The Rise and Fall of the Neoliberal Order | Gary Gerstle

Summary of: The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era
By: Gary Gerstle

Introduction

In the book ‘The Rise and Fall of the Neoliberal Order: America and the World in the Free Market Era,’ Gary Gerstle takes us on a journey of political ideologies and how they shape American politics. He explores the rise and decline of the New Deal order and the subsequent advent of neoliberalism as the dominant force. Through examining the influences of figures like FDR, Reagan, and Clinton, Gerstle sheds light on key economic and political shifts in the United States. Readers can expect to delve into the birth and downfall of these political orders, their impact on society, and how their legacies continue to shape America.

The Birth and Life of Political Orders

Building a political order involves spreading ideas by convincing people to adopt new economic and power structures. The process starts with a small group of advocates, including economists, politicians, and intellectuals, who create think tanks and political action committees. Over time, they persuade people that the good life awaits through the adoption of a new order. A political order only truly earns its name when both political parties embrace it, endowing it with endurance beyond election cycles. An order lasts for decades, but it ages and frays, giving way to a new ideology when crises emerge.

The Birth of the New Deal Order

Franklin Delano Roosevelt’s New Deal emerged as a set of reforms that aimed to address the failure of classical liberalism principles. The Great Depression exposed the flaws of laissez-faire capitalism and paved the way for government intervention. The rise of communism strengthened the bargaining position of the moderate Left, leading to an alliance with capital and labor, which established the New Deal Order. The order continued to expand through the 1960s, and its dominance endured until the early 1970s. Dwight Eisenhower, a Republican president, continued the New Deal policies, recognizing that social democracy was what the people wanted, and any party hoping to gain power had to deliver it. Overall, the success of a political order depends on its ability to shape what majorities of elected officials and voters on both sides of the partisan divide regard as politically possible and desirable.

The Evolution of American Politics

The book describes the downfall of the New Deal era and the rise of neoliberal ideology in the United States. Civil rights movements and the Vietnam War led to the loss of Democratic Party support, opening the way for Republican Richard Nixon to win the presidency. Economic crises and oil embargoes during Jimmy Carter’s administration further reduced support for big government and labor, paving the way for Ronald Reagan’s win in 1980. The fall of the Soviet Union removed the need for businesses to appease labor unions, leading to the loss of union gains and a significant increase in the CEO-employee average pay ratio. Reagan’s policies were inspired by neoliberal economists Friedrich Hayek and Milton Friedman, who aimed for a return to small government, free markets, and open trade.

Neoliberalism and Its Ideology

Neoliberalism is an economic ideology that seeks to weaken government, dismantle the welfare state, reduce regulation and promote free trade. Its proponents believe that freeing capitalism will lead to economic growth that benefits everyone, rich and poor alike. However, this system drives economic inequality, which neoliberals believe will benefit all citizens by promoting individual freedom and reducing government intervention. Neoliberalism should not be confused with conservatism, which seeks to preserve traditions and institutions. Instead, neoliberalism embraces creative destruction and innovation, marking it as a dynamic time in economic history. The ideology aligns with classical liberalism’s principles, such as the freedom to engage in business, trade, and exchange.

Clinton’s Neoliberalism

The book discusses the rise of neoliberal economics under Bill Clinton’s presidency and its impact on the US economy. Clinton’s acceptance of Reagan’s economic policies marked a shift towards free-market capitalism, causing working-class Americans to suffer. Clinton pushed the North American Free Trade Agreement (NAFTA) which undermined their economic position and signed off on the repeal of the Glass-Steagall Act, causing financial instability. Despite Eisenhower’s and Clinton’s different political affiliations, they both chose to carry on with the New Deal policies to win elections. Reagan was the architect of the neoliberal order, and Clinton was its key facilitator. The markets were finally free of labor influence, resulting in the acceleration of neoliberal policies. The book sheds light on how the Democratic Party had to embrace neoliberalism to remain in power and highlights the importance of understanding the impact of neoliberalism on the economy and society.

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