The Rise and Fall of the Neoliberal Order: A Half-Century American Odyssey

This podcast episode features Rob Johnson and Gary Gerstel discussing Gerstel's book, "The Rise and Fall of the Neoliberal Order," which chronicles a half-century of American politics and economics from the 1970s to the 2020 election. Gerstel explains that the inspiration for the book stemmed from the seismic events of Brexit and Donald Trump's election in 2016, which signaled the unraveling of a dominant political and economic order. He draws a parallel to his earlier work, "The Rise and Fall of the New Deal Order," defining a "political order" as a movement so powerful that its core ideas govern politics even when its proponents are out of office. The central puzzle for Gerstel was not just the neoliberal order's ascent under Reagan but also how the Democratic Party, particularly under Clinton, became deeply implicated in its economic project, only for it to begin fracturing with Trump's rise.

Gerstel details the "rise" of neoliberalism by first outlining the "fracture points" of the preceding New Deal order. The New Deal, characterized by a strong federal government managing capitalism in the public interest and Keynesian economics, began to crack under the weight of unresolved racial inequality (Jim Crow, Civil Rights Act of 1964, Voting Rights Act of 1965), the unpopular Vietnam War, and the economic crises of the 1970s. The end of America's global economic domination, the rise of foreign competition, and the OPEC-driven commodity price shocks led to unprecedented stagflation, rendering the Keynesian toolkit ineffective. This economic turmoil created an opening for alternative ideologies championed by figures like Milton Friedman, who advocated for monetarist policies, deregulation, and free markets, finding their articulate communicator in Ronald Reagan. Reagan, despite his B-movie actor image, was a sophisticated political thinker who aimed to replicate Roosevelt's success from a conservative, neoliberal perspective.

The episode further explores how the neoliberal order solidified, particularly with the collapse of the Soviet Union between 1989-1991. This event not only opened vast new territories for capitalist globalization but also removed a significant constraint on industrialists and employers in the West. The perceived threat of communism had previously encouraged capitalists to moderate demands and compromise with labor, leading to higher progressive tax rates. With this pressure gone, a new era of domestic politics and labor relations emerged. Bill Clinton, initially with some liberal leanings, pivoted sharply after the spectacular loss of his healthcare plan and the 1994 midterm elections. He embraced a neoliberal consensus, enacting policies like the approval of the World Trade Organization, welfare reform, the Telecommunications Reform Bill of 1996, and the repeal of the Glass-Steagall Act, effectively continuing the "Reagan revolution" under Democratic guise. Gerstel likens Clinton to a "democratic Eisenhower," securing Democratic acquiescence to the neoliberal order.

The discussion then moves to George W. Bush, who, driven by market solutions, expanded home ownership through irresponsible lending practices, contributing to the housing bubble and the 2008 financial crisis. Bush's application of neoliberal principles extended to the reconstruction efforts in Iraq. By the 2016 election, the neoliberal order had fractured significantly, as evidenced by Hillary Clinton's struggles in Michigan and the rise of Bernie Sanders and Donald Trump, both challenging the established order from different ideological directions. The episode highlights how deeply entrenched neoliberal policies became, even within the Democratic Party, and how their eventual unraveling led to the current political landscape, marked by widespread anxiety and a search for new economic and political paradigms.

this became an effort to understand what had happened not primarily by focusing on trump and everything that issued from him although there's a lot in that near the end of the book but to try and make sense of the United States and its odyssey over a 50-year period beginning in the 1970s and 80s and and concluding with the 2020 election.

I had this idea of a political order which we can talk about more if you wish by which I meant a political movement that becomes so powerful and so dominant it's it rules its key ideas rule American politics both when the party and movement is in office and when it's out of office.

how did the democratic party become so implicated in this economic project under clinton in the 1990s how was the democratic party in a sense captured by neoliberal principles and ideologies.

the core idea of the new deal order was that capitalism left unmanaged uh left free uh to do what it wished capitalists able to deploy their capital really without limitation uh to the glo the glorification of free markets there was a sense that capitalism left to its own devices in that way was not going to work.

something that is not supposed to happen in the 1970s happens and that is stagflation you're not supposed to have unemployment by the economic textbooks of the time you're not supposed to have unemployment and inflation rising at the same time.

the collapse of the soviet union in the years 1989 to 1991 and the and the elimination of of communism as a serious political ideology from the world.

as long as the soviet union was a threat uh it had a moderating effect on industrial and employer display of prerogative and privilege because there was a worry in the back of their minds that at some point and in some way workers would be drawn to communism.

clinton I call him the democratic eisenhower and what I mean by that is just that eisenhower had achieved the inversion as just as eisenhower had achieved republican acquiescence to the new deal order clinton is the key figure in achieving democratic acquiescence to the republican neoliberal order of the 1990s.