Race and the Origins of American Neoliberalism

Randolph Hohle

• Publisher: Routledge
• Year: 2015
• ISBN:
  9781317565543
• Edition: 1
• Topic: Social Sciences
• Subtopic: African American Studies
• Index: Social Sciences

Why did the United States forsake its support for public works projects, public schools, public spaces, and high corporate taxes for the neoliberal project that uses the state to benefit businesses at the expense of citizens? The short answer to this question is race. This book argues that the white response to the black civil rights movement in the 1950s, '60s, and early '70s inadvertently created the conditions for emergence of American neoliberalism. Neoliberalism is the result of an unlikely alliance of an elite liberal business class and local segregationists that sought to preserve white privilege in the civil rights era. The white response drew from a language of neoliberalism, as they turned inward to redefine what it meant to be a good white citizen. The language of neoliberalism depoliticized class tensions by getting whites to identify as white first, and as part of a social class second. This book explores the four pillars of neoliberal policy, austerity, privatization, deregulation, and tax cuts, and explains how race created the pretext for the activation of neoliberal policy. Neoliberalism is not about free markets. It is about controlling the state to protect elite white economic privileges.

1
Introduction

American capitalism changed in the second half of the 20th century. Lyndon Johnson’s Great Society programs did not eradicate poverty. The United States’ decoupling of the dollar from gold did not create global financial ruin. The world was not starting to flatten out.¹ History was certainly not beginning to end.² Nevertheless, by 1979, a definitive and identifiable shift in national political and economic policy began to crystallize into a coherent political project. Income taxes and anti-poverty program budgets were drastically slashed. The Federal Reserve abandoned its focus on reducing unemployment and focused on curbing inflation. The federal government changed the rules that governed the banking and financial sector in place since the financial collapse of 1929. To stimulate a nagging economy that introduced the term “double dip recession” to the public, the US increased their military budgets while emphasizing the need to keep state budgets small—a contradiction made possible by an American public ever so weary of the size of government. Scholars have differed on what to call this political project. Some have called this the “Washington Consensus” to highlight how the US forced developing countries to accept structural readjustment agreements over budgets and privatize national industries, which increased the US’s indirect control over Latin American economies.³ Others have used the term “market fundamentalism” to explain the devout belief in the power of the market to solve problems, dictate government policy, and define human worth.⁴ The term used most often to characterize this political project is “neoliberalism.”

Neoliberalism is the political project designed to create the conditions for capital accumulation based on the upward distribution of resources, and an ideological adherence to meritocratic notions of individual success and personal responsibility. The main neoliberal policy preferences are privatization, austerity, tax cuts for the wealthy, and regulatory changes to benefit a handful of elites and market sectors. The term neoliberalism characterizes how it profaned classic liberalism used to define liberal economics and liberal democracy.⁵ Two things are clear about neoliberalism. Neoliberalism is simply not an economic project, and the results have been disastrous for those of us not fortunate enough to reside in the top 1%, 5%, or even 10%. Neoliberalism is a stubborn and resilient political project. Proponents of the neoliberal project are not shaken by its inability to deliver economic gains. Nor are they shaken by its tendency to create economic crises.⁶ Despite financial crises in 1987, 2001 and 2008, ongoing and increasingly numerous recessions throughout the 1980s, 1990s, and 2000s, the belief in the neoliberal project persists, and in some conservative political circles, it gets stronger. It is as if the response to the problem that tax cuts produce budgetary crises rather than economic growth is, well, taxes were obviously not cut enough, so you need to cut them more. Therefore, neoliberalism’s resiliency is not rooted in economic growth, stability, or its ability to solve macroeconomic crises. Which begs the questions: how did we get here, and why is neoliberalism so resilient? As I argue in this book, the short answer is race.

To understand the relationship between race and neoliberal policy, I return to the political struggles of the American south in the 1950s rather than 1979. The postwar period in the south was characterized by federal and state attempts to modernize the southern economy via the mechanization of agriculture, increased industrial production, and tax credits for companies. At the center southern economic and political transition was the black civil rights movement. The black civil rights movement’s struggle for civic inclusion changed the balance of southern political power between the agrarians, industrialists, and the liberal business elites. Prior to the civil rights movement, whites supported an expanded welfare state. It was an era of white populists, white progressives, and the white working class against business. The result was the New Deal, the Social Security Act, and large-scale public investment into infrastructure. As desegregation became a political reality, southern whites abandoned their support for public life and welfare state political projects. This made austerity, tax cuts, and privatization meaningful in white political circles that pushed for things like a progressive income tax and more money for public schools.

The white response to the civil rights movement inadvertently empowered the liberal business class and set the stage for the national neoliberal turn. The liberal business class led the white response to the civil rights movement. The liberal business class was comprised of bankers, insurance executives, and real estate elites. I classify the business class as a liberal business class because of their moderate racism and adherence to a liberal economic doctrine. Robert Corley defined their politics as “business progressivism” because they promoted “economic growth as the primary cure for all social ills, since all citizens theoretically would derive some eventual benefits from an expanding local economy.”⁷ The liberal business class did not support racial integration. They pressured locales to limit the amount of public violence against blacks, and led the efforts to minimally incorporate blacks into the local political economy. They used race to deregulate populist state constitutions and networked with the segregationists. The segregationists were primarily concerned with school desegregation. The fusion of the liberal business class and segregationists resulted from elite struggles to protect their white privilege. Although the liberal business classes were not as influential in state policy decisions as the agrarians, they were able to draw the segregationists to their side whenever race or a civil rights issue coincided with taxes or undesirable regulations. George Wallace’s presidential campaigns, northern anti-tax movements, and white anti-busing movements nationalized the neoliberal project in the 1970s. The fusion and overlap between the segregationists and liberal business classes brought middle class whites to the side of pro–business neoliberal policy. In the process, racial identifications became the moral backing necessary to legitimate neoliberal political and economic policy. The result was a normative political project whose legitimacy and raison d’être is rooted in a culture embedded with race. The pretext for the neoliberalism was forged in the postwar south.⁸

The existing explanations of why the United States made the neoliberal turn have focused on the crisis of capital that weakened the Keynesian model of welfare states, the 1973 oil embargo, and the role of economists and national politicians.⁹ The crisis of capital was stagflation in the 1970s. Stagflation is an economic condition characterized by high unemployment and high inflation. Stagflation is an undesirable condition for the wealthy. Inflation erodes their wealth. Stagflation is also an undesirable condition for the middle class. High unemployment increases surplus labor and erodes middle-class wages. The 1973 oil crisis was the biggest culprit for stagflation. The 1973 oil crisis started when OPEC reduced the amount of oil available on the international market. This caused worldwide production to slow down, and prices to go up. Consequently, the economy began to stagnate. Stagflation placed enormous pressure on the state, which had to account for the escalating costs of running the state due to inflation and increased unemployment. Politicians, freshly empowered from the anti-property tax movement in California and anti-busing movements in the north, capitalized on the growing anti-tax sentiment of suburban homeowners, and pushed through a series of property tax cuts and passed legislation that capped how much money states could borrow. Economists like Arthur Laffer supplied a dubious social scientific theory without evidence to argue that cutting taxes would actually increase state revenue. By 1986, the highest tax bracket was reduced from 50% to 28% whereas the lowest was raised from 11% to 15%. The Environmental Protection Agency relaxed their systematic enforcement of the Clean Air Act in favor of a case-by-case review of pollution violations. Banking regulations were changed to give investment banks advantages over commercial banks in 1999. The era of privatized retirement, privatized healthcare systems, and more tax cuts for the wealthy was in full swing by the 2000s.

Although 1979 is the pivotal coming out moment for neoliberalism, the national explanation better documents the key political actors involved in Washington than explains how the US got to the point that its citizens and both political parties embraced neoliberalism. The national explanation does not explain why whites, especially whites who found themselves in the middle class, turned their backs on the welfare state that benefited them in favor of narrow political agendas organized around an opposition to taxes, business interests over labor interests, and the devaluing of public amenities like schools, roads, healthcare, and social security. Rather than a national crisis of capital, the pretext to neoliberalism was found in changing racial relations between blacks and whites created by the success of the black civil rights movement. In other words, the black civil rights movement inadvertently created the conditions that made the neoliberal turn in America possible. There was no crisis in the welfare state in the 1950s and early 1960s, so the neoliberal pretext was not made in response to an economic crisis. The politics of neoliberalism is built on race rather than class.

As I will show throughout this book, class plays an ancillary role to race when dealing with US politics. Race plays a causal role in the American political system by coding and recoding political and economic preferences into categories of black and white. The most significant recoding of state policy was embedding black into public. This explains why an economic doctrine such as supply side economics remains popular in spite of evidence that tax cuts neither creates economic growth or an uptick in state revenues. Tax cuts are a form of upward redistribution policy that rewards the most economically advantaged groups. However, the middle class continues to support neoliberalism. Indeed, others have shown that support for neoliberal policies does not resonate with working-class whites.¹⁰ Neoliberalism is a middle-class thing. Except what it means to be middle class, what it means to identify as a member of the middle class is synonymous with what it means to be white.

The Language of Neoliberalism: White-Private/Black-Public

The language of neoliberalism was the result of the white response to the black struggle for civic inclusion. The language of neoliberalism is organized around the white-private/black-public binary. White-private defined the market and economic policy that benefited businesses as white and superior. The other side of this binary was black-public that defined public works and social services for the marginalized as black, and thus, inferior. The language of neoliberalism reordered and fused the signified meanings of white, black, public, and private. The signified meanings are the culturally prescribed meanings to words, images, bodies, and policy. The process of black civic inclusion changed the meaning of public as parts of public life became desegregated, thus, fusing with the meaning of public with black. Black-public began a sequence where neoliberals could insert subsequent concrete policy proposals. For example, policy coded as black-public-schools, black-public-spending, or black-public-regulations, created a different meaning than white-public-schools, white-public-spending, and white-public-regulations. The white-public sequence was the pretext to support welfare state projects. The black struggle to desegregate public amenities prompted whites to selectively abandon support of public amenities in favor of private entities that could theoretically remain segregated. This fused white with private. White-private replaced white-public. The white-private sequence created a different meaning than white-public and black-public. Using the same example as above, white-private-schools, white-private-spending, and white-private-regulations has an entirely different meaning than either white-public or black-public. In turn, the white-private/black-public binary created the pretext to how whites perceived and valued public.

A racially integrated public means something different than a racially segregated public. By public, I include with state-funded entities designed to promote good citizenship like schools, libraries, and parks, as well as the regulations and sources of revenue used to fund public entities. Public spaces are sacred spaces in a democratic society. They represent an open and inclusive political life. However, integrated public space is avoided, abandoned, and subsequently closed. Private spaces were never integrated. The limit of the civil rights movement was that it could not pressure the state to address what is called de facto segregation, or, segregation that resulted from market forces. Because the market was never integrated, private maintained its sacred designation. Private became an end onto itself. The language of neoliberalism also defined the limits of neoliberal reforms. The neoliberals did not universally denounce all public aspects of the state as bad. They supported the use of public money for private development. The United States continues to have regulations, and the Social Security Act has survived to this day. But the Social Security Act, especially Old Age Insurance, reflects the deserving white worker. Therefore, the language of neoliberalism is activated when there is racial component to the policy because neoliberals need a bad black citizen to rally middle-class white support.

Race is a cultural and political construct that embeds positive meanings in associations with what it means to be white and negative meanings in what it means to be black, and codes normative political images, sensations, words, bodies and policy.¹¹ Racial connotations cannot simply be coded through color-blind racism because people can read codes.¹² Southern politicians did not universal...

Table of contents

• Cover Page
• Half Title page
• Series Page
• Title Page
• Copyright Page
• Dedication
• Contents
• List of Figure and Tables
• Acknowledgments
• 1 Introduction
• 2 “The American Viewpoint with a Southern Accent”: The Language of Neoliberalism
• Part 1 Taxation and Regulations
• Part 2 Fiscal Austerity and Privatization
• Conclusion: Resiliency and Resistance in the Neoliberal Era
• Appendix 1
• References
• Index