The horizon is not so far as we can see, but as far as we can imagine

The Decline and Fall of Post-war Liberalism and the Rise of Neoliberalism

strikes-involving-more-than-1k-workersIn the Anglo-US world, post-war liberalism has been on the defensive since the 1970s. This is normally shown through various wage or wealth graphs, but I’m going to show two graphs of a different nature. The first, to the right, is the number of strikes involving more than 1K workers. Fascinating, eh?

The second, below and to your left, is the incarceration rate. It isn’t adjusted for population increases, but even if it was, the picture wouldn’t change significantly.

This is the change caused by the Reagan revolution in the US, which, as is the case with most revolutions, started before its flagship personality.

(Article re-published as it’s important and a lot of current readers won’t have seen it.)

Graph of incarceration in the US over time

From Wikipedia


I was born in 1968. I remember the 70s, albeit from a child’s perspective. They were very different from today. My overwhelming impression is that people were more relaxed and having a lot more fun. They were also far more open. The omnipresent security personnel, the constant ID checks, and so forth, did not exist. Those came in to force, in Canada, in the early 1990s. As a bike courier in Ottawa, I would regularly walk around government offices to deliver packages. A few, like the Department of National Defense and Foreign Affairs, would make us call up or make us deliver to the mail room, but in most cases I’d just go up to the recipient’s office. Virtually all corporate offices were open, gated only by a receptionist. Even the higher security places were freer. I used to walk through Defense headquarters virtually every day, as they connected two bridges with a heated pedestrian walkway. That walkway closed in the Gulf War and has never, so far as I know, re-opened.

I also walked freely through Parliament Hill, un-escorted, with no ID check to get in.

This may seem like a sideline, but it isn’t. The post-war liberal state was fundamentally different from the one we have today. It was open. The bureaucrats and the politicians and even the important private citizens were not nearly as cut off from ordinary people as they are today. As a bike courier, I interrupted senior meetings of Assistant Deputy Ministers with deliveries. I walked right in. (They were very gracious — in every case.)

The post-war liberal state involved multiple sectors, in conflict, but in agreement about that conflict. Strikes were allowed, they were expected, and unions were considered to have their part to play. It was understood that workers had a right to fight for their part of the pie. Capitalism, liberal capitalism, meant collective action because only groups of ordinary workers can win their share of productivity increases.

productivity and wages

productivity and wages

Which leads us to our second chart. The moment you lock up everyone who causes trouble (usually for non-violent, non-compliance with drug laws), the moment you crack down on strikes, ordinary people don’t get their share of productivity increases. It’s really just that simple.

This is all of a piece. The closing off of politicians and bureaucrats from public contact, the soaring CEO and executive salaries which allow them to live without seeing anyone who isn’t part of their class or a servitor, the locking up of people who don’t obey laws that make no sense (and drug laws are almost always stupid laws), the crushing of unions, which are a way to give unfettered feedback to politicians and our corporate masters, are all about allowing them to take the lion’s share of the meat of economic gains and leave the scraps for everyone else.

But why did the liberal state fail? Why did this come about? Let’s highlight three reasons: (1) the rise of the disconnected technocrat; (2) the failure to handle the oil crisis, and; (3) the aging of the liberal generations.

The rise of the disconnected technocrat has been discussed often, generally with respect to the Vietnam war. The “best and the brightest” had all the numbers, managed the war, and lost it. They did so because they mistook the numbers for reality and lost control. The numbers they had were managed up, by the people on the ground. They were fake. The kill counts coming out of Vietnam, for example, were completely fake and inflated. Having never worked on the ground, having not “worked their way up from the mail room,” having not served in the military themselves, disconnected technocrats didn’t realize how badly they were being played. They could not call bullshit. This is a version of the same problem which saw the Soviet Politburo lose control over production in the USSR.

The second, specific failure was the inability to manage the oil shocks and the rise of OPEC. As a child in the 1970s, I saw the price of chocolate bars go from 25c to a dollar in a few years. The same thing happened to comic books. The same thing happened to everything. The post-war liberal state was built on cheap oil and the loss of it cascaded through the economy. This is related to the Vietnam war. As with the Iraq war in the 2000s, there was an opportunity cost to war. Attention was on an essentially meaningless war in SE Asia while the important events were occurring in the Middle East. The cost, the financial cost of the war, should have been spent instead on transitioning the economy to a more efficient one — to a “super-analog” world. All the techs were not in place, but enough were there, so that, with temporizing and research starting in the late 1960s, the transition could have been made.

Instead, the attempt was left too late, at which point the liberal state had lost most of its legitimacy. Carter tried, but was a bad politician and not trusted sufficiently. Nor did he truly believe in, or understand, liberalism, which is why Kennedy ran against him in 1980.

But Kennedy didn’t win and neither did Carter. Reagan did. And what Reagan bet was that new oil resources would come online soon enough to bail him out.  He was right. They did and the moment faded. Paul Volcker, as Fed Chairman, appointed by Carter, crushed inflation by crushing wages, but once inflation was crushed and he wanted to give workers their share of the new economy, he was purged and “the Maestro,” Alan Greenspan, was put in charge. Under Greenspan, the Fed treated so-called wage push inflation as the most important form of inflation.

Greenspan’s tenure as Fed chairman can be summed up as follows: Crush wage gains that are faster than inflation and make sure the stock market keeps rising no matter what (the Greenspan Put). Any time the market would falter, Greenspan would be there with cheap money. Any time workers looked like they might get their share of productivity gains, Greenspan would crush the economy. This wasn’t just so the rich could get richer, it was to keep commodity inflation under control, as workers would then spend their wages on activities and items which increased oil consumption.

The third reason for the failure of liberalism was the aging of the liberal generation. Last year, I read Chief Justice Robert Jackson’s brief biography of FDR (which you should read). At the end of the book are brief biographies of main New Deal figures other than Roosevelt. Reading them, I was struck by how many were dying in the 1970s. The great lions who created modern liberalism, who created the New Deal, who understood the moving parts were dead or old. They had not created successors who understood their system, who understood how the economy and the politics of the economy worked, or even who understood how to do rationing properly during a changeover to the new economy.

The hard-core of the liberal coalition, the people who were adults in the Great Depression, who felt in their bones that you had to be fair to the poor, because without the grace of God there go you, were old and dying.  The suburban part of the GI generation was willing to betray liberalism to keep suburbia; it was their version of the good life, for which everything else must be sacrificed. And sacrificed it was, and has been, because suburbia, as it is currently constituted, cannot survive high oil prices without draining the rest of society dry.

Reagan offered a way out, a way that didn’t involve obvious sacrifice. He attacked a liberal establishment which had not handled high oil prices, which had lost the Vietnam war, and which had alienated its core southern supporters by giving Blacks rights.

And he delivered, after a fashion. The economy did improve, many people did well, and inflation was brought under control (granted, it would have been if Carter had his second term, but people don’t think like that). The people who already had good jobs were generally okay, especially if they were older. If you were in your 40s or 50s when Reagan took charge in 1980, it was a good bet that you’d be dead before the bill really came due. You would win the death bet.

Liberalism failed because it couldn’t handle the war and crisis of the late 60s and 70s. The people who could have helped were dead or too old. They had not properly trained successors; those successors were paying attention to the wrong problem and had become disconnected from the reality on the ground. And the New Deal coalition was fracturing, more interested in hating blacks or keeping the “good” suburban lifestyle than in making sure that a rising tide lifted all boats (a prescriptive, not descriptive, statement).

There are those who say liberalism is dying now. That’s true, sort of, in Europe, ex-Britain. The social-democratic European state is being dismantled. The EU is turning, frankly, tyrannical, and the Euro is being used as a tool to extract value from peripheral nations by the core nations. But in the Anglo-American world, liberalism was already dead, with the few great spars like Glass-Steagall, defined benefit pensions, SS, Medicare, welfare, and so on, under constant assault.

Europe was cushioned from what happened to the US by high density and a different political culture. The oil shocks hit them hard, but as they were without significant suburbia, without sprawl, it hit them tolerably. They were able to maintain the social-democratic state. They are now losing it, not because they must, but because their elites want it. Every part of the social-democratic state is something which could be privatized to make money for your lords and masters, or it can be gotten rid of if no money can be made from it and the money once spent on it can be redirected towards elite priorities.

Liberalism died and is dying because liberals aren’t really liberal, and when they are, they can’t do anything about it.

None of this means that modern conservatism (which is far different from the conservatism of my childhood) is a success if one cares about mass well-being. It isn’t. But it is a success in the sense that it has done what its lords and masters wanted —- it has transferred wealth, income, and power to them. It is self-sustaining, in the sense that it transfers power to those who want it to continue. It builds and strengthens its own coalition.

Any political coalition, any ideology behind a political coalition, must do this: It must build and strengthen support. It must have people who know that, if it continues, they will do well, and that if it doesn’t, they won’t. Liberalism failed to make that case to Southerners, who doubled down on cheap factory jobs and racism, as well as to suburbanite GI Generation types, who wanted to keep the value of their homes and knew they couldn’t if oil prices and inflation weren’t controlled. Their perceived interests no longer aligned with liberalism and so they left the coalition.

We can have a new form of liberalism (or whatever we wish to call it) when we understand why the old form failed and can articulate the conditions for our new form’s success. Maybe more on that another time.

Published April 11, 2015, published back in the ’00s too, but I don’t remember when. Republishing doesn’t send out to lists, so I’m doing it as new piece. The original and comments can also be viewed.

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  1. anon y'mouse

    this was included in NC’s links today, and speaks of this era as well:

  2. Mark Pontin

    [1] The link above from anon y’mouse is to an interview with James Galbraith, son of John Kenneth.

    People here should read it. Galbraith Jr. makes many good points about how we got to where we are — including some you won’t get from, say, Michael Hudson regarding the inadequacies of simply re-running in the 21st century the national industrial strategies advocated by the 19th century classical economists that Hudson celebrates, given that (a) specific and real physical resource restraints exist today that must be managed for; and (b) advanced technological societies require advanced organization and thus technocrats, and the problem is how to manage those technocrats.

    [2] Ian W: “The rise of the disconnected technocrat has been discussed often, generally with respect to the Vietnam war. The “best and the brightest” had all the numbers, managed the war, and lost it. They did so … (having) …never worked on the ground, having not “worked their way up from the mail room’

    For some of us here who are older, a generation of politicians and leaders held power — if not during our childhoods within living memory — who had come up through the meatgrinder of WWI, then the interwar Depression, then WWII, and they were often competent enough to grasp that some policies that benefited elites but destroyed societies long-term were to be resisted.

    To the extent that those leaders were competent, it was because during the meatgrinder conditions that pertained from, say, 1914 to 1945, the incompetent politicians and leaders had simply fallen by the wayside. I think, for example, of that raving leftie Dwight Eisenhower who, while far from a saint , was nevertheless capable of putting out a policy statement like his ‘Cross of Iron’ speech —

    “… Every gun that is made, every warship launched, every rocket fired signifies, in the final sense, a theft from those who hunger and are not fed, those who are cold and are not clothed …

    “This is, I repeat, the best way of life to be found on the road the world has been taking. This is not a way of life at all, in any true sense. Under the cloud of threatening war, it is humanity hanging from a cross of iron.”

    “This is not a way of life at all, in any true sense.” It’s a statement that would be beyond almost any US politician today, and that would probably get the person who put it out anathematized and forced from office. Only the incompetent and venal hold office in the US today, and in any case US policy is almost entirely written by the various camps of corporate lobbyists, not the politicians.

    It seems to ineluctably happen to human societies that once crisis times are over, “success is a poor teacher’ and not the best and brightest, but the incompetent and self-serving — the carpet-baggers — increasingly fill the halls of power. Till the corruption and incompetence bring that society’s breakdown and then, if that culture is lucky, the cycle begins again.

    So those who assume the end of neoliberal capitalism or communism or whatever system is simply what’s required — though the end of neoliberalism would certainly be good — are barking up the wrong tree. The real long-term problem for human societies is maintaining competent, non-corrupt leadership and management during the good times as well as the bad.

  3. Ché Pasa

    Oh please, Ian, if you can, bring back the earlier comments. 😉

  4. I remember the late 1960’s and the 1970s — from the perspective of a child growing into a college student and young adult, with fair political awareness. I read John Kenneth Galbraith and met Milton Friedman, heard Jimmy Carter, casual jacket on his shoulder, give his pitch for the Democratic nomination. I remember Ronald Reagan giving speeches, attuned to his script but with no concern for truthfulness. I interned for a Congress critter on the House Banking committee when deregulation of banking and finance was an aspiration frustrated by a solid nearly 30-year Democratic majority.

    What made neoliberalism seem so reasonable, even hopeful? Selfish motives among suburbanites surely figured in the case. So did feminism and careers for women outside of teaching and nursing. Hostility to labor unions was a factor — was that all Edward Bernays? The myth of Archie Bunker? I don’t know that people knew they were choosing mass incarceration as a means to cope with what? a crime wave that may have had more to do with lead in gasoline than social dissatisfaction? Television and a society that no longer had time in the evening for socializing or even the softest forms of political activity — television may have made “there is no such thing as society” truer than we want to admit.

    I was precocious, I suppose, but naive. I did not lose my political innocence for at least 40 years. As I have lost my innocence, I have grown cynical about the petty coruptions of ordinary people. I recognize in myself great credulity and a political impulse to wish my idea of better rather than do anything or even think critically.

    For some reason over the last few days, I have been recalling a Bill Black essay that took apart a neoliberal speech by Tony Blair. I have not tried to find it on the internet, so sorry no link. The point is that Bill Black’s analysis exposed what Blair was saying substantively and it was horrifying, while my own superficial read just picked up on tone and word-emotional association. Blair was masterful in manipulating my response, but Black showed me the evil I was buying into by my superficial associative response.

    If you go back to Mario Savio, the famous orator of the Berkley Free Speech movement, you can see how the New Deal ultimately failed. Savio belonged not to the Baby Boom, but that super-idealistic sliver that was born in the late 1930’s and early 1940’s — like Bernie Sanders or Joe Biden. His rhetoric was powerfully libertarian, for good and ill. I can see why Baby Boomers (like me) were so impressed by the flash of those firebrands, but in many ways it was similar to the case of Tony Blair — critical appreciation of substance lost out to emotion.

  5. Feral Finster

    Neoliberalism began to take over as the threat from the Soviet Union waned. No longer was there the same need to offer something better. (This is also why the welfare state grew strongest in western Europe, as they could afford it and were most threatened by communism. )

    When the USSR collapsed, the race towards the bottom began in earnest, no longer any need to share power or the goodies.

  6. Mark Pontin

    Bruce W.: ‘What made neoliberalism seem so reasonable, even hopeful?’

    George Orwell in 1944, reviewing von Hayek’s THE ROAD TO SERFDOM:

    ‘Shortly, Professor Hayek’s thesis is that Socialism inevitably leads to despotism, and that in Germany the Nazis were able to succeed because the Socialists had already done most of their work for them, especially the intellectual work of weakening the desire for liberty. By bringing the whole of life under the control of the State, Socialism necessarily gives power to an inner ring of bureaucrats, who in almost every case will be men who want power for its own sake and will stick at nothing in order to retain it. Britain, he says, is now going the same road as Germany, with the left-wing intelligentsia in the van and the Tory Party a good second. The only salvation lies in returning to an unplanned economy, free competition, and emphasis on liberty rather than on security.In the negative part of Professor Hayek’s thesis there is a great deal of truth. It cannot be said too often – at any rate, it is not being said nearly often enough – that collectivism is not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisitors never dreamed of.

    ‘Professor Hayek is also probably right in saying that in this country the intellectuals are more totalitarian-minded than the common people. But he does not see, or will not admit, that a return to ‘free’ competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the State. The trouble with competitions is that somebody wins them ….’

  7. someofparts

    Over at NC, Lambert Strether made a point about the Canadian trucker caravan that has left me with a lot to think about. He figured out that the people in the caravan are, like the people who showed up in Washington on 1/6, the petite bourgeoisie and, in both cases, they are funded by right wing money.

    Given the fragility of the supply chain, it presents the perfect opportunity to disrupt the smooth functioning of power in exactly the way Ian has always told us is necessary. Our overlords will not do the right thing because we ask them to be nice. They will only listen if we hurt them economically and hurt them hard.

    So then, the question Strether raised that I keep thinking about is – why isn’t it the left wing doing this? Since a caravan that disrupts the supply chain is a brilliant way to pressure our leaders, why isn’t it being done by the big unions instead of the shopkeepers?

    Obviously the real question I am chewing on is to wonder what needs to change so that it IS the unions doing this instead of the bourgeoisie? I don’t have any ready answers to that question, but I figure that having a clear idea of where we need to go is the first step. The prospect of supply chain disruption sponsored by the teamsters on behalf of the real working class is a good place to start.

  8. bruce wilder

    One increasingly popular idea of where “the left” has gone is summarized as “successor ideology”, the thesis that the traditional ideas of social liberalism — “pluralism, freedom of speech, color blindness, and free inquiry” — are being supplanted by “intersectionality, social justice, identity politics, and anti-racism” propagated, as I understand it from Michael Lind and others, as that sure marker of class, the college education combined with the narcissism of virtue signaling, part of a new, emergent dark triad of the left.

    (quotations above from Wikipedia)

    Those hysterically warning of the threat of fascism from the Trump seem unaware of the authoritarianism of our “managed democracy”, where voting is a decorative norm, but actual governance is in the hands of anyone but the people. In this the “inverted totalitarianism” of Sheldon Wolin continues to be a useful concept, helping to understand that the totalitarianism that Orwell (or Hayek, pining for the well-ordered anarchy of the last few decades of 900 years of Hapsburg rule) confronted was almost a mirror-image (funhouse mirror perhaps, but still) of the political regime configurations presenting to us.

  9. Mark Pontin

    Bruce W: ‘Television may have made “there is no such thing as society” truer than we want to admit.’

    This is a central truth of what’s happened to the US, not incidentally.

  10. someofparts

    It occurs to me that what television started has been greatly expanded by the internet. Even as alienating and stupefying as television is, it is much more social than being transfixed by individual smartphones and tablets. At least people watch television together, along with a reasonably large audience of other viewers.

  11. anon y'mouse

    the “left” (whatever that means) can’t do it because we can’t afford it.

    the true left seems to be always nearly composed of the disenfranchised, and the intellectual. the latter lacks the “bottom”, the former the means.

    as for how neoliberalism “won”, all i remember from being alive during it (indeed i was possibly born in the year of its inaugeration) was “this is what will be best, will provide growth, will increase efficiency, a rising tide will lift all boats” and on and on like that. i just want to know who was buying this and why, and if they failed to see the consequences, or saw all too well the consequences for themselves of being able to take advantage of it.

    Carter may have been the kind who merely bowed to the inevitable. Reagan may have believed what he was being told to say, but Clinton was probably aware he and his people were talking shite and yet that their class would win out in the end.

    strike funds and general strikes, and shutting everything down hurts those on the bottom more than those on the top—they live in a bubble of special services and servants and it will take a very long time to hurt them.

    sieges of towns having worker’s rebellions in the Middle Ages were starved out and practically razed. the elites of that time were willing to kill everyone and possibly lose everything to maintain control. is everyone here ready to face that kind of resistance? including myself, probably not. we can’t withstand it, so we mope along with the crap we have now.

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