The Rise and Fall of American Growth | Robert J. Gordon

Summary of: The Rise and Fall of American Growth: The U.S. Standard of Living since the Civil War (The Princeton Economic History of the Western World, 60)
By: Robert J. Gordon

Introduction

Discover the fascinating insights into the constantly evolving world of political ideologies in the book ‘The Rise and Fall of American Growth’ by Robert J. Gordon. Delve into the history of political orders and their impact on American society, from the New Deal era of Franklin Delano Roosevelt to the rise and fall of neoliberalism under Reagan, Clinton, and Bush. Throughout this book summary, the key themes revolve around how these political orders shaped American politics and society, the effects of economic and social policies, and the enduring influence of these ideologies on today’s world. The introduction prepares you to explore these vital topics and complex notions in a user-friendly language that makes for an engaging and enlightening read.

Building a Political Order

A political order isn’t built overnight but through years of hard work and dedication. The process starts with a small group of individuals who spread their ideas through think tanks, the media, and political action committees. Through convincing the public to adopt new economic and power structures, they eventually become established as a political order. This order only earns its name when both mainstream political parties fully embrace it, leading to its longevity over decades until it begins to age and a new ideology takes its place.

The Rise and Dominance of the New Deal Order

Franklin Delano Roosevelt’s New Deal emerged as a political order during a period when classical liberalism was losing popularity in the US. The Great Depression exposed the failures of laissez-faire capitalism, and government intervention became necessary to stabilize the economy and provide a safety net for citizens. The rise of communism further propelled the New Deal era by strengthening the bargaining position of the moderate Left. This alliance between capital and labor proved critical in the establishment of the New Deal order, which continued to expand through the Great Society efforts of the 1960s. The success of this political order depended on its ability to shape what elected officials and voters on both sides of the political spectrum regarded as politically possible and desirable. The New Deal order remained dominant even as prosperity returned to America, and any party hoping to gain power had to deliver social democracy as the people continued to demand it.

The End of the New Deal

The New Deal era ended as a result of two significant events: the country’s opposition to the Vietnam War and stagflation in the mid-1970s. The civil rights movement in the 1960s pushed for an end to segregation, which led to white southerners defecting from the Democratic party and ultimately paved the way for the election of Republican President Nixon. Despite maintaining high taxes, Nixon introduced big-government regulatory tools, which continued the New Deal order. However, stagflation and oil embargoes during Democratic President Jimmy Carter’s administration fueled criticism of big government and labor, opening the door for the neoliberal ideas of Ronald Reagan. Neoliberalism thrived when Reagan’s arms race contributed to the Soviet Union’s collapse, leading to a decline in union power and a significant increase in CEO pay.

Understanding Neoliberalism

Neoliberalism seeks economic growth through deregulation, global free trade, and rejection of government intervention. While it acknowledges economic inequality, it believes the resulting wealth will benefit everyone. Neoliberalism diverges from conservatism by breaking with tradition and embracing individualism.

Neoliberalism is an economic philosophy that aims to weaken government intervention, welfare states, labor unions, wealth redistribution, and regulation. Its proponents believe that freeing capitalism from such constraints will cause growth rates to soar, resulting in benefits for all, regardless of social status. However, proponents acknowledge that this system of capitalism drives economic inequality. Nevertheless, they argue that the resulting wealth will ultimately “lift all boats” and that poverty can be eliminated through free trade extended globally.

One of the characteristics of neoliberalism is its rejection of the idea that freedom and equality require regulations and restraints on businesses. It sees government intervention as economic and political tyranny that robs people and businesses of individuality and freedoms.

Neoliberalism differs significantly from conservatism. The latter seeks to preserve traditions, existing hierarchies and institutions, and upholds rigid ideas such as paternalism. Neoliberalism, on the other hand, encourages creative destruction, upsets traditions, and embraces individualism. The era of neoliberalism is marked by venture capitalism, IT innovation, free trade, creativity, iconoclasm, and the individual.

In summary, the neoliberalism economic philosophy is geared towards fostering growth and prosperity by promoting deregulation and free trade while rejecting government intervention. Its proponents believe that individualism and creativity drive economic progress rather than following social hierarchies and traditions.

Clinton and the Neoliberal Order

The 1992 US presidential election resulted in Arkansas Governor Bill Clinton winning the presidency. He willingly adopted Reagan’s neoliberal mantle and extended it with relish. Clinton understood that he could not win elections by going against the current political order and had no intention of returning to the era of big government and regulation. He pushed the North American Free Trade Agreement (NAFTA) into law, which undermined the economic position of working-class Americans. Moreover, during his second term, Clinton repealed the Glass-Steagall Act, a law that prevented another financial crisis like the Great Depression. The markets were then freed of any meaningful labor influence. Ronald Reagan was the neoliberal order’s ideological architect, while Bill Clinton was its key facilitator.

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