Obama's economic team may not be irrelevant.
"Team of Rivals"? Not so much.
The Obama Agenda Fit
As I wrote above, Lind provides a very neat description of how Obama's agenda seeks to steer clear of the deeper economic problems that neoliberalism can't handle, and how it rationalizes doing so.
His key insight:
Consider the priorities of the Obama administration: the environment, healthcare and education. Why these priorities, as opposed to others, like employment, high wages and manufacturing? The answer is that these three goals co-opt the activist left while fitting neatly into a neoliberal narrative that could as easily have been told in 1999 as in 2009. The story is this: New Dealers and Keynesians are wrong to think that industrial capitalism is permanently and inherently prone to self-destruction, if left to itself. Except in hundred-year disasters, the market economy is basically sound and self-correcting.
Concerning health care, he goes on to elaborate:
Healthcare? New Deal liberals favored a single-payer system like Social Security and Medicare. Obama, however, says that single payer is out of the question because the U.S. is not Canada. (Evidently the New Deal America of FDR and LBJ was too "Canadian.") The goal is not to provide universal healthcare, rather it is to provide universal health insurance, by means that, even if they include a shriveled "public option," don't upset the bloated American private health insurance industry.
The contradiction here is obvious from outside the neoliberal bubble: If the problem is a bloated, overpriced system that fails to provide healthcare for all, the neoliberal "solution" doesn't come close to solving it. The health insurance industry is a pure cost that contributes no value whatsoever in the aggregate. So long as preserving the health insurance industry is a priority, solutions simply aren't possible.
Of course, private insurance need not be incompatible with universal coverage. It simply can't be the driving force. If it plays an ancillary role, if it's heavily regulated, like a municipal utility, with an overhead rate comparable to Medicare, then fine, there's a role for it. But such a form of insurance bears no relationship whatsoever to today's health insurance industry.
As for education:
Education? In the 1990s, the conventional wisdom of the neoliberal Democrats held that the "jobs of the future" were "knowledge jobs." America's workers would sit in offices with diplomas on the wall and design new products that would be made in third-world sweatshops. We could cede the brawn work and keep the brain work. Since then, we've learned that brain work follows brawn work overseas. R&D, finance and insurance jobs tend to follow the factories to Asia.
Education is also used by neoliberals to explain stagnant wages in the U.S. By claiming that American workers are insufficiently educated for the "knowledge economy," neoliberal Democrats divert attention from the real reasons for stagnant and declining wages -- the offshoring of manufacturing, the decline of labor unions, and, at the bottom of the labor market, a declining minimum wage and mass unskilled immigration. One study after another since the 1990s has refuted the theory that wage inequality results from skill-biased technical change. But the neoliberal cultists around Obama who write his economic speeches either don't know or don't care. Like Bill Clinton before him, Barack Obama continues to tell Americans that to get higher wages they need to go to college and improve their skills, as though there weren't a surplus of underemployed college grads already.
In fact, this whole fallacious bag of horseshit was blown out of the water way back in 1997 in the book The Judas Economy: The Triumph of Capital and the Betrayal of Work by William Wolman and Anne Colamosca, both from the socialist rag, BusinessWeek. Amongst other things, they pointed out how East Asian nations were graduating engineers at rates that would swamp the US, while the incomes of college educated young Americans were stagnating even then. Yet, here we are, 12 long years later, and the neoliberal cult around Obama still hasn't gotten the news.
As for the environment, Lind writes:
Environment? Here the differences between the New Deal Democrats and the Obama Democrats could not be wider. Their pro-industrial program did not prevent New Deal Democrats from being passionate about resource conservation and wilderness preservation. They did not hesitate to use regulations to shut down pollution. And their approach to energy was based on direct government R&D (the Manhattan Project) and direct public deployment (the TVA).
Contrast the straightforward New Deal approaches with the energy and environment policies of Obama and the Democratic leadership, which are at once too conservative and too radical. They are too conservative, because cap and trade relies on a system of market incentives that are not only indirect and feeble but likely to create a subprime market in carbon, enriching a few green profiteers. At the same time, they are too radical, because any serious attempt to shift the U.S. economy in a green direction by hiking the costs of non-renewable energy would accelerate the transfer of U.S. industry to Asia -- and with it not only industry-related "knowledge jobs" but also the manufacture of those overhyped icons of the "green economy," solar panels and windmills.
Of course, hiking the cost of non-renewable energy need not have that sort of downside... if the neoliberals weren't allergic to implementing offsetting non-market measures. But that's sort of the whole point: they're incredibly myopic, because they see the whole world through market-tinted glasses. The world must serve the market, rather than the other way around.
What's Missing From Lind's Analysis
First of all, Lind fails disastrously to comprehend the role of race. Chris has written about this before, and I'll be writing about this tomorrow again, but there's a clear correlation between racial homogeneity and support for the welfare state. It was neither accidental nor peripheral that the New Deal was a form of massive affirmative action for the white working class, much of it on its way to becoming part of the largest middle class ever known. By keeping agricultural workers and domestics outside the realm of coverage for Social Security and minimum wage protections, the New Deal effectively created the black underclass as a separate entity, while whites in very similar circumstances at the time (1935) went on to decades of steadily increasing incomes and various forms of government assistance.
What happened in the 1960s was simply that accelerated outmigration from the South suddenly dumped this long-festering problem on the doorsteps of large northern cities and states. It had nothing at all to do with the New Left, which had no real influence at all within the Democratic Party.
Indeed, the New Deal system repeatedly proved incapable of dealing with rightwing demonization. In addition to kowtowing to Southern racism, they were driven from power by McCarthyism in the early 50s, and Johnson initiated full-scale war in Vietnam precisely because he thought a repeat was inevitable if he were to withdraw instead.
Furthermore, the system of national industrial development and landuse developed during this period directly served to undermine the New Deal system. As described in The Rise of the Gunbelt: The Military Remapping of Industrial America , the Cold War era saw a massive disinvestment in the Rustbelt, as military production shifted dramatically outward, to the West Coast, Sunbelt and East Coast. This was reinforced by the Interstate freeway system, at the same time that urban cores were disinvested in, while segregated suburbs were heavily subsidized. Amazingly, it was as if the entire New Deal establishment was utterly blind to how it was committing economic/demographic suicide.
Another way in which Lind's analysis fails is that he downplays the significance of the 1970s economic crisis. Although it was nowhere near as bad as the Great Depression in terms of economic hardship, it sent a very clear political signal: the New Deal bargain was far too hard on the holders of capital, once the era of cheap and easy profits ran out. If Keynsian theory had some difficulties with the 1970s, Marxist theory did not: it was one of those periodic crises that Marx wrote about, due to the falling rate of profit, and calling for the further immisseration of labor as capitalism's solution.
All of this is to say that one should not expect Lind's preferred solutions to solve all our problems, since he doesn't fully recognize the problems that New Deal liberalism couldn't or didn't solve. Yet, it's still undeniable that neo-liberalism fails so utterly in comparison to the New Deal model that it's still fair to say the Lind offers an excellent starting point for discussing what is so terribly wrong about the course that Obama has set us on. |
