2

Liberal Capitalism: Retreat and Revival?

Surveying (and indeed living through) the postwar pattern of differential economic growth from within the UK may not have been as materially pleasant as surveying it from the safe haven of a more successful capitalist economy, but at least it awakened early a strong awareness that more successful capitalisms did exist elsewhere. Indeed for the last forty years at least, anyone following the public debate on economic performance in the UK was bound to know that capitalism came in a number of national 'models', and that the enhancement of economic performance required realignment behind a superior model of some kind. But capitalist modelling was not (and is not) just a UK disease. It is a tendency triggered everywhere by economic underperformance. So as the US economy lost world market share in the 1970s and 1980s, first to the leading European economies and then to the Japanese, a whole American literature emerged concerned with the 'coming battle' between differently organized economic blocs (Thurow, 1992) and preoccupied with the 'weaknesses' of liberal capitalist growth models. The parallel vulnerability of European economies to first American and later Asian competition had a similar effect on the volume of academic and public discussion in continental Europe, although there the main preoccupation lay with the commensurate competitive 'weaknesses' of more consensual or negotiated forms of capitalist organization (Albert, 1993; Lindbeck, 1985). Then, as we noted in chapter 1, as rising unemployment in the Swedish and German economies was joined by unexpected East Asian economic turmoil in 1997, more 'statist' forms of capitalism came under the critical hammer too, to enable the advocates of liberal models of capitalism of the US and UK kind to rekindle their confidence. In the process the strengths and weaknesses of particular models of capitalism became major political issues across the entire advanced capitalist world, and whole literatures emerged on the causes of economic underperformance in particular national contexts. It is with certain of those literatures that this and the next chapter are centrally concerned.

The erosion of the American dream?

The first economy with which any discussion of the rise and fall of postwar capitalist models has to deal is the US; and the first question it must address is the degree to which (if at all) it is still legitimate to talk of the US way of organizing economic life as being in any sense 'in decline'. As we shall see later (both briefly in this chapter and more fully in chapter 8), that debate has been put largely off limits in the 1990s, marginalized for the bulk of the US policy-community by eight years of sustained American economic growth after 1991. But it was definitely not off limits in the US in the 1980s, when, on the contrary, texts on the nature and consequences of US economic decline abounded: best-selling volumes with titles like America: what went wrong?, The American Disease, The End of Affluence, The Pooring of America and The End of the American Century (respectively Bartlett and Steele, 1992; Lodge, 1986; Madrick, 1995; Batra, 1993; Schlossstein, 1989). Since those texts set in motion themes which still resonate through the contemporary debate on capitalist models, it is with the substance of the 1980s 'industrial policy debate' in the US that we need here to begin.

Certainly among the white middle-class US electorate to whom Bill Clinton addressed his presidential campaign in 1992, there appeared to be a strong sense that the current generation of white American workers did not enjoy the sense of job security, and access to steadily rising living standards, that their parents had known a generation before. The cohort of white Americans born either side of the Second World War then looked to have been the fortunate ones, enjoying in postwar suburban America a standard of living without US historical precedent or European/Asian contemporary equivalence. At the start of the 1990s they appeared to have become the unique beneficiaries of the prodigious productivity of the postwar US economy, enjoying, as a generational cohort, unprecedented general levels of consumption, even in old age. The children and grandchildren who grew up in their shadow, with their experience as an important cultural landmark, still retained their faith in the attainability of the 'American dream' (Lipset, 1996: 287). Economic life in the US in the 1980s had not dented that, even though by then these next generations of white Americans - 'baby boomers' and their offspring - were experiencing (as they continue to experience) much higher degrees of both intra- and inter-generational downward mobility than had their parents: because, unlike them, they have been (and remain) heavily exposed to the twin processes of corporate 'downsizing' and stagnant real wages that beset the US economy after 1973. White Americans who are under 50 at century's end simply have to make far greater personal efforts than did their parents - in terms of hours worked and number of jobs held - to retain their place on the roller-coaster of middle-class American affluence (an affluence, of course, which even at the peak of its distribution across the US population as a whole never extended to large sections of America's black and Hispanic populations). For the moment in the US, this generational shortfall in economic performance seems still largely to be understood as a matter of personal failing; but as Newman has it, there are many commentators for whom it is actually 'symptomatic of far-reaching, structural disorders in the US economy' (Newman, 1994: 341-2).

For those commentators, the US economic record through to 1991 provided significant volumes of both internal and external supporting evidence. Internally, that evidence was at its starkest in the spheres of consumption, employment and earnings. Externally, it was most visible in relative US levels of investment, productivity and performance in world trade.

Considering consumption, the evidence of 'structural disorder' was at its most marked in the scale of poverty that persisted amid US affluence, and in the diminished capacity of even the new generation of affluent Americans to buy their own homes and cars. 'A joint study by the Labour and Commerce departments concluded in 1994', for example, 'that the distribution of income in America [was now] the most unequal among developed countries' (Madrick, 1995: 138): with the top 5 per cent of income earners receiving more than the bottom 40 per cent and with intensifying inequality of income between ethnic groups throughout the 1980s (Bowles et al., 1990: 140-1). By the same token, the median age of first-time house buyers, which had been 27 in 1980, rose to 35 by 1991 (Newman, 1994: 339); and the age of the average US family car was by then greater than at any time since 1948 - one car in three on American roads being more than 10 years old (the figure in the early 1970s was one in ten) (Madrick, 1995: 140). Yet none of this was necessarily surprising when set in the context of hours worked and pay earned in the US after the Vietnam War. US pay rates for non-supervisory workers (some 80 per cent of the labour force) fell in real terms by 15 per cent in the two decades after 1973, and by as much as 25 per cent for workers aged 25-35 (Maddick, 1995: 16); and commensurately the hours worked by that labour force actually grew.

Quite against the trend in advanced capitalist economies, US workers in the 1990s worked more hours than their parents had a generation before, spending on average an additional 163 hours a year at work in 1990 compared with 1970, losing leisure time, as Schor put it, to 'the equivalent of an extra month a year' (Schor, 1992: 29), and doing so increasingly in service rather than in manufacturing employment. In the 1950s one American worker in three was employed in manufacturing. By 1990 that figure had fallen to 17 in 100 (Bartlett and Steele, 1992: 18); and by then, a record 7 million workers in the US were regularly working two jobs in an attempt to maintain their living standards. Yet in spite of all their extra effort, throughout the 1980s 'the standard of living by and large fell, stagnated or grew very slowly for most Americans, even though [they] were working longer and harder' (Madrick, 1995: 128-9) with the result that US labour lost its decisive international advantage as consumers, by then earning no more than 'workers did in Germany, France or Norway, and only a little more than workers earned in a wide range of other nations' (ibid.: 82). And significantly for our purposes, the revival of the US economy in the 1990s did not quickly reverse these trends. On the contrary, as the 1996-7 survey of The State of Working America recorded,

the problem of deteriorating wages, which was responsible for the slow growth of incomes and widening inequality in the past, has not only continued in the 1990s, but it has also pulled down new groups of workers. After more than a decade of wage growth for most women, the bottom two-thirds of women in the workforce saw their wages decline between 1985 and 1995. In the 1980s, families compensated for stagnant and declining male wages by working longer and sending more family members to work, a trend that appears to have reached its maximum capacity. As a result, the incomes of middle class families have stagnated and fallen in the 1990s. At the same time...