Time for a Modern-Day New Deal
WARREN BUFFETT FAMOUSLY SAID YOU ONLY LEARN who is swimming naked when the tide goes out. It is now low tide for America’s hyperprivatized economy, and the receding waves have revealed catastrophic failures of ideology, policy, and business practice. The COVID-19 crisis has produced immense harm but one salutary effect: It has destroyed a lot of the conventional wisdom concerning governments and markets.
The dominant and now discredited ideology known as neoliberalism held that markets work tolerably well most of the time and that market failure was rare. Market fundamentalism—a total faith in the ability of free market capitalism to solve problems—was disgraced by the stock market crash of 1929 and the U.S.government’s successful New Deal reforms during Franklin D. Roosevelt’s presidency. But since the 1970s, a new neoliberal orthodoxy has been embraced by many Democrats as well as Republicans—who deregulated countless industries despite the mounting evidence that their policies were inviting financial crisis, producing more corruption than efficiency, and generating extreme inequality.
The mispricing of toxic financial assets, enabled by deregulation, led to the financial collapse of 2008. Supply-side tax cuts didn’t increase public spending but instead exacerbated inequality. Deregulation of labor markets led to wage stagnation at the bottom while concentrating wealth at the top as hyperglobalization decimated the U.S. manufacturing sector. And the extreme commercialization of U.S. health care has created the Western world’s most expensive and least efficient system. The costs of these systemic market failures vastly outweighed the benefits.
Liberated markets did not improve economic efficiency or overall growth. But they did make a few people very rich and tens of millions poorer. This rampant inequality has undermined the economic security of the American middle class.
The coronavirus crisis, which cost the U.S. economy more than 25 million jobs in four months—disproportionately hurting minorities—has further vindicated
