Then-Governor Ronald Regan speaks on December 5, 1968. He later went on to become president of the United States, ushering in a severe era of neoliberal economic policy that has continued to this day. (Photo: Bettmann / Contributor / Getty Images)
Neoliberalism makes the lower and middle classes poorer, empowers people like Trump and makes the world less safe. But what is it, and who is responsible? This article is excerpted from President Trump, Inc. (2017, Clairview Books).
In the early 1970s, the Nixon administration pushed to eliminate what neoliberal advocates call “needless barriers to competition.” This was particularly true of the financial sector, where restrictions on local bank branches, prices for deposits (so-called regulation Q) and compartmentalization (i.e., allowing the interconnection of commercial, savings and insurance) were lifted.
Experts Campbell and Bakir identify four “pre-neoliberal attacks,” which transformed the US economy into a neoliberal one:
1) Bank holding companies were established as a way of circumventing the McFadden Act 1927, which restricted the geographical competition of banks. Until the 1970s, the majority of America’s 14,000 banks were single units.
2) Regulation Q meant that banks had to find creative ways of using money market instruments to finance businesses. New York banks in particular transformed into highly liquid markets to attract corporate customers. Negotiable Certificates of Deposit were issued to undermine regulation Q. The Money Market Mutual Funds, introduced in 1971, streamlined the process. They expanded the liquid secondary business markets from $3bn in 1976 to $80bn in 1980, then to $230bn in 1982. Most of this was worthless cash.
3) The credit contractions of 1966-70 describe a period in which European banks essentially laundered US money to allow them to avoid Q-restrictions. By 1975, Euromarket loans had exploded from $25bn in 1968 to $130bn.
4) Bank holding companies were also…