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How neoliberalism manufactured consent to secure its unlimited power

From David Harvey's A Brief History of Neoliberalism

Part 7 - The organized attack on regulations and unions

Reagan’s election in 1980 was only the first step in the long process of consolidating the political shift necessary to support Volcker’s turn to monetarism and the prioritization of the fight against inflation. Reagan’s policies, Edsall noted at the time, centred on ‘an across the board drive to reduce the scope and content of federal regulation of industry, the environment, the workplace, health care, and the relationship between buyer and seller’. Budget cuts and deregulation and ‘the appointment of anti- regulatory, industry-oriented agency personnel’ to key positions were the main means.

The National Labour Relations Board, established to regulate capital–labour relations in the workplace in the 1930s, was converted by Reagan’s appointments into a vehicle for attacking and regulating the rights of labour at the very moment when business was being deregulated. It took less than six months in 1983 to reverse nearly 40 per cent of the decisions made during the 1970s that had been, in the view of business, too favourable to labour.

Reagan construed all regulation (except of labour) as bad. The Office of Management and Budget was mandated to do thorough cost-benefit analyses of all regulatory proposals (past and present). If it could not be shown that the benefits of regulation clearly exceeded the costs then the regulations should be scrapped.

To top it all, elaborate revisions of the tax code –– mainly concerning depreciation on investments –– allowed many corporations to get away without paying any taxes at all, while the reduction of the top tax rate for individuals from 78 to 28 per cent obviously reflected the intent to restore class power. Worst of all, public assets were freely passed over into the private domain.

Many of the key breakthroughs in pharmaceutical research, for example, had been funded by the National Institute of Health in collaboration with the drug companies. But in 1978 the companies were allowed to take all the benefits of patent rights without returning anything to the state, assuring the industry of high and highly subsidized profits ever after.

But all of this required that labour and labour organization be brought to heel to conform to the new social order. If New York pioneered this by disciplining powerful municipal unions in 1975– 7, Reagan followed at the national level by bringing down the air traffic controllers in 1981 and making it clear to the trade unions that they were unwelcome as participants in the inner councils of government. The uneasy social compact that had ruled between corporate and union power during the 1960s was over.

With unemployment surging to 10 per cent in the mid-1980s, the moment was propitious to attack all forms of organized labour and to cut back on its privileges as well as its power. Transfer of industrial activity from the unionized north-east and midwest to the non-unionized and ‘right-to-work’ states of the south, if not beyond to Mexico and South-East Asia, became standard practice (subsidized by favourable taxation for new investment and aided by the shift in emphasis from production to finance as the centrepiece of capitalist class power).

Deindustrialization of formerly unionized core industrial regions (the so-called ‘rust belt’) disempowered labour. Corporations could threaten plant closures, and risk –– and usually win –– strikes when necessary (for example in the coal industry).

But here too it was not merely the use of the big stick that mattered, for there were a number of carrots that could be offered to labourers as individuals to break with collective action. The unions’ rigid rules and bureaucratic structures made them vulnerable to attack. The lack of flexibility was often as much a disadvantage for individual labourers as it was for capital. The virtuous claims for flexible specialization in labour processes and for flexitime arrangements could become part of the neoliberal rhetoric that could be persuasive to individual labourers, particularly those who had been excluded from the monopoly benefits that strong unionization sometimes conferred.

Greater freedom and liberty of action in the labour market could be touted as a virtue for capital and labour alike, and here, too, it was not hard to integrate neoliberal values into the ‘common sense’ of much of the workforce. How this active potentiality was converted into a highly exploitative system of flexible accumulation (all the benefits accruing from increasing flexibility in labour allocations in both space and time go to capital) is key to explaining why real wages, except for a brief period during the 1990s, stagnated or fell and benefits diminished.

Neoliberal theory conveniently holds that unemployment is always voluntary. Labour, the argument goes, has a ‘reserve price’ below which it prefers not to work. Unemployment arises because the reserve price of labour is too high. Since that reserve price is partly set by welfare payments (and stories of ‘welfare queens’ driving Cadillacs abounded) then it stands to reason that the neoliberal reform carried out by Clinton of ‘welfare as we know it’ must be a crucial step towards the reduction of unemployment.

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