BY 

JUSTIN H. VASSALLO

 

The Democrats are in the midst of an existential crisis more profound than any since the Reagan Revolution. One explanation is that the party has failed to enhance working-class power as it did during the New Deal order. Since the 1990s especially, egalitarian redistribution and large-scale developmentalism have given way to the policy preferences of the donor class. For some, the problem is that the Democrats have lost their way after decades of playing defense against an increasingly radical Republican right. Despite promises of a new economic paradigm, an array of setbacks underscore that the Joe Biden administration lacks the resolve to meet this moment.

While accurate, this narrative nevertheless underplays the extent to which the neoliberal turn of the party of Franklin D. Roosevelt emerged organically out of the Democrats’ postwar professional-political networks. Rather than an accommodation to the Right, the Democrats’ neoliberal turn was an attempt to create a new social contract legitimized on meritocratic and pro-market principles, argues the historian Lily Geismer in Left Behind: The Democrats’ Failed Attempt to Solve Inequality. 

Geismer, a professor of twentieth-century US history at Claremont McKenna College, is also the author of Don’t Blame Us: Suburban Liberals and the Transformation of the Democratic Party. In her first monograph, she sought to explain the ideological shift within the Democratic Party, using a case study of Massachusetts to show how urban minorities and industrial labor unions were gradually marginalized in favor of suburban professionals. Her latest effort advances the uncomfortable thesis that Democratic neoliberalism “was based on a genuine belief in the power of the market and private sector to achieve traditional liberal ideas of creating equality, individual choice, and help for people in need.”

 Creating Left Neoliberalism

Geismer introduces Left Behind by tracing the Third Way’s roots to the 1970s, describing how specific, liberal ideas about growth were detached from the redistributive politics that undergirded the New Deal coalition. Beginning with the “Watergate Babies,” a new generation of Democratic leaders who extolled meritocracy, competition, and innovation was determined to reclaim and recast the political center. While dominated by Southerners such as Bill Clinton, Al Gore, Gillis Long, and Charles Robb, Geismer emphasizes that this emerging cohort spanned every region of the country, and included ostensibly more liberal voices from the Northeast such as Michael Dukakis and Paul Tsongas.

Clinton’s 1992 campaign, marked early on by his vow to “end welfare as we know it,” was not an abrupt deviation in Democratic politics, Geismer argues. Rather, it was the culmination of a strategy to center the “entrepreneurial, postindustrial economy” and “use the resources and techniques of the market to make government more efficient.”

 

Beyond an unwavering emphasis on growth over social justice, New Democrats sidelined the core constituencies — labor unions, black voters, and, increasingly, feminists and environmentalists — that the national party had cultivated since the mid-1930s. As they gelled around the prescriptions of the Democratic Leadership Council (DLC; a neoliberal think tank founded in 1985 with the goal of winning back suburban white voters who had defected to the GOP), New Democrats echoed right-wing attacks on welfare. They also “recoiled at the transactional politics” of Tip O’Neill, the Democratic congressional leader who personified the vestiges of New Deal liberalism. Resigned to the fate of traditional industries and unions, if not hostile to them, New Democrats perceived globalization as not only inevitable but desirable. The key to prosperity was more STEM education, less social spending, and fewer barriers to entrepreneurship.

The fixation on entrepreneurship, Geismer reveals, had globe-spanning origins. Through a fascinating discussion of the pioneers of microfinance and microenterprise, from ShoreBank in Chicago to Muhammad Yunus’s Grameen Bank in Bangladesh, Geismer shows how “socially responsible investing” first caught Clinton’s attention as governor of Arkansas. In the early postwar era, Arkansas had pursued a development strategy of “smokestack chasing,” but by the time Clinton entered office, the heyday of company towns was over.

Clinton’s embrace of public-private agencies as a mechanism for spurring growth was bolstered through his connections with these pioneers of for-profit development banking and the Winthrop Rockefeller Foundation, named after Arkansas’s first Republican governor since Reconstruction. Yunus’s maxim that credit “was the most basic right since it led to all other rights” spoke directly to New Democrats’ equation of empowerment with personal responsibility. It was a utopian conviction that influenced Clinton’s justification of workfare and programs to incentivize poor people to become thrifty entrepreneurs.

The significance of this backstory, Geismer shows, is that it illustrates the matrix of philanthropies, for-profit development banking, and corporate-friendly public officials that would shape Third Way governance in the 1990s. To distinguish their philosophy from Reagan’s “trickle-down” theory of growth, New Democrats repeatedly emphasized how government should catalyze “opportunity” and apply, as one strategist wrote, its “immense leverage to structure the market so that millions of businesses and individuals have incentives” to combine growth with inclusion.

 

From the New Democrats’ perspective, market inclusion and market expansion were mutually constitutive: ensuring both was a logical extension of mid-century liberals’ aim to remove discrimination in business and lending practices. As Clinton later put it when promoting the National Homeownership Strategy, his administration’s purpose was to “target new markets [and] underserved populations” and “tear down the barriers of discrimination wherever they were found.” Demonstrating that the Democratic Party could tackle “dependency” and economic marginalization in a manner that was consistent with free markets, meanwhile, would assuage the fears of white moderates that the party had accommodated too many demands of minorities and other liberal groups.

The developmental programs that captured Clinton’s imagination thus had a disciplinary logic: overreliance on for-profit entities would inevitably create new winners and losers amid a shrinking safety net. Yet New Democrats were willing to countenance this new social contract. Promises to expand ownership and unleash urban purchasing power were at odds with the fact that, by design, Third Way governance could only reinforce the trend of uneven development and disinvestment that had troubled the country since the late 1970s.

 Expanding Opportunities

Across Geismer’s documentation of the Clinton administration’s market-based development programs and reforms, she clarifies how delegating public administration to the private sector, as well as groups that were formally nonprofit but generously funded by elites, was a form of privatization in the United States, particularly in the areas of local development, education, and regulations on corporate labor practices.

A few, lesser-known examples illuminate the extent to which applying business logic to government — and actively encouraging governance via the private and nonprofit sectors — consolidated the Democratic Party’s departure from New Deal liberalism. At the urging of Robert Rubin, the director of the National Economic Council who subsequently served as Clinton’s treasury secretary, the White House rejected at the outset of Clinton’s first term both a large-scale stimulus program to reverse years of urban neglect and an overt industrial policy to foster new manufacturing jobs. Instead, it set up a competition to award block grants to deserving “empowerment zones” — a concept borrowed from Republican Jack Kemp.

 

READ MORE:

https://jacobin.com/2022/07/democratic-party-neoliberalism-dlc-clinton

 

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