“The Rise and Fall of Neoliberal Capitalism”, by David Kotz
Review by Dee Knight at the LA Progressive
Reagan’s neoliberalism: slashing taxes for the rich, deregulating basic industry and the banks, gutting environmental, consumer and workplace safety rules, cutting back social welfare programs, privatizing or contracting out public functions, and emphasizing globalization.
The term “neoliberal” can be confusing. In the United States, “liberalism” has meant less harsh social and economic policies than either “conservative” or “moderate” ones. FDR was a liberal while his successor Truman was more conservative. JFK was more liberal than moderate conservative Eisenhower. Barack Obama was more liberal than arch-conservative Bush. And so on.
Neoliberalism differs from these political labels. It’s an economic policy dating back to the 18th and 19th centuries, the period of classical economic liberalism. Think Adam Smith and laissez faire, letting the “invisible hand” of the market prevail: “the government that governs least governs best.” Ronald Reagan said things like that. He launched the Reagan Revolution – slashing taxes for the rich, deregulating basic industry and the banks, gutting environmental, consumer and workplace safety rules, cutting back social welfare programs, privatizing or contracting out public functions, and emphasizing globalization. Free trade agreements led to factory jobs disappearing overseas.
Reagan said this would benefit everyone, that is, everyone who was already rich. Neoliberalism felt like a return to the Roaring Twenties for the investor class. The top tax rate in 1950 was 91 percent for the top income bracket. The Economic Recovery Tax Act of 1981 slashed the highest rate to 50 percent. The Tax Reform Act of 1986 dropped it to 28 percent. Under Obama it rose to 43.4 percent. Trump pushed it down to 40.8 percent. Meanwhile wages and profits grew at about the same rate from the end of WW2 to the mid-1960s. From 2000-2007 profits were growing more than 13 times faster than wages.
But the Vietnam war’s end, and a global oil crunch hit profits hard in the 1970s. The overall rate of corporate profit plunged from nearly 18 percent in 1965 to a dismal eight percent in 1982. Both inflation and unemployment skyrocketed in the seventies, causing a big business panic.
Read the rest at the LA Progressive