Things Done Changed: America in the ‘90s

Chapter Five: Agreeing to Disaggregate

While the American political system during the 1990s was hardening into deep, often paralytic dysfunction, it was in fact the remaining agreement in Washington that threatened the stability and cohesion of the country as much as the rancor. It was true that the cultural and racial divides were forming two increasingly distinct Americas, each now with its own political party and, as the decade proceeded, its own divergent media environments. A new sort of foreignness marked partisan opponents in Washington and their constituent bases at home. But despite that growing enmity in Washington, a newly emerging bipartisan consensus would do much to alter what it meant to be a citizen. The new bipartisan orthodoxy being constructed under President Bill Clinton meant that the traditional role of the nation-state was changing such that it would mean less to be an American.

The ’90s saw the agreement reached in Washington to pursue neoliberalism as a shared, bipartisan project. Neoliberalism might be best understood as capitalist fundamentalism, the theory that the capitalist market is always the better arbiter of citizens’ fates than state action. The power, agency and extension of the state must be reduced, according to neoliberal theory so that capitalist market forces be allowed to best allocate resources and generate growth. To the neoliberal mind, the vast social functions still overseen and managed by the state — education, war and defense, social security, elderly health care, children’s nutrition, etc. — must be opened up to market forces and the profit motive. Even state sovereignty itself was seen as an impediment to efficient capitalist progress, and the new orthodoxy called for a “borderless world” where transnational capital would not be subject to the borders that separated one sovereign nation from another.

The decade’s neoliberal turn sought, then, to minimize the state in two ways: to diminish the state by reducing or limiting social welfare functions (Medicare, Social Security, Medicaid, food stamps, etc.) and to minimize the authority and sovereignty of the state by reducing the importance and efficacy of borders vis-a-vis capital. At the projected end of the neoliberal program the state is neither able to protect its citizens from the vagaries of globalized capitalism with meaningful borders, nor is the state able to protect its citizens with social services to buttress them against the newly fierce economic winds. The citizen in the neoliberal circumstance may lose her job to a worker across the globe, and her home country (such as that expression continues to make any sense) is now unable (or even unallowed) to provide the help the old social democratic model afforded: food, health care, unemployment insurance, etc. The longstanding, fundamental relationship of citizen and state irrevocably changed.

In the future “there will be no national products or technologies, no national corporations, no national industries,” wrote Harvard political economist Robert Reich in his 1991 book Work of Nations. “There will no longer be national economies,” he continued, “at least as we have come to understand that concept.” Reich was a friend of then-Arkansas governor Bill Clinton and would later join the incoming president’s cabinet in 1993. Clinton was seen as an early adopter of this new way of conceiving of the world under globalized capitalism. His first National Security Advisor, Anthony Lake, would later say about Clinton: “Right from the start, in fact, he understood something that none of us foreign policy nerds did, and that was what later became called globalization…. [He] loved talking about the connection of economics and politics and the lessening importance of borders. He understood this in a way that none of us did.”

The new world Reich described for his readers, Clinton most important among them, was one where globalized capitalism would not only erase much of the power of borders that distinguish nations but would also create new internal divisions inside of countries:

All Americans used to be in roughly the same economic boat. Most rose or fell together, as the corporations in which they were employed, the industries comprising such corporations, and the national economy as a whole became more productive — or languished. But national borders no longer define our economic fates. We are now in different boats, one sinking rapidly, one sinking more slowly, and the third rising steadily.

It’s clarifying, since we don’t live in metaphorical boats, to replace the word “boat” in the passage with “country,” since the nation-state is the unit of analysis in Reich’s work:

All Americans used to be in the same country. Most rose and fell together…But national borders no longer define our economic fates. We are now in different countries, one sinking rapidly, one sinking more slowly, and the third rising steadily.

Clinton mobilized his White House to address this new global economic reality, forming a brand new executive council modeled after the National Security Council (NSC), a Cold War fixture since 1947. Clinton inaugurated the National Economic Council (NEC), continued by every president since, to coordinate economic policy in the way the NSC operated in the domain of war. Where a military-minded individual was chosen to lead the NSC as National Security Advisor, Clinton selected as inaugural chair of the NEC Robert Rubin, who left his position as an executive at Goldman Sachs to steer the new economy. It was appropriate that Rubin, fresh from Wall Street, joined the White House at a time when 12 years of deficit-spending (i.e., borrowing) from presidents Reagan and Bush now meant that powerful investors in the bond market now had a place at the table when it came to fiscal decision-making in Washington. “The U.S. government’s huge debt and the resulting clout of bond investors here and abroad means that the seat of economic power, once firmly rooted in Washington, will to a greater degree than ever also reside in New York, London, Frankfurt and Tokyo,” reported the Los Angeles Times just weeks after Clinton’s election in 1992. “Thousands of bond owners and portfolio managers around the world also will have a collective influence — some economists even say veto power — over the Clinton Administration’s policy choices.”

Federal Reserve chairman Alan Greenspan made these threats real in a meeting with Clinton just days into his presidency. Greenspan, whose Fed set interest rates, put the new president “in a vice,” according to Reich, and demanded fiscal austerity in return for keeping interest rates low and fueling the ongoing economic recovery. Reich recalls: “Alan Greenspan was saying essentially this: ‘Unless you dramatically cut the budget deficit, we are not going to reduce short-term interest rates, and if we do not cut short-term interest rates this economy is going nowhere. The price that you must pay for us cutting short-term interest rates and getting this economy moving is that you’ve got to sacrifice your beloved investment agenda. There was nothing that [Clinton] could do.”

Greenspan, a free-market fundamentalist who credits his longtime friend Ayn Rand for much of his thinking, was serving the financial markets’ pre-veto on Clinton’s more ambitious domestic investments. Counseled by Reich, part of Clinton’s plan had been to combat the borderless competition of globalized capitalism with investments in what might be thought of as the nation’s fixed assets (e.g., education, health care, infrastructure) to protect Americans from the bitterest winds of what was otherwise an international “race to the bottom.” And while Clinton’s planned investments may have been insufficient to the task of fully fortifying citizens against the global economy, those plans were effectively foreclosed on in the first weeks of Clinton’s tenure.

This did not dissuade Clinton from ratifying the “free trade” tradition of the previous Republican administrations and ushering the Reagan/Bush-era North American Free Trade Agreement (NAFTA) to passage and enactment, creating the largest economic trading bloc in human history. Very suddenly, workers in the U.S. were in competition with low-wage workers just across the border in Mexican maquiladoras, while Mexican farmers were run out of business by a tidal wave of American corn from federally subsidized mega-farms in the U.S. The new globalizing economy meant that Reich’s words were coming true; the financiers and CEOs in Mexico City shared as much, or more, in common with their counterparts in New York City than their countrymen in their respective nation-states.

Everything was getting scrambled. Mexican revolutionary Subcomandante Marcos, whose Zapatista rebellion was launched on January 1, 1994 to coincide with the enactment of NAFTA, wrote about the “paradox” of neoliberal, globalized capitalism and how “while ostensibly working to eliminate frontiers and ‘unite’ nations, it actually leads to a multiplication of frontiers and the smashing apart of nations.” When the Zapatista peasant army struck against the Mexican government to carve out an autonomous region in the southern state of Chiapas, Marcos said of the Mexican national government: “We found it didn’t exist; it was finance capital.”

Finance capital has the “power to erase geographical borders,” boasted the Wall Street investment bank Merrill Lynch in a full-page the investment firm took out in the nation’s biggest papers in the late ’90s. Merrill Lynch was a massive player in the bond market that the Los Angeles Times reported having “collective influence — some economists even say veto power — over the Clinton Administration’s policy choices,” and while financial capital may have had the power to erode national sovereignty and erase national borders, new, more intricate borders internal to the formerly distinct nation-states would proliferate. Subcomandante Marcos, perhaps the era’s foremost practical theorist on neoliberal global capitalism described how it led to “fractures within the nation-state,” a “fragmented world of isolated pieces, a world full of watertight compartments which may at best be linked by fragile economic gangways.”

If neoliberalism began to dissolve the nation-state externally by erasing the borders that distinguish one from another, it also began an internal erosion of the social compact, that which connects each citizen with the center and with each other. This, too, became elite bipartisan consensus during the Clinton ’90s. President Clinton again ratified the rightward move of his Republican forebears on this front, adopting the position that social welfare programs needed to be dismantled, privatized or greatly diminished. Clinton promised to “end Welfare as we know it” and “reinvent government” and made the shrinking of government a central pillar of his candidacy. After fulfilling his promise to end the New Deal program Aid to Families with Dependent Children (AFDC, more commonly known as “welfare”), Clinton even joined in secret talks with Republican Speaker Gingrich to begin privatizing Social Security in the president’s second term.

But the bipartisan consensus being formed during the decade was not limited to the domestic sphere. Foreign policy, and especially Washington’s Middle East posture, saw an almost seamless transition from Republican to Democratic commanders in chief. The long war for control of the Middle East, begun in 1990, would continue uninterrupted during Clinton’s eight years and accelerate toward the worse conflagration to come.

Writer — bylines at Salon, Alternet, McSweeney’s, Flagpole Magazine