Economic History

The United States burst forward as the superpower after World War II. At that time, 1945, the United States had ¾ of the world’s industrial capacity and 2/3 of its invested capital. The problem for the United States in 1945 was not the dynamism of its economy coming out of the war but whether it could be sustained. What each presidential administration did from the 1940s until the election of Ronald Reagan in 1980 was to support a political and economic system that coupled promotion of super-sized corporations and banks, the globalization of capital, and the provision of a modest safety net for workers and wages that allowed the increase of mass consumption of the goods and services produced by the 200 corporations that accounted for 1/3 of all that was produced on the face of the earth. 

But beginning in the late 1960s, however, the “golden age” of the US economy evaporated. Corporations sought to reverse declining profit rates. Public services were seen as too expensive. Worker rights were challenging profit rates. And as a result of the threat to more and more profits for big corporations and banks, the economy began its shift from investment in manufacturing (with attendant higher paying jobs) to financial speculation. The whole world shifted from prosperity for some to a system of accumulating debt, challenging the rights of workers to form unions, and reducing low cost access to education, health care, and transportation. The US economy, which had led to an income distribution in which there was a broadening middle sector from the 1940s to the 1960s, began its steady transformation to a two-tiered economy based on a tiny percentage of the super-rich and a broadening marginalization of almost everyone else. And during every period from the Golden Age until now inequalities in wealth and income between whites and people of color and men and women continued or grew. 


In the United States, the long tradition of economic populism and socialist movements, inspired by post-civil war reconstruction, came to fruition in the 1930s when millions of heretofore manufacturing workers successfully organized an industrial labor movement (the Congress of Industrial Organizations or CIO) that demanded a New Deal for them and for the millions more who were unemployed, living on the streets, and traveling across the country to desperately find work in the agricultural fields of California. The New Deal, for all its limitations, brought jobs, Social Security, worker rights, support for the arts, and a codification of peoples’ culture. Perhaps most importantly a vision emerged across the land that the nation was (or should be) a community. This vision was based on the fundamental proposition that human development only occurs when people live, work, and respect each other. Unions were about workers but the idea of union was also about human community. And the struggles for workers’ rights in many locales were paralleled by the movement for racial justice. And after the World War the vision of economic and social justice was greatly expanded and inspired by the Southern civil rights movement. Dr. Martin Luther King became the metaphorical embodiment of the fusion of economic and racial justice and the pursuit of peace.

But, in reaction to a half century of peoples’ struggles for justice, a counter-offensive was launched by market fundamentalists to reverse the gains achieved by workers and people of color. The Goldwater candidacy for president in 1964 was not an aberration but rather a launch pad for a movement to reverse the modestly progressive economic and social policies adopted by the Roosevelt, Kennedy, Johnson, and even the Nixon administration. The old Social Darwinian vision of each against all in the social and economic world, the magic of the marketplace, the belief that government is not the solution but rather it is the problem became common currency in political discourse. The hero of this historic force was Ronald Reagan, elected president in 1980. Many liberals in both parties, with ties to banks and corporations, articulated a softer message, paid homage to the problems of the needy, and were more sympathetic to some women’s, African American, and gay/lesbian rights. But they also supported the dramatic reversal of economic policy embedded in the so-called “Reagan Revolution.” 

The radical right supporters of Reagan built their campaigns around so-called social issues. And the centrists of both the Republican and Democratic Party pursued an economic transformation designed to preserve and enhance profits while sometimes opposing the most egregious recommendations of the radical right. While centrists and the radical right differed on many issues they shared a common commitment to reverse the economic gains workers, people of color, and women had achieved in the prior years.

From the late 1970s until today, both political parties pursued “neoliberal” international and domestic policies. Neoliberal policies included; down-sizing government(except for the military), privatizing public institutions, deregulating economic activity, opposing workers’ rights to form trade unions, revising tax laws to reward the rich and shift the burden of public spending to the economically marginalized, and developing policies that enticed greater investment and financial speculation at the expense of ordinary citizens. These policies have been supported by international financial institutions, banks, and governments all across the globe. In the United States every presidential administration from Reagan through Obama has backed these policies. Both parties, most politicians, leading advocacy groups, corporate and financial cabals such as those organized by the Koch Brothers, and the handful of media conglomerates who control at least half of what we read, watch, and listen to, all have worked to fully institutionalize the neoliberal agenda at home as well as overseas. And importantly, the neoliberal agenda has been most enforced at the level of state government. 

Part 2 will examine the political economy of neoliberalism in one state, Indiana.