Friedman & Reagan Part I – An Insidious Seed is Planted

The Big 4: Hayek, Friedman, Reagan, and Thatcher.

There is a saying that capitalism can take either a savage or benevolent form; the United States has always been a system of savagery. Regardless of what tactic used there has always been oppression of a group of people sponsored by the government in our iteration of capitalist structure.

Our modern government uses less openly exploitative and genocidal tools than it did at the inception of our nation, but even though slavery is now illegal the wealthy forces trying to keep the status quo of power structures have wriggled their way around to find methods of keeping the people from having true power in our government. Many would point to the original vision of the founding fathers, in particular Hamilton’s centralized banking system, and say that modern American government is a bastardized version of their idealism which promotes only the interests of the wealthy and ignores the broader country. Though is our current reality truly straying from that vision, or are we just living out the results of what the constitution was always written to be? Is our society more selfish now than we were at our founding?

“It is true I believe this country is following a dangerous trend when it permits too great a degree of centralization of governmental functions, but to attain any success it is clear that the federal government cannot avoid or escape responsibilities which the mass of the people firmly believe should be undertaken by it.” – FDR

This quote came after the New Deal had been shattered and is the core debate surrounding free market neoliberalism versus regulation; how much responsibility does the federal government have? Franklin Roosevelt understood that the essential function of a democratic government is to provide the best society it can according to the wishes of its people. He knew that in order to do this some regulation was needed, and when he created the New Deal it was a spark that lifted the economy out of its deepest hole to date. One of the largest components to the strategy was federal intervention into markets and restrictions on the ways that banks could use people’s money to prevent Americans from losing everything again. The other piece of New Deal legislation was creating “big government” programs like social security, unemployment, and medicare to ensure that the population who were immediately poor and suffering could have some relief.

At the same time that FDR was expanding governmental oversight, an economist by the name of Friedrich Hayek was vocally rallying against him. After the New Deal created ‘big’ government, people didn’t argue because it was helping them in the now, as we had taken a Keynesian approach of big spending that bolstered social welfare. However Hayek was claiming that markets would naturally sort themselves out, and that leaving them free from regulation would see the Depression resolve itself over time. Needless to say, this was not a popular take at the time as people were experiencing life changing help now from the New Deal’s social programs.

He kept at it though, publishing a veritable manifesto claiming government planning would crush individualism and lead to fascism. This led to the formation of the Mont Pelerin Society, a group of influential economists from around the world that created what we now know as the neoliberal school of thought; championing deregulation and freedom of markets. The individual among them besides Hayek who is most important to our story was Milton Friedman.

Ah, the dream of 1950’s suburbia.

By the 1950’s America had thoroughly left the Depression behind and was experiencing a major economic boom. This was bolstered by social welfare that helped build generational wealth along with a humming post war economy. Families of four were able to live off of a single salary, something that seems like fiction now. It was during this time that the middle class as we know it came into existence, with high enough salaries to enable spending money and some leisure time away from work. It’s important to note however that this economic success was pretty much exclusively seen by white households as evidenced by the demographics of the great suburban migration. This was because segregation and Jim Crow policies still ran rampant through the country, and New Deal welfare hadn’t applied in the same way to minorities. This left POC and immigrants disenfranchised and lagging far behind their white counterparts because many social aid policies weren’t afforded to their communities. 

At the same time this economic boom was happening, the most popular magazine in America, Reader’s Digest, picked up a story about Hayek’s book. This exposed millions of Americans to The Road to Serfdom, and it spread like wildfire among the middle class that was now looking for interests to pursue in their leisure. The problem was, Americans are lazy. Many didn’t read the book itself, only seeing what Reader’s Digest and newly minted celebrity Friedman were telling them. There was a massive surge in pushback against the New Deal after this, and many seemed to hyper focus on the talking point that government intervention was a slippery slope to monopolization.

Quick counter to that; look at how many veritable monopolies exist in our current deregulated market with Amazon, Nestle, Coke or Pepsi, Facebook, Microsoft (with Windows), and more.

Regardless, Friedman wode his wave of stardom to be a regular appearance on TV and essentially bastardized Hayek’s original ideology by completely ignoring its underpinnings and going into gross oversimplification. In an essay called “Neoliberalism and Its Prospects” he claimed that a government had no responsibility, only the people that lived within it, and thus it should have no oversight of any marketplace or commodity. Notice the early influence of a ‘personal responsibility’ rhetoric within neoliberalism. Friedman condensed Hayek’s original ideas so much that he opted to keep only one welfare idea of a ‘reverse income tax’ which would just give people however much cash they needed to stay above the poverty line. Friedman wanted to cut nearly all federal programs while saying bureaucracy was too complicated and would mismanage safety nets anyways. (something I agree upon but the answer isn’t to just cut out everything people need to survive). He took an extreme view of our regulatory state, pushing the privatization and commoditization of everything as the answer; from education, to healthcare, to utilities like water. Friedman even wanted to abolish the FDA, national parks, social security, medicare and more. Due to his rabid belief that markets would inherently solve all problems, Friedman assured his audience that innovation would step in and find ways to improve our quality of life even more despite those safety nets being gone.

Many prominent voices came out in opposition to this view, including FDR who said that getting rid of social programs to help the disenfranchised was not only stupid, but dangerous. Hayek himself even said that he believed people were misinterpreting his work. In The Road to Serfdom he laid out concessions that the government must have oversight in to provide a baseline of living standard for the population, he just made it clear that the government’s role should be as minimal as possible. However Friedman was good at condensing ideas into easily understandable language that appeared inviting to the average person, and this appeal won the public’s attention. The rhetorical power of simplicity is strong.

Friedman in his TV glory days.

If pressed on what he would do to ensure quality of life Milton would have pointed to his negative income tax idea, which theorized a tax code based on the government paying people based on personal exemptions and deductions that prevented them from working so they could meet their basic needs. This meant that people could claim a disability or some other ailment and still get paid, but it would have to be a pre-approved condition under federal regulation. We know how that would have disproportionately manifested based on our current welfare distribution. Additionally, the negative income tax would have had the government just hand cash to people who made below a certain threshold of income. Friedman wanted to cut every social welfare program though, so this would have essentially just manifested in the government paying homeless people, or families hundreds of thousands in debt, some money to buy food and keep themselves alive. (A strategy that has been proven ineffective as all the cash in the world can’t help a single family build better infrastructure, housing, or schools for their neighborhood while building up generational wealth to be where white families are at).

Based on a desire for no welfare policies or any sort of baseline for human comfort, I shudder to think how a negative tax would have manifested for disabled or ill people that couldn’t work and were forced into the claim system. Corporations definitely wouldn’t be voluntarily handing out aid. There is so much more to quality of life than just a couple thousand dollars handed to you once a year, and the deregulation that was being pushed would have made it cost money to do anything that brought fulfillment, let alone meet your basic needs. Neoliberalism wants no protections for ordinary Americans, claiming it will maximize freedom of the economy. They push this regardless of whether those people who vote them into power would be stuck in a never ending cycle of crippling poverty with no assets.

The most valid point that I find among Friedman’s arguments is that the federal bureaucracy is way too complicated, and the fingers that branch out have too much overreach. A quote I find humorous from him is that if the government was in charge of the Sahara, soon there would be a shortage of sand. In making himself such a notable public figure Friedman’s free market  rhetoric spread like wildfire. The public was primed for a politician that would pick up the mantle,  be the voice Friedman needed in government, and allow a start to his deregulatory bonanza. All America would need is a little catalyst to translate the ideological shift into government policy.

Throughout the 1970’s there was an energy crisis as the U.S. population struggled to keep up with the price and demand of oil. The Yom Kippur War in the first part of the decade caused prices to quadruple from $3 to $12 at one point as Arab nations placed an embargo on us for supporting Israel. As a result of the shortage Congress passed the Emergency Petroleum Allocation Act so the government could step in and help out with oil prices, then further expanded upon those powers in 1975 with the Energy Policy and Conservation Act. However less than two years later the Iranian Revolution began, and all hell broke loose. Due to stipulations that had been given in the mandates prior to 1977, we had shifted heavily to imports of foreign oil. The conflict only caused a drop of about 5% in the world’s oil supply but it was felt disproportionately in the U.S. not only due to reliance on imports, but an additional practice that saw refineries withholding oil from the market in hopes of waiting for higher government mandated prices. (Since the Fed could set distribution and allocation rates for the public.)

This caused panic among Americans as prices began rising rapidly, and the supply plummeted from panic buying of gas and a lag in domestic production of petroleum due to reliance on foreign imports. To further exacerbate the problems some states had $5 filling limits, causing even longer lines at gas stations. Needless to say, gas prices were astronomical and many business activities were crippled. With the economy in its worst state since the Great Depression, people harboring anger at the government for the oil shortage, and the ever present voice of Friedman calling for deregulation as the solution, the breakout Republican star of Ronald Reagan looked like a very promising candidate.

Carter saw the public opinion shifting towards deregulation and started to reverse some New Deal regulatory policies, but the writing was on the wall for Jimmy. Reagan was essentially Friedman in the form of a president, and America fully embraced the idea of a free market remedying everything.

We began to fully transition away from New Deal policies in the 80’s with Friedman in the White House’s ear as an advisor. This led to a perpetuation of the rhetoric that governmental oversight in any form was bad, and the freer the market the better the economy for ordinary people. The New Deal was totally and utterly fucked. Reaganomics saw a temporary spike in wealth for the white middle and upper classes, but it was quickly clear that poor populations were going to be further disenfranchised. The predominantly white baby boomers who had come into political power didn’t care though, only focusing on securing personal wealth and financial security. As Democrats piled up the losses in the 80’s and 90’s they looked internally to see what needed to change about their strategy. 

This catches us up with the modern Democratic party. In the  80’s and 90’s they looked internally to see what needed to change about their strategy and Clinton set the bar as the new “Conservative Democrat” running on a veiled neoliberal agenda of deregulation that the party hoped would sway old New Deal southerners back, just adding an exciting twist so that it wouldn’t mirror the right’s policies too closely. This special flair was that the party leaders would actively pretend to fight for social progress such as LGBTQ or civil rights, making their supporters think they had their best interests at heart. In reality the Democrats have either crippled or dropped the aspects of their platform that actually helped disenfranchised groups. The party decided to try and appease the conservative ideology that was dominating and win voters back by dropping or severely changing welfare, unionization, and other worker’s rights policies. Among these concessions were Clinton putting hard restrictions on welfare timeframes, pushing a rhetoric of “personal responsibility” which was thinly veiled racist attacks.

Similar talking points are what led to Biden’s crime bill and Democratic support of other conservative attacks on personal rights. This is the period of time where “welfare queens” became a popular motif to push on poor communities that were supposedly mooching off the federal government by having multiple babies. Of course these families were stereotypically black and portrayed as such in the media. Rather than ask how there could be better access to contraceptives or sexual education, Democrats pushed for defunding massive amounts of welfare policies alongside Republican free market champions. It is ironic that there is such as fierce debate as to the ‘right to life’ for a baby to be born, but once that child is out of its mother the state will do fuck all to care for it. I suppose the right to life only extends when it gives some sort of control over the bodily function of women, because if it was true religious justification then we would have actual welfare policies to help struggling families instead of a market that acts like sharks circling the wounded.

In one of the biggest political betrayals to their voters, older establishment Democrats taken by neoliberalism were complicit in pushing anti union propaganda. Corporate interests started being catered to hand and foot as minimum wage flatlined at $7.25 and hasn’t risen since 1991. Servers and disabled wages are also criminally low, at under $3 by federal law. This has all contributed to the current landscape we see with corporations dominating the lower class and many Americans being veritable wage slaves, as entities like Blackrock buy all the available homes and pseudo monopolies control all aspects of the market to shut entrepreneurs out. While ordinary Americans suffer and lose their homes, their supposed champions are nowhere to be seen after election. Democrats such as Obama yuck it up with Zuckerberg and other billionaires in the White House, generally snuggling up with the corporations that create rampant inequality for their constituents.

The party has directly appealed to the interests of industries like big tech by refusing to hold them accountable in any way shape or form. Google, Facebook, Twitter, and others are the biggest culprits in our spread of misinformation because they have had no incentive to actually curb hate speech or radical groups until recently. Dems have also stood idly by while they sell all of America’s data, feeding social media intelligence into massive NSA and CIA oversight programs. Democrats also refused to hold any of the architects for the Great recession responsible, with Obama reappointing several of Clinton’s staff. The financial system is still just as rigged against us under the Democrats as it ever has been under the right.

This was an initial exploration of how neoliberalism has taken hold, and will lead into another post in which we will connect prosperity gospel, the alt right, and Reagan’s legacy. This story is serving to explain the context for WHY our insider politics has been so ignorant of life in the modern age, as we’ve already elucidated through the series of economic corruption how it has become a system of nepotism at the top. While Neoliberalism isn’t the end all be all of issues, it is an attack on social capital that the right and others have embarked upon and has only served to reinforce the highly unfair market we’ve explored. We will further tie in these concepts of individualism within an economic sphere into their reinforcement of savage capitalism and how it has related to pitting the population against each other through identity and race based politics. Neoliberalism was definitely not the force that created white supremacy, but has served to institutionally solidify American racism by creating an economy wherein only a few insiders with existing capital and connections can thrive, leaving tens of millions of Americans lost and trying to scramble for a place in the world.

Part II

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