Clinton ran a "putting people first" campaign, but at some point a "center-right, Washington Consensus" direction was pursued. It was a neoliberal agenda that emphasized smaller government, free trade, and deregulation of financial markets. Inflation, fueled by wage demands, was kept in check through the threat of outsourcing jobs. Welfare rolls were drastically reduced by forcing welfare recipients to work at sub-poverty level wages. The Clinton administration and Alan Greenspan made no attempt to curb the speculative excesses of the financial markets. Stocks rose to unsustainable price to earning ratios. The economy was driven by both increased consumer debt and private investment. The obsession with larger and larger budget surpluses precluded making needed investments in infrastructure and education and training.
Part of the Washington Consensus is the participation of globally-oriented financial and trade bodies, such as the IMF, the World Bank, and the WTO, who impose neoliberal policies when possible. The opening for these international bodies is when debt-ridden countries find themselves in untenable positions. But relief from these bodies is not unconditional. The countries are forced to privatize, eliminate subsidies for domestic purposes, cut government spending, and remove all restrictions on foreign investment. In addition, the countries are invariably pressured to pursue a strategy of producing for export to acquire the cash to pay off debts. Keeping wages low by disciplining workers is part of the strategy of exporting and attracting foreign manufacturers. The author shows that these neoliberal policies have had harsh effects in many countries, such as Mexico and Argentina.
Of course, the stock market bubble collapsed. The Federal Reserve had failed to exercise its power to limit speculation and now was unable to spur a recovery with huge cuts in the Federal Funds interest rate. The excessive investment during the Clinton boom had created excess capacity. The author continues with the Bush administration, which is even more committed to pursuing a neoliberal program. The massive tax cuts that are being pursued by Bush have added to the huge increase in inequality that occurred in the Clinton years. The resulting huge deficits preclude any increase in domestic spending but do allow the pursuit of a military agenda that seems geared to benefit multinational corporations. Again, it is hoped that inflation will be checked by worker insecurities.
It seems rather obvious that neoliberalism is unsustainable in the long-run. In an interesting take, the author presents neoliberalism as presenting problems that Marx, Keynes, and Polanyi delineated. He calls for the re-regulation of financial markets, limits on free trade, and more domestic investment, including full employment. But it is a glaring shortcoming of the book that no attempt is made to describe how such a redirection could or will come about. Can it happen only politically or must a major collapse on the scale of the Great Depression first occur?
For those who need convincing that the Clinton years were not as good as they seemed, this may be the book for you.
Mr. Pollin is a Professor at the University of Massachusetts-Amherst. The humanity and practicality that infuses this book is no doubt a reflection of Mr. Pollin's real world experiences, which includes work on developing living wage proposals in various U.S. cities, serving as a consultant to the United Nations Development Program in Bolivia, and as Economic Spokesperson to the 1992 Presidential campaign of Governor Jerry Brown.
Neoliberalism is defined by the "Washington consensus" of decreased government spending, free trade and deregulated markets. Mr. Pollin critiques the system for its three major defects: The "Marx problem" pertaining to the relative bargaining relationship between employers and workers; the "Keynes problem" of the tendency of financial markets to engage in speculation; and the "Polanyi problem" of the corrupting effect of corporate power.
The author builds a convincing case that all three problems have been exacerbated by neoliberalist policies, resulting in a host of deleterious effects. These include widening gaps between the rich and poor (Marx), speculative bubbles in the financial markets (Keynes), accounting scandals (Polanyi), and others. Moreover, the author provides research to show that the cumulative effect of these policies has been to slow world economic growth, thereby undoing years of progress and preventing many developing nations from significantly raising living standards for their citizens.
Mr. Pollin critiques the Clinton administration and Robert Rubin in particular for championing financial market deregulation as the linchpin for its "Eisenhower Republican" economic strategy. The author is presuasive in detailing how the stock market boom of the 1990s provided fuel for the economic boom; unfortunately, its demise quickly erased most of the gains attributed to the Clinton economy, such as a real decrease in the number of persons living in poverty. In fact, the author suggests that the single-minded pursuit of a balanced budget allowed Clinton to squander a historic opportunity to use surplus government dollars to invest in education, healthcare and the environment --programs that the author believes are critical to creating a more durable kind of prosperity for the American people.
Mr. Pollin launches a no less scathing critique of the Bush administration's policies, which the author believes have been designed to be little more than a "bonanza to the rich" at the expense of workers. The author explains that crisis has been used by Bush to justify giveaways to corporations and the wealthy; meanwhile, aggressively anti-labor and anti-environmental policies have further squeezed living standards for most. Furthermore, by highlighting the inconsistencies in Bush's budget proposals, Mr. Pollin suggests that the administration is intent on creating a fiscal crisis in order to force a dismantling of the populist social safety net.
One section that I found particularly interesting was Mr. Pollin's discussion of stimulating the economy by means of defense spending and the Iraq war. His analysis of the situation however suggests that the occupation of Iraq will further slow the U.S. economy as a whole but will benefit specific corporations engaged in the production and distribution of oil, thereby calling into question the real motives for the war.
Mr. Pollin dedicates a chapter examining the "landscape of global austerity" that has resulted from Washington's imposition of neoliberal policies onto the developing world. The analysis focuses on case studies in India, Argentina and elsewhere to highlight the human costs of the neoliberal experiment in specific countries. For example, the author shows how Asian sweatshop bosses have repressed their workers in order to gain competitive advantage for their export-oriented economies. The author argues that "policies to eliminate sweatshops and guarantee workers decent...minimum wages" are needed to narrow inequality, restore impoverished communities and develop new markets.
The final chapter explores the author's alternative economic policies more fully. The recommendations include full-employment policies, living wages and labor rights to solve the Marx problem, and financial system regulation, taxation, and increased banking reserve requirements to solve the Keynes problem. The issue is one of morality as well. Recalling Adam Smith, the author suggests that continuing with the failed neoliberal experiment of privileging the interests of capital over the rights of people amounts to "corruption of moral sentiments on a global scale" and should rightly yield to an economics dedicated to equity and social justice.
I strongly recommend this powerful, insightful and humane book to everyone.