This morning for our Summer Sunday Reading Series, I am sharing a chapter from my book Dangerous Memories: Coming of Age in the Decade of Greed.
It takes us back to the reactionary political revolution of the 1980s where the stage was set for the world we are living in today.
Forty years later we are living with the consequences.
The anger, alienation and economic insecurity that helped create the
political world of Donald Trump did not come out of nowhere.
I hope you enjoy.
Operation Break the Working Class
As 1980 dawned, I had a simple plan—quit school, play in a band, and
get a job. Except in 1980 there weren’t many jobs out there. The older brothers of some of my friends said that the best way to make good
money was to get hired at a factory or warehouse. The suburbs of
Toronto were built around a multitude of industrial operations, such
as the General Motors van plant and the numerous factories along Scarborough’s Golden Mile. But those factories weren’t hiring. Many
were closing.
Since the mid-1970s, Toronto had been undergoing a major wave of deindustrialization as garment factories, slaughterhouses, and
warehouses closed. Empty factories and warehouses dotted the neighbourhoods of Riverdale, the Junction, Liberty Village, and the
garment district along Spadina Avenue. Blue-collar Toronto was disappearing, and this led to a plethora of opportunities for young
artists to renovate loft spaces.
Lorraine Segato of the feminist band Mama Quilla II (and, later, the
Parachute Club) moved into the heart of the emerging Queen Stree
t arts scene because she could afford to rent a large loft for $266
a month. “Artists originally moved into those derelict buildings as
a result of the recession,” she told an interviewer in 2016.
I was anxious to get out of my parents’ house in Scarborough and
join this exciting world that was emerging. But the only jobs to be
had were washing dishes or taking dodgy commission gigs
hustling magazine subscriptions and vacuum cleaners door-to-door.
There was no point calling the want ads. Nobody ever called back.
So I put on a skinny black tie and went downtown, stopping in at
every restaurant and shop to ask if they were hiring. This went on
for weeks.
I didn’t comprehend that I was coming of age during the bleakest
economic crisis since the Great Depression. It was bad across
Canada and even worse in the United States, where a huge number
of steel mills, garment factories, and manufacturing plants
closed. Millions of well-paid union jobs were gone forever.
The crisis created a panicked race to the bottom, as workers who were
still hanging on were given the untenable option of accepting wage
cuts and the erosion of benefits or seeing their employment disappear altogether.
But there was a major difference between the job crisis of 1980 and
the Great Depression. In 1929, the world was hit by an unexpected economic collapse that defied the understanding of politicians and economists. In 1980, however, the economic shock was planned
at the highest level, and it had the fingerprints of
Milton Friedman all over it.
You can name all the people who personified the excess or the
austerity of the 1980s—Ronald Reagan, Margaret Thatcher,
Madonna—but it was Friedman who defined the era. On
January 1, 1980, he and his wife Rose Friedman released
a provocative manifesto called Free to Choose:
A Personal Statement.
A little more than a week later, he followed it up with the launch
of a syndicated weekly television series extolling his simple
message: government is bad; capitalism is good. Get
government out of the way and the natural order of the universe
will be restored by the magical “invisible hand” of the market.
It was a form of economic fundamentalism based on the pseudo-scientific
claim that an economy driven solely by greed and those with the most
money is the natural order.
Friedman was the key spokesperson for the Chicago School,
a group of economic counter-revolutionaries who pushed this fundamentalism to its hardest conclusion. They openly
challenged the economic consensus on which the post–World
War II economy had been based: that a balance of public
and private interest was essential for creating a prosperous
society.
Instead, they argued that the only business of business was to make
as much money as possible, with none of the hindrances of
social responsibility. Democratically elected governments needed
to be limited to the function of providing tax breaks for the wealthy
while cutting public spending and stripping regulations.
This was a total repudiation of the factors that had made the great
economic miracle of postwar North America possible. The
American labour movement tagged the birth of the
twentieth-century middle class to the famous sit-down
strike by autoworkers in Flint, Michigan, in 1936–7.
The strike galvanized workers across the country and signalled
an end to the days when the working class would accept precarious
employment and low wages. The subsequent union victories were
backed up by the progressive idealism of President Roosevelt’s
New
Deal, which put in place a slate of public programs to guard agains
t a repetition of the economic disaster of the Great Depression.
The improvements for blue-collar workers could be easily
measured—strong wages and solid pension plans. The
working class achieved unprecedented social mobility as
workers gained the ability to own a house, send their children
to university, and retire with dignity.
The postwar era represented the golden age of American life
and social advancement, but Friedman derided this economic
miracle as the road to “tyranny and misery.” His attack on the
New Deal, government investment, and workers’ rights made
him a fringe economic figure for much of the 1960s and early ’70s.
But in 1975, Friedman was given a chance to try out his
theories when he was invited to give advice to Chilean
dictator Augusto Pinochet. It is ironic that Friedman’s experiments
in “economic freedom” were undertaken against a backdrop of
brutal repression and terror that came in the wake of the
cia-manufactured coup.
And the experiments didn’t go well.
Under Friedman’s direction, Chile’s economy went into free fall.
Inflation spiralled to 375 percent, and more than 177,000 jobs
were lost in the manufacturing sector between 1974 and 1983.
Both the middle and working classes suffered a huge loss of
economic stability.
The Chilean upper class, however, viewed Friedman as a miracle
worker, because his economic policies resulted in a massive
transfer of public assets into the hands of the super-wealthy. In
her book The Shock Doctrine, Naomi Klein writes:
“Chile never was the laboratory of ‘pure’ free markets that its
cheerleaders claimed. Instead, it was a country where a small
elite leapt from wealthy to super-rich in extremely short order
—a highly profitable formula bankrolled by debt and heavily
subsidized (then bailed out) by public funds … Chile under Chicago School rule was offering a glimpse of the future of the global economy … a huge transfer of wealth from public to private hands, followed by a huge transfer of private debts into public hands.”
Friedman saw an opportunity to import these extreme methods to
the United States. The New Deal cooperation between labour,
big business, and government had been severely weakened by
inflation, economic stagnation, and the dramatic energy price
shocks that came as a result of the 1973 Arab-Israeli war.
On top of this, North American manufacturing was being forced
to contend with Asian competition, and they were losing.
By the late 1970s, there were a number of corporate leaders
and politicians, such as Ronald Reagan, who thought the
United States was ready for the Friedman touch. “The tide
is turning,” Friedman wrote in his January 1980 manifesto.
“In the United States, in Great Britain, the countries of Western
Europe … there is growing recognition of the dangers of big
government … It is becoming politically profitable for our
representatives to sing a different tune.”
Friedman’s disciples knew full well that any attempt to introduce
the Chilean “miracle” to the US would face significant social and
political resistance. Their solution was audacious. They wanted
to force an economic crisis of the magnitude of the Great
Depression so that workers would have no choice but to
accept the Friedman solution.
The proposal was put forward by Friedrich Hayek founding father
of the Chicago School. Writing in the New York Times, he
promoted the notion of engineering an economic collapse
to create wage insecurity and restore the power of capital.
He derided American politicians for being too “afraid” to take
such an obviously destructive approach.
But there were those in power who saw the brutal efficacy
of Hayek’s proposal, and the plan was put into action in two
phases by Federal Reserve chairman Paul Volcker.
The first was an initial interest rate spike to 13 percent that hit hard
in January 1980. This sudden increase caused the economy to
stumble badly and led to a massive loss of jobs. Volcker followed
up with an even more severe shock in 1981, when he drove rates
above 21 percent.
The American economy went into a tailspin. People stopped
purchasing vehicles and appliances. Families defaulted on their
mortgages. Small and midsized companies were hollowed out and
left as easy pickings for the emerging face of mercenary capitalism
—the corporate raider.
Volcker knew exactly what he was doing. Speaking before Congress,
he laid out the strategy:
“The standard of living of the average worker has to decline.”
Volcker’s move was a punch in the face to unsuspecting blue-collar America.
In his book Reaganland, Rick Perlstein notes that “elite opinion was largely ecstatic” about the “radical shock treatment” being used to teach American workers their true place.
But interest rate hikes were only the first part of this shock to the system.
The second was political. And unionized workers were completely unprepared for the destructive forces that were suddenly being turned on them.
In 1981, the Professional Air Traffic Controllers Organization (PATCO) went on strike. Newly elected President Reagan gave them a two-day ultimatum to return to work. He then fired more than 11,000 of these highly skilled workers in a single shot and blacklisted them permanently from being hired by the federal government.
The union movement was staggered by Reagan’s harsh penalty. Nothing like this had been done in the postwar world. Volcker was impressed. He believed that Reagan’s decision to publicly destroy such a powerful union was the most significant move in the battle to bring the working class to heel.
The obliteration of the air traffic controllers union was a signal to corporate America to begin the rollbacks of wages, security, and benefits—launching a full-scale attack on the unionized workforce.
These attacks on workers’ security took place amid widespread job losses. In 1980 more than 188,000 jobs evaporated at auto plants for the Big Three—GM, Ford, and Chrysler. The hit to the American steel industry was equally traumatic.
It had begun in the late 1970s, when steel mills began to close across the United States. In the face of these catastrophic job losses, heroic efforts were undertaken to create community-based economic alternatives.
When 50,000 steelworker jobs were lost in Youngstown, Ohio, two local Roman Catholic bishops—James Malone and John Burt—led a coalition of workers and church leaders to push for a community takeover of the immense steelworks.
The son of a steelworker, Malone personified the social-action bent of a generation of American priests who had come up in the age of the New Deal. He represented a fascinating and rare moment in the American Catholic Church when religiously conservative Church officials worked with and protected union organizers.
Even in the paranoid anti-Red McCarthy era, the powerful Chicago Catholic archdiocese had given political cover to the left-wing Jewish community organizer Saul Alinsky because of his ability to improve lives for the Catholic working class. Malone was one of those bishops inspired by Alinsky’s radical grassroots activism.
Youngstown could have been a symbol of American resilience and community spirit, but Democrat and Republican legislators preferred to let the immense industrial tools in Youngstown turn to rust than allow worker control of America’s industrial engine.
Bruce Springsteen summed up the bitterness of this political betrayal in his song “Youngstown,” in which he lamented that the “big boys” (politicians and capitalists) were able to destroy the arsenal of American democracy in a way that Hitler never could.
What was happening to communities like Youngstown and workers across the United States could be called Operation Break the Working Class. It was a broad policy to undermine worker confidence by destroying the capacity of organized labour to offer resistance.
This took place in tandem with a large transfer of wealth to the financial elite. Reagan’s first budget represented a giveaway of more than $750 billion to the super-rich in a mere five years. This drove the federal debt to $2.8 trillion and turned the United States into the world’s largest debtor nation.
At the same time, Reagan cut basic services to the underclass such as the food stamps program.
But the lasting impact of “Reaganomics” came from the full-scale attack on the regulations and protections that had maintained the economic balance in postwar America. Key to this was stripping the oversight governing America’s financial and banking sector.
The result was a flurry of high-risk borrowing and speculation. It brought an unprecedented flood of wealth to financiers but the working and middle classes paid the price. The market was soon flooded with junk bonds and risky debt leveraging that led to a series of financial disasters.
The Savings and Loans Crisis of the late 1980s was a direct result of this casino economy. Banking deregulation had created a culture of increasingly reckless financial speculation in the historically prudent savings and loans industry.
In a few short years, the industry suffered an unprecedented collapse that wiped out a third of the savings institutions where millions of Americans held their mortgages and family savings. Taxpayers were stuck with paying a $132 billion bailout to cover the collapse.
This was nothing compared to the 2007–2010 subprime mortgage crisis that obliterated the savings and home ownership of millions. This later crisis can be directly traced to a Reagan-era scheme that allowed speculators to gamble and offload bad debt in the form of a derivative known as a credit default swap.
Looking back more than forty years, we can see how the Reagan/Friedman counter-revolution dramatically altered the entire social, economic, and political landscape of the United States. As author William Kleinknecht writes:
“The bitter legacy of Reaganism—the subprime mortgage scandal, the near collapse of the financial system, widening income inequality, the emergence of Lockdown America, the obscene inflation of ceo compensation, the end of locally owned media, market crashes, blackouts, drug company scandals, rampant greed and materialism—is all around us.”
Such clarity is often obscured amid the toxic political rhetoric and disinformation of a nation increasingly defined by red state/blue state culture wars. Dangerous memories of the real history are sorely needed. And the statistical data is indisputable. Across all economic indices, American workers have faced a shocking level of lost opportunities over the last four decades.
A 2020 study by the Rand Corporation undertaken to identify the links between economic disparity and political instability of American life in the twenty-first century found massive losses to workers since 1980.
For example, in 2018, a working-class Black man was making $26,000 a year less than he would have been paid if the income patterns prior to 1980 had held constant. A college-educated worker earned between $48,000 and $63,000 a year less.
The authors of the Rand Report tracked these lost wages as a direct conduit to the bank accounts of the 1 percent. They valued the loss of income for every worker as $1,144 a month, for every year over the last four decades. The final price tag for this looting of the American worker comes to $50 trillion in accumulated lost wages and benefits.¹
There is nothing natural about this wage theft.
Operation Break the Working Class has created a generation of billionaire oligarchs through the stolen wages of the American working class.
Donald Trump was an early symbol of the excess and narcissism of the Reagan revolution. It is a bitter irony that this huckster was able to feed on the alienation and anger of those who had watched their own economic security disintegrate because of the so-called Friedman miracle.
There is a direct line from this “miracle” to the nightmare we are living today
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