THE BIG GLOBAL MOVE:
HOW REAGAN, G. H. W. BUSH, AND CLINTON CHANGED THE COURSE OF THE ECONOMY FOR BETTER OR WORSE
BY: DR. RICHARD PAUL, D.D.
Since we have previously discussed the types of economic theories used by Reagan. It's time to stop with just looking at the theories and move onto the policies that provoked movement towards the sudden drop in the US Economy as a whole, and to specify if there were any historical earmarks that could explain why it happened. Since we now understand that the different economic theories help to explain what happened, and took an in depth view into Hayek's theory, and why Ronald Reagan preferred that style over Keynesian Theories, we can fully evaluate the history of the U S Economy during the transition from a more Isolationist to a Global Economy. While the move did not start with Reagan, he definitely had the greatest impact of moving towards Globalization. The rhetoric was hugely skewed away from the smaller country the US was.
Let's start this with Reagan. He really did believe that in Hayek's Theories. He believed that stagflation needed to be combated with smaller government. The problem lied more in how to move from Keynesian Economics theories into Neoliberalism. While we didn't so much as go thoroughly through Neoliberal Economics, we can assert that the ideology had great impact on Hayek's Theories and Reagan's own personal preferences about how the economy moved.
Neoliberalism is the economic theories surrounding many of today's more conservative personas. The term was coined in 1938 by a German Scholar, Alexander Rustow. The basics of it went beyond just laissez-faire liberalism. It said that we had to move beyond liberalism. We had, as a nation to advance towards the more progressive Neoliberalism, or in other words we needed to depend solely on the priority of the price mechanism, the free enterprise, the system of competition, and a strong and impartial state. This is dynamically opposed to the more traditional Freiburg School of Economic Thought, which said simply that some markets needed stronger oversight than others. Neoliberalists were so dynamically opposed that the two schools of thought are today debated in the public forum. According to the very definition of neoliberal, social justice is best maintained by minimal interference and free market force. Hayek's ideas grew out of neoliberalism.
I needed to give you that definition in order for you to understand why the move towards globalization was a Reagan Idea. Reagan was not a conservative. Reagan didn't have a conservative bone in his whole body. Reagan was, in point of fact, tied ideologically to the more neoliberal schools of thought. He was a person that believed in progressing beyond simple laissez-faire designs. For all intents and purposes, he was a progressive ideologist concerning economics in that he advocated economic reform.
Neoliberalism itself went further than just economics. It also maintains that socio-psychological constructs should not be maintained by the government. Further, it maintains that only a free enterprise, or in today's terminology, the free market system, can effectively produce economic growth. In order to maintain this, you must eliminate the government maintenance within the centralized governing bodies. Neoliberal ideology originated in Marxist Economic School of Thought. It helps to put all of this movement into perspective, sometimes.
In the 1940's and 1950's, if you were to propose the changes Reagan had, you would have been called a loon and sent to the insane asylum immediately. The people in that era were decidedly more socially responsible than after Reagan. The whole idea that government wouldn't help the poor was extremely foreign. People expected the government to help the poor, to help the elderly, to ensure people were able to get a hand up when they needed it. People expected the government to regulate banks for their safety. All of these things are what people expected out of government, and more.
Reagan came along. He moved the economic thoughts away from Keynesian Theories towards neoliberalism. He became the person that could move a nation with divisiveness. It would take that divided country to move away from stagflation. A Neoliberalist theory in the Austrian School of Economic Thought and Chicago School of Economic Thought evolved.
Reagan proposed moving the economy forward with globalization. The key was to make a majority of Americans accept that Social Justice, or Social responsibility, was a harm to economic growth. It was believed that if you could make some people believe the General Welfare was harming economic growth. Reagan did this with the infamous "Welfare Queen" speech. Reagan maintained that welfare hurt the average worker because it forced them to pay someone to be lazy. These people, he claimed, refused to help themselves. He said these people needed forced to get up and do a hard days job. All the time he was working in the background setting the stage for Globalization with Margaret Thatcher. If you can occupy people's heads, their hearts and their hands will follow. Reagan needed neo-liberalism to seem as if it were the natural and normal condition of humankind. He needed people to believe that any other form of economic theory was bogus. The gambit demanded that people not think past their own woes. All that mattered was opening up the Global Free market System for economic growth for all nations. Free Trade was needed then more than ever because it allowed for greater free under-regulated markets. The consequences be damned as long as the economy could grow. The IMF and World Bank needed more control over the monetary values of differing countries in order for this to become more effective. Reagan knew all of this, and helped shape the way forward into neo-liberalism.
Enter George H. W. Bush. While Reagan was involved in these foreign dealings, Bush 1 was involved in the spin. he had to maintain the "status quo" because the plan to move the economy hadn't been fully realized. He wouldn't raise taxes, was the claim. It was more expedient, was the proposition, to move towards a Free Trade market system and relieve some of the tariffs that helped the US economy. In order to get to that point, income and payroll taxes, as well as other taxes, needed to be raised to fund the government. His "Read My Lips, No New Taxes" speech was bait and switch tactic. It was a setup to create the additional revenue for Globalization. Fortunately, the Congress wouldn't pass it under Bush 41.
During the Election Campaign of 1992, a famous businessman named Ross Perot said that Globalization and Free Trade would have excessive negative consequences on the US Labor Market. Some people listened to him. Others thought he was a loon. Whatever else people thought of him, his predictions were right about the negative impact of Free Trade and Globalization. With the accuracy of his prediction, one would wonder if what else was said might have the ring of truth.
During this time, the Democratic Leadership Council started its version of Neoliberalism. They maintained that Reagan's movement from what they considered Isolationism towards Globalization was the right course for the US Economic Growth factors. As a side note, it was during this time period that Clinton made his rise to power on the backs of the working class. They billed themselves as pragmatists, but are not at all. They said that they were the middle, but only moved it so far. They maintain that theirs was best, and made all else look like fools.
Clinton came to the election cycle with excitement of liberal change. People thought he'd be different than the former two Presidents. They were excited about having "one of their own" in the White House. Was Clinton's economic stance really that much different than Reagan or Bush's was, though?
To show you exactly how similar they were, we will briefly talk about Clinton's Free Trade and Globalization Initiatives. Reagan and Bush started the political conversation. Clinton not only perpetuated the political conversation, but got NAFTA and other Free Trade Agreements passed through Congress setting up for the repeal of the Glass-Steagall Act. At the time, it made sense to most economists because of the move towards the neoliberal economy. Clinton was the most key figure to move towards the Globalization because he could get Democrats, who he and Newt Gingrich purposely divided with other more mundane social issues to distract from all these movements away from the real issues of Free Trade and Globalization Markets.
Newt Gingrich and Clinton, while on the outside looked increasingly divided, were very united in the task of Globalization. Had it not been for Newt Gingrich and Clinton taking the spotlight in other matters, most economists agree that Free Trade would have not happened at that time. All the pieces to the puzzle had to be in place for this to happen. It was the right time at the right place for Globalization to finally make its biggest mark in the U.S. Neoliberalism was the main reason that the Social Safety Net had to start to move away from helping the poor. Welfare was demonized and attacked and the people on it were said to be lazy. All the key factors had to be in place.
Finally, the biggest economic change had happened. Clinton and Gingrich finally had moved the bar away from Keynesian Economics and regulated, real capitalism towards the more risky neoliberal economic theories. After it was all said and done, over a million people would be negatively affected by the Clinton/Gingrich great compromise. The memes of "A rising tide lifts all boats" had been fulfilled. The economy was booming and making billions within the newly established global markets. They didn't realize, or failed to see, that sometimes a rising tide sinks the ships when they're anchored. The markets were set up for a major fall because of the lack of understanding among the neoliberal economists insistence of this type of progressive movement.