The "New Economy"

Summary

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"

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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.

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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])

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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])

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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.

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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])

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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])

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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.

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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.

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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.”

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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.

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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.

Transcript

[Martin DeCaro]

History as it happens. December 10, 2024. The new economy.

[Gus]

The performance of the new economy has been powered by technology driven by ideas rooted in innovation and enterprise. Can you explain what Internet is, Gus?

[Al Gore]

What is this main artery of the information superhighway? To what degree are we in a new economy? And if one defines that as an Internet driven one, I think the answer is that we are moving rapidly into that.

[Newt Gingrich]

When you are the world's most competitive nation in so many of these important new areas of growth, what we should supporting is free trade.

[Gus]

They've signed five separate trade agreements with us.

[Nelson Lichtenstein]

They violated all five trade agreements.

[Martin DeCaro]

Telecommunications giant WorldCom may declare bankruptcy tonight.

[Congressman]

What is going on in our country today that allows for the kind of corporate thievery and deception? What are we in Congress really beyond sound bites going to do about it?

[Martin DeCaro]

Let's continue to explore the origins of our working class discontent because it wasn't supposed to be this way, not in our Internet age. As free trade expanded and productivity increased, the new economy was supposed to lift all boats. Yet it proved to be an illusion. Or did it? That's next as we report history as it happens. I'm Martin DeCaro.

[Al Gore]

The unemployment rate has stayed below 4%.

[Gus]

For 20 months in a row. The longest stretch in 50 years.

[Martin DeCaro]

Very simple word, groceries.

[Gus]

Like almost, you know who uses the word?

[Martin DeCaro]

I started using the word the groceries. When you buy apples, when you buy bacon, when you buy eggs, they would double and triple the price that a.

[Nelson Lichtenstein]

New economy was sort of meaning that old issues, whether it's keeping interest rates high to avoid inflation or whether union management relations meant that all these old issues were sort of dead.

[Gus]

I want to welcome all of you here for this conference. Let's get right to work.

[Martin DeCaro]

April 5, 2000.

[Gus]

We meet in the midst of the longest economic expansion in our history and an economic transformation as profound as that that led us into the industrial revolution.

[Martin DeCaro]

President Bill Clinton kicks off a White House conference on the new economy. And the future did look good.

[Gus]

Supercomputers, for example, have helped Detroit automakers cut the development times of new cars by half or more. They've helped pharmaceutical companies cut down the development of new anti. The development time for new anti cancer drugs by several years. Clearly, they will have a profound effect. Information technologies in biomedical sciences in the 21st century. As we see by the simple fact that in the next few weeks we will announce for the first time the complete sequencing of the human genome. Something that would have been literally impossible without information technology.

[Martin DeCaro]

Unemployment was low, inflation was dormant. The stock market boomed, major industries had been deregulated, and Congress was getting ready to pass a big trade deal with China.

[Al Gore]

It's good because for the first time in 20 years, we'll have a greater opportunity to sell goods into China, and we will get China to agree to make commitments that they will be required to live up to, not only to the US but to the 135 members of the WTO.

[Martin DeCaro]

And as historian Nelson Lichtenstein notes, in A Fabulous Failure, the Clinton Presidency and the Transformation of American Capitalism, the lead speaker at that conference was Abby Joseph Cohen, a famous and hyper bullish stock market analyst from Goldman Sachs.

[Newt Gingrich]

Over the last 10 years, this economy has been blessed, I believe, by improvements in two broad categories. Number one, solid economic policy, and secondly, an improvement in the behavior of US Corporations.

[Martin DeCaro]

An improvement in the behavior of US Corporations. Well, corporations love the new climate. As Lichtenstein wrote on page 411, the deregulatory ethos was greatly advanced by its linkage to the ideological power generated by those who foresaw an American new economy in the making. Heavily influenced by libertarian currents swirling out of Silicon Valley, both liberals and conservatives partook of this economic elixir, writes Lichtenstein, with Newt Gingrich as well as Al Gore sharing in the excitement. A case in point was the Telecommunications act of 1996, which changed the fundamental rules governing the world of electronic and digital information, all in the name of deregulation and creation of an information superhighway traversing the new economy. Gore, the administration's point man on this reform, asserted that the administration sought open and free competition that would unleash consumer demand for the information, products and services that will educate, entertain and empower our people.

[Al Gore]

It's me, Ernestine. Al Gore.

[Ernestine]

Oh, Mr. Veep. Surfing the net, downloading images of global climate change again, you crazy guy. It's true what I've been telling my friends. You're not stiff, you're just a techno nerd. I can just see the headlines. Bill signs bill. And you, Mr. Smartypants, if you know so much, how come you're not signing the bill?

[Martin DeCaro]

The 1996 act, writes Lichtenstein, lifted many regulatory limits on cable television and allowed the regional telephone companies, the Baby bell offspring of AT&T, to go into cable and long distance service. Above all, it ended most merger restrictions in an industry that accounted for more than 15% of the entire economy.

[Gus]

This law is truly revolutionary legislation that will bring the future to our doorstep.

[Martin DeCaro]

And again, that is historian Nelson Lichtenstein at UC Santa Barbara, the director of the center for Study of Work, labor and Democracy. He will join us in a moment. So one company that exploited the opening to a wondrous high tech tomorrow was WorldCom, whose growth at all costs mantra fed on the perceived unlimited growth that the Internet and telecommunication bubbles were creating. But when that bubble burst, as all bubbles eventually do, it exposed massive accounting fraud at WorldCom, fraud perpetrated to mislead investors to keep their money coming, and it led to hearings in 2002.

[Al Gore]

In the late 1990s many so called experts proclaimed that there was virtually unlimited potential for telecommunications companies to carry high speed data over their fiber optic networks. As we have seen recently with the difficulties experienced by Global Crossing and others, that demand did not materialize.

[Congressman]

The two important questions that we have to address today and in the future are first, what is going on in our country today that allows for the kind of corporate thievery and deception that we are seeing? And secondly, what are we in Congress really beyond sound bites going to do about it?

[Al Gore]

I've been instructed by my counsel not to testify based on my fifth Amendment constitutional rights. After careful consideration, I have decided to follow my counsel's instruction, even though I do not believe I have anything to hide in these or any other proceedings.

[Martin DeCaro]

And to return to Lichtenstein's writing on page 413, when the dust settled early in the 21st century, a series of bankruptcies had wiped out 2.8 trillion trillion in stock market valuation with WorldCom, the single biggest bankruptcy in American history to that time. As the NASDAQ Telecom index plummeted 92% from its March 2000 peak, more than half a million jobs were lost in the single industry, with unionized workers taking the biggest hit. Most of the new wireless and cable firms were resolutely anti union. This was a far larger debacle than the SNL crisis of the 1980s, he writes. And compared to the Simultaneous.com crash, the telecom bust was far more consequential. The swift fall among the high tech stocks nearly pricked a stock market bubble. After all, many Silicon Valley startups had no actual product, no income and few employees. But the telecom collapse destroyed companies whose component parts and the modestly good jobs that went with them, often stretch back a century. Consumers soon paid higher prices for telephone and cable service deregulation of the telecom industry. That was a mistake, concluded Laura Tyson some years after she left her NEC post. And I would add, less than a decade later, another bubble burst also brought on by a misplaced, even delusional faith in the capacity of profit driven enterprises to regulate themselves. Let's Fast forward to 2008.

[Alan Greenspan]

Dr. Greenspan, I want to start with you. You were the longest serving chairman of the Federal Reserve in history. And during this period of time you were perhaps the leading proponent of deregulation of our financial markets. You have been a staunch advocate for letting markets regulate themselves. And my question for you is simple. Were you wrong?

[Unnamed Federal Reserve Official]

Partially. But let's separate this problem into its component parts. I took a very strong position on the issue of derivatives.

[Alan Greenspan]

Let me interrupt you because we do have a limited amount of time, but you said in your statement that you delivered the whole intellectual edifice of modern risk management collapsed. You also said those of us who have looked to the self interest of lending institutions to protect shareholders equity, myself especially, are in a state of shock, disbelief, end quote. Now that sounds to me like you're saying that those who trusted the market to regulate itself, yourself included, made a serious mistake.

[Unnamed Federal Reserve Official]

Well, I think that's true of some products, but not all. I think that's the reason why it's important to distinguish the size of this problem and its nature.

[Alan Greenspan]

You had an ideology. You had a belief that free competitive. And this is your statement. I do have an ideology. My judgment is that free competitive markets are by far the unrivaled way to organize economies. We've tried regulation, none meaningfully work. That was your quote. You had the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis. You were advised to do so by many others. And now our whole economy is paying its price. Do you feel that your ideology pushed you to make decisions that you wish you had not made?

[Unnamed Federal Reserve Official]

Well, remember that what an ideology is. It's a conceptual framework with the way people deal with reality. Everyone has one, you have to exist, you need ideology. The question is whether it is accurate or not. And what I'm saying to you is yes, I found a flaw. I don't know how significant or permanent it is, but I've been very distressed by that fact.

[Alan Greenspan]

You found a flaw in the reality.

[Unnamed Federal Reserve Official]

In the model that I perceived is the critical functioning structure that defines how the world works, so to speak.

[Alan Greenspan]

In other words, you found that your, your view of the world, your ideology was not right, it was not working.

[Unnamed Federal Reserve Official]

Precisely.

[Martin DeCaro]

The legendary Alan Greenspan, kinda sorta admitting that his free market ideology missed the mark. Now there is more to the story of the new economy as envisioned by President Clinton and many others than the problems caused by deregulation. That alone cannot explain how we got to this point in American history, the age of Trump, anti establishment populism, a backlash to globalization, what call neoliberalism. Other parts of the story are faith in technology to solve problems.

[Gus]

I believe the computer and the Internet give us a chance to move more people out of poverty more quickly than at any time in all of human history. I believe we can harness the power of the new economy to help people everywhere fulfill their dreams.

[Martin DeCaro]

And a belief that free trade with China, for example, would help the US as much as it would help the other country. And if the economic benefits were mixed, free trade turned out to be politically toxic. Here's Arkansas Senator Tom Cotton. A couple of years ago, marking the anniversary of China's entry into the wto.

[Nelson Lichtenstein]

Millions of Americans lost good paying blue collar jobs to the China trade shock. In the years that followed, countless small towns, main streets and working class neighborhoods were gutted and boarded up.

[Martin DeCaro]

And as our guest in this episode notes, the term new economy would fade in the new century, replaced by gig economy, surveillance capitalism, and the fissured workplace. Terms that still apply in today's climate. One in which great macroeconomic numbers mean little to working class Americans if we're to believe what some say are the real lessons of the 2024 election. Nelson Lichtenstein, welcome back to the show.

[Nelson Lichtenstein]

Delighted to be here.

[Martin DeCaro]

It's been about a year and you know, I've been talking about your book on the show quite a bit. I've mentioned it in my newsletter. So I thought I should actually just have you back on to continue this discussion because, you know, I can't tackle big subjects in one podcast episode alone. So, you know, under the rubric of how did we get here in the United States in the age of Trump, why is there so much working class discontent? I keep coming back to your book, A Fabulous Failure.

[Nelson Lichtenstein]

Well, good. Okay, good.

[Martin DeCaro]

It refreshed my memory because I lived through that period, but I was a teenager, I wasn't paying attention. Before we get to Clinton and the quote, unquote new economy, what is your take on this disconnect? Because I've been thinking about this disconnect in preparation for this podcast. Between the macroeconomic picture that Biden and his surrogates were talking about and the lived experience of the working class who didn't want to hear about all the macroeconomics.

[Nelson Lichtenstein]

Right, right. That's the question of the day. Because, yeah, there was no payoff to the presumably prosperity of the, of the Biden moment. And in terms of the election, the phrase lived experience, I think that's that is a key to it because we had something really extraordinary happen during the pandemic and shortly thereafter. That is something which was out of kilter with the general austerity of American, you know, budgets. In March of 2020, it was under Trump, but it was really. The Democrats pushed it, but it was sort bipartisan. We had this gigantic CARES Act, I think 2.2 trillion, which basically, you know, sent checks to people who are being laid off. It stopped evictions. It did an enormous number of things, getting money to the. To the bottom of the working class. And then in February of 2021, with Biden, the American Rescue Plan, another almost $2 trillion. So you had this enormous social welfare spending, really. Student loans didn't have to be repaid. You couldn't be evicted. Savings accounts were expanding. And I'm not talking about the rich. I'm talking about people who are at the very bottom. We almost like, had for a moment a Nordic welfare state in America. But what happened was that this was temporary when it began to evaporate or end. And that was around late 2022, 2023. Partly, it was partly because of the divisions in the Democratic Party. Manchin and Sinema weren't willing to sign on for more. It was, of course, the Republicans, by that point, were against ordinary people all of a sudden who weren't paying attention to the conflicts in Congress or whatnot. What happened? I was getting all this money for my childcare and it stopped. Now my student loans are due. I may be evicted. Hey, things were pretty good back there under Trump, and now they aren't. And I think that is as important as the inflation in explaining, as it were, this particular moment of lived experience, that the social infrastructure law, as it were, Biden would succeed in getting a kind of, you know, the CHIPS act and the infrastructure building highways and things. He got that. Then that takes a while for that to get through the pipeline. But the social side of it, the family supports and things of that sort, which we didn't get meant for the point of view. Ordinary people, their conditions were worse in 2023 or 2024 compared to 2020 or 20. So they just, you know, hey, yeah. So I mean, I think that that helps as much as inflation. I think it. What the tragedy here is that Biden and his people that he put in place and this was really part of a kind of a deal with the Warren and Sanders wing of the Democratic Party. This was ambitious. This was a break from the Clinton Obama neoliberalism. And it was only halfway completed. And now what happened? Now I'm struggling once again, paycheck to paycheck and inflation's going up. So I think that's part of it. I mean, we had 40 years or really half a century of austerity and neoliberalism. And you know, it's hard to reorganize, you know, the, that in a fundamental way. And so I was going to say.

[Martin DeCaro]

Austerity for everyone except the Pentagon.

[Nelson Lichtenstein]

Well, right, of course, at the very top, the Pentagon.

[Martin DeCaro]

Well, the Pentagon budget is. There's no austerity there.

[Nelson Lichtenstein]

But yeah, that's been going on. I have to say one thing about the phrase, and more than 10 years ago, the phrase the 1% and the 99%, I've never been a fan of that because from the point of view of ordinary people, people who are part of the 99%, I mean, they never see the 1%. They, maybe they see it in a, in a, in a television. They never encountered it. What they see and what they encounter is I'm working a precarious job and here's Joe, someone else is working a kind of steady job. They, they're all part of the 99%. In fact, the income may not be that different, but I think those distinctions are what's really important. Sometimes that leads to resentment, for example, against public employees who do seem to often have a more permanent job. People never encounter, counter the 1%. And here, let me say this, something that the UAW just did in its strike and negotiations of last year. One of the major grievances that autoworkers had was the two tier pay system where some people would be making 22 bucks an hour and others making 30 doing the same job. It was an irritant, it was inequitable. And I think people felt that in a stronger fashion than even, you know, the fact that we had, you know, Musk and, and other billionaires running around and the UAW got rid of that. That was a tremendously progressive thing. It will have payoffs in terms of working class solidarity down the line.

[Martin DeCaro]

That was a comprehensive answer. Nelson, thanks for being on the show. We'll see in.

[Nelson Lichtenstein]

Sorry for Too much.

[Martin DeCaro]

No, you're right. The pandemic exposed holes in American capitalism, if you will. It showed how skimpy the safety net was. So you get the $2 trillion CARES act that was under Trump, March 2020, CARE stood for Coronavirus Aid, Relief and Economic security. Then in March 2021, one year later, Biden is now the president. You get the American rescue plan and you're Right. The industrial policy stuff that's going to take some time. The infrastructure bill, the Green New Deal which was really part of the ira, the inflation reduction, I think it was Act IRA that was really a climate bill and the CHIPS act. Those are three, if I'm not leaving anything out, three big pieces of industrial policy. You don't see the immediate effect of that.

[Nelson Lichtenstein]

Dan Rodick wrote a piece on this and he made the point, and I think it's a good point that we could do a lot to enhance manufacturing in the United States. And that's what the Biden plan, what survived of the Biden initiative was, you know, let's get manufacturing going for cars and the green transition and things of that sort. Manufacturing does not employ as many people as it used to. So the social impact is somewhat less than it might have been than 50 years ago. What does employ a lot of people are retail and hospitality and service sector and things of that sort. And there clearly there was a need for the so called great resignation meant that people were finally jumping out of their McDonald's job and getting some other and there that's what was the whole income supports and social supports for that giant service sector was not enacted. And I think that's again that's one of the another one of the reasons that ordinary people, workaday people didn't see the prosperity as you know, helping them.

[Martin DeCaro]

Since you brought up Danny Roderick, I was going to bring this up during our conversation. I'll mention it right now. Yes. He says there is the possibility that Bidenomics was economic populism of the wrong kind. He says by focusing on manufacturing old style union power and worker organizations and geopolitical competition with China paid too little attention to the changing structure of the economy. We're going to get to that with your historical work about the changing structure of the economy. And he says the nature of the new working class in an economy where only 8% of workers are employed in manufacturing, a policy that promises to restore the middle class by bringing manufacturing home is not only unrealistic, it rings hollow, he says because it does not align with workers aspirations and everyday experiences. So there you go.

[Nelson Lichtenstein]

I really do agree with that. And as the author of a book on Walmart which has many hundreds of thousands more workers than General Motors, I totally agree with that. And I think there was the possibility, I think here's what sort of the tragedy is. I think there was the possibility in this last couple three years post pandemic period to transform the nature of that service work that retail Work that. That's what the great Resignation was all about. People were discontent. They had market power and they were moving. And wages did go up for, you know, retail and food service, et cetera. And that could have been reinforced had the social part of the Inflation Reduction act been put in effect. Because then you would have had people, you know, receiving money or support for childcare and for, you know, all sorts of other social services. And they would say, take this job and, you know, screw it unless you pay me, you know, considerably more. Not to mention the fact that the minimum wage remains at 725 an hour. No one's paying that, but it remains there rather than 15 or 17 or $19 an hour where it should be. So I think that's part of the missed opportunity of this last two or three years.

[Martin DeCaro]

Yeah, I think the Inflation Reduction act was a bad name too.

[Nelson Lichtenstein]

But okay, well, right, because.

[Martin DeCaro]

Yes, yeah, really. Well, okay, we'll save that for part two of this conversation. So that's the current situation. What I hope to accomplish with our conversation is give people an idea. They should read your book as well. And I've been talking about this on the podcast a lot lately in different conversations, different context. How did we get to this point when there are so many hopes and dreams, or as you said, a wondrous high tech future. So we'll go back in time to the 1990s, late 1990s, turn of the century. What was the new economy? What was that supposed to be?

[Nelson Lichtenstein]

Right. It was a phrase which purported to describe technological and organizational change that had taken place in the American economy. I should just mention that the phrase, if you look at one of these diagrams of the use of phrase in the newspapers, and there's a huge Spike. It's about 1995, 96, and then in 97, then it drops off. That was a moment. It was being touted by not just the Clinton administration, but various newspapers and Wall Street. Well, okay, what it was, it had a lot to do with, with Silicon Valley and the digitalization of information and the economy. It was once said by an economist that computers are marvelous. They've changed everything except the productivity statistics in the office. But by the 1990s, they were having an impact. There was an impact that was taking place. But people, everyone from Alan Greenspan on the right, he was head of the Federal Reserve Board, to Robert Reich on the left, were touting that a new economy was sort of meaning that old issues, whether it's keeping interest rates high to avoid inflation or whether union management relations Meant that all these old issues were sort of dead. We didn't have to deal with them because the new economy was solving that problem sort of ipso facto.

[Martin DeCaro]

And because of the advent of information technology, that was a big part of it.

[Nelson Lichtenstein]

This is true of all social prognosticators. I mean, it's true then now you can find it everywhere. Something new does happen. It's real, it's new. Cheap satellites or electric cars or, or what's the latest AI? AI is the latest crypto. And so, and so they say, oh, well, that's going to change everything. I mean, I mean, I mean, you know, all 130 million jobs in a, you know, I mean, you can have a new technology or a new innovation or something, but the overwhelming majority of people are still doing what they were doing. You know, people who are intellectuals and hear from, from Clinton to Robert Reich to Alan Greenspan, they project these transformations that are way beyond what is actually happening. And you know, it's. Maybe it's in human nature to do that. Just to take Robert Reich, who was one of the key proponents of this today, very much on the left, by the way, but then more of a centrist figure. He thought, oh, we're all going to. Because of the computer, because of technology. We'll all be knowledge workers. You know, we'll all be, you know, manipulating symbols. I mean, yeah, there are people manipulating symbols, sure, but, but that's still, you know, a small minority of all American workers. The fastest growing occupations in the 1990s were not computer programmers, but were, you know, home healthcare aides and, you know, and people working in hospitals, orderlies. I mean, you know, these were the fast growing occupations. You still had that.

[Martin DeCaro]

Yeah, yeah. I want to get to how the new economy was very much like the old economy, but, but you hinted at it there, there was an ideology behind this as well, pervading everything. Labor relations, monetary policy, trade, telecom, banking, free trade. An ideology that we don't really need the activist state, the Keynesian pro labor union idea anymore. That the new economy would be different.

[Nelson Lichtenstein]

Yes. That this new structure of the way the society was going to be conceived as a result of information technology meant that old class conflict or issues of poverty or issues of restraining inflation, that these would be just evaporate. So Hank Greenspan, for example, who's usually thought to be quite a conservative guy, he was, but he became enamored of the idea that because of information technology, productivity was increasing very rapidly in American industry, American economy, and therefore when real wages were going up, profits were Going up. He did not have to put on the brakes and raise interest rates. And that was a sort of fight that took place inside the Federal reserve in the mid-1990s. He said we don't need to do that. Well, they didn't do that. And what you ended up with, you got a boom and then a bubble and then a crash. But Greenspan had bought into that. A woman like Janet Yellen who was a more traditional and she was more of a liberal, but she said, wait a wait, no, no, no, that's not happening. We should actually put on the brakes a bit more. And we're getting a bubble, we're getting a boom that's unsustainable. But Greenspan didn't listen. So we ended up with first the dot com bubble that burst in 2001 and then later on the really big bubble that burst in 2008.

[Martin DeCaro]

And the telecom bubble as well.

[Nelson Lichtenstein]

Oh yes, it was also telecom. Let me just. This telecom. Let me mention some.

[Martin DeCaro]

I have a bunch of questions about that, but you can go to it now.

[Nelson Lichtenstein]

Yeah, let me tell. The Telecommunications Reform act of 1996 I think it was. Al Gore and Bill Clinton were both pushing this and this was going to be kind of a signature reform to unleash the Internet. And when they were in the process of pushing this, there was a kind of photo op where Al Gore and Bill Clinton are installing fiber optic cable in some classroom so that everyone will have the Internet. That was the idea. And, and we'll have a deregulation of telecommunications. Now again, it was all projected and all motivated. Oh, we're going to unleash the Internet. Universal availability of information.

[Al Gore]

With this legislation we strengthen the bonds that allow us to learn together, to reason together and to live together in peace and well being.

[Gus]

It clearly enables the age of possibility in America to expand to include more Americans. It will create many, many high wage jobs. It will provide for more information and more entertainment to virtually every American home.

[Nelson Lichtenstein]

There was a little bit some truth to that. Yes. But what was really happening was that the telephone companies, the so called Baby Bells, which were the regional telephone companies which had a monopoly of basically landlines and then they would move into wireless pretty soon, but they had a monopoly of that. They would be unleashed to basically merge with each other and eventually gobble up at&t the long distance carrier, Omar Bell, which is what happened. So the rhetoric was about the World Wide Web. What was really happening was a consolidation and merger of telephone companies really old fashioned and creating new monopolies. And that happened There was over expansion and then there was a bust that took place again in the early 21st.

[Martin DeCaro]

I was going to mention WorldCom. People have forgotten WorldCom. Yeah, yeah, WorldCom merged with MCI. I was going down a rabbit hole to prepare to speak to you, Nelson. I found an FCC news release from 1998, WorldCom and MCI. The merger there. Well, because of that optimism that Internet growth was going to be off the charts, it led WorldCom to basically feed on this optimism and overstate Internet adoption. Right. So they can continue to get more and more investor money. And they overextended themselves with all these acquisitions and mergers, et cetera. So they then had to lie about their bottom line. You know, there's just this atmosphere of irrational exuberance. Was that what Greenspan would have called it led to these completely fraudulent accounting practices at WorldCom which as you note in your book was the biggest bankruptcy in history. And this is, we're not even talking 2024, this is in 2000. So we already see the consequences here.

[Nelson Lichtenstein]

Joseph Stiglitz pointed this out and he was a kind of a, somewhat of a critic of this merger mania in the world of Silicon Valley and other related and telecommunications and other. What you want is a monopoly and so therefore you're willing to go into debt enormously and do all sorts of things that are semi legal to get that sort of first mover advantage so that you kind of monopolize the whole thing and then you can't have competition, then you can make tons of money. And you can see that clearly with the social media, you know, firms today in, in, in Silicon Valley. But this was true 30 years ago in telecom where we do have the baby bells. So called baby bells. They were actually quite large. They basically have moved now into wireless and they basically have kind of monopolies of service in many places.

[Martin DeCaro]

Anyone listening to this show who's under the age of, I don't know, 30 or 40 is wondering what, what's a landline, what's a baby bell and all that. So, you know, the story is not entirely bad. I did find online archives for the Clinton White House. There are online archives of what they accomplished during their eight years in office. There's one page that says unleashing the new economy. Between 1993 and 2000, Clinton invested an additional 10 billion in a range of science and technology programs, something called the 21st Century Research Fund, Research and Experimentation, Tax Credit, Climate Change Technology Initiative. Unprecedented investments in biomedical research. Strongly supported the efforts of the National Human Genome Research Institute. Et cetera, et cetera goes on and on. So there was real investment in real stuff here. It wasn't just asset bubbles. You know, when we talk about what's gone wrong in the last quarter century, we talk about asset bubbles. But there was, you know, real progress here, if you will.

[Nelson Lichtenstein]

Yeah, of course those things did happen. I mean, actually, I put it in terms of, again, you mentioned you started off with the lived experience of ordinary Americans, the asset bubbles that when they did pop, that had a big impact on 401ks of lots of people. You know, and that is one of the problems with research. It takes, it takes a while for this to, to have a, have an impact. But for, for ordinary people, these asset bubbles destroyed the future retirement security of millions when they popped. By the way, we're now, I just read a piece by Robert Kutner in American Prospect saying, well, you know, we're heading for another bust. I mean, you know, the unsustainable stock market prices at this particular moment.

[Martin DeCaro]

So we can't discuss the new economy, Capital N, Capital E without some context here because the US and global economies were changing. The terrain was shifting beneath our feet, as they say, deindustrialization. This is well before nafta, the decline of organized labor. These are just two examples. Can you tell us a little bit about the changes that were underway? 1970s, 1980s, the types of things that led the Reagan administration to do managed trade. And then of course, during the Clinton years, the 1990s, they weren't just coming up with these ideas out of nowhere. They were responding to changes in global capitalism. Right.

[Nelson Lichtenstein]

Right after the mid-70s, trade becomes much more important than it had been, say in the previous 50 years. And then after the fall of the of communism, both in terms of markets and of labor markets, you get a tremendous expansion and then East Asia becomes also open. So you have a much more of a worldwide network of trade and of labor that could be deployed. And with the rise of simultaneously of the supply chains, which again, the key to that is containerization, which is not a high tech thing. Containerization, by the way, one could argue it's as important as the computer. It's a very low tech thing. It's just big boxes put on big ships. But it reduced the price of getting goods from East Asia or from Europe to America dramatically, dramatically, which, and meant that you could have worldwide supply chains. And then that's really the essence of globalization. So you don't need some fancy new technology, you just need a kind of organizational agreement that everyone's going to use the same size box. Basically, that's what it was all about. So when that happened, it did in fact mean that American industry would be subject to competition from abroad. Trade agreements like that of nafta, and even more important, China entering the wto, even, I think more important than NAFTA meant that American workers would be subject to that competition. Now, economists are correct in saying that trade, free trade, is beneficial, taken as a whole. That is, yes, Walmart can sell a whole basket of goods at a lower price because they come from China than otherwise. That is true. But the benefits of those lower prices is sort of spread over the entire population. So my sweater that I'm wearing, you know, costs 20 bucks rather than 22 bucks, you know, and so that's good. But the damage, the pain is concentrated. It's concentrated in this Toledo factory, which shuts down, or that Ohio bicycle factory, which just shuts down. And the social cost of that is very visible, sort of toxic, and has great political consequences. I think the architects of this free trade world, they were insufficiently understanding of that kind of disruption that was taking place.

[Martin DeCaro]

And when you go back and listen to their speeches, the proponents of all of this, they don't talk about the drawbacks at all.

[Gus]

We have made a decision now that will permit us to create an economic order in the world that will promote more growth, more equality, better preservation of the environment, and a greater possibility of world peace.

[Nelson Lichtenstein]

And they also have an enormous illusion. So Gene Sperling, Charlene Barshevsky, who was head of the trade in those days, Clinton and Gore and everyone else, they would say, oh, we're going to trade with China. That means they're going to have a stock market in China. That means you have to have a free press, at least a free business press. Trade is going to democratize China. I mean, they said that repeatedly when debates over China, China being a part of the wto, were taking place. You know, they were just simply wrong about that.

[Martin DeCaro]

Yeah, so we were talking about what the new economy was, what it was supposed to be, whether it was an illusion. Let's also talk about some of the stuff that sounds more like the old economy. As you say on page 439 of your book, America was generating a new economy. But it was far different from what Silicon Valley and its White House cheerleaders had imagined. Walmart and McDonald's, Amazon and FedEx, Marriott and HCA Healthcare all were giant growth companies. Software engineers and computer support specialists were among the fastest growing occupations. But when it came to sheer numbers, occupational Growth was still concentrated in low wage, low skill jobs in retail trade, food preparation, in restaurants, hospitals, nursing homes, home health care, janitorial services and offices. Jobs are often structured and supervised by a new digital infrastructure. Call center and warehouse work were prime examples, but they were hardly, you say hardly of the sort envisioned by the New economy enthusiasts. Yeah, it doesn't sound like that's changed much over the past 30 years.

[Nelson Lichtenstein]

No, no, I think, no, I think that's still the same technology. Is there very sophisticated technology both in terms of how Walmart functions, how Amazon functions, how, you know, even home healthcare workers. But the is that of control. You know, it's the algorithmic boss. You know, people are immersed in it, but they don't control it. It's a new control mechanism that is the new economy. You're right. And the inability of unions or of the Congress or the state to really radically raise wages and conditions in this vast, vast 40, 50 million person sector of the economy means that all those people are living in desperation and, and when demagogues come along, they are willing to follow them, you know, whether it's anti immigrant or whatever, whatever the latest thing is. So I think there was a possibility for a moment of a radically progressive transformation of that kind of work, just in the lee of the pandemic. But I think we may have lost that moment.

[Martin DeCaro]

And you said that I was right about something. I have to correct you. You were right about it. You wrote the book. So on that point though the New Deal, Franklin Roosevelt was, I think the term that David M. Kennedy used to describe his attitude toward organized labor was diffident. But the New Deal did lift organized labor. It opened up the possibility where it could thrive even if the federal government didn't put its own hand on the scale for the first time. Actually the federal government wasn't weighing in on the side of capital. So we saw this big growth in union membership, which was possible because the types of industries that were around that could be organized. We mentioned earlier in the conversation that these service jobs, they're hard to unionize and organize because people just have them for a year or two, they're low wage, and then they move on to something else. So I'm gonna eventually get to a question here. Why was there no vision for a robust union piece in the new economy that Clinton and all those guys are talking about?

[Nelson Lichtenstein]

The liberal wing of the Clinton people, they came of age during the worst period of American trade unionism, not in terms of numbers or even power, but in terms of ideology. The trade union movement in America in the 1960s and 70s had no attraction whatsoever to liberals who were otherwise not part of labor. I mean, they were for the Vietnam War. They were hostile to the more advanced forms of the civil rights activism. They were anti gay in many respects and immigrant as well. It doesn't surprise me that a young social reformer like Robert Reich or Aramaic or Bill Clinton for that matter, who saw himself as unquestionably as a liberal and in Arkansas, he wanted to develop the state of Arkansas in an economic way. He just saw labor as dull, solid and irrelevant. And partly that was their own fault. Now, more sophisticated and ideological people, there were those around who said, yes, the labor movement must be revitalized and we can do it. I was part of that, that movement in the, in the 90s as well. But it doesn't surprise me that liberals, certain kind of liberals were. Saw labor as irrelevant. Now, recently, what's. I mean, recently, of course, we have this. Today we have some elements of labor which are. Which are quite exciting and, you know, and are doing things, whether it's industrial workers, like in auto and under new leadership, or grad students and cultural workers, you know, who are organizing, et cetera. What I find interesting today, in the New Deal, when labor was at full tide, you had a strata of businessmen, of employers who said, well, that's the future. I guess we better sign up. Maybe they wanted to sign up with the afl, more conservative. They didn't want the Reds, you know, but, you know, it's. We're gonna, we're gonna sign up. And you didn't get opposition to union organization very much except the Deep south in, you know, in the period of the late 30s and 40s. And it was. It was kind of easy, easy to get unionized.

[Martin DeCaro]

Walter Reuther and everyone was doing so well too, because of the war and the contracts and everything.

[Nelson Lichtenstein]

Great labor leader of that, the auto workers, he said, he made the remark in the early 50s, organizing workers, that's the easy part. Unionizing is hard. What he meant was it's easy to formally get them in the union. Then we have to educate them, et cetera. Well, today it's just the opposite. Despite all the popularity of the union movement and despite the Biden, in fact, was pro union. He did show up on a picket line. We don't have what I call the Eisenhower corporate leaders. We don't have the corporate leadership in this, in the corner offices as well. I guess we better go along with this, you know. I guess, you know, you know, so let's. Let's sign a deal.

[Martin DeCaro]

Let's, let's agree to Starbucks, Amazon, they're, they're huge employers.

[Nelson Lichtenstein]

They don't, and you know, I don't know what's Japanese, transplant company companies, the Amazons, the hospitals, the, you name it, we don't have it. I mean, every so often you get evicted. Maybe in the academic world, you know, but mainly you don't. Despite all the talk of popularity of unions, et cetera, the needle hasn't moved at all in terms of their size and potency. That's right.

[Martin DeCaro]

Well, a historian whose name you're familiar with, Michael Kazin, he just wrote a piece called the Decline of Union Hall Politics and Dissent where he says the notion of some leftists that unions can revive without aid from the state and from a major governing partner a la the New Deal is and has always been a fantasy. Since its birth, he says in the 19th century, the American labor movement has been endorsing politicians and fighting for laws that would improve workers lives on and off the job. Support from the state continues to be critical to a healthy and enduring revival of the movement. And then he quotes a historian by the name of, of Nelson Lichtenstein. You wrote recently, quote, the union movement's comeback in recent years could not have taken place without the existence of a set of political initiatives that generated both low unemployment and a high level of government guided business investment. But even so, as we've been discussing here, the numbers in private sector unionization is what, 5, 6, 7%?

[Nelson Lichtenstein]

Yeah, 6%. Yeah, you're right. I mean, there's a, how should I put it, a kind of a narrow path here. On the one hand, and there have been many examples of this in the past, that the union movement becomes too dependent on the state, you know, but from fdr, the Godfather, you know, kind of, oh yeah, he'll protect us. Too dependent on the state. Then the other side of it is a kind of almost wobbly anarchist. The state is just a repressive institution and we have to be out there, you know, raising hell. It, it is a sort of dialectical kind of balancing act. I think you do want to raise a lot of hell, but you also do need state activities. And by the way, I think in the south right now, the enormous amount of money that's going into the Green transition is having a salutary effect in terms of organizing at Volkswagen I think was crucial, and I think it will be crucial with some of the other German companies and also the battery plants. I mean, what's happened is that southern politicians in the past would say, oh, oh, we're going to give this $100 million incentive to create this plant. But quid pro quo is no union. You can't have a union. Well, today the federal government, at least thus far, maybe not under, is giving a billion dollars or more to set up a plant. There's no kind of quid pro quo, at least anti union quid pro quo. So it means that the influence of southern politicians is less and that of the federal government is more. So I agree, obviously I do agree with Mike, by the way, that article that he wrote was also, also part of this review of a very good book by Theda Scotchpole. I think it's called the Rust Belt Union Blues. And she looks at western Pennsylvania, which like is the crucial place in America about, you know, politically about what happened to the working class in Western Pennsylvania. Why is it all Trump? And she shows the way, and I've done my own research on this as well, that if you go back to the 30s and 40s and 50s, the union hall, there were 50, 100, 200 union halls were centers of activity and politics and social life and weddings.

[Martin DeCaro]

They had newspapers.

[Nelson Lichtenstein]

And it wasn't that the unions were knocking on doors and handing out leaflets. It was that this was what you were, you were a union person and it was a social world. It was your identity. And therefore, of course in the elections you voted not just Democratic, you voted New Deal Democratic, you voted CIO Democratic, you voted labor Democratic. And that been lost the whole deindustrialization and that's been. And so even, even where you have a union in, in Western Pennsylvania today. I think the co author of the book walked through the parking lot of this unionized steel mill and what did she find? She looked at the, at the bumper stickers, you know, the gun club here, the, the megachurch there, the, you know, the, the Trump, you know, and very few, you know, stickers for like the union, you know, the.

[Martin DeCaro]

Instead of worker solidarity, you're getting a different kind of cultural right.

[Nelson Lichtenstein]

And that's true. A gun club or a megachurch provides that social world that was once provided by the union.

[Martin DeCaro]

A couple of things and I'm going to ask you my last question. When you're talking about unions raising hell, unions raised more hell after World War II was over because expectations had been raised. And that's when they started losing popular support because there were so many, even maybe during the war too. I learned this from Kennedy's book, the number of strikes likes and the other thing too, about A union job and what it meant to people. Reminds me of a joke. Lou Costello said in one of his movies. Some guy was bossing him around, bullying him around, said to him, you know, you've got to work all night for me here. You owe me this or that. Costello said, I'm not going to do that. I'm a union man. I only work 16 hours a day.

[Nelson Lichtenstein]

A union man only works eight hours a day.

[J]

I belong to two union unions, by the way.

[Martin DeCaro]

I belong to two unions, but I'm not an active member neither, because I don't have a union job right now. CWA and sag, aftra. Okay, final question, Nelson. What is today's Capital N, Capital E, New economy. I'm pretty sure, although I can't be positive of this, that whatever we're saying about it now is not going to turn out to be the entire case 10 or 15 or even sooner than that, years from now. AI, right. All this talk about how AI is going to transform the economy. What are your thoughts on that?

[Nelson Lichtenstein]

Well, yeah, I do think, I think that is some combination of an illusion or I don't know what a meme almost. AI. It's not a thing. It's a outlook, a managerial outlook. And AI can be quite primitive in some respects or sophisticated. And I think that again, it's one of these ideas. There's something new there. You are aggregating huge amounts of data and you can generate a paragraph, but it's not going to have an impact on 97% of the American people. A lot of new technology ideas and technology itself. That very concept, really, when you get down to the brass tax, it's about the managerial mindset. How can we control labor, production, sales in a more effective and centralized way? And that's what technology means. I mean, when you get right down to it. So what is the new economy today? Well, I think it's actually a bit of a, a kind of, a little bit confused mixed bag here. Obviously there are some things, you know, Elon Musk would have, his own, would have a vision, you know, electric cars.

[Martin DeCaro]

Going to Mars, things like that.

[Nelson Lichtenstein]

But I, I think that, I do think that it's, it's, it's up for grabs more today. I do think it's up for. And Trump himself, by the way, the total Trumpite sort of moment that itself is, is a mixed bag because they're, they're hostile to world trade. On the other hand, they're sort of, well, they're, they're kind of hostile to, you know, various Kinds of the green transition. But on the other hand, you know, they're now getting in bed with Silicon Valley. So I think it's a mixed bag and up for grabs, really. That's what I think today we'll see.

[Martin DeCaro]

If they support things like higher minimum wages or something like that.

[Nelson Lichtenstein]

Well, that. Yeah, sure. Local unions, by the way, just to say the new. The new Secretary of labor that has been nominated. Nominated, who is kind of a bit of a pro labor Republican, I think, follow her career in the next six months, I think it'll be pretty rocky.

[Martin DeCaro]

Well, I mentioned the New Deal. I said that would be my last question. I lied. The New Deal, it was a fundamental reorientation or change to the relationship between citizens and their government. And even to a certain degree, citizens or labor and capital, we need that. Now we talk about technology and all this other stuff. Stuff the basics of capitalism are there and that is that capital still has a lot more power than labor. And I think that goes to the heart of why there's so much working class discontent. And until we do something about that, then I don't know.

[Nelson Lichtenstein]

Yeah, yeah, no, absolutely right. And I think the paths that used to be available to working class discontent to making itself manifest have been blocked. That is unionization is one thing, or even like regulation through the FTC or something on the other. And so there's sort of a blockage. When you get a blockage, then that discontent moves into other perverse and different ways. And I think that that was one of the promises of the very recent moment, was that we would have an explosion of interest in unionization. I think, by the way, if you want to know what the New Deal was like in terms of labor, look at the academy. Dramatic increase in unionization among grad student types. And really most administrations, most universities, just saying, okay, okay, we'll let it happen. And that's only one very small sector of the American economy today. But the dynamic, if it were 10 times, 100 times larger, that would be what it'd be like in the late 30s and the 40s in the New Deal. And we've seen that. And by the way, in the academy, you have the STEM people, the science, technology, they've come over to the union side. They were always hostile, they were always negative. But they've come over to the union side. And that's what happened to various strata in the late 30s and 40s that had historically been hostile to unionism. They said, okay, you can't beat them, we'll join them.

[J]

Recently, the most notable public questions that have concerned us all have had to do with industry and labor. And with respect to these, certain developments have taken place that I consider of great importance. I am happy to report that after years of uncertainty common culminating in the collapse of the spring of 1933, we are bringing order out of the old chaos with a greater certainty of the employment of labor at a reasonable wage and of more business at a fair profit. These governmental and industrial developments hold promise of new achievements for the nation.

[Martin DeCaro]

On the next episode of History as It Happens, the rise and fall of the Assad dynasty in Syria. Remarkable developments in the Middle East. Remember new episodes every Tuesday and Friday. My newsletter Every Friday. Go to history as it happens.com and sign up.