Published by EH.Net (September 2023).

Nelson Lichtenstein and Judith Stein. *A Fabulous Failure: The Clinton
Presidency and the Transformation of American Capitalism*. Princeton:
Princeton University Press, 2023. 525 pp. $39.95 (hardback), ISBN
978-0691245508.

Reviewed for EH.Net by James K. Galbraith, Lyndon B. Johnson School of
Public Affairs, The University of Texas at Austin.



This splendid book is an unconventional collaboration. Judith Stein,
Distinguished Professor of History at the City University of New York,
began to write the history of Clintonism before her passing in 2017. Nelson
Lichtenstein, Research Professor of History at the University of
California, Santa Barbara, picked up the notes, drafts and archives, and
has now finished the job.

*A Fabulous Failure* is an intellectual history expressed in politics. It
chronicles how the Clinton years were for Democrats what Reagan\’s had been
for Republicans: a grand showcase of competing plans, roped together by an
impresario. The authors\’ signal achievement lies in tracing ideas,
particularly those developed by the party\’s progressive wing, from their
origins at MIT, Berkeley, Princeton, and Harvard\’s Kennedy School to their
demise at the White House and on Capitol Hill.

The book is organized as parallel chronologies, each covering a major
economic or social policy debate (and debacle) of Clinton\’s presidency:
health, trade (with Japan, Mexico, and China), industrial relations,
“reinventing government,” welfare, international debt crises (Mexico, 1995,
and Asia, 1997), and the final paroxysm of banking deregulation in 1999 and
2000. Apart from trade, crucial foreign policy issues are not covered. The
mishandling of Russia rates just a few pages; NATO, Bosnia, Croatia,
Serbia, and Kosovo do not appear in the index; the bombing of the Chinese
embassy in Belgrade is mentioned but written off as a “mistake.” (There is
no good reason to believe this.)

This reviewer haunts these pages like Banquo\’s Ghost. Though some years
younger than most of Clinton\’s top advisers, my career in American public
policy was over by 1992. Still, in the previous decades it had intersected
with most of the players described here, going back to Clinton himself at
the McGovern headquarters in Washington in 1971. In the 1980s at the Joint
Economic Committee I had organized hearings and sponsored studies,
collaborated or competed with fellow staffers, and (then and later) written
many articles for the small journals where Democratic progressives made
their mark, notably *Working Papers Magazine* and *The American Prospect. A
Fabulous Failure* is, to me, a story of acquaintances, old colleagues, and
friends.

Their mood, reflected in some harsh blurbs, is of dreams betrayed. Michael
Kazin writes of “a dubious agenda of neoliberalism.” Robert Kuttner writes
of “ideological seduction and political corruption”. The bitterness is
personal. Much is directed at Clinton; some at the economists (Larry
Summers), the political entrepreneurs (Al From, Dick Morris), and the Wall
Streeters (Robert Rubin) who ended up on the winning side in the Clinton
policy wars. Among the losers, Labor Secretary Robert Reich stands out,
especially as he was an old “Friend of Bill” and hoped for more clout than
he would enjoy.

What did Clinton\’s progressives want? They were not radicals. Broadly,
their faith was in institutional reform, economic democracy, business-labor
codetermination, and managed trade. Their inspirations were Swedish social
democracy, French health care, Italian decentralized manufacturing, and the
tamer parts of the New Deal/World War II mobilization legacy, not including
price control or strict subordination of the Federal Reserve. Their goal
was to revive American industry while strengthening labor, to foster
investments in science and technology, to expand the welfare state,
especially health insurance. Their tools were—largely—argument,
exhortation, and negotiation.

Without excusing Clinton, Rubin or Summers, a fair-minded observer should
ask, how realistic and reasonable were the ideas (and campaign slogans) of
such people as Reich, Kuttner, Derek Shearer, and Laura Tyson? Many had
spent the Reagan-Bush years in academic incubators; some (for instance Ira
Magaziner, who ran the Clinton health care effort) had been in consulting;
Kuttner was (and remained) a magazine editor. Their *beau ideal* was often
the “thirty glorious years,” 1945-1975, of the postwar epoch in the United
States and Europe. They were not working in politics or the unions in the
early 1980s and, I fear, their understanding of the irreversible industrial
destruction wrought by Reagan and Federal Reserve Chairman Paul Volcker’s
disinflationary policy was often superficial. Monetary and budget economics
did not much interest them. Japan was the main threat they perceived. China
was a mystery to them, its potential neither known nor noted. Russia played
no role on their stage except as a broken model, that of “Soviet central
planning”. In retrospect, arguably, the leading progressives of the early
1990s were already behind their times—even though the conventional thinkers
who bested them were their intellectual inferiors in many respects.

The progressives thus ceded macroeconomic and financial control to the
other wing of the Clinton coalition—to budget balancers like Leon Panetta,
to mainstream economists, to Robert Rubin and his money men, and to Alan
Greenspan at the Federal Reserve. This, along with the complexities of
institutional (and international) compromise in areas like health,
industrial relations, and trade, doomed their projects. Nor were the
progressives always on the ball. As Lichtenstein and Stein observe,
Clinton\’s greatest domestic policy misdeed—the deregulation of
finance—encountered only slight opposition from his progressive wing at the
time. Clinton himself, rather like Reagan but with even fewer fixed
principles, was mainly interested in his own political success. Top
American politicians rarely survive otherwise, as the progressives who were
charmed by him eventually learned.

And yet, as Lichtenstein and Stein acknowledge, not everything failed.
There were successes—some sustainable, others not—among the debacles.
Thanks to Greenspan, who held his fire after 1995, Clinton presided over a
long boom, reaching full employment without inflation by the late 1990s.
Growth was fueled by investments in new technologies, not the refurbishing
of old ones. AFDC was abolished, but the Earned Income Tax Credit, together
with abundant jobs, drove poverty down. Health care reform failed, but
eventually Medicaid expansion (alongside CHIP, for children) became the
go-to form of single-payer coverage for, presently, about ninety million
Americans. Part of the resentment progressives now express may, perhaps, be
put down to the fact that the successes (such as they were) did not flow
from their ideas. Some, indeed, defied their predictions.

Lichtenstein and Stein flash forward occasionally, for example to the Great
Financial Crisis of 2008—Clinton\’s direct legacy—and to Obama\’s
Affordable Care Act, the resurrection of his first failure. They pass over
Bush\’s wars and the entrenchment of the Rubin coterie under Obama with at
most a few words. But they do note that under Biden, elements of the 1990s
industrial agenda have at last broken through. In 2020, Trump and Covid
busted budget orthodoxies, incidentally validating Modern Monetary Theory.
In 2021 and 2022, infrastructure, renewable energy, and advanced
manufacturing got attention and funding. Inflation—briefly resurgent—seems
to be abating without a bust, leaving mainstream economists mystified and
the Federal Reserve apparently irrelevant, except to the money markets.
Kuttner, among others, sees these developments as a kind of vindication.

I fear my old friend\’s optimism is misplaced. Biden\’s boom (even more
than Clinton\’s) rests on a fragile foundation. It depends on fracked
fossil fuels, possibly already in decline, and on renewable forms of energy
that may soon run up against resource and engineering limits. His chip
policy presumes an industrial competence that disappeared at least two
decades back. His government, long ago outsourced to private contractors,
lacks the technical ability to run the policies that his advisers believe
necessary. These days, the American government mostly writes checks.

Most of all, Biden\’s policy of taking on China and Russia at once—a policy
inflamed by moralizing—rests on a vast underestimate of the weight and
power of these two countries. Clinton arrived at the dawn of the unipolar
age, which placed him under the obligation to manage American power wisely
and with restraint. This, notably in Russia, Yugoslavia, and with respect
to NATO in Eastern Europe, he failed to do. This reviewer began to visit
Russia back then and heard directly the bitter reaction to the looting and
chaos of those “liberal” times. Russia has since recovered its social
balance, its economy, and its military power. Clinton\’s China policy,
moreover, was based on a fantasy of Western cultural superiority—“engage
with them and they\’ll become like us.” I also advised in China in the
1990s and knew then that the Chinese were not going to take that bait. They
didn\’t, and today, China\’s economy is larger than ours and hardly less
advanced.

After Clinton, George W. Bush launched America into brutal invasions,
demolishing America\’s reputation worldwide. Obama aggravated relations
with Russia, and Trump broke with China. Today, as Biden pursues
simultaneous conflict with Russia *and* China, the US is squeezed out of
the Middle East by the Saudi-Iran rapprochement. Meanwhile
“social-democratic” Europe, long a hollow fiction under the neoliberal EU,
is crumbling under sanctions and energy sabotage, aimed at Russia but
wreaking havoc, especially, on Germany. Though the hegemony of the dollar
and Treasury bond has not disappeared, its days may be numbered. Yes, the
US economy is holding up, for now. There is no basis for confidence in the
long term.

Today, we are very far from the thirty glorious years. We are also long
past the peak of US primacy and free maneuver in the world. Perhaps,
indeed, the progressives of the Clinton era had already missed their
moment, now thirty years ago, when they were offered a fleeting chance to
play at power. Yet their influence remains; their perspectives,
preconceptions, commitments, and judgments still largely dominate what
passes for progressive thought in America today. At the core of their
worldview, the United States and the Western European are the good ones—the
democratic and economic beacons of their youth, imperfect but fixable,
given political goodwill and institutional reforms. This leaves the serious
matters to financiers, information tycoons, foreign policy ideologues, and
the Joint Chiefs of Staff.

It will not end well.



James K. Galbraith holds the Lloyd M. Bentsen, Jr. Chair in
Government/Business Relations at the Lyndon B. Johnson School of Public
Affairs at The University of Texas at Austin. He was Executive Director of
the Joint Economic Committee in the 1980s, Chief Technical Adviser for
Macroeconomic Reform to the State Planning Commission of the People\’s
Republic of China in the 1990s, adviser to the Finance Ministry of Greece
in 2015, and recently elected to the Russian Academy of Sciences.

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