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- [00:01]
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Podcast Host (Martin DeCaro)
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Podcast Host (Martin DeCaro)
Go to vanta.com calm history as it happens March 13, 2026 Neoliberalism Revisited. The era of big government is over.
- [01:13]
Nelson Lichtenstein
The US will export more jobs to Mexico. We'll be sending a signal to the world that Americans don't shrink away from competition.
- [01:21]
Podcast Host (Martin DeCaro)
Our products will gain better access to China's market.
- [01:25]
Historical Audio Clip / Various Speakers
In every sector from agriculture to telecommunications
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Nelson Lichtenstein
to automobiles, we see a well planned effort to undermine the economies of all the ASEAN countries by destabilizing their currencies.
- [01:38]
Podcast Host (Martin DeCaro)
Developing countries in particular have been hard
- [01:41]
Nelson Lichtenstein
hit by the crisis and growth will
- [01:43]
Podcast Host (Martin DeCaro)
be slower in 1999. What is or what was neoliberalism? Are we living in a post neoliberal order? Neoliberalism is often used to describe the enormous changes that have transformed global capitalism, and not for the better in the eyes of critics. Can it explain why some Americans today believe the American dream is hollowed out? Maybe we need a new vocabulary. That's next as we report history as it happens. I'm Martin DeCaro.
- [02:12]
Robert Rubin (Historical Audio Clip)
We can make American financial markets already the most efficient and most effective in the world, even more competitive and more efficient.
- [02:21]
Nelson Lichtenstein
I would say at the core of it is unfettered mobility of capital. Now, when I say mobility of capital, I mean that in two ways. One is geographic, you know, moving money all over the world. And sometimes that creates financial crises. So geographic mobility and, you know, the capacity of banks and other institutions to just move money really fast, instantly, with a click of a button all over the world. The second is when I say mobility of capital, I mean the way in which capitalists, those who have it, can transmute it into different forms.
- [02:57]
Bernie Sanders (Historical Audio Clip)
My, my, my. All of these heavy hitters working night and day trying to help us bail out Mexico.
- [03:09]
Podcast Host (Martin DeCaro)
Who remembers a Senate confirmation hearing from 1995. Other than the people who were there? Well, probably no one. Historians might remember that in January 1995, Robert Rubin appeared before the Senate Finance Committee to make his case to be President Bill Clinton's Treasury Secretary.
- [03:27]
Robert Rubin (Historical Audio Clip)
We can make American financial markets, already the most efficient and most effective in the world, even more competitive and more efficient through modernizing regulatory structures and regulations. But the issues are very complex and competing considerations must be weighed carefully and thoughtfully Now.
- [03:49]
Podcast Host (Martin DeCaro)
That same month, the US and the IMF bailed out Mexico. The entire international rescue package topped $50 billion to stop a peso devaluation and liquidity crisis. Rubin was asked one question about whether Mexico's problems could ripple across Central America's borders.
- [04:07]
Historical Audio Clip / Various Speakers
In the last few weeks, there's been a lot of attention focused on Mexico and the potential ripple effect that that might have on the economic development of other nations in the hemisphere. Like your comments as to whether you see this situation in Mexico as being isolated to that country and episodic, or will it have a more pervasive impact throughout Latin America and the Caribbean?
- [04:35]
Robert Rubin (Historical Audio Clip)
Senator I think that's a very complicated set of questions, and I don't know that it lends itself to a very, very brief response. Mexico accomplished enormous reforms under President Salinas and to some extent under his predecessor in the area of privatization, opening markets, deregulation. As a consequence, the country is far better positioned today than it was before to realize the very substantial economic potential that Mexico has at the present time. It clearly is experiencing some difficulties. I think it is very much in our interest to support them as they work their way through those difficulties. As you correctly observe, the difficulties that Mexico is currently having have started to affect foreign exchange markets with respect to certain other Latin American countries.
- [05:21]
Podcast Host (Martin DeCaro)
Now we're going to Open to page 367 of Historian Nelson Lichtenstein's A Fabulous Failure. Mexico, he Sundays in early 1995, was the first big crisis and the one that set the template for the Clinton administration's response when, two years later, the Asian contagion threatened to plunge a half dozen economies into default and disarray. Following the contentious NAFTA debate in late 1993, Mexico had slashed public expenditures and pegged the peso to the dollar, thereby guaranteeing to foreign investors that it would not replicate the peso devaluation of a decade before, when foreign investments lost much value and the real buying power of millions of Mexican wage earners plunged disastrously. To maintain a high peso value, the Mexican finance ministry issued billions of dollar denominated bonds known as teso bonos, and from the proceeds they bought pesos, thereby sustaining the dollar peso peg for the moment. Mexican consumers found that US imports were cheap, and to the Clintonites delight, it generated a US trade surplus with Mexico in 1994. Foreign capital poured into the country, much of it lured by those high teso bono interest rates. But all this came crashing down by the end of 1994. After NAFTA's passage, Mexico enjoyed no manufacturing boom because low wage producers in East Asia proved formidable competitors.
- [06:47]
Historical Audio Clip / Various Speakers
This support package is not foreign aid.
- [06:49]
Podcast Host (Martin DeCaro)
It's not a gift, it's not a bailout, it's not a government loan.
- [06:53]
Historical Audio Clip / Various Speakers
It won't affect our current budget deficit a bit. We will attach strict conditions to make sure that any money Mexico does borrow
- [07:00]
Robert Rubin (Historical Audio Clip)
on the basis of our guarantees is
- [07:03]
Nelson Lichtenstein
well and wisely used.
- [07:04]
Podcast Host (Martin DeCaro)
Lichtenstein goes on to say, after the assassination of a presidential candidate in March 1994, Mexico seemed an increasingly risky venue for foreign capital. And then there was a decision by Federal Reserve Chair Alan Greenspan to double the Fed interest rate benchmark that same year, slashing the relative premium that Wall street bankers had enjoyed from their Mexican investments in a pattern that would be repeated in the Asian crisis two years later. Foreign bankers feared that unless they pulled their money out fast, they would be left holding a radically devalued investment. Capital flows therefore abruptly reversed during the summer of 1994. So as you're following along here, what do you think would happen next? Would the United States allow Mexico's peso to basically fall through the floor? Lichtenstein provides an answer. The Clinton administration, he says, could not stand by. There was, first of all, the tequ effect, the fear that the Mexican crisis might spread to the rest of Latin America. Mexico was hailed as a role model for developing countries, said Robert Rubin. The public failure of that model could deal an enormous setback to the spread of market based economic reforms and globalization. So the moral of the story told by Lichtenstein. In this new age of international finance, market forces and emerging markets of the mid-1990s, crises were inevitable. It was up to people like Robert Rubin or Larry Summers and Alan Greenspan to manage them, to soften them. International financial crises became an acceptable risk because capital had to be allowed to flow to whiz around the world. Now the bailout of Mexico was opposed across the political spectrum by people on the right like Pat Buchanan, and on the left by this man, then a member of Congress. Today he's a senator, and at the
- [08:56]
Bernie Sanders (Historical Audio Clip)
Banking Committee meeting in pursuing the bailout for Mexico. We had the Secretary of State, Warren Christopher, we had the head of the Federal Reserve, Mr. Greenspan, and we had the Secretary of the Treasury, Mr. Rubin. My, my, my. All of these heavy hitters working night and day trying to help us bail out Mexico. And yet I look at what happens to family farmers in Vermont working 80 hours a week losing their farms.
- [09:28]
Podcast Host (Martin DeCaro)
Yes, that was Bernie Sanders. And what he said in 1995 sounded a lot like the statements he and other politicians made after the Wall street bailout in 2008, 2009, turning Wall street into a global institution. Was that neoliberalism? What is neoliberalism? Can we blame it for our problems today? You know, after Donald Trump was reelected in late 2024, Project Syndicate ran a story headlined Did Neoliberalism Kill American Democracy? In it, the economist Joseph Stiglitz said the fundamental problem is obvious. 40 years of neoliberalism have left the US with unprecedented inequality, income stagnation and declining average life expectancy, and workers are desperate for an alternative. To become that alternative, Stiglitz said, the Democratic Party must abandon neoliberalism and return to its progressive roots in the presidencies of Franklin Roosevelt and Lyndon Johnson. This is a follow up episode to the one I published in late December with historians Daniel Besner and Phil Magness about this word neoliberalism. In this episode, Nelson Lichtenstein is back. He is a major labor historian at UC Santa Barbara and the author of the aforementioned the Fabulous the Clinton Presidency and the Transformation of American Capitalism. Our conversation next Tap. Subscribe now in the Show Notes for early access ad free episodes and all of our bonus content. You'll never be interrupted listening again or go to historyasithappens.com
- [11:03]
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- [11:33]
Podcast Host (Martin DeCaro)
Nelson Lichtenstein welcome back to the show.
- [11:36]
Nelson Lichtenstein
Glad to be here.
- [11:37]
Podcast Host (Martin DeCaro)
This is actually a follow up episode on something I did last year with a couple of historians, Phil Magnus, Daniel Bessner on this thorny question of what is neoliberalism what does that term even mean to ordinary working class Americans? Does it even have a meaning? How do you define it?
- [11:56]
Nelson Lichtenstein
I would say at the core of it is unfettered mobility of capital. Now, when I say mobility of capital, I mean that in two ways. One is geographic moving money all over the world, and sometimes that creates financial crises. So geographic mobility and the capacity of banks and other institutions to just move money really fast, instantly, with a click of a button, all over the world. The second is, when I say mobility of capital, I mean the way in which capitalists, those who have it, can transmute it into different forms. And here, well, crypto would be kind of most recent example of that. I mean, it's money, but it's being transformed into a different form, obviously, other kinds of instruments, derivatives and all sorts of insurance swaps and things of this sort. It was particularly prominent, it became more prominent in the late 90s, early 20th century. Mergers and acquisitions is another way of transmuting and transforming capital. And this is to be sort of unfettered. Now, the state is essential to all of this. The state is not absent. The state is the guarantor of this capacity of capital to transform itself. So neoliberalism does not mean the absence of the state. It means, in fact, the state is increasingly more powerful. Now, this mobility of capital comes at the same time as you have the immobility of labor because of that. Well, we have had labor mobility, but from the very beginning, from the 50 years ago, it was a political issue. It's a political opposition. And the opposition to the mobility of capital, of labor, has gotten greater and greater, even as capital itself moves all over the globe and takes on new baroque forms that couldn't imagine before. But I want to say one more thing about, about neoliberalism, which is maybe not usually said. And I get this from my friend and very esteemed colleague Gary Gerstel, who wrote a book called the Rise and Fall of Neoliberalism came out two or three years ago. And he made the point which I think is important part of the attractiveness of neoliberalism, and not just for a few billionaires, et cetera. Neoliberalism represents a kind of cosmopolitanism, pluralism, cultural pluralism. I've never been to Abu Dhabi, but these kind of magical cities that emerge out of the sands, I mean, these are neoliberal symbols. And what are they? They're multinational and of a certain class and certain strata. And I think that sort of cosmopolitanism, internationalism, obviously, just for a certain sector, certain strata of society. But that's attractive and here just to be totally contemporary. I think one of the elements that made Epstein a kind of charming, attractive kind of figure who pulled all these people into his network was he represented that to a degree, he was a Jewish working class kid who sort of made it and now could link himself up with British royalty and all sorts of academic superstars. Gary made this point, that's an attractiveness and of late, say a corporation. Well, now we'll get to this Trump and things of that sort. But you know, I say eight years ago or something, you looked at a corporation. They all had DEI programs, they all were making points that they were trying to hire and advance people of all sorts of races, et cetera. I mean, that was an element of neoliberalism, which I think was attractive to people.
- [15:36]
Podcast Host (Martin DeCaro)
So you raised a number of points there about the immobility of labor versus the mobility of capital. So, well, if a factory is going to be built or moved to Mexico or China, American laborers are not going to follow it. You also brought up the importance of the state under neoliberalism. That's because its cheerleaders or its espousers understood that rapid movement of capital at the click of a mouse or push of a button all over the world was destabilizing. So the state had to play a role. Right. I have a few other things I want to bring up, but why don't you stick with that one for now?
- [16:10]
Nelson Lichtenstein
Yeah. I mean, in writing this book, I wrote a book on the Clinton administration and its economic policies. And I was struck by the degree to which the chief advocates of what we call neoliberal policy, Robert Rubin, Larry Summers and others like that, they were quite aware of the fact that this new system had great instabilities and that crises would be periodic and were almost inevitable. The Mexican peso bailout in 95 and the East Asian crisis in 97 and the long term capital collapse. I mean, they were quite aware of all this. So Rubin and the Treasury Department, which was very, very important, kind of a Treasury part, was sort of the center of the sheer power, but also intellectual firepower. In this period, and still is, at least under Democrats, a booklet was put out called American finance in the 21st century, in which Rubin and his team, very deep team, people like Geisner, who would become Secretary of Treasury under Obama and others, they made this distinction. They said, look, as a result of this new system, which we're all in favor of, neoliberal, they didn't call it that. But mobility of capital. It will create efficiencies and global prosperity. It will create crises. There will be crises. But they said, look, our task is not a crisis prevention. And that might have been the perspective of the Bretton woods system of a few decades earlier that was created after World War II, where capital was not as mobile. And there was a great effort not to have another Great Depression or another crisis that was viewed as due to destabilizing. We know that there will be crises, and we are not in fact, going to try to prevent them because they're just inevitable. However, we do want crisis containment. And that is the phrase they use, crisis containment. And that meant the mobilization of state power and really the coercion in various ways of financial institutions, Wall street, the Federal Reserve, to contain, whether it's the East Asian fiscal crisis of 97 or whatever it is, or actually the. The 2008 crisis was even a greater collapse, that you'll use this new power, enhanced power of the state to intervene. And Larry Summers, always kind of on the edge on these things. He said, look, we have international jet travel. It's very convenient, it's great. But every so often there's a plane crisis. That doesn't mean we prevent jets from taking off, but we just have to contain the fallout of this. You can't possibly prevent it. So that was a view, and I think that does help in a very graphic way. You can see that when a crisis occurred, Rubin would get on the phone with his banker friends and arrange an emergency meeting. The New York Fed was usually the group that put the real hammer to the banks. And they would insist, no, you must do this. You cannot call in your loans. You must extend credit. They were very hyperactive in what they thought of as the containment of these crises. So the state is very important to neoliberalism.
- [19:25]
Podcast Host (Martin DeCaro)
You brought up the Mexican bailout. It's largely forgotten among ordinary American working class people today. I don't know how much it affected them. But if you go back to the Mexican bailout days, you'll find that Bernie Sanders and Pat Buchanan condemned it.
- [19:42]
Bernie Sanders (Historical Audio Clip)
Two million people in America are homeless children who are hungry. Where is, where are the heavy hitters who are standing up and say, we have an emergency right here in the United States of America. Our standard of living is in decline. Let's pay attention to that need. So I get a little bit resentful, a little bit resentful when all of this energy and all of this big money focuses on bailing out Mexico. And yet the needs of the American people seem to be ignored from opposite
- [20:11]
Podcast Host (Martin DeCaro)
ends of the political spectrum. There's an echo there for today's populism. So yes, on page 383 of a fabulous Failure, which everyone should read. Don't judge the book by its cover. A Fabulous Failure. The picture of Bill Clinton. It's really a history of the economic changes, profound economic changes in the United States and the world in the 80s and really the 1990s, you say here. Summers often analogized the emergence of global financial markets to the invention of the jet airplane. When there's a crash, you don't ban jet landings, you do stuff to improve air traffic control, lengthen the runways, et cetera. Likewise, you say, no set of prudential standards, sound banking regulations, bankruptcy laws, anti corruption statutes could prevent countries from getting themselves into, quote, very profound financial difficulties at the sovereign level. In short, we need systems that can handle failure. Well, that ideology, and I'm calling it an ideology that works until it doesn't, here's the famous Henry Waxman, Alan Greenspan moment.
- [21:15]
Historical Audio Clip / Various Speakers
Over and over again, ideology trumped governance. Our regulators became enablers rather than enforcers. Their trust in the wisdom of the markets was infinite. The mantra became government regulation is wrong. The market is infallible. Those of us who have looked to the self interest of lending institutions to protect shareholders equity, myself especially, are in a state of shocked disbelief. In other words, you found that your view of the world, your ideology was not right, it was not working. Precisely, no. That's precisely the reason I was shocked because I've been going for 40 years or more with very considerable evidence that it was working exceptionally well.
- [22:05]
Nelson Lichtenstein
The failures are extremely costly. I mean, mass unemployment, whether, whether it's Ohio or Korea or, you know, whether it's Russia. The failure means really the shift to a kind of oligarchic kind of fascism. I also, by the way, that book is out in paperback. A fabulous failure now in paperback, so cheaper and easier to get. I mentioned in this book Hyman Minsky, who's a Marxist theorist of economic and stock market crashes. And I don't know whether Robert Rubin heard of him or not. Rubin was a pretty sophisticated guy, so maybe he did. But Minsky made that point that yes, finance capital is always going to have crises. It's going to come periodically. It has a disciplining effect for the capitalist system. Ending speculation at least for a moment, liquidating unproductive capital. He was a Marxist. But the cost of this is enormous. To the working class. It's something a moral society should not tolerate. But it Makes the system work. The system does work, but the cost is too high.
- [23:04]
Podcast Host (Martin DeCaro)
Well, so, Nelson, going back then to a definition of neoliberalism, your first answer would not fill two or three sentences in a dictionary. It would take up several pages. But, you know, it's been used to your point this has been used, or to your definition as a pejorative or. Critics say this neoliberal age, however defined, helps us explain why so many Americans today are despondent about the American Dream. The economic outlook. That neoliberal capitalism is different than preceding forms of American capitalism in the Cold War and even before that. It involves people who are making gazillions of dollars in these financial industries, financial instruments. They're not producing anything of value for the rest of society, but they're making a lot of money for themselves until this house of cards they construct comes collapsing down. Is that an element of neoliberalism?
- [24:04]
Nelson Lichtenstein
Yeah, I mean, certainly it is. And the financialization we, you know, the statistics are overwhelming that, you know, some, I don't know, 40% of all American profits come out of, you know, financialism, which is another way of talking about speculation and arbitrage and, and taking advantage of interest rates difference and things of that sort, if capital was being mobile in a totally liquid way. And another historian, John Levy, wrote a very good book called the Ages of American Capitalism. And he said, from the beginning, from the way back, there's always been a liquidity preference on the part of capitalists. Now, that's been staunched and prevented by various forms of governmental action and popular sentiment, et cetera. But that liquidity preference, the idea that you want capital to be absolutely mobile and absolutely, absolutely transformative, that recently has become much more the kind of the rating orthodoxy. But the social costs of that, of course, are enormous. Now, trade is just one aspect of that. The people in the White House and in the ruling circles are quite aware of what's going on. So, for example, Alan Blinder, who was the head of the Council of Economic Advisors for a time in the Clinton period, he said, look, every economist in the world, or most of them, is in favor of free trade. And he said, yes, free trade does create great efficiencies overall. You can buy whatever it is, cheaper. However, free trade has specific targeted victims, and the victims are, in the 1990s and next decade were centered in the American Midwest and the hollowing out of American industry. And that's a political problem. People don't notice the fact that, that you can go to Walmart and you can buy a pair of sneakers eight bucks cheaper than you would have in real terms 20 years earlier. But everyone notices when the factory shuts down in Peoria or when Caterpillar in Peoria launches what would turn out to be a five year class war against its workers in order to reduce the wages so they can compete with Komatsu in Japan. So one of the reasons for neoliberalism getting a bad rap, a bad name, is precisely that. And both the right and the left came to see that. And I think that's why we're in an era now where certainly ideologically the props have been severely damaged when it comes to, quote, neoliberalism.
- [26:29]
Podcast Host (Martin DeCaro)
So that first episode I did, Phil Magness, historian, was one of my guests. He says there is no such thing as neoliberalism. It's just a pejorative. What did you. I know you listened to that. What did you say?
- [26:39]
Nelson Lichtenstein
Yeah, well, I think, yes, there are many varieties of it, and I would endorse that. I mean, by this point, point, it means so many different things to so many people. I think when David Harvey first sort of really made the term very popular 20 years ago, I think it had more precision to it. But I mean, yes, today it's practically useless. As when someone announces neoliberalism, they often mean, for example, the austerity and the destruction of a welfare state. And I made the argument that's not necessarily the case, that it's much more difficult to have a welfare state in a neoliberal environment. Much more difficult, but it's not actually impossible. I think Robert Rubin is a kind of a figure. He was in favor of at least a moderate welfare state, but I think all of his policies mandated against it. But nevertheless, ideologically at least, he was not an opponent of the welfare state in the same way that, say some paleo conservatives these days, the kind of conservatives of a much earlier anti New Deal, pre New Deal period would just think the welfare state is ipso facto immoral and therefore should be eliminated. That's not neoliberal, that's something else.
- [27:43]
Podcast Host (Martin DeCaro)
Whatever we call it. There have been profound changes in global capitalism going back to the 70s, really, deindustrialization on into the 80s, different ways of trying to manage these changes. There was the varieties of capitalism argument in the 90s, and I do want to talk about the fact that there really wasn't any type of purity in this. Even the Reagan administration bought into some type of, you might call, quasi protectionist policies. We'll get to the history again in a second, but let's just stay with the present moment here. Are we in a post neoliberal moment? I mean, again, there's a backlash to free trade, for instance.
- [28:23]
Nelson Lichtenstein
Yeah, well, it's very messy and it's undetermined. But clearly both Biden and Trump. We'll talk about more. Biden had very clearly an industrial policy idea, you know, trillions of dollars for basically the state encouraging in almost Alexander Hamilton sort of way, the creation of new industries. That was somewhat different then, of course, Trump. I mean, I think it's sort of an irrational fixation with tariffs, but nevertheless it transgresses what had been a. Whether it's called neoliberalism or something else. It had been really an 80 year tendency to have lower tariffs beginning in the Roosevelt administration, reciprocal trade agreements, et cetera, and then the various international agreements in the post war period. So clearly Trump is ending that. I would say that this sort of almost Mafia like or gangster like effort to manipulate international lending and grants and business, I mean, this is not systemic. The neoliberals at least wanted to think of creating a set of their own rules that they could abide by. Well, and one of the arguments of historians has been that neoliberalism, you want to create a kind of transnational supranational set of rules which no individual country, whatever the politics of it are, can escape. Well, Trump is just the opposite of that, just the opposite of that. So we're clearly in a messy period and I'm not about to forecast precisely where we'll come out at the end of this, but clearly a very messy, contradictory period where neoliberalism is both idea and praxis is being thwarted.
- [30:05]
Podcast Host (Martin DeCaro)
When you talked about the mafia tactics of Trump, you might be referring to the kidnapping of Venezuela's president and then telling the country to give us your oil.
- [30:14]
Nelson Lichtenstein
So, yes, yeah, I want to pronounce the name of this historian correctly. Sobodan. He wrote his first book on the collapse of the Austro Hungarian Empire. And his argument was that the Viennese economists, Mises and Hayek and people of that sort, we think of them as the, the grandfathers of neoliberalism. They saw this collapse of the Austro Hungarian Empire after World War I. You have all these little competing nationalisms, Serbia and Czechoslovakia, et cetera, but they still wanted capital to be able, an anti socialist capital to be able to freely function. They were trying to construct, at least ideologically at that time, a supranational set of rules that would supersede and, and negate the intense nationalisms of that Central European moment. And so the ideologies of neoliberalism are sort of formed the kernel there in that moment. And I think that was true until recently.
- [31:13]
Podcast Host (Martin DeCaro)
Although the financialization and conglomeration of the US economy, the global economy, that has not changed. That's still with us, right?
- [31:23]
Nelson Lichtenstein
No, that's correct. And that's one of the reasons it's messy. That's absolutely. We just have these mergers that Trump people are allowing these mergers to take place. So it's clearly not any consistent assault on neoliberalism. It's very, very messy. And some things are. And crypto, the whole crypto thing. What is crypto except a kind of scam, another transmutation of unfettered capital? And the Trump people are totally behind that.
- [31:47]
Podcast Host (Martin DeCaro)
It's a scam. All right, to the history here, I agree with you.
- [31:52]
Nelson Lichtenstein
But yes, a lucrative scam for some people.
- [31:54]
Podcast Host (Martin DeCaro)
I guess some people in a Ponzi scheme make money. But all right, so historically here though, the so called dawn of the neoliberal era, some people would point to the end of the terrible 1970s New Deal liberalism is a spent force. Those solutions don't work anymore. We get the dawn of Reaganism, Thatcherite economic policies. But even under Reagan, right. He was not a free market purist in practice, his administration give us some examples of where he strayed from the so called neoliberal gospel. And I'm not even sure Reagan ever used that term neoliberal.
- [32:30]
Nelson Lichtenstein
It wasn't used in the 1980s. But no, I would say this. The Republicans in general, at least even with Trump Republicans have had a kind of ad hoc protectionism, tariff protectionism and then sometimes even kind of investment policy. So Reagan, and this is the period when Japan and Germany are big competitors. So early on in the Reagan administration, for example, there's this one straight tariff that's put on motorcycles so Harley Davidson can succeed. And that actually worked. But even more important was the Reagan administration saw the Japanese auto imports as a real problem. So they created again a sort of semi coercive, what was called a voluntary import agreement with Japan where the Japanese would be prohibited from just exporting from their factories in Japan a certain proportion of cars. And they were encouraged and they did establish what we call transplants, that is factories. In the US it was straight tariff coom industrial policy. The tariff part of it was done by the national government. The investment side was done by states. So all the states in the south gave enormous incentives and tax reductions and grants to these Japanese companies. I don't know whether they needed them or not is another story. But they all did and really made these governors of these southern states contemporary Chinese officials in which they're invested politically and economically in the success of these transplants. And then even more dramatic under the Reagan period, and by the way, I should say that within the Reagan administration there was kind of a war going on between again, the Treasury Department, which was much more orthodox and kind of free trade, et cetera, way, and the Commerce Department. The Reagan Commerce Department is very oriented toward what we call industrial policy. Anyway, a guy named Clyde Prestowitz, who is the assistant Secretary of Commerce under Reagan, will become a big fan of industrial policy under the Clinton era. And later on.
- [34:35]
Podcast Host (Martin DeCaro)
What about the microchips? Microchips was another big one on.
- [34:38]
Nelson Lichtenstein
Yeah, the Reagan people put up a half a billion dollars, which was a lot of money in those days, to create a consortium of chip makers who would compete with the Japanese and they pressure the Japanese to buy American chips. And it was straight industrial policy. Had a kind of military side to it. Of course, the whole military aspect of this is much of the kind of, we know the Internet and it really came out of the Pentagon and the military has always had been hostile to, to what we'd call neoliberalism, has always been in favor of a kind of industrial policy, more domestic side. So Reagan, there are a number of examples you can find in the Reagan era which transgresses what we think of as a free trade, low tariff regime.
- [35:24]
Podcast Host (Martin DeCaro)
So yeah, under Reagan, Clinton, Biden, maybe even Trump stabs at an industrial policy to try to temper the negative consequences as they're viewed by some of the neoliberal orders. These never seem to have held very long.
- [35:40]
Nelson Lichtenstein
Yeah, that successful. I mean, Clinton, I mean, I have a disagreement with some other historians that Clinton doesn't walk into the White House as a neoliberal. In fact, he'd spent the previous 12 years, he was governor of Arkansas a lot longer than he was president United States. And in Arkansas he was trying in one way or another, not always successfully, but he was at least he was trying to, you know, industrialize Arkansas in the first the way that Alexander Hamilton two centuries before had talked about what we have to do for America. He went all around the world to Germany, Japan.
- [36:17]
Podcast Host (Martin DeCaro)
So why doesn't it work in our country?
- [36:20]
Nelson Lichtenstein
Well, one thing was, of course, taxes. He got burned and getting some higher taxes than early in his regime. So he was unwilling to do that. They didn't have the money. And also you do need a certain kind of Human capital that's ready to be both industrialist and entrepreneurial. And I was struck by this. I was struck when I toured some industrial areas of Bologna in Italy. Now Bologna is in northern Italy and it's a center of very skilled manufacturing. They make terrific motorcycles and Ferrari, I don't know, all sorts of cars and machine tools, et cetera. And I was struck by the degree to which this kind of industrious, entrepreneurial, but also very radical. All the communist world of the working class was based on initially an anti clericalism which had been very powerful in northern Italy at the dawn of the industrial revolution. And secondly a kind of radical working class which encouraged the state to do all sorts of things that were useful to both high wages and innovation. Well, that's missing in Arkansas. Arkansas is not northern Italy. Even though Clinton went there and came back and oh, that's terrific. We need to replicate that kind of middle level manufacturing. Kind of middle level. But what Arkansas ended up getting were branch plants of some textile apparel manufacturer which paid low wages, were non union. Clinton was in fact anti union. It just wasn't about to be kind of create the necessary ingredients for a kind of industrial entrepreneurial world. And the way you had, you know, in Cincinnati in the 19th century or you know, Detroit in the 20th century, that wasn't about to happen in Arkansas.
- [38:06]
Podcast Host (Martin DeCaro)
The conversation continues. Tired of interruptions? Want to support the show tap? Subscribe now in the show notes or go to history as it happens.com.
- [38:24]
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- [38:54]
Podcast Host (Martin DeCaro)
You know, you're the economic historian here. Some changes are simply, I don't want to say inevitable, but the changes in the global economy meant that capital is going to find cheaper labor at some point. Before American manufacturing moved overseas, it moved to other parts of the United States when there were fewer unions. Yeah, so that's what I'm getting, right?
- [39:14]
Nelson Lichtenstein
Well, right. And Arkansas did recruit, but it was often kind of this branch plant which is sort of low tech, low wages and really you just create a Shed a big box and then you put a lot of cheap labor in there. And then when things go south, you just close it all down. So there was kind of that branch plant industrialization which lasted say from the nineteen oh, late fifties, really through the eighties. And then you'd have Mexican or Asian competition. But let me make this point. 80% of the value added in the United States is still rooted in services. And it's domestically there, from fast food to hospitals, et cetera. The conservatives are right that we sometimes fetishize manufacturing. Now, manufacturing has had higher wages and better benefits than other employment, in part because unionization took hold in manufacturing and for two or three generations created a higher wage, a better environment. But that isn't necessarily the case. If you go back to the early 20th century, manufacturing wasn't high wage. It was terrible in all sorts of ways.
- [40:22]
Historical Audio Clip / Various Speakers
Sure.
- [40:23]
Podcast Host (Martin DeCaro)
So as an economy matures, as the US Economy matures, those types of jobs go somewhere else.
- [40:31]
Nelson Lichtenstein
Yeah, well, that's right. But what doesn't go somewhere else are fast food, hospitals, service, retail, et cetera. And there's no law of economics that says you can't do double the real wages in those service jobs. And that would solve a lot of problems. But, you know, that's been, you know, resisted. And I think too many liberals have thought, well, you know, the only way to get higher wage jobs is manufacturing, but you can do it in services. And what we think of as low skill services. I'm encouraged in California, you know, we. They have passed some laws here when McDonald's people earn 22 bucks an hour, but they need to earn more even.
- [41:10]
Podcast Host (Martin DeCaro)
But here's the thing about the past. Maybe we have a nostalgic, idealized vision of it, but the social fabric in these places, as the economy changed in many of these places, for instance, with the globalization of auto manufacturing and what happened to Detroit or any of the Rust belt areas in our country, nothing really replaced it. Right. That had the same kind of generational. You know what I mean?
- [41:35]
Nelson Lichtenstein
Yes, that's true. And by the way, a very good book called by Theda Skocpol came out called Rust Belt Union Dreams about the destruction decline of western Pennsylvan working class communities which were Roosevelt Democrats 80 years ago and now are Trump Republicans. Yes. Although once again, community can take many different forms. The community that existed around a certain industry, coal or steel or what have you, and seemed to be permanent, but really they were transitional. They were only two or three generations. And take Las Vegas for example, which is totally a service town. It has a strong union. So therefore housekeepers in Las Vegas can make enough money to own a home. You know, there you have a community which, you know, it's not based on manufacturing. The big institutions are the hotels and the gambling. But still it's there. And it's sort of a different kind of community. I think we have to look at that. I mean, the, the old factory centered community is gone. And I'm not too nostalgic about it.
- [42:39]
Podcast Host (Martin DeCaro)
Arlie Hochschild, the sociologist, wrote a big piece for the New York Times about the seven years she spent in eastern Kentucky getting to know the people there who are now Trump voters who may have been New Deal Democrats a few generations ago. And you know, just despair. The despair, the hopelessness or the lack of horizon that people see and feel there. And I guess I just don't know the answer to that. If that there's nothing that can be done about that.
- [43:05]
Nelson Lichtenstein
Well, look, in West Virginia there are more Walmart workers than there are coal miners. And again, I mean, there's reasons that Walmart employees in West Virginia earn low wages and have intermittent employment. I mean, because the retail associations and et cetera, the Chamber of Commerce have lobbied bitterly against any raise in the minimum wages. And those aren't union jobs, laws that make it easier to unionize. But this is not a law of nature that retail workers have to earn much lower real wages than manufacturing workers used to earn. And in fact, I did a study once in the immediate post war period in the late 40s, textile workers earned about two thirds of the wage of auto workers. Then that declined and retail workers earned about almost 2/3 of what an auto worker, that was like the late 40s and that was a result of the New Deal and the war, et cetera. And then over the next 20, 30 years, even before the rise of neoliberalism, that wage disparity got greater and greater. So that by the 1970s, retail workers or textile workers earning about a third what auto workers earned, that was not a law of nature.
- [44:13]
Podcast Host (Martin DeCaro)
And your book is very good on these issues, especially Walmart and China. To wrap up here, Nelson, whether what we just discussed here about the plight of workers in America, although we should also point out that many people are doing quite well now, life has never been better for more people across the world, many of those people being in China, for instance, who are now been pulled out of poverty. But that aside, whether we call this neoliberalism, whether that term has any relevance for ordinary people as they sit around the dinner table and discuss their Futures as families or in their church congregations or whatever. It seems like we just need a better vocabulary to explain what is happening in the world today and this notion that the American dream is not working the way it should be.
- [44:59]
Nelson Lichtenstein
Your phrase about vocabulary, that's a very important point. I think that's. You're right. That's a very good point. We don't have the vocabulary to describe what is happening right now. And the vocabulary is important because that's a way of categorizing and identifying and highlighting the problem or the issue. And we don't quite have that. And it is a messy thing. As I say, the same time Trump is railing against tariffs and he, more than almost anyone, has a nostalgic vision of a. It's not a social democratic vision, but a nostalgic vision of some sort of coal mine community or some male middle aged industrial worker.
- [45:39]
Podcast Host (Martin DeCaro)
East Rail against Japan in the 80s. Now it's China, but go ahead.
- [45:42]
Nelson Lichtenstein
Yeah, right. But the vocabulary is important and we don't quite have the name. I mean, I think David Harvey and others did a service in defining the regime as neoliberal. I think that did provide a lot of analytic tools. But I think that's over. That moment is, is over. And I agree with you. But I don't have a. I don't have a phrase. I do not have a phrase. I, I welcome one that, that would describe this moment where gangster capitalism is one phrase that comes to mind. But, but I don't know.
- [46:10]
Podcast Host (Martin DeCaro)
Well, you know, I don't know anyone who ever complains about neoliberalism outside of intellectual circles. Insofar as I'm in any of those, I do, especially among younger people, I hear criticisms of what they call late capitalism. We're not in late capitalism. This is just capitalism. It's global capitalism. It's the only game in town. It's not going anywhere as far as I can tell. So I do see criticisms of this form of American capitalism. My nephew considers himself a democratic socialist and he would like to see something more akin to social democracy in this country. All the mayor of New York, the types of positions that he pushes.
- [46:51]
Nelson Lichtenstein
Yes, by the way. Yeah. I mean, this phrase, late capitalism, of course, implied that it was the end time of capitalism. A very good historian named Sven Beckert wrote a gigantic fat big book called Capitalism A Global History in which he clearly did not end to talk about we're in late capitalism. He just thought that capitalism was kind of would morph into different varieties almost inevitably into the future. But there was nothing late about it. But it is interesting, by the way, that the popularity of the word socialism among many, many Americans, young people especially now, clearly, I think what they mean by that, and Bernie Sanders has almost made this explicit, what they mean is Roosevelt era social democracy. That's what they mean. And there's a kind of a debate going on in the left about, oh, is sewer socialism of the municipal sort. Is that a kind of a sellout or a great thing? But really, I mean, Milwaukee style sewer socialism of the nineteen teens or something, that's really just a prologue to the New Deal and LaGuardia in New York City and Mondame. I mean, they are often linked together and rightly so. I mean, that's social democracy. That's Roosevelt era social democracy. And what that implied was, yes, capitalism is going to exist, no doubt about it, only it's going to be regulated and constrained and counterposed by a powerful state and a powerful labor movement. I don't call that socialism. I'm not hostile to it. But I do take a more classically Marxist view of what socialism is, which is the abolition of capitalism. But that's not on the agenda and I'm not about to begin advocating that.
- [48:29]
Podcast Host (Martin DeCaro)
Higher marginal tax rates and a larger social safety net, programs like universal health care, universal child care, paid family lead. That's not socialism per se. So I guess this will be the last thing I ask you if we're to believe the AI cheerleaders. Yeah, well, that's all coming for our jobs. I'll be replaced at some point by a robot voice doing these podcasts. Well, then in the utopia that may come along or not come along, so much wealth will be created that ordinary people can spend our lives doing the things we enjoy. We wouldn't have to work for a living.
- [49:07]
Nelson Lichtenstein
It's good to put on a historical hat here because there have been many, many technological innovations of great enormity, from the railroads and the telephone to the first computer revolution, et cetera. And there's always a kind of apocalyptic and sometimes a utopian sense that this technology is going to transform everything. It turns out. And I think this is historic, at least if there's any historical laws. Everything becomes much more incremental. Yes, things do change, but they're much more incremental than you would have thought. And also, there is no relationship between a new technology and the reduction in work time. In fact, people today are working far more than they used to. Their wants increase. They're what they want. And it is more efficient for me to type a letter on a computer than in a typewriter. But I just, you know, we all just then fill in the extra leisure time with other work. My caution would be that any new technology, it's going to be more incremental
- [50:07]
Podcast Host (Martin DeCaro)
than you thought and the boundary between work and home life has been destroyed.
- [50:12]
Nelson Lichtenstein
Yeah, that's true too.
- [50:14]
Podcast Host (Martin DeCaro)
On the next episode of History As It Happens actually, the next several episodes will deal with the war in Iran, Israel, in Gaza and the Middle East. Keep tabs by signing up for my free newsletter. Just go to Substack and search for History As It Happens.
- [50:31]
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