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

By MARC McDONALD

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.

New York Times Company CEO Pockets Millions While Demanding Steep Union Concessions

By MARC McDONALD

The New York Times Company, owner of The New York Times and The Boston Globe, has taken the gloves off (and put on a pair of brass knuckles) in hard-line negotiations with its unions. The company is threatening to close The Boston Globe unless the newspaper's unions quickly agree to $20 million in concessions, the Globe reported on Friday, quoting union leaders.

But while The New York Times Company is demanding that its employees make steep sacrifices, its CEO is raking in millions.

The New York Times Company CEO Janet L. Robinson raked in $5,578,451 in compensation for 2008. This includes $1,552,603 in restricted stock awards, as well as a salary of $1 million, according to Forbes.com.

Once again, America's CEOs pull down huge pay packages, even as they demand brutal sacrifices from their workforces across America.

You know, I expect this sort of thing from a hard-line, right-wing company like the Coors Brewing Company. But this is the "liberal" New York Times for Chrissakes. So much for the now-quaint notion that "The business of a newspaper is to comfort the afflicted and afflict the comfortable."

Is A Capitalist Meltdown Upon Us?

By MANIFESTO JOE

I'll only be 53 on my next birthday in late July, yet it already seems like I've lived a tiring amount of history. Only 20 years ago, the world saw the meltdown of Soviet-style communism -- and many observers, largely neo-conservatives, interpreted that as an ideological culmination, "the end of history." There was even an influential book written with that title. (Does anyone remember that author now? And, does he want to remember that book? Yeah, I know -- Francis Fukuyama.)

It appears that reversals of fortune can happen quickly. Now it looks like the allegedly venerable ideology of "free-market" capitalism is on the ropes, and in serious danger of going down. Who would have thought it?

Die-hard Marxists did. I've never been one of them, even as a long-ago radical all of 23 years old. I still know three people who have continued to call themselves Marxists in total defiance of dismissal or ridicule, and they are probably gloating a lot now. The economic train wreck they kept dogmatically predicting finally seems to be in front of us.

But even as America sleepwalked through our Second Gilded Age (circa 1981-2005), I grew skeptical of the Marxist vision. "Historical inevitability" always sounded like a religious tenet, without the pure superstition; and Marxism itself, a sort of quasi-religion for embittered atheists.

We should be as cautious about awarding hard-line socialists a victory here, as much as "we" (in the editorial sense) should have checked for our wallets the minute Reagan started talking about trickle-down and Phil Gramm started talking about deregulation. The past century should have taught us that the answer lies in between.

Starting with the excesses of laissez-faire: America has, for the past 30-ish years, seen the roller-coaster ride that happens with that sort of economic policy. An elite grows very rich, a minority near the bottom slips much further down, and most people tend to stagnate in the middle.

There are cycles of boom and bust. The booms are good for most people, but especially good for a few. The latter group inevitably forms a "Why Should I Have To Pay Taxes?" lobby and gets bonanzas from lawmakers eager to please. And since these are the people of ostentation and material success, their influence is great among fashionable "thinkers" of the day.

Now the big bust is upon us. It's a bit like 1933 all over again -- not as grim or total in devastation, but it's likely to get worse. President Barack Obama has warned us that this is so.

But history, with its entire lesson, should be heeded, and it seems like Obama is one who will do so.

There were very good reasons for the meltdown of the Soviet empire 20 years ago. Contrary to right-wing mythology, Reagan and his military buildup had little to do with it. Post-Soviet Russian economists recall the problems as internal, and any intellectually honest person knew what they were. There's no need for me to recite the litany here -- Americans heard it all for decades.

But let's face it, die-hard socialists out there -- state-run enterprises have a poor track record. The employees seem to lack incentives to produce. Cooperatives tend to degenerate into personal conflict, power struggles and chaos. And as for the concentration of power in the hands of "vanguard revolutionaries" -- the horrors and enormities of that have been abundant just in the past century.

I don't think it's hard to argue for a sense of balance and measure. In America, it seems like the compromising wheeler-dealers -- the FDRs, the Trumans, the LBJs, the Ted Kennedys -- got more done for working Americans than any of our homegrown radicals ever did.

But there is little doubt that there's been a sea change, and it's been back toward socialist thinking. The Nobel Prize committees have not been known for their sympathy toward socialist-leaning economists, yet Nobel Laureate economist Joseph Stiglitz has more or less come out in favor of the nationalization of U.S. banks. That would be a major step toward socialism of some fashion. Why not? We've just given the bastards $700 billion in taxpayer money to keep them in business. Here's a link to the interview with Stiglitz.

And, it appears that such state power would be the only thing to force the shameless swine who run these enterprises to behave themselves. Sen. Claire McCaskill, D-Mo., made a speech on the Senate floor about the Wall Street oinkers who had themselves awarded $18.4 billion in bonuses while their enterprises got in on the aforementioned $700 billion, because of reckless and disastrous mismanagement. Here's another link to reports on this issue, and to a video of McCaskill's speech. Be patient, the video seems very rough.

So, what should be the ultimate American destination, in an era of "capitalist" meltdown? The Swedes, with a hybrid socialist-capitalist system, don't seem to do badly, with avowed Socialists predominantly in power since 1929. Their booms are smaller, but so are their busts. Their people don't live in fear of homelessness or inability to afford basic health care. Right-wing humorist P.J. O'Rourke, when asked about the Swedes' seeming happiness with their stable system, said that they are all insane -- but that their insanity is distributed equally among the people.

It's a funny line. But there's nothing funny about facing a mortgage foreclosure, or about the welfare rolls shrinking even as joblessness is rapidly expanding. With a growing U.S. underclass, it may be time to take a second look at the socialist mind-set -- despite the old Marxist baggage. Nobody requires us to go to extremes.

Manifesto Joe is an underground writer living in Texas. Check out his blog at Manifesto Joe's Texas Blues.