New Neoliberalism

In which I prove that I am not an economist.

It looks like the Obama Administration is intent on saving neoliberal capitalism. I guess I'm far behind, but I still wonder what went wrong in the last go-round. You will recall that, in the mid-1970s, the political and economic classes determined that it would be best if the majority of American workers had their wages, and consequently their living standards, reduced. The corporate and financial interests would insure continued markets for their products by creating an international middle class, so that somewhere around 20% of the world's population would do most of the consuming, while the poorest 80% would be placed in competition with one another to provide the lowest wages for production.

In addition, as manufacturing left the industrialized countries, the jobs lost would be replaced by jobs in the service sector--everything from the health industry to the hospitality industry to finance, insurance and real estate. What they didn't tell us, of course, was that most of the jobs in these industries don't pay very well, and that most of those industries don't make a lot of money. A dollar invested in a manufacturing enterprise makes a lot more than a dollar invested in a hotel. So off the corporations went in search of the cheapest labor.

Meanwhile, Americans have coped by sending women (specifically wives and mothers) into the labor force to make up some of the wages lost in the first paragraph above. Well and good. But then something seems to have gone frightfully wrong, and I'm not sure what it is. Was it that the ability to produce goods very cheaply led corporations to produce so much of them that the international middle class couldn't consume it all? Was it that the international middle class didn't materialize? Was it that the international middle class already had its own products and didn't want the stuff produced by US corporations with cheap labor?

It appears that by the mid-1980s the whole system was dependent on American debt--the willingness of Americans to go into hock to buy these products. The bubbles--stock, credit, housing--only served to keep the whole thing afloat, until the accumulated weight of all that debt finally sank the system. Given that the Republocrats coming into office this January are intent on saving this system, you'd think that they would seek some understanding of what went wrong, and how to prevent another blow-up 30 years down the road.

At this point they seem to have gotten it into their heads that if they can just get us to spend again, all will be well. But neoliberalism doesn't call for us to be spending--we're supposed to be impoverished. Someone else is supposed to be doing the spending--not us. This seems to me to be the hard question, and I don't know why anyone isn't asking it. I guess I really did just prove that I wasn't an economist.