Left-leaning neo-liberals rose to power just as new ideas about economic development and poverty reduction emerged. Old-style New Deal democrats lost to Richard Nixon in 1968 and 1972. New-left politicians were first elected in the 1974 Democratic wave after the Watergate scandal. Their main base was the white suburban middle class, and they won with promises to clean up the government, including their complaints about taxes and government spending that would soon erupt into a nationwide tax revolt.
When crisis after crisis in the 1970s created “stagflation”––inflation created by budget deficits and two oil shocks combined with deindustrialisation as competition from Japan and Germany intensified––they got their chance to act. They looked past the proximate causes of these crises––budget deficits were created to finance the war in Vietnam, oil shocks were a reaction to US policy in the Middle East, and competitiveness was lost as managers were caught flat-footed when economic conditions changed. Instead, they blamed “big government” and “big labor”––unions. To them, the largesse and protection offered by these institutions made the entire economy sclerotic.
Being on the political left, their main goal was to increase employment and worker incomes, not to benefit the wealthy. However, in keeping with their left-leaning neo-liberal approach, they fixated on the idea that unshackling the economy from government and unions was the answer. Their policy recommendations shifted the locus of government programs away from directly providing for the needs of workers and households through income redistribution and support for unions toward accelerating productivity growth.
Underlying their approach to policy was a fundamental belief in the genius of American free enterprise––that it is the greatest poverty-killing weapon that man had ever devised. Their core policy vision was to promote investment of public and private resources away from sunset industries––mainly old-line industries with unionised workforces––toward sunrise industries. The ensuing boom would take care of the rest of society, and they stressed education and retraining as a way to adjust to the new future. Starting in the early 1980s, no arena seemed more promising than computers and high tech, and the group’s intense promotion of the technology would lead to their nickname of “Atari Democrats”.
Unlike right-leaning neo-liberals, these left-leaning neo-liberals did not write the government completely out of the picture. Their view was that the government’s role was to stimulate market-oriented solutions to address social ills such as unemployment and poverty. As such, they developed the concept of government as a partner––public-private partnerships (especially with the tech industry) and support for “third sector institutions” such as nonprofits and other community organisations––which they argued offered a more effective means of providing social services and economic development than traditional government bureaucracies that directly addressed problems of inequality.
On the other hand, they demonstrated a clear mistrust of any of the traditional left’s policies or institutions capable of redistributing wealth. It was not just government spending programs. From the beginning, unions were one of the main targets. Unions were accused of driving up costs because their contracts had cost of living adjustments that kept pace with inflation and protecting lazy or incompetent workers:
We aren’t against government, period, as––with the exception of the national security apparatus––many conservatives appear to be. But we are against a fat, sloppy, and smug bureaucracy. We want a government that can fire people who can’t or won’t do the job. And that includes teachers.
The role of unions as a political actor whose power secured support for popular social welfare programs such as Social Security and Medicare, as well as decent wages, health insurance, and retirement benefits for the working class, was pushed aside. Against unions, they held out the promise of employee stock-ownership plans, where workers would be incentivized to become more productive because they were an “owner” of the company they worked for.
Many New Democrats were candidates for the presidency: Gary Hart, Paul Tsongas, Dick Gephardt, and Bill Bradley among them. But it was with the election of Bill Clinton and Al Gore in 1992 that New Democrats reached the pinnacle of power. They made these themes central to their campaign. Clinton repeatedly promised “a new approach to government” that “offers more empowerment and less entitlement … that expands opportunity, not bureaucracy.” Once in office, they would soon promote these ideas as an approach to economic development and poverty reduction in the global south as well.
Ron Bevacqua is an Adjunct Research Fellow at the Griffith Asia Institute as well as the Co-Founder and Managing Director of ACCESS Advisory Inc.