An old blog post of mine from 2016, The Welfare State Goes Corporate, Pt. I, continues to be the most popular. I will probe into this issue further today. Politicians lament about America having lost its luster since the glorious postwar era ending in the mid 1970’s. Trump’s MAGA campaign, devoid of originality, capitalized on this fact. Disillusioned Americans clinging to faith in trickle down economics and the elimination of abortion “want their country back”, yet are clueless about how it was taken away or who took it away. It wasn’t a Marxist NWO cabal.
What happened? The United States ascended to unprecedented global power when it won World War II, specifically because Europe and Japan were in ruins. The United States had HALF the world’s gross domestic product at the end of WW2. The Bretton Woods Agreement of 1944 established the U.S. dollar as the global currency backed by gold at the fixed price of $35 an ounce. This agreement would work as long as the U.S. had balanced trade. Instead, during the 1960’s the U.S. had trade deficits, meaning that it imported more than it exported. Dollars piled up in European countries and were traded for American gold. America was about to run out of gold reserves. Therefore Nixon made his famous 1971 speech in which he ended the gold standard, also abandoning the Bretton Woods Agreement that provided stability and unparalleled economic growth for all income strata 25 years.
The 1970’s, not the 1980’s, were when corporate tyranny replaced the social democratic economic infrastructure that had built the world’s largest middle class in the world’s most prosperous country, the U.S. With the dollar removed from the gold standard, there was a big recession 1973-1975, and a quadrupling of OPEC oil prices. America’s high inflation blues combined with high unemployment became known as “stagflation”. The same year Nixon ended the gold standard, Lewis Powell authored his famous memorandum, “Attack on the American Free Enterprise System”. The free market ideologues (Milton Friedman, Friedrich von Hayek) rose to fame and set the stage for trickle down economics and corporate tyranny of Margaret Thatcher and Ronald Reagan.
The Scheme 1: The Powell Memo (senate.gov)
Everyone blames Reagan for “trickle down” economics, but these policies were already in place with the dollar meltdown, OPEC oil shocks, and stagflation and Lewis Powell’s memo to the transnational corporate cabal to take over because the labor unions, leftists, and hippies had “taken over”. “We want our country back”. The key strategy of the TCC (transnational corporate cabal) is to con common blue collar folks that they would get “their” country back even though it never really was “theirs”. Gar Alperovitz notes: “The shuttering of Youngstown Sheet and Tube in 1977, one of the first big steel mills to close in what would become known as the US Rust Belt. At the time, the prospect of such a closure – with all the harm it would inflict on a community whose fabric depended on the presence of a particular corporation – was quite unprecedented, a topic for the national news.”
A social capitalism – RSA (thersa.org)
Already before Reagan took office, the big corporations were implementing “neoliberalism” which translates into cutting taxes on corporations and rich people, slashing welfare programs or any government programs aiding the non-wealthy under the pretext of “facilitating free enterprise” or “the free market”, and deregulating corporations. Japanese car companies created small economy cars succeeding in the gas crisis era. The TCC demanded efficiency and high profits in the new global economy. More profits were to be made overseas, making steel or cars. The transition to a service economy began, meaning manufacturing was offshored. Profits for the rich, shareholders in transnational corporations, were prioritized over American workers, i.e., the non-rich.
These harsh worker-impoverishing policies of neoliberalism, meant corporate welfare replaced social welfare. How did the mainstream media con the American masses, blue collar workforce, to go along with neoliberalism? You see, the big bad government taxes you too much, needs more “pro-business” policies, needs to crush those “Marxist” labor unions. Wedge issues like abortion and the “immorality and decadence of hippies, Marxists, and communists” were written into conservative scripts. When Reagan was elected, America had a charismatic mouthpiece for these wedge issues. With Jerry Falwell’s Moral Majority, Bible Belt conservatives were combined with disillusioned blue collar workers who had voted for Jimmy Carter to create the popular support for the new neoliberal regime.
From the 1974-75 Recession to the ‘Volcker Shock’ | A Critique of Crisis Theory (wordpress.com)
Since Reagan the next phase of neoliberalism was the financialization of the economy, called “casino capitalism”. Bogus investments were created out of mortgages bundled together in a real estate boom in the first 6 years of George W. Bush’s presidency. These were mortgage backed securities (collateralized debt obligations and credit default swaps). This was after the Clinton Tech Bubble crashed just after Dubya stole the 2000 election from Al Gore. The new economy or “new normal” is a series of stock market bubbles, each with limited participants in the non-wealthy strata. Most people didn’t buy lots of Apple, Microsoft, Amazon, or Google stock in the early days. The Obama-Trump stock market bubble oozing into the Biden era is largely based on the Fed’s quantitative easing and the dollar’s relative strength compared to the sagging euro and the fact of China’s fake prosperity based on a real estate bubble with ghost cities, many empty buildings. China’s stock market is largely closed, meaning investment dollars still get ballooned in American casino capitalism, stock market bubbles.
In this Covid Era with people permanently opting out of the labor force, not classified as “unemployed”, we have serious labor shortages, artificially lower unemployment rates listed for public consumption. Just a small proportion of people forced home during the initial covid quarantine people can return to work and make “new jobs” statistics look rosey. It’s still a fake economy with enough optimism to keep the stock market high (except during panics about the Omicron variant, polarized Congressional ineptitude, etc). The labor shortage due to Covid gives a rare leverage to workers who can make higher wages for desperate understaffed employers. The axiomatic truth is all bubbles burst. Most of us aren’t sages capable of knowing what odd event will cause the next “correction” or stock market plunge, which I hope is mild, not as bad as the last one under George W. Bush. The labor situation, supply chain disruptions, bad relations with Russia and China, some new unpredicted Covid variant (far worse than Omicron) could each wreak havoc upon our bubble economy. Stay tuned.