The Scourge of Neoliberalism, U.S. Economic Policy from Reagan to Trump—Jack Rasmus, Clarity Press, 2020
This is an excellent overview of Neoliberal policies from their inception to late 2019. Some of the book is very detailed and useful recap of the various policies. Just as important, he makes several stimulating and provocative analyses:
Neo-liberalism is not actually a return to the Liberalism of the 1800’s. It is instead closer to Merchantilism. One obvious difference is that the increased government functions and economic interventions from the post-Classical Liberal period have NOT been jettisoned. Instead some of those functions have been privatized. The government through taxation continues to pay for them, but the profits off of those functions are now made by corporations. As others have pointed out Neoliberalism is not a shrinking of government but a transfer for functions from the carrot to the stick.
Capitalist restructuring drives changes in government policy. He outlines several such shifts—the early 1900s that brought the Federal Reserve and Income tax when it was necessary to raise more funds and regulate the out of control banking system. During WWI , this entailed an accommodation with labor
The New Deal where government intervention was needed to prevent complete economic collapse. He doesn’t note enough that some of the changes were made in response to mass action of workers.
The post-WWII period, where the U.S. took on a global military and economic role. This was still based on the gold standard and fixed exchange rates.
Finally, Neoliberalism which he attributes mainly to the Reagan period though he does mention Carter as well. He even discusses Nixon’s beginning moves in this direction. This was driven , the author believes, by the need by the U.S. ruling class to recover hegemony in the face of competition from Germany, Japan and others.
The author mainly says that government policy shifts are in response to economic changes within capitalism. Shifts in the base require shifts in the superstructure. However , he is sometimes unclear about the relationship between the two. Already developing globalization was a spur to neo-liberal polices.
One major weakness of his account is the downplaying of the tendency for the rate of profit to decline as a source of crisis. There is also little discussion of economic crisis as a driving force of the various waves of restructuring. His stress on technological and economic changes within capitalism is useful and interesting. However, it is weakened by this missing element. The shift to Neoliberalism for example ignores that a key reason for it was the declining rate of profit. It was not just that the U.S. wanted to reassert hegemony, but that it d needed that hegemony to increase the profit of its corporations.
This leads to the author accepting the idea that the economic power of labor that threatened capitalist profits. The key problem was actually declining profit rates. This meant that capitalists who could afford rising living standards in the 50’s could no longer afford those from the late 60’s on. Though the author credits class struggle with provoking the crisis that led to Neoliberalism, he doesn’t otherwise discuss class struggle much throughout the rest of the book.
His nuanced explanation of the roll out of Neoliberal policies is important. Reagan was the first main executor or NL policies but in a crucial respect he differed from later policies. To squeeze inflation out of the economy, he and Volker pushed high interest rates. Once this was accomplished, low interest rates became the norm of NL policies. These lowered the value of the dollar vis a vis other currencies. This allowed U.S. manufacturers to be more competitive. Also it allowed US companies to invest abroad and receive more dollar profits on repatriation to the U.S. The implicit deal worked out was that U.S. investment abroad would help capitalists in other countries. They would recycle the money they accumulated from the resulting U.S. trade deficit into U.S. bonds. This would allow the U.S. to cover its trade deficit and at the same time cover its budget deficit. The U.S. budget deficit mainly resulted from low and declining corporate tax rates in the U.S. and high military spending to maintain U.S. economic and military dominance around the world.
These policies were inherently contradictory though they did produce a Neoliberal boom until 2008. Attracting foreigners to buy U.S. bonds required higher interest rates than what was encouraged in the U.S. This added to the budget deficit. The budget deficit produced pressure toward austerity---cutting social programs etc. This was actually more successful under Obama than under Trump. Over time, low interest rates had less and less of a stimulatory effect on the economy. Neoliberal policies pushed other countries to do the same which led to competitive devaluations and a trend toward negative interest rates across the world
“ External Policy” including trade deals which gave more freedom to U.S. corporations did not fully go into effect until the end of Reagan’s term and early GHW Bush. These allowed more freedom for U.S. corporations to make and repatriate profit. Under Trump, the U.S. trade position slipped so much that Trump tried to push harder on allies and especially on China. The author sees this as a more muscular neo-liberalism when others have seen it as a break from NL. The old NL policies were not working well enough and had to be shaken up.
Usually commentators see Trump’s trade nationalism and dissing of NATO and going it alone policies as all of a piece and a real diversion from the policies of all previous post-WWII presidents. The author does not address the NATO issue but sees Trump’s “America First” policies as an extension of NL. It has its own contradictions. Reducing the trade deficit can reduce the world subsidy to the U.S. budget deficit. The disruption of the world economy that his trade wars cause pushes more sheltering of funds in the U.S. which drives up the value of the dollar and in turn undercuts trade policy which is based on the low U.S. dollar.
One important point he makes is the source of opposition to Obamacare. It was a boon to health insurance companies---ensuring them a market. However , it was based on taxes on other corporations to subsidize the purchase of insurance by some of the poor. This resulted in a division in the ruling class over the subsidy and gave fuel to the far right over this. The irony is that something close to Obamacare was originally proposed by the right wing Heritage Foundation.
The author goes through in detail how the various NL policies were implemented and the obstacles to them that limited them at various times. He stresses the Marxist view that Neoliberalism was not primarily an ideology that somehow manifested itself in policy. Though it was developed well before its implementation, it was primarily a justification for policies used to augment U.S. hegemony and in my view to raise the rate of profit. Racism did not cause slavery. Racism became the justification for slavery. So NL ideology did not cause the practice of Neoliberalism, but justified it later. This is a very important foundation for understanding NL.
Though it tends to be too free-floating, he does discuss NL “industrial policy”---basically weakening unions and driving down real wages. This is aimed at recuperating the rate of profit by raising the rate of exploitation, though the author doesn’t quite put it this way. His attack on NAFTA and seems to give some ground to protectionism--- that sending jobs abroad was key to driving down wages. He also seems to oppose increased skilled immigration for the same reason and sprinkles these arguments throughout the book. He does not stress the much larger job loss from automation. Though the main thrust of the book is anti-capitalist, it does give some ground to nationalist arguments. He also disses “identity politics” on 193
He notes on page 93 that NL policies tend to soften the blow of NL on the very poor while attacking the middle and upper sections of the working class. This of course allows the Republicans to win some support from the middle and upper sections of the WC, which are of course disproportionately white. This reinforces their attempt to divide workers on racial lines.
On 103 he summarizes GW Bush’s policy focused on privatization, destroying defined benefit pensions and holding down the minimum wage, reducing overtime pay and attacking public unions.
On 113, he notes the lowering productivity growth in the 21st century as an example of crisis of NL. Again , he does not relate this directly to the declining rate of profit. Also he seems to exaggerate it. A big part of the declining position of the WC is that productivity continues to rise while wages stagnate. Charts show this as a continuing phenomenon from the early 70s on and continuing today. Obama’s recovery policies were relatively ineffective compared to previous recoveries---showing NL is increasingly unable to push up profit rates.
Trump’s NL policies on 122: rising war spending; business tax cuts; making taxes more regressive; reducing social programs; restructuring trade relations; expansion of free trade treaties; low dollar exchange rates; continuing the twin deficit solution; low interest rates; deregulation and privatization; destruction of unions; wage compression
Trump has so far actually less succesful at reducing social spending than Obama. However, he has been more successful with the other policies. This is one important point that the author makes:
Trump policies are an expression of the needs of the US Ruling Class and in general an extension of NL policy. Many commenters have noted that in spite of Trump’s unpredictability, narcissism, crudeness etc,. he has feathered the nest of business, mainly through tax cuts. However the author takes it further saying that Trump in general is following the collective interests of the RC. He also notes that the authoritarianism Trump is criticized for is a result of the intensification of NL. This is partly true in that the public consistently opposes many NL policies and its opposition must be depressed to fully carry them out. Since Nixon, there has been discussion of the ”imperial presidency”.
This is of course true in part. However, Trump has provoked more intense RC opposition than most other presidents. This is partially reflected by his opposition in the press, from Republicans, exTrump officials, anti-Trump books etc. The author downplays this division in the RC over Trump.
The question remains, how much of RC opposition to Trump is due to his personal qualities, his crudeness , his acceptance of support from Nazis etc. and how much is it due to policy differences?. Are his “America First” policies a real departure from the collective approach to international problems? George W Bush was attacked for these as well. Are his trade policies a departure from the NL consensus or an intensification of it as the author insists. In either case these policies have provoked significant RC opposition.
This relates to the 2020 election and our view of the post Trump era should Biden win. How significant is the difference between Biden and Trump? How much can we expect any significant departure from Trump policies from Biden? In the view , not much difference can be expected.
On page 126, he rightly notes that resistance will help determine whether NL will intensify or not
181—One contradiction of NL policy is that low interest rates needed for corporate profit lead to more and more financial instability. 183---Central banks are not as independent as they are said to be.
Though the author alludes to declining profit rates as a major problem for capitalists, he does not stress this enough. He therefore, raises the possibility of substantial changes to the NL consensus. He does not specify what that new policy would be. However, many elements of NL would have to continue to overcome 2 of the most important contradictions of capitalism---the need to raise the rate of profit and the need to increase the rate of exploitation in order to do that. This means that even is certain aspects of NL disappear such as the double deficit and low interest rates, the industrial policy, austerity , low taxes on the rich etc. will persist. They will only be challenged seriously by generalized class struggle. His focus on technical changes in capitalism as the source of policy changes, downplays the centrality of these contradictions and hence the need of capitalism to maintain some NL policies.
His discussion of the next technological revolution is interesting but a bit speculative---Hydrogen, AI etc. He underestimates the commitment of capitalism to fossil fuels. This is a clear example of the relations of production ( capitalism now fixed on fossils) conflicting with rising forces of production (hydrogen etc.) The outcome of this conflict is not as predictable as he makes out.
The other major innovation is AI which he feels will wipe out millions of low level jobs, and not just in manufacturing. Again this seems a bit telescoped and speculative. He does not recognize that this revolution to the extent it is carried out will exert a major downward pressure on profit rates since the socially necessary labor time to produce products will drop and the capital input will grow. His discussion of home 3d printers seems especially speculative--- Who will be able to afford these especially with mass layoffs? He implies that government will have to move away from NL to provide for the newly laid off. Again this contradicts his correct insight that class struggle is the key here.
The other aspect of the future is more financial instability due to growth of crypto currency.
His discussion at the end shows with examples that NL contradicts democracy. This is fine except that he implies that somehow pre-NL U.S. politics were more democratic. This echoes David Harvey’s idea that the RC re-took power in the 70s. In reality, it already had power but adopted different policies when it needed to re-establish profit rates and as the author says international hegemony.
Overall , this is a very interesting book and an excellent description of Neoliberalism and the policies of various presidents trying to carry these out. It is stimulating though it has certain limitations noted above.
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