BOOK REVIEW: ‘A Fabulous Failure’

OPINION:

A minor blunder in President Bill Clinton’s first year in the White House seemed to portend the false hope of a free trade regime that now defines working-class discontent with global capitalism. At a NAFTA news conference, his staff handed Mr. Clinton a speech claiming the agreement would create “a million jobs in the first five years of its impact.” As soon as the words left his mouth, the look on the president’s face — “his eyes bulged” — revealed his embarrassment.

It turned out that the speechwriter had inserted “million” as a placeholder because administration insiders couldn’t agree on a figure. Mr. Clinton admitted the mistake to reporters, but “the million jobs number stuck, taking on a life of its own that burdened Clinton in the weeks and years to come, especially as the whole NAFTA idea became increasingly controversial, and within a large slice of the Democratic Party absolutely toxic,” writes Nelson Lichtenstein, an accomplished labor historian at the University of California, Santa Barbara, in “A Fabulous Failure: The Clinton Presidency and the Transformation of American Capitalism,” a scholarly account of the excessively optimistic 1990s. (Mr. Lichtenstein picked up the project when historian Judith Stein died in 2017, expanding upon her research and writing the book himself.)

The North American Free Trade Agreement eroded U.S. manufacturing, but the “giant sucking sound” of Ross Perot’s imagination did not happen. In the two decades after the free trade deal took effect, an estimated 40,000 jobs floated away to Mexico each year, concentrated in sectors such as textiles, “leading to the demise of production at Levi Strauss and other old apparel firms in the United States,” Mr. Lichtenstein notes. Many more jobs would migrate to China.

Other consequences mattered more, as our politics today make plain. Manufacturers used the threat of outsourcing to demand more concessions from their American workforce. NAFTA spurred waves of illegal immigration after U.S. agribusiness, exploiting the opening to the Mexican market, bankrupted small farmers who then sought jobs north of the border. What Mr. Lichtenstein calls the “NAFTA debacle” contributed to the Republican takeover of Congress in the 1994 midterm elections, led by a new breed of scorched-earth partisans personified by Newt Gingrich, the Georgia Republican who became House speaker in 1995.

Moreover, NAFTA was part of a free trade template bereft of labor protections that the neoliberal Clintonites envisioned for the rest of the world. From our perspective today, the notion that China’s entry into the global trading system would liberalize Chinese society and compel the Chinese Communist Party to follow the rules seems laughably naive. The Communist Party’s antipathy to democracy and its sordid human rights record mattered little to multinational corporations and Wall Street banks, which saw in the emerging Chinese market the potential for eye-popping profits.

Wal-Mart “was in the vanguard,” Mr. Lichtenstein writes. Within years of China’s entry into the World trade Organization, “80 percent of the six thousand foreign factories in Wal-Mart’s supplier database were located in China. … Wal-Mart alone was almost certainly responsible for the elimination of nearly two hundred thousand U.S. manufacturing jobs in this period.”

Retail and service jobs with low wages and skimpy benefits replaced the once solid middle-class incomes swallowed up by globalization, a story told so often since 2016 that it’s become a cliche. In the hands of a skilled historian, the story becomes a page-turner that will improve readers’ economic and financial literacy while mostly sparing them the arcana of derivatives and credit default swaps.

This book transcends William Jefferson Clinton’s presidency and the wonkish debates between the increasingly marginalized liberals and the ascendant neoliberal globalizers. Mr. Lichtenstein is at his best when dealing with the tectonic political-economic shifts underway long before the former Arkansas governor arrived in Washington.

After the Volcker shock and Reaganite assault on the welfare state and trade unionism, Bill Clinton campaigned as a liberal in 1992, but not a pro-union, Keynesian, New Deal liberal. He understood there was little political space for a revival of ideas discredited by the brutal 1970s. Rather, Clintonite liberals were “coming to see the virtue of the market as a mechanism that rewarded efficiency, spurred economic growth, and even enhanced democratic practice,” Mr. Lichtenstein writes.

At the same time, “a group of well-connected policy entrepreneurs” embraced “industrial policy.” They envisioned the government favoring particular industrial sectors, i.e., chip manufacturing, to compete with Japan’s version of “managed capitalism.” Ultimately, the industrial policy advocates lost to the champions of free trade and deregulation, but credit the author for resurrecting old debates over how best to shape American capitalism. They remind us that important warnings were ignored or downplayed to the eventual detriment of blue-collar voters who flocked to the populist banner of Donald Trump or Bernie Sanders a generation later.

Mr. Lichtenstein argues that the Clinton presidency betrayed liberalism. The man who declared in 1996 that the “era of big government is over” became a neoliberal espousing tough-on-crime and anti-welfare politics, the free flow of capital into and out of “emerging markets” despite the often disastrous consequences, and the wholesale deregulation of financial markets — cheered on by Robert Rubin, Alan Greenspan and Larry Summers — that gave us the 2008 crash.

What about the Clinton boom? Mr. Lichtenstein does not ignore the decade’s record economic expansion or progressive wins like the CHIP Act. Therein lies the paradox encapsulated by this provocative book’s title. It was a fabulous time, but it was built on sand.

• Martin Di Caro is an award-winning broadcaster and host of the podcast “History as It Happens” at The Washington Times.

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“A Fabulous Failure: A Fabulous Failure: The Clinton Presidency and the Transformation of American Capitalism”

By Nelson Lichtenstein and Judith Stein
Princeton University Press
525 pages, $39.95