RUND ABDELFATAH, HOST:
Hey, it's Rund.
RAMTIN ARABLOUEI, HOST:
And Ramtin.
ABDELFATAH: So how much are you learning about capitalism so far in this series? How much are you questioning it? Well, come question it with us next Thursday, July 8 at 8 p.m. Eastern for a special capitalism edition of THROUGHLINE Trivia.
ARABLOUEI: Yup, that's right. We are back with three rounds of trivia that you can play by yourself or with a team of up to five people. The winning team will take home a three-month subscription to the NPR Coffee Club. And let me tell you, that's some really good coffee.
ABDELFATAH: Listen closely to this episode to help your chance of winning trivia on July 8 and go RSVP at nprpresents.org. OK, on with the show.
(SOUNDBITE OF MONTAGE)
MILTON FRIEDMAN: Look at this lead pencil. Literally, thousands of people cooperated to make this pencil.
These people who cooperated with one another don't speak the same language. They're people of all different religions. They may hate one another.
When you go down to the store and buy this pencil, you are, in effect, trading a few minutes of your time for a few seconds of the time of all those thousands of people.
That's the miracle of the price system. Everybody has benefited. There's been no central direction.
It was the magic of the price system that brought them together and got them to cooperate to make this pencil so that you could have it for a trifling sum.
It worked so well that, ordinarily, we're not aware of it.
That is why the operation of the free market is so essential - but even more to foster harmony and peace among the peoples of the world.
(SOUNDBITE OF MUSIC)
UNIDENTIFIED PERSON #1: (Distorted, unintelligible).
(SOUNDBITE OF NATURE, BIRDS CHIRPING)
LAINE KAPLAN-LEVENSON, BYLINE: On April 10, 1947, a group of 39 economists, historians and sociologists gathered in a conference room at a posh ski resort at Mont Pelerin, Switzerland. Glasses clinked. Cigars burned. A mission statement was written.
(SOUNDBITE OF GLASSES CLINKING)
UNIDENTIFIED PERSON #2: (As Hayek) Over large stretches of the Earth's surface, essential conditions of human dignity and freedom have already disappeared. In others, they're under constant menace from the development of current tendencies of policy.
KAPLAN-LEVENSON: What happened in that smoke-filled room over the course of a few days probably didn't feel all that consequential at the time. It probably just felt like any old conference. But this small gathering was a group of thinkers with really fringe ideas; so much so that they tucked away in the Swiss Alps to be able to freely talk about them.
UNIDENTIFIED PERSON #2: (As Hayek) The position of the individual and the voluntary group are progressively undermined by extensions of arbitrary power.
KAPLAN-LEVENSON: And from that meeting, they would start an organization called the Mont Pelerin Society - MPS. And the ideas discussed in that room more than 70 years ago would evolve and warp and - this is no exaggeration - come to shape the world we live in.
UNIDENTIFIED PERSON #2: (As Hayek) Even that most precious possession of Western man, freedom of thought and expression, is threatened by the spread of creeds...
KAPLAN-LEVENSON: This is Friedrich Hayek.
UNIDENTIFIED PERSON #2: (As Hayek) ...Which seek only to establish a position of power in which they can suppress and obliterate all views but their own.
KAPLAN-LEVENSON: Hayek was the man who invited everyone to that first meeting at Mont Pelerin, which launched the Mont Pelerin Society, a society that would produce Pulitzer and Nobel Prize winners and members that would become political leaders and top advisers. They believed that liberty, freedom, was the most important thing and that market capitalism had to be protected because free markets meant free people.
These shared principles became a decades-long political project that influenced a long list of U.S. politicians and presidents from both parties. But it didn't stop with politics. It's become an ideology that's reshaped our relationships to our government, each other and our own selves; an ideology some people call neoliberalism.
I'm Laine Kaplan-Levenson. And today on THROUGHLINE, a story about how a small group of determined people can change everything and how the ideas thrown around in that Swiss hotel room came to dominate our way of life.
(SOUNDBITE OF MUSIC)
ERIC: This is Eric (ph) from Casselberry, Fla., and you're listening to THROUGHLINE from NPR.
ARABLOUEI: Part 1 - Go Tell It on the Mountain.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED REPORTER #1: Radicals and reactionaries gained power as people searched for leadership and answers.
KAPLAN-LEVENSON: In the late 1920s, the economy of the United States collapsed. Nearly 9,000 banks failed. People lost everything.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED REPORTER #1: As frustration turned to fear and anger, people took to the streets. Communists led hunger marches in many big cities and attracted thousands. The week before Americans went to the polls in '32, 20,000 unemployed filled the streets of Chicago.
KAPLAN-LEVENSON: In 1932, three and a half years into the Depression...
(SOUNDBITE OF ARCHIVED RECORDING)
FRANKLIN ROOSEVELT: First of all, let me assert my firm belief...
KAPLAN-LEVENSON: ...Franklin D. Roosevelt, FDR, became president.
(SOUNDBITE OF ARCHIVED RECORDING)
ROOSEVELT: ...That the only thing we have to fear is fear itself.
KAPLAN-LEVENSON: And having nowhere to live and nothing to feed your kids, FDR knew the country was in fear, was in crisis, and he needed to act quick.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED REPORTER #2: To do so, he created the famous alphabetical agencies of the New Deal. Their purpose - to fight the depression, to provide work and security. Soon the...
KAPLAN-LEVENSON: His government went hard, spending money and creating programs we still have today, like Social Security, unemployment insurance, welfare and food stamps. They also passed the National Industrial Recovery Act, which allowed the government to regulate industry and business. All of this was a huge change. The government was suddenly involved in the economy in a way it had never been before.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED REPORTER #2: And from Roosevelt's desk flowed a huge program of public works. Pressing a button, he put into operation a great new system of dams, flood control and electricity for the people.
(SOUNDBITE OF MUSIC)
KAPLAN-LEVENSON: And that strategy pretty much worked. The U.S. made it through the Great Depression. And after the start of World War II, the economy was more robust than ever.
LILY GEISMER: One of the things that the New Deal did was to really change the relationship of the ordinary Americans to the federal government.
KAPLAN-LEVENSON: This is Lily Geismer.
GEISMER: I'm a professor of history at Claremont McKenna College.
KAPLAN-LEVENSON: She's also currently writing a book called...
GEISMER: "Left Behind: How the Democrats Failed To Solve Inequality."
KAPLAN-LEVENSON: Lily says the success of FDR's policies sent a signal to the people that said, hey; the government's here for you.
GEISMER: It engendered a tremendous faith in government. And I think that this was sort of seen as kind of the right approach by a large number of Americans. For many people, that's the idea that you go into their houses, and they'd have pictures of FDR up on their walls - I mean, that he played this kind of really powerful role.
KAPLAN-LEVENSON: But here's the thing. The history of the New Deal that most of us get today is pretty flat. The reality is not everybody enjoyed the benefits of these programs, especially Black Americans. But what it also did was piss a lot of people off, people who fundamentally disagreed with the government intervening in the economy. Even people across the world, like our guy Friedrich Hayek, was tearing his hair out.
ANGUS BURGIN: Hayek was arguably the most prominent and influential advocates for free markets in the North Atlantic world from the 1930s to the 1950s.
KAPLAN-LEVENSON: This is Angus Burgin.
BURGIN: I'm a historian at Johns Hopkins University.
KAPLAN-LEVENSON: And an expert in all things Friedrich Hayek.
BURGIN: He became the person who kind of symbolized a reaction to the Great Depression that said, no, we shouldn't engage in dramatic fiscal stimulus, certainly not in dramatic monetary stimulus to try to pull ourselves out of this situation. Rather, we should let events take their course because if we try to do anything dramatic, we're only going to end up, as he thought, exacerbating a boom-and-bust cycle that would carry on in perpetuity.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED ACTOR #1: (As Friedrich Hayek) The basic conviction which has guided me in my efforts is that if the ideas in which I believe unite us and for which, in spite of abuse of the word, there's still no better name than liberal are to have any chance of revival, a great intellectual task is in the first instance required before we can successfully meet the errors which govern the world today.
(SOUNDBITE OF MUSIC)
KAPLAN-LEVENSON: Hayek was born in Austria in 1899 and would eventually live in London and later the U.S. to pursue a career in economics.
BURGIN: His whole life, he spoke with a pretty thick accent. He had kind of an aristocratic bearing.
KAPLAN-LEVENSON: Hayek considered himself a liberal, not a liberal in the sense we think of it today but what many call classically liberal - someone who believed in individual freedom, liberty and free thought. So to him, FDR's policies had gone way too far.
BURGIN: He and a lot of his colleagues hated things like the NRA...
KAPLAN-LEVENSON: The National Recovery Administration - that NRA.
BURGIN: ...And efforts by the government to proclaim what business should be doing and therefore interfering with what he saw as the inherent wisdom of individuals and business owners. Hayek was arguing - in the very early 1930s, the appropriate response, in his words, to the Great Depression was to leave it to time to effect a permanent cure.
KAPLAN-LEVENSON: That's a very bold statement because you're imagining people have no money. They're waiting on lines to get food. There's no jobs. There's no end in sight. And someone's saying, you know what the government should do to solve this? Nothing.
BURGIN: Yeah.
KAPLAN-LEVENSON: What must have made Hayek's take sound even more out there was that by the 1940s, FDR's policies combined with massive wartime production had actually lifted people out of poverty and cemented the U.S. as an economic powerhouse.
BURGIN: Of course, people in situations of deep distress are going to be looking for solutions. And if you don't provide them with solutions, they're going to turn to somebody who does. And hence, Hayek was increasingly marginalized from his colleagues and not that many economists shared his views. There is no lack of mentioning in Hayek's letters or his colleagues' letters just how marginalized they were, right? And so they are very preoccupied with their own sense of marginalization within their profession and a broader public.
(SOUNDBITE OF MUSIC)
UNIDENTIFIED PERSON #2: (As Hayek, reading) Our freedom of choice in a competitive society rests on the fact that if one person refuses to satisfy our wishes, we can turn to another.
KAPLAN-LEVENSON: Hayek didn't quit. In 1944, he released a book - or maybe you could call it a manifesto or Bible.
UNIDENTIFIED PERSON #2: (As Hayek, reading) But if we face a monopolist, we are at his absolute mercy.
KAPLAN-LEVENSON: It was called "The Road To Serfdom."
UNIDENTIFIED PERSON #2: (As Hayek, reading) And an authority directing the whole economic system of the country would be the most powerful monopolist conceivable.
KAPLAN-LEVENSON: That title meant to hit a nerve. Serfdom meant economic servitude - very not free.
BURGIN: The message that a lot of people took from it is that, you know, one, two, three steps towards government intervention in response to a crisis or in other kinds of circumstances that are seen as reasonable solutions to problems that people are facing at that time would eventually lead us down a pathway to socialism.
UNIDENTIFIED PERSON #2: (As Hayek, reading) It would have complete power to decide what we ought to be given and on what terms. It would not only decide what commodities and services were to be available and in what quantities, it would be able to direct their distributions between districts and groups and could, if it wished, discriminate between persons to any degree it liked.
BURGIN: And the key moment in that, in Hayek becoming a public figure in the United States, was the condensation of that book by Reader's Digest. And Reader's Digest might seem kind of irrelevant to us today, but it was the largest circulation magazine in the United States at the time. It had over 8 million subscribers. Lots of people were reading it. And it was presented as the lead article, this condensation of the book. And many, many people encountered Hayek's ideas.
KAPLAN-LEVENSON: Almost overnight, Hayek went from an obscure, aristocratic Austrian economist to a public symbol in the U.S. who represented a type of New Deal resistance, which you'd think would make him thrilled. But Hayek was actually kind of frustrated. He felt like most people didn't really understand what he was trying to say.
BURGIN: Reader's Digest stripped away a lot of the nuance. And he expressed himself a frustration that he thought many readers took it the wrong way, right? He thought many readers were saying that Hayek thinks that the market is always right and we shouldn't have any form of government intervention in the economy. And if you closely read the actual book, "The Road To Serfdom," not this condensed version - right? - you find all kinds of caveats, right? He's willing to acknowledge that the government does have a role in providing food and shelter, certainly regulating businesses for potential environmental damage, pollution, things like that.
KAPLAN-LEVENSON: The government does have a role to an extent, which Hayek felt was a fine line and a dangerous one. Because people who got excited about government subsidies could get excited about socialism - his biggest fear.
BURGIN: He wanted to persuade these people who might otherwise be pulled in by what struck them as deeply compelling ideas that no, if we lose this core element of the market mechanism, we're going to lose many things that we hold dear. We'll, in a sense, throw the baby out with the bathwater.
(SOUNDBITE OF MUSIC)
KAPLAN-LEVENSON: Way before he even published "The Road To Serfdom," Hayek had been fantasizing about bringing together a big meeting of scholars who agreed with him...
BURGIN: ...In order to exchange ideas with one another and hopefully, as he saw it, plant the seeds for a revival of liberal social philosophy. He had this new celebrity in the United States as a result of "The Road To Serfdom." And he wanted to capitalize on that momentum to garner a little bit of funding and maybe to convince colleagues from a range of different national environments to come together and talk about their ideas.
KAPLAN-LEVENSON: He found a place in the Swiss Alps, Mont Pelerin, to host the meeting. And he sent out a bunch of invites. Slowly, the responses started coming in. Dozens of people were on board, some making plans to cross the Atlantic Ocean for the first time since the end of the war. This was a big deal, and it was all lining up. And finally, this group of people from all over the world, almost all men, found themselves in a room being greeted by Hayek.
(SOUNDBITE OF MUSIC)
UNIDENTIFIED PERSON #2: (As Hayek) I must confess that now, when the moment has arrived to which I have so long looked forward, the feeling of intense gratitude to all of you is strongly mixed by an acute sense of astonishment at my own presumption and audacity in setting all this in motion I've taken on me in asking you to give up too much of your time and energy for what you might well reward as a wild experiment.
KAPLAN-LEVENSON: The wild experiment had begun. Hayek was living his dream. Except...
BURGIN: The meeting itself actually wasn't that great.
(SOUNDBITE OF MUSIC)
KAPLAN-LEVENSON: I mean, it was a conference. So, you know, it kind of sucked.
BURGIN: The reality is that sessions are boring. Conversations about ideas very often don't really go very far, right? They end up being a little more superficial than the people who planned the meeting hoped that they would be. Why then is it important? Why do we talk a lot about this 1947 meeting despite that? And I think even if conferences are sometimes disappointing in their actual ideas that are discussed, they're very important for networking and for creating a sense of solidarity, a sense of community, establish lines of communication. So it's less actually the conversations themselves in the rooms in this hotel overlooking a lake and Alps in Mont Pelerin that we should see as transformative so much as the connections that people made while they were there.
KAPLAN-LEVENSON: And that's exactly what happened. The meeting launched the Mont Pelerin Society, which kept all these scholars connected as they went on in their careers. It was a way for these fringe ideas to keep cooking on a low burner, a slow boil.
(SOUNDBITE OF ARCHIVED RECORDING)
FRIEDMAN: Those few of us who believed in freedom and free markets and minimum government were regarded as nuts, over on an extreme fringe.
KAPLAN-LEVENSON: Remember that guy talking about a pencil at the top of the episode? That's this guy, Milton Friedman, one of the people at that first Mont Pelerin Society meeting.
(SOUNDBITE OF ARCHIVED RECORDING)
FRIEDMAN: Add to that this was my first trip overseas, my first trip out of the United States, so then it was a very memorable meeting indeed. It was a remarkable collection. You have to give Friedrich Hayek full credit for having the idea of organizing the society and for being able to make the physical arrangements to do so.
(SOUNDBITE OF MUSIC)
KAPLAN-LEVENSON: When we come back, Milton Friedman takes Hayek's ideas to the people, and the people start to listen.
DAVID OWENS: This is David Owens (ph) from Danville, Ala. You're listening to THROUGHLINE from NPR.
ARABLOUEI: Part 2 - The Eclipse.
(SOUNDBITE OF TYPEWRITER)
KAPLAN-LEVENSON: (Reading) Dear, Ed.
UNIDENTIFIED PERSON #3: President Dwight Eisenhower, in a letter to his brother, Edgar Eisenhower - November 8, 1954.
KAPLAN-LEVENSON: (Reading) Now, it is true that I believe this country is following a dangerous trend when it permits too great a degree of centralization of governmental functions. But to attain any success, it is quite clear that the federal government cannot avoid or escape responsibilities which the mass of the people firmly believe should be undertaken by it. Should any political party attempt to abolish Social Security, unemployment insurance and eliminate labor laws and farm programs, you would not hear of that party again in our political history. There is a splinter group, of course, that believes you can do these things. Among them are an occasional politician or businessman. Their number is negligible, and they are stupid.
(SOUNDBITE OF MUSIC)
UNIDENTIFIED SINGERS: (Singing) Ring, a make a boom, boom. Hello, a make a boom, boom.
KAPLAN-LEVENSON: If there's one word that's often used to sum up the 1950s, it's boom.
(SOUNDBITE OF MUSIC)
UNIDENTIFIED SINGERS: (Singing) Well, then my heart goes boom, boom. And when your voice says hello, well, then again, my heart goes boom, boom.
GEISMER: There's a level of just general prosperity that has never been really seen before.
(SOUNDBITE OF MUSIC)
GEISMER: You had a car for the first time. You could take a vacation. You could support a family on a single-breadwinner salary. You lived a kind of middle-class lifestyle.
KAPLAN-LEVENSON: If you were white. Remember; the New Deal was exclusionary, and Black people and people in farming and domestic service jobs were explicitly left out of programs that helped you buy homes and get Social Security, things that helped people build wealth. At the same time, the 1950s was pretty much when our ideas about what it meant to be middle class in the U.S. came into being. And most people agreed the New Deal policies were responsible for it. Lily Geismer says you couldn't really find a Democrat or Republican who openly disagreed with that.
GEISMER: Amongst the political parties, there was relative consensus that these were the kind of ideas that were broadly governing society.
(SOUNDBITE OF ARCHIVED RECORDING)
FRIEDMAN: The subject of the talk tonight is the role of government in a free society. And I think in discussing that subject, the first thing you have to do is to emphasize the very different meanings that free has.
KAPLAN-LEVENSON: But, of course, not everyone was on board.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED PERSON #4: Would you please join me in welcoming Dr. Milton Friedman.
BURGIN: So when you ask who is Milton Friedman - despite having much in common with Hayek as far as his ideas are concerned, personally, he was a real contrast. He was not coming from this kind of aristocratic, highly cultured Austrian background that Hayek was coming from. He was coming from a much more marginalized community.
KAPLAN-LEVENSON: Milton Friedman's family didn't have a lot of money. He was raised by working-class Jewish immigrants in New Jersey at a time when most people didn't have a lot of money since the depression was in full swing by the time he got his masters in the 1930s. This financial strain inspired Friedman to study economics.
After school, he took a job working in the government, FDR's New Deal government, and eventually got a job at the University of Chicago, where he got connected to Hayek and started to develop different views from his former government colleagues. And that's what landed him an invitation to that Mont Pelerin meeting in 1947, where finally, he was amongst friends.
BURGIN: Friedman later described it as a unique environment where you could say things without being worried that somebody was going to stab you in the back (laughter). There was a sense that you were surrounded by colleagues who you could trust to some degree.
KAPLAN-LEVENSON: A safe space that emboldened Friedman to go public with his fringe beliefs. In 1951, he published an essay called...
BURGIN: ..."Neoliberalism And Its Prospects." It really encapsulates a lot of the ideology of this meeting at Mont Pelerin in 1947.
(SOUNDBITE OF MONTAGE)
FRIEDMAN: First of all, the government doesn't have any responsibility. People have responsibility. This building doesn't have responsibility. You and I have responsibility. People have responsibility.
We have been becoming an over-governed and over-regulated society. We have been moving down the road that Friedrich Hayek, in his great book, called the Road to Serfdom. We do not have to continue down that road. We can be the masters of our own destiny.
(SOUNDBITE OF MUSIC)
KAPLAN-LEVENSON: Friedman was carrying the Mont Pelerin torch and turning Hayek's complex ideas about privatization, deregulation and individual freedom into bite-sized snacks.
BURGIN: And Friedman turned out to be great at that - taking very complicated ideas and conversations and packaging them to make them sound very simple and compelling in ways that the normal people could understand. He understood the rhetorical power of simplicity.
KAPLAN-LEVENSON: And could translate an entire ideology into one simple idea.
BURGIN: The market could solve problems that the government couldn't.
KAPLAN-LEVENSON: And this applied to almost everything.
BURGIN: In his utopian world, he was pretty clear there would be no public education.
KAPLAN-LEVENSON: He pushed for school vouchers...
(SOUNDBITE OF ARCHIVED RECORDING)
FRIEDMAN: Market competition is the surest way to improve the quality and promote innovation in education as in every other field.
KAPLAN-LEVENSON: ...And something called the negative income tax, an alternative to welfare that simply gave people money through the tax code.
(SOUNDBITE OF ARCHIVED RECORDING)
FRIEDMAN: With a positive income tax, you're entitled to a certain amount of personal exemptions and deductions. And above that amount, you pay tax. But suppose you have no income. Under a negative income tax, a fraction of your unused exemptions would be paid to you by the government, guaranteeing at least a minimum income.
KAPLAN-LEVENSON: He clearly liked the idea of giving people money so they can meet their basic needs. But health insurance? Not so much.
(SOUNDBITE OF ARCHIVED RECORDING)
FRIEDMAN: Let's not call it national health insurance. It's not national health insurance. There's nothing national about it. It's for individual people. There's no health about it because it'll make medical care less good. It'll make the health of the American people worse. And there's no...
BURGIN: So he talked about abolishing things like the FDA, abolishing national parks, abolishing the estate tax, abolishing the charitable tax exemption and just say we should throw this stuff out. He could say, I could share your desire to, you know, improve the well-being of people who are in bad economic circumstances, but I have this different, more economically efficient way to do so.
KAPLAN-LEVENSON: And you know what's not economically efficient, said Friedman - the federal government. If you put the government in charge of the Sahara Desert, Friedman said, in five years there'd be a shortage of sand. The guy knew how to make a point, and he talked to whoever'd listen. And so over time, he went from unknown academic to TV celebrity. He went on talk shows.
(SOUNDBITE OF TV SHOW, "THE PHIL DONAHUE SHOW")
PHIL DONAHUE: Here he comes again, Milton Friedman. And boy, does he make an entrance now because this is a blockbuster book, "Free To Choose," which...
KAPLAN-LEVENSON: A bestselling book led to a 10-part, 10-hour long PBS special, also called "Free To Choose," which had an impact on everyone from Phil Donahue to Arnold Schwarzenegger.
(SOUNDBITE OF ARCHIVED RECORDING)
ARNOLD SCHWARZENEGGER: Being free to choose for me means being free to make your own decisions, free to live your own life, pursue your own goals, chase your own rainbow without the government breathing down on your neck or standing on your shoes.
(SOUNDBITE OF MUSIC)
KAPLAN-LEVENSON: He had a regular column in Newsweek magazine, wrote a guest essay for The New York Times and lectured on any podium put in front of him. He was everywhere all the time. If you turned on the TV, there was Friedman. If you walked into a bookstore, there was Friedman. If you opened the paper, there was Friedman. The guy was just always there...
(SOUNDBITE OF MONTAGE)
FRIEDMAN: The more successful a capitalist society is, the better.
There has never in history been a more effective machine for eliminating poverty than the free enterprise system in the free market.
KAPLAN-LEVENSON: ...And always on brand.
(SOUNDBITE OF MONTAGE)
FRIEDMAN: The armies of bureaucrats administering our lives, making our decisions, spending our money - all supposedly for our good.
The people who get on welfare lose their human independence and feeling of dignity.
A society that aims for equality before liberty will end up with neither equality nor liberty.
I'm a believer in freedom.
(APPLAUSE)
KAPLAN-LEVENSON: It was a rallying cry and a daring one because it was a direct attack against a system that Americans were told worked. So why listen? Well, you wouldn't, unless, all of a sudden, you felt like things weren't working so well anymore.
GEISMER: It sort of hit at this particular moment.
(SOUNDBITE OF MUSIC)
KAPLAN-LEVENSON: The '70s - the Vietnam War was winding down. The high of the post-war boom was wearing off, and the economy was starting to tank.
GEISMER: But the kind of straw that really hits in 1973 to cause a recession is the oil crisis.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED REPORTER #3: Good evening. The Middle East war produced developments all over the world today. The oil-producing countries of the Arab world decided to use their oil as a political weapon.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED PERSON #5: How much have you got left in there?
UNIDENTIFIED PERSON #6: None. It's empty. There is no oil. There's none to get, and they can't deliver any.
UNIDENTIFIED PERSON #5: You worried?
UNIDENTIFIED PERSON #6: You damn right. And when you got babies, you're going to have to worry.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED PERSON #7: I just couldn't imagine something like this would happen in America.
GEISMER: When there's this lack of oil, it also sort of just creates sort of economic havoc and leads to rising inflation and rising unemployment. And so this is what we call - was known by the great phrase of stagflation.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED PERSON #8: I'm a waitress. How long I've been out of work? Since June the 20 of '73.
GEISMER: This really affected everyday life. The cost of things just went up multiple. So all of these things, they're really feeling it.
(SOUNDBITE OF ARCHIVED RECORDING)
UNIDENTIFIED PERSON #9: You say you're a furniture manufacturer. For how long?
UNIDENTIFIED PERSON #10: About 24 years.
UNIDENTIFIED PERSON #9: Have you ever seen it this bad?
UNIDENTIFIED PERSON #10: Yes, during the Depression.
(SOUNDBITE OF MUSIC)
GEISMER: That really creates economic hardship, but I think creates a sort of psychological and intellectual just sort of freefall. I mean, the combination of the recession coupled with all of those events opens up kind of a new landscape and brings in kind of a search for new types of approaches. And people look to the sort of market-oriented ideas of people like Hayek and then also Milton Friedman, and they gained new attention.
BURGIN: Friedman was very explicit about the importance of crisis to people's mentality, people's willingness to test out new ideas. He would say explicitly that some of my ideas seem extreme, and nobody's going to implement them right away. But the next time that a crisis hits, they'll be ready to hand. And people are looking around for a solution. And they'll say, what we've been doing in the past hasn't worked, so let's try out something different.
You put out ideas with kind of a long-term vision for political change. They marinate, and then something will happen that will make a marginal idea seem newly possible.
(SOUNDBITE OF MUSIC)
KAPLAN-LEVENSON: Over the course of the 1970s, there's a shift away from government - a government that was looking less and less reliable - and towards markets as the solution to the country's problems. And suddenly, those fringe ideas and thinkers that came together at Mont Pelerin weren't looking so fringe anymore.
(SOUNDBITE OF ARCHIVED RECORDING)
RONALD REAGAN: I don't think it's an exaggeration to call Milton Friedman's "Free To Choose" a survival kit for you, for our nation and for freedom.
KAPLAN-LEVENSON: And there's a president who's probably most well-known for selling that message to the American people, a president who became a Milton Friedman fanboy.
(SOUNDBITE OF ARCHIVED RECORDING)
REAGAN: Government is not the solution to our problem. Government is the problem.
(APPLAUSE)
KAPLAN-LEVENSON: Ronald Reagan is basically Friedman in presidential form. And his supply side trickle-down economics, or Reaganomics, was inspired and literally advised by Friedman. So it makes sense that he's often credited as the guy who took a sledgehammer to taxes, regulation and welfare, the pillars of the New Deal. But he wasn't the first.
(SOUNDBITE OF ARCHIVED RECORDING)
JIMMY CARTER: I know that the American people are still sick and tired of federal paperwork and red tape.
(APPLAUSE)
KAPLAN-LEVENSON: Before Reagan, there was a soft-spoken peanut farmer from Georgia named Jimmy Carter.
(SOUNDBITE OF ARCHIVED RECORDING)
CARTER: Bit by bit, we are chopping down the thicket of unnecessary federal regulations by which government too often interferes in our personal lives and our personal business.
GEISMER: He implements a lot of the things that are sort of associated with Reagan.
KAPLAN-LEVENSON: Today, Carter's kind of remembered as a progressive. I mean, he put solar panels on the White House roof in 1980. But he also deregulated the trucking industry, the airline industry. He slashed taxes, particularly capital gains taxes, which helped investors over everyone else, and all with the full support of his fellow Democrats.
GEISMER: One of their major slogans was that the solutions of the '30s can't solve the problems of the '70s. And then they changed that to the solutions of the '30s can't solve the problems of the '80s (laughter). And then it was the solutions of the '30s can't solve the problems of the '90s.
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BILL CLINTON: While the evening is young...
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CLINTON: ...And we don't know yet what the final tally will be, I think we know enough to say with some certainty that New Hampshire tonight has made Bill Clinton the comeback kid.
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KAPLAN-LEVENSON: Coming up, the left takes a sharp right turn and doesn't look back.
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ANDREA EMERSON: This is Andrea Emerson (ph) in Portland, Ore., and you're listening to THROUGHLINE from NPR.
ARABLOUEI: Part 3 - The Air We Breathe, The Water We Drink.
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UNIDENTIFIED PERSON #11: OK, forget the fun and games. It's time to get serious. And for dads to be truly inspired, they need to be truly wired.
KAPLAN-LEVENSON: This is from a 1994 TV segment about the hottest new gift idea for Father's Day.
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UNIDENTIFIED PERSON #11: Called the internet - you can send and receive mail to and from people all over the world. Dad can log on 24 hours a day and find out what the email mailman has dropped off. Just reading my email.
KAPLAN-LEVENSON: And now that I think about it, a bunch of dorky dads excited about reading their email from home is the perfect way to picture the '90s tech boom.
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UNIDENTIFIED PERSON #12: Boom boom bingo. I'm making money...
UNIDENTIFIED PERSON #13: You're making money.
UNIDENTIFIED PERSON #12: ...With this finger, John (ph), with this finger.
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KAPLAN-LEVENSON: The World Wide Web, powered by entrepreneurs, powered by you.
GEISMER: Entrepreneurialism and the tech industry - that's the kind of way to bring about economic growth.
KAPLAN-LEVENSON: And the Democrats were fully on board. After years of Reagan and Bush, the party was looking inward, wondering why they just kept losing. They decided that some of their core values - welfare, labor unions, oversight - were bringing them down. And they wanted to win.
GEISMER: And there's this idea of this kind of political realignment that's going on in the United States towards the Republicans. And Bill Clinton becomes the kind of real centerpiece of that approach.
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UNIDENTIFIED PERSON #14: They're a new generation of Democrats, Bill Clinton and Al Gore, and they don't think the way the old Democratic Party did. They've called for an end to welfare as we know it, so welfare can be a second chance, not a way of life. They've sent a strong signal to criminals by supporting...
GEISMER: OK, so Bill Clinton is part of this orbit of Democrats. He's the governor of Arkansas. He becomes governor quite young, and he's trying to kind of bring in new solutions.
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UNIDENTIFIED PERSON #15: The NFL joins together in welcoming the next president of the United States of America...
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UNIDENTIFIED PERSON #15: ...Governor Bill Clinton, Hillary Clinton and Chelsea Clinton.
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GEISMER: Wins in 1992, wins back a lot of the kind of white moderate suburbanites and white lower, middle-class and working-class voters who've been kind of drifting towards the Republican Party, and comes into office at a moment of kind of the end of the Cold War and a sense that these ideas of kind of liberal democracy and free market capitalism are the best approach.
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CLINTON: This election is a clarion call for our country to face the challenges of the end of the Cold War and the beginning of the next century, to restore growth to our country and opportunity to our people, to empower our own people so that they can take more responsibility for their own lives.
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GEISMER: So many of the bills have the word responsibility in them because there was this idea of, like, people - government will be responsible in some ways, but, like, it's a reciprocal relationship and people have to be responsible for themselves.
KAPLAN-LEVENSON: So, like, we'll help you, but only up to a point. Then you're on your own. But you'll be better off because you'll be able to make more money that way than living off a government handout. This thinking basically describes Clinton's signature Welfare to Work reform, which pulled the plug on welfare services after two years.
GEISMER: And that is seen symbolically as a sort of change in the New Deal.
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CLINTON: It gives us a chance we haven't had before to break the cycle of dependency that has existed for millions and millions of our fellow citizens, exiling them from the world of work that gives structure, meaning and dignity to most of our lives.
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GEISMER: Another famous nail in the coffin of New-Deal liberalism passed under Clinton is the repeal of the Glass-Steagall Act, which created a separation between commercial and financial banks.
KAPLAN-LEVENSON: The Glass-Steagall Act was a signature law of the New Deal era that was created in direct response to the 1929 stock market crash. The main goal of the act was to not let that ever happen again by severing ties between banking and investing activities. It was so that 9,000 banks never failed again, because that's literally what happened during the Depression. But when key provisions of Glass-Steagall were repealed under Clinton to boost the economy, it felt like a slap in the face for FDR's legacy, making Clinton's message loud and clear.
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CLINTON: The era of big government is over.
GEISMER: And so you have a Democratic president saying that, and that sounds very similar to what Ronald Reagan was saying.
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REAGAN: Government is not the solution to our problem. Government is the problem.
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CLINTON: I say again, the era of big government is over.
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KAPLAN-LEVENSON: By the '90s, these two supposedly rival political parties seemed to be moving in lockstep. Carter, Reagan and Clinton all started to sound kind of the same - kind of like a bald, 5-foot tall man from New Jersey who never held political office but had more influence on America's economy than almost anyone else. They sounded like...
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DONAHUE: Milton Friedman.
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KAPLAN-LEVENSON: And when Friedman died in 2006, top Clinton adviser Larry Summers wrote an op-ed for The New York Times that said it plain and simple.
BURGIN: Any honest Democrat will admit that we are now all Friedmanites (ph). And so you can see right there the kind of admission of the ways in which the common knowledge has shifted, when you had the New Deal order to a neoliberal order. You have people on the left admitting that they are thinking alongside Friedman.
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BARACK OBAMA: I stand before you today to announce my candidacy for president of the United States of America.
GEISMER: It's so funny. I think actually, if I remember correctly, weren't there lots of pictures when Obama came in of, like, him dressed like FDR? And there was this idea that he was going to be just like - I think they just pick - they do the time - they have done that many times where they, like, have someone dressed as FDR. But they did it around Obama. And there was - I think there was a question, like, what would the approach be? And I think in many ways, Obama's policies were a continuation of the kind of Clinton approach. Many of the people who were in the Clinton White House came back under Obama, and many of the programs the Obama administration adopted were very pro-market and particularly pro-Wall Street.
KAPLAN-LEVENSON: He was all about the marketplace, whether it came to health care - because the Affordable Care Act or Obamacare is a marketplace for health care - or schools - because like Clinton, he was a huge charter school advocate. And like Clinton, Obama was all about the hustle.
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OBAMA: It means we should support everyone who's willing to work and every risk-taker and entrepreneur who aspires to become the next Steve Jobs. Most new jobs are created in startups and small businesses. So let's pass an agenda that helps them succeed. Both parties agree on these ideas. So put them in a bill, and get it on my desk this year.
KAPLAN-LEVENSON: He made regular visits to Silicon Valley and teased Mark Zuckerberg like an old friend.
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OBAMA: My name is Barack Obama, and I'm the guy who got Mark to wear a jacket and tie.
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OBAMA: Thank you. And I'm very proud of that.
MARK ZUCKERBERG: Second time.
OBAMA: I know. I will say, and I hate to tell stories on Mark...
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GEISMER: I'm someone who spends a lot of time on college campuses, and, like, there's all this language about entrepreneurship and sort of being your own person and starting your own business, which many people look to as this kind of celebration of the moment But that's actually, like, quite neoliberal in its thinking that you're in charge of yourself and that you're your own actor and that there's not the kind of - there's not the sort of safety net looking out for you and that you're somehow, like, empowered by that experience with like, setting your own hours. But on the other side of that is that you don't have the kind of typical protections in place, that you have no job security, you have no overtime, you have no health benefits. We're all doing lots of work, and the idea that we're, like, more empowered by it (laughter), but like, in fact, it's, like - it's creating other kinds of precarity and stress.
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KAPLAN-LEVENSON: OK, we've been talking about economic policy for a while now, longer than I ever thought I'd talk about economic policy maybe ever, and we've seen how this fringe movement won over both political parties, whether they ever named themselves as neoliberal or not. It made them different versions of the same thing in a lot of ways. But so what? How do these presidents talking about tax cuts and deregulation and free markets and individual responsibility and entrepreneurship - how does that actually affect our lives? This is what UC Berkeley poly sci professor Wendy Brown thinks about constantly.
WENDY BROWN: I've written on a lot of different topics, but on neoliberalism, I've written two books. One is called "Undoing The Demos: Neoliberalism's Stealth Revolution."
KAPLAN-LEVENSON: And the other is called "In The Ruins Of Neoliberalism...
BROWN: "The Rise Of Antidemocratic Politics In The West."
KAPLAN-LEVENSON: The reality is we live in a country that's fully embraced the idea that the market can solve most of our problems. It's part of our national identity. And Wendy says that's creeped into our own personal identities and gotten inside our own heads.
BROWN: I take neoliberalism to be a worldview and a set of practices and a way of governing that is much larger than simply free market policies. And if you don't have an understanding of that as what has saturated our society, it becomes the air we breathe, the water we swim in, but we don't know what we're breathing, and we don't know what we're swimming in. It is a way of conducting yourself that you imagine to simply be natural but actually has been very specifically constructed and organized over the past 40 years.
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BROWN: If you understand yourself as a bit of human capital, if you understand yourself in a fully economic way, it means you might approach your dating life or your educational life or your leisure time, not so much as a profit-making undertaking but still as one to manage in economic terms and think about in economic metrics. So concretely, this means that you might think, well, I could take a vacation, but that would actually depreciate my chances of being noticed in the following six ways at work or in the dating scene or something like that. And it might depreciate my value in those domains, so this is not the right thing to do. Now, what's happened there? What's happened is that you have a human being who is thinking about everything they do in terms of their human capital value being enhanced or depreciated. Should I choose this partner to work with or that one? Should I date this person or that person - not out of feeling, not out of desire, but out of human capital valuation. And that is a significant transformation of human beings.
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MICHAEL DOUGLAS: (As Gordon Gekko) The point is, ladies and gentlemen, that greed, for lack of a better word, is good.
BROWN: This economization of our decisions and our ways of life, this is novel. This is what has been brought about by the transformation that neoliberalism has brought into economizing everything in the public and social domains.
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DOUGLAS: (As Gordon Gekko) Greed clarifies, cuts through and captures the essence of the evolutionary spirit.
BROWN: I mean, this is basic Wall Street. And this is the basic Wall Street that has gone into all of our souls.
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DOUGLAS: (As Gordon Gekko) Greed for life, for money, for love, knowledge has marked the upward surge of mankind.
BROWN: All of these things are the result of a deregulated economy, which unleashes the capacity to make profit on things that have no oversight and no regulation and pull people in with the promise you, too, can be a homeowner. You, too, can be a middle-class person by getting this education. You, too, can be a millionaire. You, too, can climb your way up to the top. Except there is no top. You never get off this wheel.
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BROWN: I think that, you know, it's a Hobbesian world in some ways. Hobbes described us as creatures who would only be, as he put it, diffident or untrusting and competitive and anxious and, finally, murderous if we didn't have something that secured and held us in common. And one could say that what neoliberalism has done is taken away that thing that secures and holds us in common. It doesn't believe society exists, so there's no social body. So it's just ourselves. So what are we? We're little Hobbesian creatures - diffident, anxious, competitive, and in the end, a little murderous.
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ABDELFATAH: Next week, in the final episode of our capitalism series.
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UNIDENTIFIED PERSON #16: He's like, if you think positively, you're going to get all of these things.
UNIDENTIFIED PERSON #17: Get up every morning, look in the mirror and repeat over and over again, I am going to conquer my profession.
UNIDENTIFIED PERSON #18: So you give money. Like a seed, it goes into the ground. It's dormant. Don't ask about it anymore. But then it will pop up, and it will come back to you...
UNIDENTIFIED PERSON #17: You will be granted wealth.
UNIDENTIFIED PERSON #18: ...Ten, a hundred, a thousand-fold.
UNIDENTIFIED PERSON #16: God says it. I can have it. I believe it. That settles it.
ARABLOUEI: How religion and capitalism join forces to change the way we think about our work, our society and ourselves. The Prosperity Gospel - next week on THROUGHLINE from NPR.
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ABDELFATAH: That's it for this week's show. I'm Rund Abdelfatah.
ARABLOUEI: I'm Ramtin Arablouei. And you've been listening to THROUGHLINE from NPR.
ABDELFATAH: This episode was produced by me...
ARABLOUEI: ...And me and...
JAMIE YORK, BYLINE: Jamie York.
LAWRENCE WU, BYLINE: Lawrence Wu.
KAPLAN-LEVENSON: Laine Kaplan-Levenson.
JULIE CAINE, BYLINE: Julie Caine.
VICTOR YVELLEZ, BYLINE: Victor Yvellez.
DARIUS RAFIEYAN, BYLINE: Darius Rafieyan.
YOLANDA SANGWENI, BYLINE: Yolanda Sangweni.
ABDELFATAH: Fact-checking for this episode was done by Kevin Volkl. And a special thanks to Pablo Luna (ph) and Lorenz Giorgi (ph) for their voiceover work.
ARABLOUEI: Thanks also to Anya Grundmann, Tamar Charney and Julia Carney.
ABDELFATAH: Our music was composed by Ramtin and his band Drop Electric, which includes...
NAVID MARVI: Navid Marvi.
SHO FUJIWARA: Sho Fujiwara.
ANYA MIZANI: Anya Mizani.
ARABLOUEI: And don't forget to show us what you've learned at next week's virtual trivia event. On Thursday, July 8, at 8 p.m. Eastern, we go hard with three rounds of questions all about capitalism hosted by Rund and I, along with our trivia third, Terri Simon.
ABDELFATAH: It's been a while, and it's going to be great. RSVP and get more info at nprpresents.org. We hope to see you there.
ARABLOUEI: And finally, if you have an idea or like something you heard on the show, please write us at throughline@npr.org or hit us up on Twitter at @throughlinenpr.
ABDELFATAH: Thanks for listening.
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