Labor was cheaper in China and India, so after much lobbying and a few cheer-leading (but deeply flawed) books like Thomas Friedman's The Lexus and the Olive Tree, we dropped our permanent average import tariffs into the realm of 2 to 3 percent, where they remain today. (Trump's tariffs are meaningless, as they're short-term and based on an executive order that expires with his presidency.)
The result was easily predicted. Most of our manufacturing went overseas, while the profits from the sale of foreign-made goods concentrated in a few hands (think Walmart and General Electric, the companies that first and most proudly drove China and India respectively into our manufacturing and service sectors).
While we didn't make much here anymore, we still had a lot of cash and other "real assets" -- real, physical wealth -- left over from the two centuries when we made everything here. The share of that wealth in the hands of the middle class was mostly in the equity in our homes, cars, and pensions/savings.
And so the predators among us turned their sights on these last reservoirs of wealth in America. Starting in 1981, the Reagan administration and every subsequent Republican administration have pushed through both a deregulation of banks and investment companies, as well as a deregulation of how commodities (real things) were traded on margin (using money borrowed against the value of the commodities).
George W. Bush's Fed jumped into the game, dropping interest rates below the rate of inflation for the biggest institutional borrowers -- giving the Masters of the Universe all the cash they needed to gamble with, thus driving up the cost (but not the value) of commodities from houses to oil to gold.
But then the music stopped in 2008, in an early warning of today.
The Fed stepped in and poured trillions into the banking system, bailing out billionaires, hedge funds and foreign corporations in 2008 and 2009. Things seemed to stabilize, but, because nothing structural really changed, we're now more in debt than we were in 2008 and the Fed is largely out of ammunition.
The last time things unraveled like this was during the Republican Great Depression of 1929-1938. That, too, followed a series of Republican administrations that had radically deregulated banking and securities rules, leading to wild speculation and asset bubbles, starting with a real estate explosion in Florida in the early 1920s. That Florida real estate bubble burst in 1927, and by 1929 it had spread to Wall Street.
What we are witnessing today is the death of neoliberalism (e.g., Reaganomics), although few in the corporate media will call it out. And the 40-year embrace of that neoliberalism -- by both Republican and Democratic administrations -- is every bit as responsible for our coronavirus mortality rates as is the incompetence of the Trump administration.
"Roosevelt is dead," Rush Limbaugh famously intoned at the appointment of G.W. Bush as president, "but his programs remain, and we're in the process of doing something about that, as well." Indeed.
Let's start calling this what it is -- the total discrediting of the economic theories of Friedrich von Hayek, Milton Friedman, and borrow-and-spend Reaganomics. It's the obvious failure of the "globalization," deregulation and privatization promoted by the GOP through the 1980s and adopted by the Clinton Democrats in the 1990s.
Today's coronavirus market crash is a clear and clarion call for a return to the commonsense policies Franklin Delano Roosevelt put into place that saved capitalism from itself and its predators (and led to four decades of sustained growth of both the economy and the middle class) three generations earlier.
The coronavirus crisis will pass within a year or three; after a great toll, enough of us will have immunity, or a vaccine will be widely available, or both. And when it does, the pent-up demand for goods will pop. We should reorganize our trade systems now (or in the next administration) to make sure most of those goods will again be made in America.
Now that we are again "rediscovering" the lessons of the Herbert Hoover's market crash of 1929, if we don't begin to move manufacturing capacity back into this country we will be, within a few years, far worse off than Americans were in 1932.
If we succeed in rebooting American manufacturing through the measures used by Hamilton (and emulated by China over the past 30 years), our recovery from this crisis could mark a new dawn for the American middle class.
(Note: You can view every article as one long page if you sign up as an Advocate Member, or higher).
