Thursday, February 09, 2012

How Ronald Reagan Unwittingly Laid the Groundwork for the Death of Capitalism


Thanks to tireless efforts by historical revisionists over the past two decades, Ronald Reagan has gotten a lot of credit for achievements that he had nothing to do with. "Winning" the Cold War is a good example.

In reality, Reagan's policies had little or nothing to do with the collapse of the Soviet Union. In fact, the last thing the Military Industrial Complex ever wanted was to see the Cold War's end (and with it the trillion-dollar gravy train of "defense" contractor funding).

On the other hand, Reagan should get credit for something that he actually did achieve: laying the groundwork for the death of capitalism as we know it.

Capitalism had its first near-death experience during the Great Depression. Ironically, it was saved by the most progressive president that the U.S. ever had: Franklin D. Roosevelt. Although attacked by the business community at the time, FDR's New Deal in fact resurrected capitalism and gave it new life. The New Deal created the Great American Middle Class: tens of millions of well-paid workers that actually had the money to buy the products that the system produced.

It was a wonderful arrangement that made America a superpower and the most envied nation on the planet for decades to come.

However, America's wealthy never got over their hatred of FDR and the New Deal---despite the fact the latter saved capitalism from itself. The Rich & Powerful constantly plotted to abolish the New Deal. And in 1980, with Reagan's election, the wealthy class finally saw its chance to begin the attack on the New Deal---a process that continues to this day.

Under Reagan, middle class entitlements were slashed, as were programs to assist the poor. And sweeping changes in tax policy began to favor the very wealthy, at the expense of the middle class and the poor. Also, labor unions and labor laws were gutted. Lastly, under Reagan's disastrous "free trade" policies, America started shipping all its good-paying manufacturing jobs overseas.

The result of all this was that, under Reagan, the Great American Middle Class began to shrink---a process that continues to this day. And with a much-weakened middle class, U.S. capitalism has hit a major crisis in that fewer and fewer consumers are able to buy the products that the system produces.

The latter is a crucial component of capitalism that has long been curiously overlooked by the "free market" Chicago School zealots who've long championed a completely deregulated economy. I find it interesting how these zealots are always so concerned about the plight of the "over-taxed, over-regulated" rich (who they claim are the only necessary ingredient for successful capitalism).

Of course, what these ivory tower zealots overlook is that capitalism as we know it simply can't function unless there is a strong, prosperous middle class around to buy the products created by the system.

Although Reagan's policies gutted the U.S. middle class, the resulting devastation to capitalism didn't become readily apparent until much later on. This was because the whole crisis was masked by America's increasing embrace of credit-fueled consumption, which created the mirage of prosperity.

Under Reagan, America simply stopped paying its bills. The government started borrowing hundreds of billions of dollars from the likes of Japan. And consumers increasingly started pulling out their credit cards to pay for purchases, rather than using cash.

Finally, a series of bubbles came along to further create the illusion that the American economy was much more prosperous that it really was. These included the Dot Com bubble and the more recent housing bubble.

Of course, the whole Ponzi scheme all came crashing down in 2008. Since then, the U.S. economy has remained on life support. The nation continues to plunge further into debt, even as the U.S. dollar continues to hit new all-time lows. The middle class is all but extinct these days, as are the good-paying jobs that once help make the American economy the mightiest on earth.

Virtually all of this is a legacy of Reagan's policies. And unlike capitalism's first near-death experience, in the 1930s, it's extremely unlikely that we'll see another FDR ever come along to give the whole system a new lease on life. In our Citizens United era, that's simply not ever going to happen.

Reagan (or more specifically, his wealthy backers) originally aimed to crush the New Deal and return the U.S. to an unregulated 19th century dog-eat-dog form of capitalism. They hoped that this would propel capitalism to new heights. But by ignoring the key role of middle class consumption in their calculations, they unwittingly severely damaged capitalism itself and turned America into a second-rate power.

We continue to see the corrosive effects of the Reagan legacy to this day. The serious problems that began to emerge during his presidency (out-of-control fiscal and trade deficits, a shrinking middle class, the loss of good manufacturing jobs, and a plummeting dollar) continue to this day.

Of course, the wealthy class to this day continues to live in denial that the whole capitalist party is now over. They continue to cling to the hope that the crisis caused by the 2008 economic collapse will eventually be fixed and the capitalism will somehow continue.

The problem is that the good-paying manufacturing jobs are gone for good. And the much-hyped service economy jobs that were supposed to replace the latter have in fact been poor substitutes, offering vastly lower pay and benefits, for the most part. In fact, to this day, America continues to bleed what few good manufacturing jobs it has left, thanks to the utter absence of any kind of intelligence trade policy.

What's more, given the ever-weakening dollar and the ever-growing trade and fiscal deficits it faces, America has less and less clout on the world stage. For the entire post-World War II era, America could simply print more dollars to bail itself out of fiscal crises, given that the dollar was the world's international reserve currency. That era, clearly, is near an end.

With the demise of the dollar, America will be a much weaker and less wealthy nation. For the entire post-World War II era, America has been the standard-bearer for capitalism. With the latter now discredited, it's clear that the rest of the world is increasingly rejecting the U.S. model of economics and is instead turning to the regulated, technocrat-led economies of China and Singapore as the new role model.

Not only did Reagan's era doom capitalism, but his toxic legacy ensured that America will find it extremely difficult to remedy the crises that resulted from his administration. These range from the deterioration of public education that resulted from Reagan's budget cuts to America's crumbling infrastructure. These two factors alone will make it increasingly difficult for America to compete globally in the years to come.

But perhaps the most toxic legacy of all was Reagan's abolishment of the Fairness Doctrine. This ensured that America's mainstream media would increasingly do little more than parrot the official corporate line. Americans today are hopelessly misinformed on the issues these days. And a nation that is misinformed is going to find it difficult to ever take the necessary steps needed to fix the crises unleashed by Reagan's policies.


Jack Jodell said...

Hats off to you for this very thoughtful, accurate, well-reasoned post. Like you, I was never swept up by the Reagan hysteria. I always viewed his "trickle down" economics to be mere piss dribbles directed downward from the wealthiest elements of society, and time has proven me right. Any idiot who proclaimed "government is the problem" never deserved a public paycheck.Reagan, rather than an enlightened visionary, was a bellicose bully when it came to foreign policy and a coward when it came to standing up against corrupting corporate power on behalf of regular citizens. Based on all of this, Ronald Reagam ranks as a very mediocre President. He truly laid the groundwork for much of what has befallen our once-great country.

Marc McDonald said...

Hi Jack, thanks for stopping by.

>>Any idiot who
>>proclaimed "government is the
>>problem" never deserved a public

Great point. And here's something interesting: for someone who bitched and moaned so much about government, who in America ever benefited as much from government as Reagan did during his lifetime? For decades he sucked down millions of dollars in taxpayer-funded paychecks, both as governor of California and as president.
His time as president also directly led to other million-dollar paydays, like when he pocketed millions for giving a couple of speeches in Tokyo. Of course, our media never took a look at why, exactly, the Japanese paid Reagan these millions for merely giving a couple of speeches. (Was it payback for stabbing the American worker in the back and cooperating with Japanese industrial policy?).
Leave it to our "free" MSM to completely ignore this important story. (Hell, we wouldn't even likely know about Iran-Contra had that story not been first revealed by a Lebanese magazine).

Anonymous said...

Jack absolutely spot on in everything you said. You should submit this to publication. Reagan was a front man who betrayed his own in front of the HUAC during the Red Scare. He knew if he took care of the man the man would take care of him. A country who elected a B-movie actor deserves what it got. And, did we get it in spades. I remember, reading an article at the time in the Houston c
Chronicle business section that said "we can't all keep cutting each others hair forever". As my German industrial design faculty used to say, "If you can't build anything, you're dead". We're ...

Anonymous said...

I immediately thought of Reagan when watching that great episode of Boardwalk Empire where Nucky Thompson hustles both the white and black crowds with great speeches.
It's the kind of amoral duplicity that frequently characterizes "leader of men" types- Reagan, Obama, and Clinton fit the bill to a T.

People talk about Clintonian compartmentalization but I think Reagan was the king. The guy that broke the unions and the american labor movement was the president of SAG.

That's why Reagan is the darling of conservatives- we might never see such a gifted liar again.

"My heart and my best intentions still tell me that's true, but the facts and evidence tell me it is not."

The guy could sell anything.

And if socialism is about the redistribution of wealth, then Ronnie was the most effective socialist in human history.

dixie blood said...

Reagan also damaged the Republican Party by courting the Religious Right.

Most all of the problems we see with today's Republican political positions can be traced back to the unholy alliance Ronnie "Monkey Sidekick" Raygun formed with the Religious Right starting in the early '80s.

At that time the Religious Right had just become believers in the Gospel of Prosperity. This perverse view of wealth became the "I got mine" meme we see today. The hell with the poor, they are flawed sinners.

The unholy alliance forced a secular conservative party into pandering against Roe v. Wade to garner votes. BTW, they don't want to get rid of Row v. Wade, they pander to it to raise money and whip up the Jesusmongers.

The Religious Right taught the Republicans how to do some serious, downhome hatin'. They managed to help the Republicans learn that hating black people was only part of what they could learn to hate. This was an extension of Nixon's Southern Strategy. Now Republicans are experts in hating everything they disagree with. They don't just express themselves anymore. For example, they write laws that leave millions of dollars of crops rotting in the fields of the South.

The consistency of position/viewpoint in the old conservative movement was turned upside down into an hypocrisy that makes little or no sense outside of the Republican/Religious Right world. The Religious Right taught hypocrisy to the Republicans. At one time they had consistent positions. That disappeared with the unholy alliance. Now they are free to say one thing to one group of people and the opposite to another group of people and the Religious Right don't dare point out that lying is a deadly sin.

While Nixon founded the EPA and was conservative (in his day) the Religious Right taught the Republicans Dominionism [sp?]. This lets the Republicans off the hook for environmental concerns. They believe the Earth was placed here for the exclusive use by man and that God will fix anything we screw up. It's a very selfish and childish view. This is why the Republicans no longer care about clean air, water, safety, longevity, etc. The Religious Right let them off the hook for destroying God's greatest creation.

IMHO this goes a long way to explaining Republican greed, hypocrisy, lies, hatred, racism and selfishness.

Orangelion03 said...

THIS!!! The absolute bottom line. Without a strong middle class, this country is doomed.

Perfectly succinct summation of the last 30 years of the US. Thank you!

Lexy said...

Why for the love of God can't middle class and working class Americans realize that Reagan was one of the worst Presidents ever in American history. His Presidency made plausible the Presidency of George W. Bush and the near vice-Presidency of Sarah Palin. The fact that it was possible to foister such an inconsequential dunce like Reagan on the country using "racist dog whistles" like welfare mothers etc., etc, and making his announcement speech for the Presidency in "VIcksburg MS" the heart of "jim crow" confederacy, showed the corporations and the wealthy how easily the working class could be manipulated into voting against their own interests. They have been so successful that look at where the so-called "Reagan Democrats" are now. In their extreme poverty, most of them call themselves "conservative Republicans" and "Tea Party Patriots". Their stupidity would be hilarious if it wasn't so sad and disastrous for America.

Peter John said...

The bubbles did not just come along. The bubbles are created by the excess wealth that the rich have. And the bubbles are aided and abetted by the deregulation of the financial market. The bubbles will continue until both problems are fixed.

Marc McDonald said...

Hi Anon, thanks for your comment.
>>Reagan was a front man who
>>betrayed his own

Yes, definitely. Many people forget that PATCO actually supported Reagan in the 1980 election. They just couldn't fathom how a fellow union brother would turn around and stab them in the back. Any union member who votes GOP these days, of course, if a f*cking moron who deserves what they get.

Marc McDonald said...

Hi Anon No. 2, thanks for stopping by.
>>I immediately thought of Reagan
>>when watching that great episode
>>of Boardwalk Empire where Nucky

I saw that. Boardwalk Empire is truly a classic show and a rare exception in the empty wasteland that is TV today. In fact, for my money, it's better than the vast majority of the dreck that is in the movie theaters these days.

Marc McDonald said...

Hi Dixie Blood, thanks for your comment---great points.
>>While Nixon founded the EPA and
>>was conservative

I wonder how many of today's Republicans even know that the dreaded EPA was founded by Nixon?
Michael Moore said it best when he noted that, for all his flaws, Nixon was the last Liberal president the U.S. ever had.

Marc McDonald said...

Hi Lexy, thanks for stopping by.
>>They have been so successful
>>that look at where the
>>so-called "Reagan Democrats" are
>>now. In their extreme poverty,
>>most of them call
>>themselves "conservative
>>Republicans" and "Tea Party

One thing that particularly galls me is that on the Sirius Satellite Radio listings, the Liberal channel is called "Progessive," but the right-wing Rush/Hannity/Levin hate-mongering channel is called, "The Patriot Channel."
If this situation was reversed, the Right-Wing Noise Machine would raise such holy hell that it'd eventually be changed. But the wimpy Dems just bend over (once again) and take it up the ass, like they do on all other issues.

Marc McDonald said...

Hi Peter, thanks for your comment. Good point!

Marc McDonald said...

Hi, Orangelion03,
>>Perfectly succinct summation of
>>the last 30 years of the US.

Thanks for your kind words.

Yastreblyansky said...

That's a very elegant and insightful argument. Globally, Sweden, Germany, etc. saved capitalism by making and enforcing peace between owners and workers, we only did it halfway and then under Reagan began undoing it. Personally I think capitalism is still alive but the capitalists are gone, replaced by selfish rent-seekers--in proper Marxian terms the means of production are literally out of control.

Woody (Tokin Librul/Rogue Scholar/ Helluvafella!) said...

The author of the neo-fascist counter-revolution, who wrote the book on the capture by the corpoRats of all the "public institutions" of the People, was Lewis F. Powell, a 1972 Nixon appointee to the SCROTUS, not long AFTER Powell had written a long, and now somewhat better known memorandum to a neighbor and friend who was the COO of the US Chamber of Commerce, in which he outlined, very specifically, the steps which corpoRat amerika had to undertake to wrest hegemony away from the liberal impulses of the People and their institutions, and restore the interests of the owners, oligarchs, and the rest of the so-called one-percent to their rightful supremacy.

rapier said...

Alan Greenspan's appointment was the beginning of the end of capitalism and functioning capital markets. Nobody knew it at the time, probably not even Greenspan himself and shurly not Reagan who at that point, late 87, didn't know much of anything.
It took over 20 years and Greenspan's successor to finally kill capitalism. I measure the death of capitalism by the advent of ZIP, zero interest rate policy. If the cost of money, the interest rate, is zero then the most important price signal of all has been eliminated. Markets or now so called markets will misallocate capital and economic performance will of necessity be worse with the kicker that its diminishing returns will flow ever more strongly to those who get to borrow money for free.

The Feds ZIP and relentless expansion of its balance sheet, ie. money printing, is unambiguously the embrace of a command economy.

Rehctaw said...

Yes! This may be my favorite post in the Jon Swift Round-up. The Reagan myth is a multi-faceted, highly-polished turd. That it is the dominant American myth will continue to bite us in the ass for generations.

Three aspects that need to be included and considered with equal importance are
1)undermining subsistence: the established base that enabled "capitalism" to operate without pressure for "full-employment". The cheap subsidy that allowed corporations to disinvest in their social contracts.
2) Promoting and rewarding Vulture Capitalism that systematically dismantled the manufacturing base.
3) Re-militarization. Building an armed forces that demanded deployment. An "All-dressed-up-with- no-place-to-go" American military could only prove to be too much temptation.
It was only a matter of time before it had to be used, if only to somehow justify the Trillions$$$
dedicated to building it.

Reagan's "policy" dominoes continue to fall, taking us all down with it.

Welcome to Opposite World!

Marc McDonald said...

Hi, Woody, thanks for your comment. I'm not that familiar with Powell. I'll have to read up on him.

Marc McDonald said...

Hi Rapier, thanks for your comment.
>>Alan Greenspan's appointment was
>>the beginning of the end of
>>capitalism and functioning
>>capital markets.

Good points you make, thanks.

Marc McDonald said...

Hi, Rehctaw,
>>This may be my favorite post in
>>the Jon Swift Round-up.
Thank you for the very kind words.

>>The cheap subsidy that allowed
>>corporations to disinvest in
>>their social contracts.

This is a very succinct way of putting it. I'm reminded of the likes of Walmart, a mega-billion-dollar corporation that enjoys fantastic profits and yet can't be bothered to pay its employees a living wage, forcing them to collect food stamps and Medicaid that the rest of us pay for.

Anonymous said...

The educated class created by Californias education policies of the 50's-70;s were automated out of jobs in the 80's-2000 by computers and the blue collar workers by robotics. The 1% can produce most of what they need without the help of the 99% so we are all fired. Reagan wanted less government regulation of coperations and more corprate regulation of government, in ether case the peoples lives are equally regulated. Reagan wanted to ensure the 1%'s dominance over a shrinking pie.

Unknown said...

You people are under a tremendous delusion. No other president, including JFK EVER spoke, and THE WORLD LISTENED! The Repubicans NEVER COMPLAINT ABOUT THEIR TROUBLES BEING CAUSE BY THE PREVIOUS ADMINISTRATION, BUT THE DEMOCRATS ALWAYS CRY ABOUT WHY THEY CAN'T DO THEIR JOB! I did very well under the Reagan administration. If you didn't, then you're a loser!
Ronald Reagan DEAD is 10 times the president then obama is ALIVE!

Marc McDonald said...

Hi Tom, obviously, I strongly disagree. Reagan was a disaster for America.
I find the Reagan quote you mention to be amazingly ironic. You do realize that Reagan racked up $3 trillion in new spending during his term and put ALL OF IT on America's credit card?
Of course you don't.
You continue to listen to Rush and wallow in ignorance.
Incidentally, for someone who claimed to hate government so much, I wonder if anyone ever benefited so much from government as Reagan did? How many millions of our tax dollars did he pocket over the years, as a governor and president? And how about those millions he pocketed from Japanese industrialists when he gave a couple of speeches in Tokyo? What, exactly, where they paying him for? As usual, the "liberal" media sat around with its thumb up its ass and never investigated this important story.

Marc McDonald said...

>>>He is a real man.

Really? So that's why he never set foot outside of Hollywood during World War II (while real men like Henry Fonda signed up and went and fought in the war).
Reagan was a chickenshit coward. So are his brainwashed, deluded followers.

Unknown said...

Well... now that everyone has had their pity party, what direction now ?

do we continue to ship jobs out ? How do we force manufacturers to hire American workers ?