History As It Happens: The "New Economy" Episode Summary

Host: Martin Di Caro
Guest: Historian Nelson Lichtenstein
Release Date: December 10, 2024
Episode Title: The "New Economy"

Introduction

In this episode of History As It Happens, host Martin Di Caro delves into the concept of the "New Economy," tracing its origins, implementation, and the subsequent disillusionment that has shaped the current economic landscape. Through insightful discussions with historian Nelson Lichtenstein and references to key political figures, the episode unpacks how technological optimism and deregulation ideologies have impacted American workers and the broader socioeconomic fabric.

The Rise of the "New Economy" (Late 1990s to Early 2000s)

The term "New Economy" gained prominence in the late 1990s, championed by the Clinton administration as a transformative shift driven by technological innovations and the burgeoning Internet. Leaders like Al Gore and Newt Gingrich portrayed an optimistic vision where technology and free markets would propel the United States into unprecedented economic prosperity.

Al Gore emphasized the pivotal role of the Internet, stating at [00:13] “...what is this main artery of the information superhighway?...we are moving rapidly into” an Internet-driven economy.

Newt Gingrich echoed this sentiment, advocating for free trade to maintain the nation's competitiveness:
“When you are the world's most competitive nation...what we should be supporting is free trade.” ([00:25])

Deregulation and Free Trade: Policies and Promises

Central to the New Economy was the push for deregulation, particularly exemplified by the Telecommunications Act of 1996. This legislation aimed to foster competition and innovation by lifting regulatory constraints, allowing telecommunications companies greater freedom to merge and expand.

Nelson Lichtenstein critiques this approach, noting that the deregulation ethos was intertwined with Silicon Valley’s libertarian ideologies, supported by both liberals and conservatives:
“The deregulation ethos was greatly advanced by its linkage to the ideological power generated by those who foresaw an American new economy in the making.” ([04:04])

The Act facilitated significant mergers, such as WorldCom and MCI, under the guise of unleashing the Internet’s potential. Gus highlights the optimistic declarations at the time:
“This law is truly revolutionary legislation that will bring the future to our doorstep.” ([05:56])

The Burst of the Internet and Telecom Bubbles

The initial optimism surrounding the New Economy was short-lived. Companies like WorldCom engaged in aggressive expansions and unethical accounting practices to sustain investor confidence, leading to one of the largest bankruptcies in American history.

Martin DeCaro narrates the collapse:
“When that bubble burst... it exposed massive accounting fraud at WorldCom...more than half a million jobs were lost...” ([07:39])

Al Gore later reflects on the overestimation of telecommunications demand:
“...that demand did not materialize.” ([06:39])

This collapse not only decimated the stock market but also had devastating effects on unionized workers, highlighting the vulnerabilities of the deregulated economy.

Consequences for the Working Class

The burst of the telecom bubble had profound repercussions for the American working class. Despite macroeconomic indicators like low unemployment rates and stock market booms, the reality for many workers was starkly different.

Martin DeCaro points out the disconnect:
“When free trade expanded and productivity increased, the new economy was supposed to lift all boats. Yet it proved to be an illusion.” ([00:57])

Nelson Lichtenstein adds that the promise of the New Economy did not translate to tangible benefits for the majority of workers, particularly in blue-collar sectors:
“Millions of Americans lost good paying blue collar jobs to the China trade shock...” ([12:54])

Decline of Unions and Growing Discontent

A significant theme of the episode is the decline of labor unions, which once served as pillars of worker solidarity and advocacy. The dismantling of union power, coupled with deregulation and globalization, exacerbated working-class discontent.

Lichtenstein explains the erosion of union influence:
“...the union movement becomes too dependent on the state...now, recently, we have some elements of labor which are quite exciting...” ([43:16])

He contrasts the robust union support during the New Deal era with today’s fragmented and weak union landscape, where major employers like Amazon and Walmart remain largely non-unionized.

Martin DeCaro underscores the absence of a unified union presence:
“Instead of worker solidarity, you're getting a different kind of cultural right.” ([48:21])

Government Interventions and Their Limitations

The episode also examines government responses to economic challenges, particularly during the COVID-19 pandemic. While substantial relief packages like the CARES Act and American Rescue Plan temporarily alleviated hardships, these measures were not sustained, leading to renewed struggles for workers.

Nelson Lichtenstein discusses the transient nature of these interventions:
“This was temporary when it began to evaporate or end...now my student loans are due. I may be evicted.” ([14:34])

The withdrawal of these supports, amid rising inflation and job insecurity, further deepened economic disparities and eroded trust in governmental efficacy.

The Transition to Today's Economy and Future Prospects

Moving to the present, Di Caro and Lichtenstein explore how the remnants of the New Economy have morphed into phenomena like the gig economy and surveillance capitalism. Despite technological advancements, these changes have not fundamentally altered the precarious nature of most American jobs.

Lichtenstein critiques the current "New Economy" narrative:
“AI can be quite primitive in some respects or sophisticated...it’s about the managerial mindset. How can we control labor, production, sales in a more effective and centralized way?” ([49:49])

He suggests that without structural changes to empower workers and regulate corporate power, economic transformations will continue to favor capital over labor, perpetuating working-class discontent.

Notable Quotes

• Al Gore [00:13]:
  “To what degree are we in a new economy...we are moving rapidly into that.”

• Newt Gingrich [00:25]:
  “What we should supporting is free trade.”

• Nelson Lichtenstein [04:04]:
  “Both liberals and conservatives partook of this economic elixir...”

• Martin DeCaro [00:57]:
  “The new economy was supposed to lift all boats. Yet it proved to be an illusion.”

• Alan Greenspan [09:33]:
  “...free competitive markets are by far the unrivaled way to organize economies.”

• Nelson Lichtenstein [43:16]:
  “The union movement becomes too dependent on the state...”

• Nelson Lichtenstein [49:49]:
  “AI is not a thing. It’s a managerial outlook.”

Conclusion

The "New Economy" episode of History As It Happens offers a comprehensive exploration of how technological optimism and deregulation ideologies of the late 20th century set the stage for present-day economic challenges. Through historical analysis and expert insights, Martin Di Caro and Nelson Lichtenstein illuminate the failures of the New Economy narrative to address the needs of the working class, emphasizing the critical role of unions and government intervention in forging a more equitable economic future.

Listeners gain a nuanced understanding of the complex interplay between technology, policy, and labor dynamics that continue to shape American society. As the episode concludes, it calls for a reimagining of economic structures to genuinely empower workers and rectify the systemic imbalances that have fueled enduring discontent.

For more insightful discussions on how history shapes our present, tune in to History As It Happens every Tuesday and Friday. Subscribe to Martin Di Caro’s newsletter at historyashappens.com for weekly updates.