John Steinbeck’s last novel was called “The Winter of our Discontent.” It focused on one man, Ethan Hawley, who was forced to accept a job as a grocery clerk when the grocery his family owned was bought out from under them. Ethan was a good man, in all the ways we should and do admire. He worked hard, was honest and would never take advantage of anyone’s weakness. But the forces of greed and power eventually recruited him to lie and even murder just to get back what many told him was rightfully his – the family business. He succeeded in his goal, but as Steinbeck showed earlier in “East of Eden” the price was too high to pay. “The Winter of our Discontent” was published in 1961 to mixed reviews. Recently, it has been reevaluated in the light of how America and the world have changed since 1961. Back then it was still Summer, today it is Winter in America and the Neoliberal takeover of our economic policy has erased our moral character as a nation, just as on a smaller scale it did to Ethan Hawley. This begs the question; when was Fall and when did Winter start? Fall began with deaths of Martin Luthor King and Robert F. Kennedy. Bill Clinton proudly introducing Fleetwood Mac’s “Don’t Stop Thinking about Tomorrow” as his inauguration theme song also presaged the start of Winter.
The term Neoliberalism is generally used to describe the economic teachings of Milton Friedman and the Chicago School of economics. This model resurrects much of mid-19th century thinking about how a Capitalist economy should operate. Most of us learned about that in high school or college as ‘Laissez-Faire’ (hands off), as a failure due to its tendency to put business success as the primary objective of economic policy. It turned out that less regulation and lowered labor costs did not benefit business. Instead, it resulted in dramatic income inequality and worsening living conditions for workers. What was done in modern times was to rebrand ‘Laissez-Faire’ and call it ‘Free Market’ Capitalism adapting it to the more modern, Post WW2 economy. Politically, the ideas were first introduced by Barry Goldwater in his 1964 presidential bid. Neoliberal policies were partially taken up by Richard Nixon during his first term. The years leading up to Nixon’s election during the transition from Summer to Fall saw three critical upheavals that planted seeds for Neoliberalism’s rise. The upheavals can be briefly noted as the Social changes arising from the Civil Rights movement, the anti-war movement generated by the Viet Nam War, and economic disruption from high inflation and the Arab oil embargo. At the same time, a plan to implement a Neoliberal future for America was written by Lewis Powell and it outlined what would be necessary to impose Neoliberal policies throughout the entire economy. It describes the need to establish Think Tanks to produce white papers that support Neoliberal policy, assert Neoliberal ideas in the mass media and on college campuses. It outlines corralling a TV network to push their agenda and monetarily endow colleges and universities to present neoliberal policy in the classroom. The Powell Memo was the game plan and the conditions of the post-MLK and RFK America set the stage to move America in a new direction. The first winner was Lewis Powell, who was named to the Supreme Court, the losers were the American people when a major economic event changed our economy; the dissolution of the Bretton Woods agreement ending the US Dollar’s being backed by the gold reserves held at Fort Knox. This move effectively revoked the US Dollar’s position as the world’s sole reserve currency.
Ending the Gold Standard altered the way the macroeconomy operates. Since the end of the gold standard, a study of how macroeconomics operates has been developed. It is called Modern Monetary Theory (MMT). As opposed to Neoliberalism which is a set of policy choices, MMT describes how an economy operates on a macro or aggregate level. The US chose when it ended the Gold Standard to adopt a sovereign fiat floating currency, where all federal spending and collections can only be denominated in dollars. This has since become common throughout the world, with other nations such as the United Kingdom, China, Russia, Canada, Japan, and Australia chose the same monetary regime in their own currencies. The most critical difference that occurs when an economy adopts a sovereign fiat currency instead of a commodity-based currency is that the constraint on spending changes from the total value of gold on hand (or whatever the commodity is) to the total productive capacity of the nation where the government is the monopoly issuer of the currency. All other economy participants are currency users, including cities and states. In the US, our productive capacity far outstrips the value of gold reserves it holds now or when the Gold Standard was in place. That means that the US has had the capacity to spend more into the economy than it did under a Gold Standard regime. Neoliberalism operates under the assumption that the increased spending capacity must be spent towards advancing the wealth of the wealthy, instead of on the General welfare as prescribed in the US Constitution.
Since Neoliberalism consists of microeconomic policy choices, and MMT describes how a macroeconomy works one must understand that MMT does not replace Neoliberalism, but what I will be discussing is that Neoliberalism must be replaced by microeconomic choices that not only reflect what MMT tells us are the limits of our economy but do so for the public benefit.
The most important component that keeps Neoliberalism in place and prevents the American populace from searching elsewhere is fear. Before Winter set in under Clinton, Reagan began employing Neoliberalism throughout the economy. He and the Fed Chairman Volker set about reining in inflation by dramatically reducing jobs, a process begun by Volcker during the Carter administration. Inflation was the first bugaboo Neoliberal advocates used to place fear into people. Ever since the high inflation of the 70s, people reflexively fear inflation. The next manufactured fear was unemployment strengthened by Volker’s intentionally harsh solution to inflation. Intentional, because any other solution would have infringed on profits of businesses, a Neoliberal no-no. After that, Reagan himself weakened labor unions firing striking air traffic controllers. A symbolic gesture that served notice to the unions that their power in America’s future was uncertain. Over the years the items to fear that fly in the face of what the macroeconomic realities of a sovereign fiat currency offer have been served up as things to fear. The deficit, the debt, foreign debt, government “expansion”, government regulation, the media, obligations of the US to individual Americans such as Social Security, Medicare, Food Stamps, Unemployment compensation, and public education. All have been framed as harmful to the financial stability of the United States. Presently in each one of these categories, funding is cut, regulations are dismantled, and corporations take over the tasks formerly performed by government. Their profits are greater than ever before, while wages relative to inflation have decreased. And the narratives of fear are pushed out from the very institutions that Powell described.
Winter came to America with the election of Bill Clinton. The remaining Liberals / Progressives in America pinned their hopes on him dismantling everything that Reagan had put in place. Instead, Clinton continued the same economic path of Neoliberal policies, squandering the opportunity afforded him to re-examine the objectives of existing economic policy. Instead, he doubled down on neoliberal policy by allowing the media to become a monopoly trust with only 6 corporations running over 90% of the industry. He ended welfare payments and introduced workfare. He dismantled Glass Steagal which protected consumers from the risks of speculative banking and allowed banking derivatives to be expanded setting up the bubbles that resulted in the 2008 market crash. All of these are neoliberal policies, and he pushed through the first Neoliberal Free Trade agreement, NAFTA. Bill Clinton’s 3 successors have done nothing to alter the course of or change the frame of imposing Neoliberal policy.
Should we have followed through and adopted policies that recognized in a nation such as the US, having a sovereign fiat currency allows the federal government, the currency issuer, to create more obligations on itself to provide for the general welfare, instead of threatening to take them away or diminish them in some way. After over 25 years of Winter, it is time to jump start Spring by adopting policies that recognize our economic potential. In fact, if there is anything to fear it is not running deficits or worrying about a debt that is only the sum of all dollars not collected in taxes since 1792; it is not money the US has to collect from its citizens to pay off debtors. It is also not our debt to China, which is a savings account the Chinese government has at the Federal Reserve. And it certainly is not the Federal Reserve, which is the US Government’s Central Bank and it answers to Congress; it is not a private bank. Spring will begin when we recognize that misdirected fears and lies have been the tool used by moneyed interests to hijack the wealth of America for themselves by taking advantage of the post-gold standard macroeconomy. It is unequivocally neoliberalism we need to fear.
But if we do not act soon there will be diminishing gains from not stepping away from Neoliberalism and going in a different direction. A direction that recognizes that at its core neoliberalism is amoral. An economy founded on morality will choose to implement Health Care as a right, post high school education as a right, a guaranteed job if you want one as a right, shelter, and food as a right, and so much more. But beyond morality a post-neoliberal economy must embrace both Democratic Socialist principles for what we need, and Free Enterprise Capitalism for what we want. Free Enterprise Capitalism recognizes governments role in creating an environment that enforces competitive markets and leveling the playing field with regulations along issues such as work and product safety. The longer we wait, the fear you should have is not that our debt will make all our grandchildren paupers.
The thing you should fear the most is atrophy. While we wait to institute economic policies based on morality, Democratic Socialism, and Free Enterprise, our infrastructure is crumbling. Climate Disruption is bringing larger storms that will inflict more damage on our already decaying infrastructure. Every day we hesitate to begin the rebuild, the more it will cost, and the more resources that will be required to rebuild. Allowing millions to wallow in debt paying back their college loans, forces choices upon people who if freed from that debt might choose to create new enterprises improving the entire nation’s ability to adapt and create new technologies. Millions of American are living in the streets, hopelessness pushing them to drugs and alcohol to dull the daily fear their lives have become. Many are dying way before their time. Providing them 4 walls, a roof, and a door they can lock along with assurances of food, a job, and medical care will save a good many of those lives, making them productive participants. To treat them like we currently do, as non-entities takes away from our productive capacity, and increases the atrophy we must not allow.
Back in 1974 when the US was in turmoil from years of war and social disruption, back when we were facing high inflation and our President was about to be impeached, Gil Scott Heron recorded a song that not only captured that era but captures today’s as well. Like a fine wine, it pairs well with Steinbeck’s “The Winter of our Discontent”. It was called “Winter in America”. Heron wrote poetry, then set it to music, it plays well in both mediums.
Winter in America
Gil Scott-Heron, Brian Jackson
From the Indians who welcomed the pilgrims
And to the buffalo who once ruled the plains
Like the vultures circling beneath the dark clouds
Looking for the rain
Looking for the rain
Just like the cities staggered on the coastline
Living in a nation that just can’t stand much more
Like the forest buried beneath the highway
Never had a chance to grow
Never had a chance to grow
And now it’s winter
Winter in America
Yes and all of the healers have been killed
Or sent away, yeah
But the people know, the people know
It’s winter
Winter in America
And ain’t nobody fighting
‘Cause nobody knows what to save
Save your soul, Lord knows
From Winter in America
The Constitution
A noble piece of paper
With free society
Struggled but it died in vain
And now Democracy is ragtime on the corner
Hoping for some rain
Looks like it’s hoping
Hoping for some rain
And I see the robins
Perched in barren treetops
Watching last-ditch racists marching across the floor
But just like the peace sign that vanished in our dreams
Never had a chance to grow
Never had a chance to grow
And now it’s winter
It’s winter in America
And all of the healers have been killed
Or been betrayed
Yeah, but the people know, people know
It’s winter, Lord knows
It’s winter in America
And ain’t nobody fighting
‘Cause nobody knows what to save
Save your souls
From Winter in America
And now it’s winter
Winter in America
And all of the healers done been killed or sent away
Yeah, and the people know, people know
It’s winter
Winter in America
And ain’t nobody fighting
‘Cause nobody knows what to save
And ain’t nobody fighting
Cause nobody knows, nobody knows
And ain’t nobody fighting
‘Cause nobody knows what to save
Songwriters: Gil Scott Heron
Winter in America lyrics © Peermusic Publishing
Further Information
Neoliberalism described in a short video.
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