It was during the Reagan administration that the principles of neoliberalism were brought to the fore, and began being acted on; but, sadly for the record of the American left, it was during the Clinton and Obama administrations that they were solidified. President Bill Clinton had campaigned on a platform aimed squarely at the middle and working classes—public investment in job training, education, infrastructure, health care reform, and a middle-class tax cut. But soon after he assumed office, his economic team—chiefly Bob Rubin, director of the National Economic Council—informed him that he couldn’t afford to pursue these programs; rather, his priority should be reducing the deficit of the federal government, which would, among other things, require a tax increase on the middle class. And Clinton heeded their advice. Sandel cites the historian Nelson Lichtenstein, who wrote in The American Prospect in 2018 that Clinton “normalized key aspects of the Reagan economic world view.… at the very dawn of his administration, Clinton opted to trust markets more than activist government. This course would set the tone for later decisions defining Clinton as a neoliberal rather than the heir to FDR and LBJ.” These later decisions would involve the North American Free Trade Agreement and other attempted free-trade deals, and various forms of financial deregulation, such as the cancellation of the Glass-Steagall Act and the refusal to regulate the derivatives (“financial instruments of mass destruction,” in Warren Buffett’s words) that played such a large role in the financial crisis of 2007 to 2008.
As a direct result of that crisis, incoming President Barack Obama faced an array of challenges himself, all of which involved a choice between liberal and neoliberal policies. He was off to a bad start in the people he chose to advise him on the matter—Timothy Geithner and Larry Summers, his choices for treasury secretary and director of the National Economic Council. Sheila Bair, head of the Federal Deposit Insurance Corp., was astonished that Obama chose two of the people most responsible for setting the stage for the crisis in the first place to help him straighten it out. Acting on their advice (as well as his own conservative instincts), he did nothing to reconfigure the banks or make them pay a price for their irresponsibility, as he did with the auto industry. He also refused to extend any but the most minimal assistance to the millions of Americans whose mortgages were now underwater and who were going to lose their homes. Meanwhile, he allowed Wall Street institutions implicated in the crisis to hand out generous bonuses at Christmastime, as if any of their top staff had done anything to deserve them. Obama, Sandel suggests, might have taken advantage of the financial crisis to do what FDR did: negotiate a new, reformed relationship between capitalism and democracy. Instead, Sandel quips, he trod the same neoliberal path, but without Clinton’s guilt about doing so. After Clinton made the decision to jettison his entire campaign platform in favor of appeasing the bond market, he expressed chagrin at his own actions. “Where are all the Democrats?” he demanded of his staff. “We stand for lower deficits and free trade and the bond market. Isn’t that great?”
Neoliberalism could be analogized to a large pincer movement, of which one prong is globalization and the other financialization, with neither able to function successfully without the other. The early progenitors of neoliberalism, such as Friedrich Hayek and Ludwig von Mises, envisioned a worldwide capitalist system beyond the control of democratic institutions, hearkening only to the signals of an impersonal marketplace. The financialization of the United States, or the initial stage of it, seems to have begun, like so many things that are wrong with the country today, in the 1970s. As Sandel notes:
