Mark Blyth - A Brief History of How We Got Here and Why

"Other People's Blood". “...to establish its credibility, the Federal Reserve had to demonstrate its willingness to spill blood, lots of blood, other people’s blood.” - Reagan’s economic adviser Michael Mussa on Volker [link] I've been desperate to learn more about this since watching Mark Blyth's talk "A Brief History of How We Got Here and Why" ( [this video] ) And while Blyth takes the opinion that Volker and Friedman were just the next steps in the evolution of capitalism, and I am still desperately lacking knowledge about this context, I can't help but have a feeling that if the future is continues with worsening inequality and political instability in a neoliberal context, we'll look back and be able to say it started with Volker.

neoliberalism has a fairly specific meaning in academic contexts. There absolutely was a "culture war", or war of ideas, that was waged to sell deregulation and privatization to the masses. Ironically, these included some fairly generous handouts, e.g. earned income credits or the welfare programs in the UK funded by the oil windfall. Ultimately, we wouldn't have ended up were we are today without a continuous campaign selling neoliberalism. It's how the Democrats became the party of wall street, and new labour in the UK is more conservative than the tories 50 years ago. Mark Blyth gives a great primer called "A brief history of how we got here and why": [this video]

A lot of it is politicians chasing a golden age where everything lined up for American prosperity which we can't really return to. The postwar period had so many things going for America, everyone else was rebuilding or bankrupt, immigration was very low, the majority of global capital was USD, strong capital controls meant domestic investment which hindered outsourcing and de-industrialization and the monetary policy of the time was reacting to prewar era of massive unemployment that led to political instability in the world, so they focused heavily on full employment to maintain stability. Focusing on full employment meant wage growth was persistent since it was always in high demand, which worked because it was paid for by the gains in innovation from those workers, and the rest of the world was catching up and created demand creating a cycle. The cycle eventually became unsustainable because at some point innovation gains could not keep up with inflation and the world became more competitive as everyone caught up. Labor had a lot of power in this regime but if it was not worth it for capital to invest since there was no return, they would stop investing because the scales of power tipped too far in the favor of labor, which led to unemployment and stagflation. The response to this was to shift monetary policy towards taming inflation and creating price stability. The pendulum swung hard in the other direction against labor. Interest rates were jacked up and the financial