World
When the Clock Broke: Con Men, Conspiracists, and How America Cracked Up in the Early 1990s.
By John Ganz
Farrar, Straus and Giroux, 2024
A Fabulous Failure: The Clinton Presidency and the Transformation of American Capitalism
By Nelson Lichtenstein and Judith Stein
Princeton University Press, 2023
Campaigning for the presidency in the midst of the 2008 economic crisis, Hillary Clinton would put this arch question to critics of her husband’s presidency: “I always wonder what part of the 1990s they didn’t like: the peace or the prosperity?”
Historians of the United States agree that such nostalgia for the 1990s misinterprets the popular meaning of the decade’s apparent political stability—Hillary Clinton, after all, lost both her bids for the presidency. Following the economic disruptions of the 1970s, an empowered conservative movement, newly in control of the Republican Party, had reconfigured American economic policy in the 1980s around regressive taxation, public-sector austerity, and financial deregulation. “Market”-based policy solutions became bipartisan: privileging entrepreneurs over workers in US law and policy, restructuring employment around imports at the expense of domestic manufacturing, and deregulating banks. This left a bitter and ambiguous legacy that shaped both the War on Terror and political immunity of the financial services industry. In this common interpretation, the Clinton era represents a continuation of the counterrevolution begun by Reagan and carried forward under George W. Bush.
The past eight years, however, have seen history move. To explain the origins of today’s rapidly changing domestic politics, historians have shifted their focus—and with it their perspective on the meaning of what Clinton administration economists Janet Yellen and Alan Blinder referred to as the “fabulous decade.” New accounts of the 1990s locate the origins of today’s politics not in the accommodations and defeats faced by labor and liberals in the 1970s and 1980s and their consolidation under Democratic Party leadership, but in the unfinished struggle that defined federal policy in the Clinton years over the transition from a productive industrial economy to the services-based postindustrial economy. As we near the end of the Biden administration—lauded for its return to industrial policy, justified by a national security imperative—revisiting the debates surrounding the 1990s’ neoliberal settlement reveals troubling parallels with the present political juncture.
Consensus and contestation
Recent scholarship challenges the idea that the 1990s represented a denouement to the Reagan Revolution. Some portray the decade as a period in which the Democratic White House did not merely fail to reverse many Reagan-era policies of the 1980s, but intensified the benefit cuts and wage repression driving the social fragmentation of the American polity, as in Lily Geismer’s Left Behind. More approbative historians describe a decade of technological and cultural transformation, as in Gil Troy’s The Age of Clinton. Narratives of polarization that identify the 1990s as an inflection point for vicious contemporary partisanship have become increasingly popular in the last few years. But texts focusing on the GOP’s confrontational House Speaker Newt Gingrich, such as Julian Zelizer’s Burning Down the House or MSNBC host Steve Kornacki’s The Red and the Blue, juxtapose these political fissures against broad policy consensus over a maturing neoliberal settlement. The latest scholarship on the decade dispels any notion of consensus: this was not only a decade in which a “neoliberal order” took hold, but one in which this settlement was fiercely contested in ways that prefigure the so-called “post-neoliberal” moment of the 2020s.
John Ganz’s new political history When the Clock Broke, adapted from a 2018 Baffler essay, offers a prehistory of the populist, Trumpian Right. Ganz shows how the US economy’s structural shift towards finance and real estate speculation, and the speculative values these entail, was uncannily reflected in the early-1990s by the increasing prominence in American political culture of figures who embodied these trends—Donald Trump himself most prominent among them. Ganz argues these figures channeled a conspiratorial, racist, far-Right politics of exclusion, practicing a “politics of despair” that outlasted their own political struggles. Rather than a strictly continuous tradition dating back to Reagan and Goldwater, Ganz builds on recent scholarship such as Nicole Hemmer’s Partisans to argue that the Cold War’s end created a historical opening for older rightwing currents of isolationism, skepticism of free markets, and nativism to remake modern conservatism. From figures once deemed peripheral or eccentric, such as Patrick Buchanan or the intellectual Samuel Francis, Ganz argues, a line can be traced to twenty-first century Right-populism.
The dominant popular narrative about Democrats in this era, in which Ganz shares, is one of “liberal betrayal”: the “Atari Democrats” (later, “New Democrats”) of the 1980s–1990s took a sharp, ideological, rightward turn towards the market, away from the activist state and twentieth-century liberalism’s history of supply-side developmentalism. Offering a nuanced revision of this popular narrative in A Fabulous Failure, historians Nelson Lichtenstein and the late Judith Stein forcefully argue the neoliberal settlement that embraced free markets for private capital and political constraints for the public sector and labor was far from inevitable in the early 1990s. Instead, they contend, the Clinton Administration emerged from a rich ferment of Democratic debate. Many in the Arkansas governor’s team entered office intent on using the activist liberal state to manage American capitalism for broad-based prosperity. Their failure to do so not only gives Lichtenstein and Stein’s book its title, but elicits contemporary comparisons.
Recession and stagnation
The Cold War’s thawing and abrupt end, a significant factor in the recession of 1990–1991, transformed the geo-economic environment in which the US federal government made macroeconomic policy. More than 90 percent of the job losses in those two years were concentrated in manufacturing. Employment only reached pre-recession levels in 1996: this “jobless recovery” continued the pattern of economic growth of the 1980s, but even more sluggishly, creating a new type of business-cycle upturn. Because of the collapse of employment in the aerospace industry and defense-related construction, Southern California encompassed more than a quarter of all job losses in 1990–1991. New England, another hub of defense and high-technology industries, was afflicted with particularly durable longer-term employment decline.
The 1990–1991 recession was also a hangover from the savings and loans (S&L) crisis of the 1980s. These once-sleepy local financial institutions (also called “thrifts”) had been sucked into a frenzy of speculation during the inflation and financial deregulation of the prior two decades: loosening of capital standards, easing of restrictions on commercial lending, and demolition of statutory barriers to S&Ls’ geographic expansion. The end of inflation not only threw many thrifts into bankruptcy, but precipitated the deflation of a commercial real-estate bubble in many growth centers. The increasing interrelation of domestic and foreign economies exacerbated the downturn. Famously, throughout the 1980s, Japanese investment had poured into US government securities and high-profile commercial real estate. When Japan’s stock market began to decline in 1989–1990, Japanese companies’ stateside investment fell precipitously—a collapse that would be particularly pronounced in early-1990s Southern California.
Ganz adroitly connects these various features of early-1990s economic malaise to the era’s unspooling rightwing politics. His fixation on such cloacal political personalities as David Duke, Pat Buchanan, and libertarian economist Murray Rothbard suggests that criticism of the unfolding “neoliberal” economic transformation was confined to the far-Right. What’s misleading in Ganz’s narrative is his framing of the early 1990s as a historical moment bifurcated between market triumphalism and conspiratorial, right-wing backlash. In reality, as A Fabulous Failure forcefully demonstrates, reform-minded Atari Democrats contested the politics of economic stagnation, confused global purpose, and social anxiety with a version of national economic planning for world markets. These center-Left advocates sought to revive the market-shaping liberal state for a new economic era.
Far East meets West
The contrasting role played by the image of Japan reveals these differences in emphasis and interpretation. Industrial decline and global economic competition were already well-advanced by the 1980s. The US’s negative trade balance peaked at nearly $158 billion in 1987—by then the concept of US “competitiveness” was pervasive in political and policy discourses. As Japan reached the zenith of a decades-long “economic miracle,” the Cold War client of America’s dollar dominance itself played the role of leading antagonist in the political imaginary of American economic-nationalist discourse. As Ganz explains, Japanese firms’ success in the technical innovation, manufacture, and export of both “traditional” industrial products (such as cars) and high-tech goods (from critical components like semiconductor chips to finished products like VCRs) occasioned declinist fears among American political and business leaders. Economists such as Pat Choate, subsequently billionaire populist Ross Perot’s 1996 vice-presidential running mate, depicted Japanese economic success as a security threat. Such warnings assumed dark guises of xenophobia and paranoia: Japan as alien, an “enigma,” even—despite its status as a Cold War ally—a potential geopolitical adversary.
Yet Japan’s role in the political imaginary was, for many American liberals, dichotomous. It was not merely a threat but a model for economic policy. Reconsidering the industrial policy moment of the 1980s–1990s in A Fabulous Failure is one of Lichtenstein and Stein’s most significant historiographic contributions. As the solution to long-term deindustrialization, liberal policy entrepreneurs such as Lester Thurow, Robert Reich, and Ira Magaziner advocated a strategic approach to government participation in industry at both national and regional levels. Elected national Democrats in networks such as the Committee on Party Effectiveness used these policy entrepreneurs’ arguments to craft legislative plans for a new industrial policy. In partnership with high-tech-manufacturing companies like Intel and Advanced Micro Devices, prominent Democrats such as former California governor Jerry Brown and Colorado Senator Gary Hart created industrial-policy advocacy groups. This debate within the Democratic Party took place in parallel with the project of the centrist, primarily Southern Democratic Leadership Council (DLC) to fashion a brand concerned more with macho cultural politics than with substantive economic ideas. (Bill Clinton is usually thought of as merely a creature of the DLC; Lichtenstein and Stein persuasively contend that the charismatic Arkansan was more valuable to the Council than it was to his political advancement.)
Lichtenstein and Stein’s policy entrepreneurs not only admired the East Asian economic miracle but suggested—in influential books such as Ezra Vogel’s Japan as Number One (1979) and Chalmers Johnson’s MITI and the Japanese Miracle (1982)—that the institutions and high-tech orientation of Japanese industrial policy could be adapted for a new industrial policy, American-style. Earlier in the Cold War, a similar bricolage of industrial policies had been incubated within the military industrial complex; by the 1980s, liberal reformers advocated embracing these potentialities for civilian purposes.
The Cold War had, to some extent, formed a walled garden within which regional and local developmental programs could be nourished with public investment and public-private partnerships—areas of economic life to be protected. Just as its American patron was settling into an apparently protracted decline, the Japanese client of US dollar dominance reached the zenith of its decades-long “economic miracle.” The same conditions that propelled debate in the US—the Cold War’s end—paradoxically foreclosed the possibility for industrial policy’s fruition. By knocking down walls between “Western” allies, the Cold War triumphalism of the early-1990s freed corporations to search for new capital and labor markets overseas, to complete the integration of the “free world” which had been the raison d’etre for earlier Cold War protectionism.
Paths not taken
The key moment of advance for these trends, according to Lichtenstein and Stein, was the development of the federal budget in the Clinton administration’s first year. Prominent figures such as Robert Reich and Laura Tyson urged an injection of fiscal stimulus into the fatigued post-recession economy in the form of government spending. Robert Rubin, the urbane Wall Street arbitrageur whom Clinton appointed successively as director of the newly-formed National Economic Council and as secretary of the Treasury, countervailed against this proposal by emphasizing the importance of deficit reduction through “constrained social spending and higher taxes”—fiscal austerity. Rubin’s supporters included, crucially, the Reagan-appointed Federal Reserve chairman Alan Greenspan, a staunch proponent of financial deregulation.
President Clinton’s 1993 decision to support Rubin’s program of deficit reduction over the Reich-Tyson program of expenditure expansion proved significant. But this was not primarily because it encouraged social-policy austerity. (Indeed, Rubin himself later opposed the president’s most maligned act of such retrenchment, 1996’s welfare reform.) Rather, Lichtenstein and Stein argue, it proved a significant intervention on the landscape of American political economy because it restricted the scope of future public investment in economic development. The decision to prioritize deficit reduction in 1993—in the wake of the 1990–1991 recession that had helped get Democrats elected—rearranged the zone of long-term political decision-making about a changing US economy away from investment in “reindustrialization” and towards investor “confidence.” These political conditions were conducive to the policies of the later 1990s and early 2000s that continued the shift of capital towards finance and real estate.
Reform-minded Atari Democrats had spent the 1980s dreaming of an economic future that would consist of a high-tech upgrade for postwar America’s glorious industrial apogee. The most significant workforce shift of the 1980s and early-1990s, however, was not into “sunrise” manufacturing, but rather into lower-paid, sometimes precarious, often nonunionized service sectors. The Clinton Administration’s ambitious 1993 healthcare reform program was crafted with an eye to business support from blue-chip industrial firms such as IBM, Kodak, and the Big Three automakers. Such support was undercut when major business groups like the US Chamber of Commerce realized that under-unionized employers in retail, hospitality, and other services were now more significant corporate constituencies. (Ironically, the biggest fish in this new corporate pond, Walmart, came from Clinton’s home state.) Greasing the investment wheels turning this industrial and occupational restructuring was the Federal Reserve, whose chairman Alan Greenspan cherished the appreciating values of financial-sector speculation that culminated in the dot-com bust and Enron.
Even critical historians like Lichtenstein and Stein contend that the shift towards a financialized and globalized economy was, ultimately, beyond the ability of any single presidential administration to control. They describe the post-Cold War lure of offshoring and financialization as “nearly irresistible.” The Clinton Administration’s surrender to this trend, against its once-ambitious vision for industrial policies and managed growth, is symbolized by the passage of the North American Free Trade Agreement (NAFTA). One of Clinton’s most controversial achievements, NAFTA remains a popular scapegoat for manufacturing-job loss among both resurgent leftists and the populist Right. NAFTA’s manufacturing-employment debit was modest; on average, perhaps around 40,000 jobs per year between 1994 and 2010. (China’s inclusion into the WTO, initiated by Clinton and completed by George W. Bush, delt a larger hit.) But NAFTA’s political impact was crucial: it hastened a slow-moving separation between the Democratic Party and electorally-significant working-class voters in the Rustbelt and the South. After NAFTA, Democratic policymakers essentially abandoned efforts to protect domestic employment in the productive economy.
A long shadow
The Biden Administration has returned to the quest for American industrial policy, rediscovering Atari Democrats’ propensities of the 1980s–1990s. These include a priority on high technology, attention to geopolitical rivalry’s political-economic dimensions, and using the government for developmental investment. But to an extent with which Lichtenstein and Stein do not fully engage, the liberal advocates of the 1980s–1990s failed to build an actual political constituency for their vision of industrial policy and “managed capitalism.” Industrial policy remained, from the early 1980s through its reflorescence in the early 1990s, an overwhelmingly elite preoccupation. Outgoing president Joe Biden may have essentially recapitulated this exact political failure, despite his wining of investment legislation that failed in earlier phases of industrial-policy thinking. A cohesive policy jigsaw requires a component of popular support. This is especially true when individual pieces—such as every major economic policy win of “Bidenomics”—are long-term investments with only piecemeal short-term gains for ordinary voters.
The beginning of an answer to Hillary Clinton’s 2008 question lies in these terms. Already apparent when she asked it then, there is today neither the peace nor the perception of prosperity that propelled liberal Democrats through the 1990s. Our living political context ought therefore to inform the emerging scholarly reappraisal of the decade. The “end of history”—whether meant in its bowdlerized sense as an evocation of triumphalism or more accurately as a period of historical resolution—has been rethought. While the 1990s were an era of enormous doings, it was also an era in which political liberalism’s enduring popularity fell apart. In 2024, Democratic policymakers find themselves standing at the edge of another, strikingly similar, lost opportunity.
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