The Reagan Revolution of the 1980s opened the door to a revival of unregulated, free market capitalism in opposition to the Keynesian social democratic and welfare state policies that had been the norm since the 1930s and 1940s. Wall Street was largely left unregulated for many years, which led to speculative booms and repeated crashes, with the worst of occurring in 2008-09. Poverty and inequality increased in the U.S., while major social, economic and public health issues were ignored. In foreign policy, Reagan’s support for various ‘freedom fighters’, including Islamic terrorists in Afghanistan, set the stage for the attacks of September 11, 2001.
Identify at least (2) two major historical turning points in the period under discussion.
Analyze the impact of the two (2) or more major historical turning points selected on America’s current society, economy, politics, and culture.
Ronald Reagan’s election in 1980 was a major turning point in U.S. history because it indicated a sharp rightward turn in domestic policy away from the welfare state, Keynesianism and social democracy that had been the political consensus since the New Deal of the 1930s.
Reagan favored the deregulated, free market-laissez faire capitalism of Milton Friedman, as did his Federal Reserve Chairman Alan Greenspan. Domestic programs were slashed in the 1980s, taxes for the rich decreased and Wall Street allowed free reign. All of these policies resembled those of the Gilded Age and 1920s, and fittingly Reagan always said that his favorite president was Calvin Coolidge.
Future president followed similar policies, including George W. Bush in 2001-09, and they finally ended up in the worst Wall Street crash and depression since 1929. During his presidency, with funding for the Centers for Disease Control and public health were cut back significantly, just as the new AIDS epidemic raged out of control. Reagan did not even mention the existence of this disease until 1985, five years after its appearance, nor did he seem to care that its primary victims were the poor, minorities and gays. In foreign policy, Reagan intensified the Cold War, doubled the national debt and military spending, and also sent billions of dollars in assistance to anti-Communist “freedom fighters”, including the Islamic fundamentalists of Afghanistan.
Explain ways in which the AIDS epidemic shook American’s general confidence beginning in the 1980s.
Give at least two (2) examples of how the deregulation movement of the Reagan era affects us today.
Discuss the factual rationale behind this nation’s decision to go to war with Afghanistan and Iraq after the 9/11 attacks as well as the response from the international community.
Ronald Reagan came into office in 1981 when the economy was suffering from the oil shocks and stagflation of the 1970s, and he promised to revive it by cutting taxes on the wealthy, reducing domestic spending, limiting the right to strike and form labor unions, and deregulating capitalism. Under the efficient markets theory that has been in vogue since the 1980s—which is simply laissez faire with a postmodern label—banks and other large corporations have been left largely unregulated and turned into casinos. John Maynard Keynes, the economists whose theories dominated the 1945-75 era, always loathed speculators and profiteers and thought they should be economically euthanized, and after being ignored for thirty years, when the crash of 2008-09 occurred “in about thirty days the defunct economist was rediscovered and rehabilitated” (Skidelsky, 2010, p. 19). Even though Keynesianism did not abolish the business cycle, it bottom phases were not so low and its recessions not as long as in the 1930s, the 1980s or the present (Minsky, p. 160). Governments had to ensure full employment to maintain maximum aggregate demand, while on the supply side taking action to ensure that monopolies and oligopolies did not keep prices artificially high. From 1945-70 “full employment was maintained, real wages rose constantly, economies were relatively stable, and wealth and income inequalities were reduced”, which was definitely not the case in the 1920s and 1930s or in the last thirty years (Skidelsky, p. 164). Keynesianism also proved to be inflationary in the 1960s and 1970s, although the deficit spending in the Vietnam War and the oil shocks were also a major factor (Minsky, 2008, p. 160). To be sure, the stagflation of the 1970s was often unfairly blamed on labor unions and the social democratic and Keynesian policies of Western governments.
Milton Friedman and other free market-monetarist economists argued that Keynesian stimulus policies simply did not work, and argued for central bank manipulation of money supplies and interest rates as a way of eliminating boom and bust cycles. This was the specialty of Federal Reserve Chair Alan Greenspan, a devout disciple of Friedman, Ayn Rand and other free market ideologues, but in the wake of the great crash even he had to admit that these policies had failed. Intense speculation increased tremendously in the U.S. and other economies over the past thirty years as well, while the tax system became continually less egalitarian—to the point where many wealthy corporations and individuals pay no taxes at all. Reagan and his successors were unconcerned about the rising levels of poverty and inequality, which continued to increase for decades. Even when the AIDS epidemic began, he ignored it for the first five years of his presidency, at least until his friend Rock Hudson died of it. Millions of people around the world were infected with the virus during this time because of the politics of health care under the Reagan administration did not permit any mention of this disease, much less any serious funding to deal with it (Shilts 1987/2007). The current recession, which is the most severe since the Great Depression of the 1930s, is also a direct result of the regulated, free market capitalism embraced by Reagan and his successors. The parallels with the situation in the 1930s are all too obvious, and had Keynesian measures of deficit spending, stabilization and fiscal stimulus not been undertaken promptly the entire economic system would have collapsed. These included a Troubled Assets Relief Program (TARP) designed to aid banks and other corporations facing bankruptcy, an $800 billion stimulus passed in 2009, extensions of unemployment and health care benefits, and new regulations on bank holding companies through the Federal Reserve. If they are withdrawn too quickly, a collapse may still occur, along with radical deflation, mass unemployment and extreme political unrest. Given the present weakness and dysfunction of the global capitalist economy, the stakes could not be higher.
As it took shape in the first few years of his presidency, the Reagan Doctrine centered on countering the Soviet Union’s military buildup during the 1960s and 1970s, and its support of revolutionary governments in Africa, the Middle East, Central Asia and Central America. In so doing, he was already fighting the last war rather than the new one against militant, right-wing Islam in Iran, Afghanistan, Lebanon and other regions of the world, although very few Americans at the time realized this. With 20/20 hindsight, some Reagan enthusiasts like Steven Hayward maintain that Reagan really intended to ‘win’ the Cold War he certainly never mentioned this at any time during his presidency. He espoused a Doctrine of “Peace through Strength” and doubled military spending during his presidency on both nuclear and conventional weapons. Reagan opposed détente, the strategic arms limitation agreements, and the Panama Canal treaty as policies that weakened the United States, and was highly critical of Jimmy Carter’s refusal to take military action against Iran during the hostage crisis of 1979-80 (Hayward, 2009, p. 99). In short, the Cold War was central to Reagan’s entire worldview, no matter that it was clearly coming to an end by his second term and new threats were emerging which he and his officials only dimly appreciated at best.
On September 11, 2001, the Islamic ‘freedom fighters’ originally supported by the Reagan administration came back to haunt the United States. Security procedures that had been in place for decades were radically overhauled and intensified, since this generation of terrorists was far better trained, financed and organized than those in the past. Even worse, they were more fanatical and prepared to commit suicide in the belief that God would bless them as martyrs to the cause. No one had really anticipated that they would use aircraft as flying bombs to cause maximum death and destruction to ground targets. Prior to September 11th, the worst case scenario imagined by risk managers and insurance companies was that two passenger planes would collide, or that hijackers would take over planes and demand money or the freeing of political prisoners. After September 11th, they could imagine terrorists who would use nuclear, chemical or biological weapons to destroy a large city. Within a few years, over 45,000 people were employed by the Transportation Security Administration, including thousands of armed air marshals, although other countries resisted this policy, as they did the arming of pilots and flight crew. In the United States, all airline security was removed from the hands of the airlines and private contractors and turned over to the federal government. Essentially, the TSA took control of the screening of passengers, cargo and baggage. Because it was the most influential country in the world and the largest market, the U.S. was also able to insist that other countries follow its revised security procedures as well, or be denied access to American air space.
The main goal of terrorism is to promote fear and insecurity in the public mind all out of proportion to the actual military and economic damage that terrorist groups can inflict. This is why they depend heavily on mass media publicity to spread anxiety and fear, and if the perception of the threat is great enough then there will be greater “willingness to place restrictions on civil liberties to increase safety and security” (Breckenridge and Zimbardo 2007, p. 117). Terrorists also understand that dramatic televised images of their acts have a greater impact and shock value than print stories. Airline passengers will demand more intensive security screenings, while at the same time become irritated at the delays, long lines and invasion of privacy. Fear will also stimulate a “pessimistic assessment of risk”, although airlines and passengers will generally assume that someone else is always more likely to be a victim of terrorism rather than themselves (Breckenridge and Zimbardo, p. 118). Those who have already experienced violent traumas like these will be the most likely to react with extreme fear and anxiety and to suffer from psychiatric disorders. On the other hand, genuine “mass hysteria and panic is rare”, except in situations where the dangers are immediate and the chances of escape very limited (Breckenridge and Zimbardo, p. 119).
References
Breckenridge, J.N. and P.G. Zimbardo (2007). “The Strategy of Terrorism and the Psychology of Mass-Mediated Fear” in M. Bongar et al (eds). Psychology of Terrorism. Oxford University Press, pp. 116-36.
Hayward, S.F. (2009). The Age of Reagan: The Conservative Counterrevolution. NY: Random House.
Minsky, H.P. (2008). John Maynard Keynes: Hyman P. Minsky’s Influential Re-Interpretation of the Keynesian Revolution. McGraw-Hill.
Shilts, R. (1987/2007). And the Band Played On: Politics, People, and the AIDS Epidemic. NY: St. Martin’s Press.
Skidelsky, R. (2010). Keynes: The Return of the Master. Perseus Books Group.
