Sunday, August 23, 2009

The Man Who Poured America Down The Drain by William Kleinknecht

The appeal of Ronald Reagan to certain segments of the country is no mystery. America was deeply paranoid and insecure in the late 1970's, a time when oil shocks and resulting stagflation had threatened American prosperity to a degree not seen since the Great Depression. The invasion of Afghanistan by the Soviet Union and the seizure of the American hostages in Iran made us fear for our ability to stave off our enemies in a dangerous world. The economist Robert Heilbroner wrote of those years that "a great national illusion was gradually destroyed- the illusion that an invisible sheild surrounded the United States that held at bay the brutalities and irrationalities that seemed to be part of the life of other nations, but not our own."

Reagan was the perfect antidote to this gloominess and uncertainty. He seemed to personify the confidence and elan of America's past. It hardly mattered that he was misrepresenting that past as a laissez-faire utopia. What was important- at least to the 27 percent of eligible voters who pulled the lever for him in 1980, a year with record low turnout at the polls- was the intensity of his convictions. Such assuredness has deep resonance in American history. It is indeed the central; tenet of the only important American-bred schjool of philosophy, pragmatism, which emphasizes basing one's actions and ethics on personal experience rather than an abstract search for the truth. "The true", wrote William James, "is the name for whatever proves itself to be good in the way of belief, and good, too, for definate and assignable reason'. In his famous essay Self-Reliance, Emerson had provided the foundation for pragmatism: "To believe your own thought, to believe that what is true for you in your private heart is true for all men- that is genius."

It is axiomatic that great men bend history to their will, and that the peculiarities of their own psychology, or their understanding- warped or not- of long-dead philosophers, can become the dominant ethos of an age. It is no less certain that the masses are more easily swayed by appeals to the emotions than to their intellects. Even a humanist like the theologian Reinhold Niebuhr could fault liberalism as "the gray spirit of compromise", lacking the fervency and power of myth. "Liberalism", he wrote, "is too intellectual and too little emotional to be a force in history."

But the genius of James and Emerson, while inspiring as philosophy and edifying to the individual in search of self-esteem and self-justification, while potentially electrifying on the campaign stump, is not necessarily a recipe for sound government or stewardship of something so complex as the American economy. In public policy, as in science, there are truths and there are untruths, and the wrong actions have dire consequences.

It has proven untrue that deeply slashing income taxes promotes investment and creates an increase in tax revenues; it has proved disasterously untrue that deregulating the financial sector benefits the consumer; it has proved tragically untrue that abandoning social-welfare spending and locking up millions of young black men solve the problems of the inner city.

The fervency with which Reagan believed these things, and the riches they brought to certain Americans, did not make them true.

Our nation was founded on the principles of the Enlightenment, the idea of a society based on reason, democracy and social contract, not on the perquisites of monarchs and aristocrats. The Progressive Era and the New Deal rested on those principles. They brought intellect to bear on the most serious problems of society. Reaganism replaced Enlightenment thinking with a corrupted Romanticism that portrays free-market purism as an article of religious faith that is the real meaning of America. The answer to any of the economic challenges of the twenty-first century is to do nothing. Cut taxes, eviscerate all regulation of private enterprise, and trust the market to guide our fates.

With Reaganism has come an abandonment of all faith in reason and progress, and it has accrued manifestly to the detriment of the average American. It is the fate of that common lot of humanity that is the subject of this book.


  1. What had brought the steel industry so low was a paucity of investment in new technology. American firms had fallen behind their overseas competitors in modernizing plants so they could produce more efficiently and compete in the market for specialty steels. The salvation of American steel, as with other heavy manufacturing, lay in innovation, not in wage concessions and environmental deregulation...When Reagan imposed restrictions on steel imports in 1982, he justified the move by complaining that European governments were unfairly aiding their steel companies with public subsidies, including direct funding of capital. The corollary of that finding should have been obvious:government subsidies could also be effective in boosting the competitiveness of heavy industry in the U.S.

    "Regulatory rollbacks will not restore America's industrial edge since regulations are demonstratively not responsible for American industry's competitive decline", wrote Robert Reich at the time.

    But Reagan and his aides mocked any notion of an industrial policy as creeping socialism. Instead, through tax policy and deregulation of finance, they subsidized mergers, speculation, and paper entrepeneurism, which generated fortunes on Wall street but did little to invest in America's industrial future.

  2. Although restrained by Congress from eliminating key regulatory agencies altogether, Ed Meese, Reagan's ideological gatekeeper, injected himself into the hiring of key regulatory officials. This scutiny worked. In short order, The Environmental Protection Agency, The Occupational Safety and Hazard Administration, The Consumer Product Safety Commission, The Mine Safety and Health Administration, the Food and Drug Administration and a host of other regulatory agencies (including the IRS) cut their staffs and curtailed their enforcement.

    No spectacle, of course, was a more potent symbol of the irrationality that Reagan did so much to create than the collapse of Enron. That is, before the sub-prime mortgage meltown.

    Where was the Security and Exchange Commission while this free-for-all on Wall Street was reshaping the corporate map.? Where was the Federal Energy Regulatory Commission, The Federal Trade Commission, the Justice Department Antitrust Division or all the other agencies whose job it is to protect citizens from corporate thievery? They were fulfilling the promise of Reagan and his Millionaire Backers. They were letting the market work its magic.

  3. Under pressure from powerful lobbyists, Congress blocked the passage of the Federal Trade Commission's budget and then passed legislation stripping the agency of its power to regulate children's advertising.

    As discouraging as this was for the growing coalition of children's advocates, which included the American Academy of Pediatrics, The National Congress of Parents and Teachers, the Consumer's Union and the Child Welfare League, far worse was to come.

    With the inauguration of Ronald Reagan, any notion of protecting children from irsesponsible television advertising was driven out of Washington. Not only did the FTC kill its investigation of children's television in 1981, but none of the data collected during three years of fact finding were ever published. In 1983 all limitations on the duration and character of commercials in children's programming were thrown out. Mark Fowler, Reagan's chief at the FCC reported that "The marketplace will take care of children."

  4. By the end of Reagan's two terms, 138 members of his administration had been convicted, indicted or investigated for criminal activity, a record of graft that far surpassed even the Nixon, Harding and Grant Administrations......

    In his stump speeches Reagan never mentioned his real plans for the country; the selling of national parks, tax cuts skewed toward the rich, deregulation of the finance industry, the gutting of environmental enforcement, or the promotion of unproductive mergers betwen companies. Instead, he spoke broadly of attacking big government and focused on the "wedge issues" , principally race, in coded phrases like "welfare queens", "state's right's" and "affirmative action"...

    You get the picture, the litany of complaints is extensive. Based on his decade-long experience as the public spokespman for G.E., one of Edward Bernay's original clients, Reagan made Public Relations the first priority of the American Presidency. It has remained so ever since.

    In many respects, however, Reagan simply set the stage for far worse things to come, from both sides of the partisan isle.

    His unreconstructed legacy is a huge obstacle to any kind of reform or change, despite the brief note of optimism the author expresses in the very last sentance of this book

    "The Man Who Sold The World; Ronald Reagan and The Betrayal of Main Street America", by William Kleinknecht; Nation Books,N.Y., 2009

  5. The author is a veteran reporter for the Newark (N.J.) Star-Ledger, which placed him in the optimum position to witness the devestating effects of Reaganomics. He also visited Reagan's home town of Dixon, Illinois whose numerous monuments to the dead President do not conceal the ruin there either.

    Edward Bernay wrote that the masses of people were like cattle whom it is possible to "control and regiment according to our will without them knowing about it."

    As far as I can see Obama has not clearly reputiated one iota of Reagan's "magic market" formula, which belies the hope the author expressed in the last sentance of his book.