The Structural Crisis of the New Deal Order Gave Us Neoliberalism

The rise of neoliberalism wasn’t simply about centrist and right-wing politicians deciding to unleash market forces. It reflected a genuine crisis of the postwar economic order — and the absence of a powerful working-class movement to push a left alternative.

US president Bill Clinton delivers a speech at the 1999 Democratic Leadership Council National Convention in Baltimore, Maryland. (Paul J. Richards / AFP via Getty Images)

By any measure, economic inequality has shot up over the last half-century. Since 1970, the share of national income claimed by the bottom half of earners has fallen from 21.3 percent to just 13.6 percent, while the share pocketed by the top 1 percent has nearly doubled — from 11.6 percent to 19.1 percent. Although social programs have substantially reduced poverty over that span, stingy eligibility criteria and state-level discretion have eroded the livelihoods of low-income families. The racial wealth gap, sustained by generations of exploitation and exclusion in private realty and public programs, is as wide now as it was in the 1960s.

A common story dresses up these trends in partisan garb: the Democrats struggled to extend or shore up the New Deal; the Republicans — out of ideological fervor or slavish deference to private interests — just as determinedly tried to tear it all down. There is a glimmer of truth to this tidy narrative, but just a glimmer. In fact, the return of inequality to levels not seen since the Gilded Age has been a frequently bipartisan project: the Democrats have held the upper hand (controlling both the House and Senate, or the presidency and one or both chambers) for thirty of the last fifty-four years. Their fingerprints, to varying degrees, are on every single policy that drove up inequality during this stretch.

That rap sheet is the central thread of Left Behind, historian Lily Geismer’s provocative examination of the Bill Clinton presidency, its political and intellectual roots, and its lasting impact. Left Behind opens by tracing the now-familiar story of the Democratic Leadership Council (DLC), founded in 1985, and its determination to cut the party loose from its “special interests” (unions, racial minorities, the feminist movement, etc.) and split the unlikely difference between the Great Society and Reaganomics. As Geismer argues, Clintonite invocations of a “third way” or “a bridge to the twenty-first century” could scarcely conceal the real intent and the result: to abandon the bottom half of the income distribution in favor of market solutions that would make Friedrich Hayek blush.

This was not, in Geismer’s account, simply a battle for the soul of the Democratic Party — or, as it is so often portrayed, an effort by beleaguered Democrats to adapt to a right-wing turn in the electorate or to blunt the nastiness of Newt Gingrich’s “Contract with America.”  The DLC was central to the rhetorical triumph of neoliberal policies, to rising inequality, to withering economic security, and to the impoverishment of social citizenship in the United States. The DLC’s policy prescriptions (and the assumptions behind them) were not concessions or retreats; they were developed eagerly and willingly, and long before the Clinton presidency was pressed to “triangulate” in the face of a hostile Congress.

Geismer casts a wide net. The usual culprits — welfare reform, the North American Free Trade Agreement, the health care debacle — all make appearances, but the book’s real contribution is in building out from these episodes to underscore how a relentless faith in market forces shaped the entire policy agenda of the Clinton years. In economic development and labor standards, the administration relied on the assessment and initiative of market actors. In education and housing policy, it facilitated the discipline and displacement of public goods by market forces.

At each turn, Left Behind draws in the DLC’s unusual fascination with microenterprise and small-scale credit. At first blush this seems an odd choice, the political and economic impact of microenterprise dwarfed by Geismer’s attention to it. Yet as the argument builds, it becomes clear that such policies had an outsized, talismanic place in DLC thinking.

The “bootstraps” logic of microenterprise helped sidestep the central contradictions of Clintonomics: that market forces (in the wake of NAFTA and welfare reform) were not creating good jobs, and that rents and house prices were dramatically outpacing income growth. Rather than confront the actual effects of its policy choices, the administration paraded out odds-defying and scattered success stories — the welfare mom who opened a beauty shop, the public housing tenant who bought a home in the suburbs, the “get tough” charter school that dramatically raised test scores — as if they were serious, scalable, and structural solutions.

What this meant, in a policy regime where market success had become the primary currency, was that those left behind were vilified, marginalized, and neglected. They were the unsuccessful and, by definition, the undeserving. Invocations of “responsibility” or “independence” or “empowerment” grafted market values onto programs and policies originally intended to protect the most vulnerable from market forces, or provide goods (education, affordable housing) that the market would not. Behavioral conditions and expectations recast every disadvantage, every misstep, as a personal failure.

The Structural Roots of Clintonomics

I have two hesitations with Geismer’s account (though these are less criticisms than reflections). First, Left Behind could have more systematically explored the reasons why state actors did what they did. Geismer’s is largely a narrative of backroom deals, chance encounters, and personal or professional ambitions. At times, the driving force behind the administration’s policies seems to be its ideological commitment to a “third way” animated by market fundamentalism and brimming with “knowledge economy” buzzwords. At times, as in some accounts of the New Deal, it comes across as a series of reluctant compromises in the face of unassailable political and fiscal obstacles.

But left untapped is a more structural explanation, in which policy choices are shaped (or constrained) by larger economic realities. In the United States, as in other capitalist democracies, private business interests make the key decisions about how to allocate resources and where to invest. Public policies, at best, mop up some of the damage — their attention focused on market failures and narrowed by the necessity of sustaining private growth and profitability. The market, as political scientist Charles Lindblom famously put it, is a prison.

The boundaries of that prison, and the political behaviors it is likely to punish or reward, reflect the shifting character of the market economy. Steady economic growth bolstered by US globalism made the institutions of the New Deal order (including a capital-labor accord, a modicum of economic security, and relatively robust investment in some public goods) possible and sustainable. The collapse of that growth (and its global underpinnings) made retreat largely inevitable in the absence of a robust working-class movement armed with a progressive alternative. In this respect, the Clinton administration was not so much reinventing the New Deal or Great Society for the twenty-first century as responding to the same resource and demand constraints that shaped the GOP policies that came before and after.

It is hard, in other words, to fully understand the conservative ascendance after the 1970s through the narrow temporal window offered by any one administration. Like Rick Perlstein’s brilliant trilogy on the Richard Nixon and Ronald Reagan years, Left Behind details the ways that political actors, political factions, and political parties navigated the landscape of the “zero-sum” society. But it doesn’t tell us a lot about the landscape itself, or explain why some political actors navigated it more successfully (at least on their own terms) than others.

Second, it is important to recognize that market deference operated differently — and on different trajectories — depending on the policy realm. In the case of welfare, the federal-state program of cash assistance launched in 1935 insulated mothers from labor force participation. The decision to “end welfare as we know it” in 1996 was the culmination of a retreat that began in the 1960s. In health care, public programs in the United States have long served to sanctify private coverage by taking on those (the poor, the elderly) left behind by job-based provision. The Clinton health care plan foundered on its determination to cater to those entrenched, and competing, private interests.

Federal housing and economic development policies, by contrast, have always deferred to private capital, with federal dollars never doing much more than subsidizing the (segregating and gentrifying) pipe dreams of local property interests. In education, the genuflection to competition came later — the Clinton-era Democrats embracing charter schools as a thin public alternative to vouchers.

On each of these policies, the DLC had a particular neoliberal take and pulled the larger party in a particular direction. But for the most part, that change in direction was a matter of degrees — the final twist in a long and tortuous right turn.