The US Economy Since 1980
What makes the U.S. so unlike other rich nations? There is no single answer. At the top of a list is the power of the business class to shape policy-making and the lives of the nation’s populace. In The United States Since 1980, economist Dean Baker focuses on the policies that have set the country on a business-friendly path. There have been far-reaching effects.
"For most of the population of the United States, the quarter century from 1980 to 2005 was an era in which they became far less secure economically, and the decrease in security affected their lives and political attitudes," he writes. "It is important to note that this decrease was the result of conscious policy, not the accidental workings of the market."
Baker steers clear of ambiguous terms. This is a great help to the layperson searching for clear-headed policy analysis of this critical 25-year period. Ruling interests’ efforts to roll back the popular gains of the vast mass of workers has marked this time.
"The change in the ground rules affecting the market distribution of income has had a much greater impact on the country than the change in tax and transfer policy," Baker writes. Accordingly, a changed rule of critical impact driving the wage gap between Americans on the bottom and in the middle and those at the top has been in employee-employer relations. What does (not) happen at the point of production, the workplace, matters.
Take U.S. trade policy, an area of expertise for the author. He explains, clearly, how this policy has put the country’s factory workers into job competition with workers in developing nations paid as low as one-tenth the wage rate in the stateside manufacturing sector. The same trade policy leaves intact licensing and professional barriers for U.S. doctors. This shields them from global job competition. Thus the pay structure of American physicians is such that they earn twice and more than their counterparts in other industrialized countries. Baker offers policy alternatives, not just doom and gloom.
For instance, he suggests standardizing rigid licensing and professional requirements for physicians. Of course the American Medical Association opposes that. Meanwhile, some 800,000 U.S. doctors earn double and more versus their European counterparts. If the licensing and professional barriers to foreign doctors practicing stateside ended, U.S. health care would become more affordable for those with low and middle incomes, Baker argues. As he makes clear, high-wage earners such as doctors get government protection. The vast bulk of the U.S. labor force is on its own.
As secure union jobs faded, several negative outcomes have become part of the national landscape. One place to look is at the lives and jobs of workers most likely to be union members, African Americans. An eighth of the total populace, blacks make up half of the nation’s prison population. Baker, asserts, based on international data, the U.S. is totally off the charts from other rich countries in this policy of racial imprisonment. Such policy follows structural unemployment.
Baker’s book has seven chapters and an epilogue. In chapter two, he sets the stage, domestic and foreign, as Jimmy Carter ends his one-term presidency. Ronald Reagan’s victory in the 1980 presidential election speeded up a national policy shift favoring uppe-income Americans at the expense of those in the middle and on the bottom. While Reagan’s fiscal policy benefited the well-heeled, his labor-management policies were noteworthy. For instance, he fired striking federal air traffic controllers. The relative silence of action from the U.S. labor union bureaucracy on this change in public policy was deafening. Later, private-sector employers aped Reagan’s anti-labor union policy, terminating striking employees and hiring replacement workers during contract negotiations. "Most Europeans would still consider it outrageous that a worker would lose her job because she went on strike, as did most people in the United States before the PATCO strike," Baker writes. He compares and contrasts the policies of the U.S. and other developed societies throughout the book. His use of figures and tables to illustrate the policy impacts of such changes on most working Americans is helpful.
As the Reagan White House waged war by proxy against Nicaragua, administration and CIA officials broke a law that barred funding of such mercenary forces, called the Contras. Despite the efforts of a special prosecutor who investigated this secret and illegal financing scheme, none of the government officials were held accountable. In Baker’s view, this law-breaking helped to institutionalize a trend of unilateral deception in the executive branch of the U.S. government. The parallels to the domestic and foreign policy machinations of the George W. Bush White House since the September 11, 2001 terror attacks are as plain as day.
In the 1988 presidential campaign, GOP candidate George H.W. Bush, racially appealed to some white voters. He linked the case of Willie Horton, an African American convict who committed violent felonies against a white couple during a prison furlough in Massachusetts under Governor Michael Dukakis, also the Democratic presidential candidate. The political use of an individual’s skin color to taint an entire race harkens back to the Reconstruction era. White racial supremacy is a feature of U.S. society that shapes public policy.
A foreign policy outcome of the Soviet Union’s decline as a superpower was the rise of U.S. power on the U.N. Security Council, according to Baker. The first President Bush, who inherited rising federal budget deficits from Reagan’s increased military spending against the so-called Soviet threat, used the council to impose economic sanctions on the Iraq populace after its leader and former U.S. ally Saddam Hussein invaded neighboring Kuwait. The sanctions lasted 14 years and strengthened his rule until the March 2003 U.S. invasion and occupation. For Iraqis, "many had to go without basic necessities and medical care," Baker writes of U.S. policy that punished civilians by design. The policy was a war crime. It should be so named.
President Bill Clinton won the White House from George H.W. Bush in the 1992 election. Though the latter’s popularity ratings rose sharply after the U.S. defeat of Iraq, Baker notes economic pressures reversing that jingoistic spurt. To wit, a national recession from summer 1990 to spring 1992 slowed job growth and real wage increases. A business-friendly Democrat, Clinton’s response to the American people’s concern about work and pay was to continue President Bush’s drive for the North American Free Trade Agreement.
Baker analyzes how and why Clinton’s support for NAFTA was not about freeing trade but advancing a global model of the marketplace for the benefit of powerful domestic interests. One is the U.S. pharmaceutical sector. It relies upon governmentgranted patent monopoles that hike the shelf prices of prescription drugs by triple digits over their production costs, Baker explains. This policy illustrates government protectionism for corporate America to the harm of hourly wage earners and pensioners generally.
Baker places NAFTA in a global context, which U.S. economic reporting rarely does. He compares NAFTA with the European Union’s "social charter." White House policymakers crafted NAFTA in part to flood Mexico with corporate American agriculture, which bankrupted scores of Mexican peasants, forcing them to become laborers who earn wages a fraction of their U.S. counterparts. By contrast, the EU provided a funding mechanism to bring the poorer regions of Europe up to those of the richer regions. The climb of living standards in Ireland is a success case in point, according to Baker. NAFTA was not set up to bring Mexican’s living standards up to Americans’.
Monetary policy was a key stimulus to the economic expansion under Clinton. Baker details how Federal Reserve Board Chairman Alan Greenspan ignored the conventional wisdom of the economics profession that cutting interest rates and allowing the unemployment rate to fall below six percent would cause inflation. Greenspan oversaw multiple interest-rate cuts during Clinton’s second term. And the national jobless rate dropped from just under six percent in the beginning of 1996 to four percent at the end of 2000. There was no simultaneous climb in the inflation rate as job creation increased.
Greenspan’s cheapening of credit, however, stimulated a stock market boom which busted in 2000. Later from its ashes emerged a housing boom. Baker carefully details the reasons and results of both speculative bubbles. His crisp writing style is instructive in moving below the surface structure of the economics profession and economic reporting to flesh out the class interests of policies behind the rise and demise of the stock and housing markets. Baker demonstrates his assertions with data that the general reader can comprehend.
The Clinton administration sold a U.S. aerial attack on the Yugoslav republic of Serbia as a humanitarian intervention to rescue Albanians in Kosovo during spring of 1999. According to Baker, "the civilian population of Serbia incurred a substantial portion of the casualties from the U.S. bombing." This military action under a Democratic president, like the 1991 Iraq war on the watch of a Republican president, injured and killed scores of non-military combatants. These war policies are crimes of war, or the legal term lacks meaning.
The crimes of September 11, 2001, when hijackers crashed four airlines into East Coast targets helped the George W. Bush White House to make sweeping changes in federal law enforcement policy. Congress, for example, approved the Bush-backed PATRIOT Act, Baker writes. Most members failed to read the bill’s provisions. As he recounts, the White House’s case to invade Iraq"from its links to the attacks of September 11 and weapons of mass destruction"had more holes than Swiss cheese, with fateful consequences for both nations. One of those has been the administration’s use of the National Guard from the Gulf Coast states for duty in Iraq, which weakened the response to the Hurricane Katrina disaster in summer 2005.
Baker and his colleagues at Washington’s Center for Economic and Policy Research have been working against the political campaign to privatize the U.S. Social Security system. The 2000 bust of the stock market harmed workers’ retirements invested in the stock market. This outcome soured President Bush’s attempt to win political support to divert Social Security payroll taxes into the stock market. Baker’s book contains a nice summary of the case for (Wall St.) and against (Main St.) privatization of the popular system.
While U.S. superiority in weapons systems is nearly useless against the anti-occupation forces in Afghanistan and Iraq, the sun is also setting on the nation’s day as the world’s biggest economy. China and India, the two nations with bigger populations than the U.S., are gaining ground fast, economically and politically, Baker observes. "Yet, foreign policy planners largely assume that the United States will be the preeminent world power for the indefinite future."
His book on the changed structure of the U.S. polity and economy between 1980 and 2005 is a must-read to better know this quarter century and grasp the many policy challenges ahead. The debate to change the nation’s system of health care is one example. Baker’s analysis of that is a good place to grasp what is at stake for the status quo and the working many.
SETH SANDRONSKY is a member of Sacramento Area Peace Action and a co-editor of Because People Matter, Sacramento’s progressive paper www.bpmnews.org/. He can be reached at: firstname.lastname@example.org.