Wall Street and Washington Are Failing Spectacularly -- Where Do We Go?

I was 19 in October 1979, when I first stepped into a campaign office. It was the Draft Kennedy (Teddy) for President office, located directly east across the Daley Plaza from Chicago's City Hall. I would work on that campaign across the country for ten months, and it would instill in me an interest in politics, more accurately an interest in the politics of self-government that has lasted 30 years. It was a time when economics dominated political discourse from the nightly news to the kitchen table. Unfortunately, little did I understand, two months before I walked into that campaign office in 1979, President Jimmy Carter had appointed Paul Volcker head of the Federal Reserve, an event that would change American politics for the next three decades. Almost everything I learned on the Kennedy campaign about how American politics worked collapsed over the course of the next ten years. A new political regime, people, institutions, thinking, and culture replaced what had been the dominance of New Deal politics. Monetarism, Reaganomics or Neoliberlism, call it what you may, would totally dominate the American political landscape until today.

This new political regime's greatest accomplishment was actually something quite extraordinary, they basically removed economics, or at least any meaningful discussion of it, from politics. Various terms like "free markets" and "free trade" became mantras repeated without end and thus believed by most adherents to have a meaning negating any need for further debate. Economics became removed from political discussion to an extent unprecedented in American history. Yet today, the Reagan Revolution seems similar to its New Deal predecessor in 1979, a cultural, ideological and political spent force, not up to meeting the challenges being asked of it in the first decade of the 21st century. Looking a little deeper, it would seem this quaking of Neoliberal politics portends not simply the passing of another regime of our two-centuries-old industrial economics, to which the New Deal also belonged, but a more fundamental revaluation of political economy. A necessary revaluation of economics that will move us beyond the "dismal science."

Looking back at the politics of 1979, what in hindsight can be seen as the end of the New Deal, it is an era seemingly belonging to a different world. The late 1970s and early 1980s were the greatest economic troubles the United States experienced since the Depression and there has been nothing as significant since. Unemployment was high, inflation was high, and the economy was barely growing, a configuration of symptoms economists up to that time didn't think possible, thus a new name was born, stagflation, and of course in that peculiarly human trait, the naming of something gave the wrongful notion that it was also understood.

Fundamental forces were moving the American economy in the late 1970s, including debt from the Vietnam War, the acceleration of deindustrialization, the slow but continuing deterioration of American post-war global economic dominance, and finally a spike in the price of oil brought about by the U.S. domestic oil production peak in 1973. New Deal politics, which owed a great deal to the thinking of John Maynard Keynes seemed powerless in meeting these challenges. Much of Keynes economic thinking was developed in the Depression and dealt with falling prices, creating demand, and putting to use underutilized capital, while the problems of the 1970s seemed exactly the opposite, rising prices and too much demand. This created an open public dialogue, and thus the 1980 campaigns were all centered around economic ideas. The Kennedy campaign, unbeknown to all involved, became the last stand for New Deal economics, though its corpse would be dragged around by Walter Mondale four years later.