David Longstreath/AP Photo
The Clinton administration’s approach to China was more wide-reaching than NAFTA for the U.S. economy.
This article appears in the October 2023 issue of The American Prospect magazine. Subscribe here.
A Fabulous Failure: The Clinton Presidency and the Transformation of American Capitalism
By Nelson Lichtenstein and Judith Stein
Princeton University Press
In December 2001, less than a year after Bill Clinton left office, The American Prospect ran an exchange between E.J. Dionne and Robert Kuttner, asking: “Did Clinton Succeed or Fail?” Kuttner noted, “As always with our Bill, we can emphasize the half-full or the half-empty glass.” After they unsurprisingly failed to reach consensus, Dionne ended the exchange suggesting that they “meet in five or ten years and figure out who was right.” The two never resumed their conversation (at least publicly), but since then, the question has served as dinner party conversation fodder among Democrats, and has been the subject of many an American Prospect article.
With the benefit of more than two decades of hindsight and none of the word count constraints of magazine articles, the eminent historians of labor and capitalism Nelson Lichtenstein and Judith Stein offer the most extensive response to the question. The title of their more than 500-page book suggests that they take the half-empty side. Yet the descriptor “fabulous”—a riff on Janet Yellen and Alan Blinder deeming the 1990s “The Fabulous Decade”—connotes their contention that the true travesty of Clinton’s presidency was the fact that his administration abandoned its progressive vision of statecraft, especially with regard to how to manage and reform capitalism.
Lichtenstein took up the daunting task of completing a project the late Judith Stein had started, seeking to understand why the Clinton administration had failed to take advantage of a mostly peaceful and prosperous decade to construct a more stable economy and political order. Stein had focused primarily on U.S. trade policy. Lichtenstein combined it with his own expertise on labor, global supply chains, and specifically Walmart, and expanded its focus to include a much wider range of issues, including health care, workplace relations, and welfare reform. The result is a book that is dazzlingly impressive in its scope and depth. It draws on a wide range of archival materials and interviews and oral histories with key actors, which it fuses with the authors’ expertise on the history of the late 20th century.
A Fabulous Failure serves as an indispensable resource to anyone, providing fresh insight into topics like the health care debacle (including a careful discussion of why Obama succeeded where Clinton failed), the NAFTA debate, and the repeal of the Glass-Steagall Act, all of which have been covered elsewhere. At the same time, it spotlights issues such as trade policy with Japan and workplace management that have been given short shrift by other historians.
In an argument Lichtenstein previewed in the Prospect in 2018, the book aims to go beyond the dismissive accounts of the Clinton years that write off the era as simply the heyday of corporate Democratic centrism. He and Stein are by no means Clinton apologists who look at the economic prosperity and low poverty rate of the 1990s as a symbol of Clinton’s effectiveness. Nor do they blame Clinton’s shortcomings and shifts solely on the growing power of the GOP. Instead, they seek to understand how the shift in Clinton’s thinking and policies became driven by larger economic and geopolitical forces. They also emphasize that Clinton was not simply a passive victim of globalization and financialization. Rather, his administration—especially the Treasury Department under Robert Rubin—actively contributed to constructing these trends. In doing so, they remind us that success and failure are in the eye of the beholder; in amplifying the forces of unfettered free trade, runaway capital, and the deregulation of the tech industry, the administration absolutely succeeded.
A FABULOUS FAILURE’S MOST NOVEL and important contribution is in refocusing the narrative of late 20th-century history to show that the fall of the Berlin Wall was more significant to the U.S. and global economy, as well as the maturation of neoliberalism, than the election of Ronald Reagan. The book is notable as the rare study of neoliberalism that successfully connects domestic and global contexts and issues. Lichtenstein and Stein persuasively argue that the end of the Cold War was initially significant because it left no serious alternative to capitalism, which shifted the entire policy process toward pursuing market-based solutions to social problems. Second, it opened Eastern Europe and East Asia to export manufacture, which would fundamentally reshape the labor market and economy both domestically and globally.
Examinations of economic globalization in the 1990s have tended to concentrate primarily on NAFTA, and give China merely a passing reference. While Lichtenstein and Stein contend that NAFTA was politically and ideologically important, it was the Clinton administration’s approach to China that was far more wide-reaching for the structure of the American economy. The authors convincingly argue that the Clinton’s administration’s decision to delink human rights and trade and grant China “most favored nation” status in 1994 set in motion a chain of events that would lead to China’s admission to the World Trade Organization seven years later.
A Fabulous Failure provides a reconsideration of not only the Clinton years, but also of presidential history more broadly.
In addition to the rush by American manufacturing companies to China, the authors also emphasize the significant role that Wall Street money played in restructuring the Chinese economy, an activity that Robert Rubin recognized and encouraged. This codependency, as Lichtenstein and Stein illuminate, would intensify especially as China used its export earnings to buy more than $1 trillion of U.S. Treasury bonds, which put downward pressure on U.S. interest rates and contributed to Wall Street overconfidence and the debt-fueled housing bubble. Thus, they powerfully argue that “the road to the financial collapse of 2008 was paved … by China’s admission to the WTO.”
The Clinton administration’s China policy also exposed the fallacy that free-market capitalism would usher in democracy across the Global South, and that new consumer goods would offer individual freedom to the billions of people who lived there. Lichtenstein and Stein argue that this was one of many instances of “wishful thinking” the Clinton administration both believed and promoted, with significant costs borne by the American people and the economy. The most notable and overarching version of this, they contend, was the faith in the “new economy” as the solution to seemingly every problem.
What makes this focus on Silicon Valley and Wall Street as salvation particularly disappointing to the authors is their contention that, when Clinton arrived in Washington, “the management and reform of American capitalism stood at the top of his agenda.” Clinton’s retreat from this agenda, they argue, came not from an abiding or pre-existing ideological commitment to neoliberalism, as many other scholars and popular accounts have contended. Rather, it emerged from a response to the restructuring of the global economy and the political dynamics of the moment.
IN TRACKING THE TRANSFORMATION in Clinton’s agenda, Lichtenstein and Stein concentrate on the early influence on his thinking from a group of policy entrepreneurs, including Robert Reich, Ira Magaziner, Laura Tyson, and Jeffrey Garten, several of whom were founders and frequent contributors to The American Prospect. As early as the 1970s and 1980s, many were staunch proponents of the idea of industrial policy as the best way to help ease the transformation to a postindustrial society. Although careful to elucidate the fine-grained differences in their ideas, Lichtenstein and Stein suggest that they, and the ideas of industrial policy, were pivotal to Bill Clinton’s thinking while he served as governor of Arkansas and to his presidential campaign, undergirding the campaign manifesto Putting People First. After gaining high-profile posts in the administration, Reich, Magaziner, Tyson, and Garten sought to apply these ideas to arenas such as health care and trade with Japan. Lichtenstein and Stein argue that Clinton’s appointment of the “highest-profile advocates” of industrial policy reveals “the degree to which the label ‘neoliberal’ fails to capture the original ideological and policy thrust of his administration.”
This discussion returns important attention to the industrial-policy debates of the 1970s and 1980s, which have often been overlooked in accounts of the late 20th-century political economy, and provide new ways in which to understand Clinton’s famously complicated health care proposal. But it is worth pointing out that industrial policy itself is not inherently progressive. Progressive figures have been some of its staunchest advocates, including several writers for the Prospect (which Lichtenstein and Stein dub “a fount of industrial policy advocacy”). But industrial policy is a tool that can be adopted for a variety of different ends, and its importance rests more on its implementation. It could lead to a bolstered industrial manufacturing base and more socioeconomic equity or a series of corporate handouts that do not reach the vast majority of workers.
GREG GIBSON/AP PHOTO
Robert Reich was one of a group of Clinton’s high-profile advocates for industrial policy, focused primarily on high-tech, non-union industries.
The version that Clinton pursued in Arkansas and the one advocated by Magaziner and Reich, as the authors concede, was hardly a carbon copy of the more socially democratic iterations that proved successful throughout Western Europe. Unlike the Swedish, West German, and even Japanese models, Magaziner and Reich’s approach (and less so Tyson’s) concentrated primarily on high-tech, non-union industries. Throughout the 1980s, each evinced deep and abiding skepticism for organized labor. In fact, this is one of the reasons it was so appealing to Clinton, and why these iterations of industrial policy earned staunch opposition from unions. A United Steelworkers representative protested to Reich at a meeting in the early 1980s: “You cannot glibly write off whole segments of industries.”
ONE OF THE MOST DISTINCTIVE—and surprising—claims Lichtenstein and Stein pursue is that Clinton and his top advisers operated at a remove from the Democratic Leadership Council. Indeed, they argue that the New Democrats and the Democratic Leadership Council lacked influence on Clinton. This distinguishes their argument from other accounts of the Clinton years (including my own). But in making such a case, they fail to acknowledge that many New Democrats were enthusiastic proponents of industrial policy, and that the DLC similarly entertained the idea in many of its early policy statements, seeing it align with their vision of how to remake the American economy.
In their efforts to draw a distinction between Clinton and the DLC, Lichtenstein and Stein also overstate the influence of progressive reformers in the White House. The fact that Clinton decided to listen to Rubin, Alan Greenspan, and others, and pursue deficit reduction and NAFTA as early as January 1993, essentially made most progressive ideas dead on arrival. The authors themselves argue that “when it came to virtually any financial issue, Treasury was by far the most important institutional force in the Clinton administration,” and in any battle with the more progressive-oriented Council of Economic Advisers, they would reliably win. The discussion of figures like Reich, Magaziner, Tyson, and Garten’s efforts to implement their ideas on investment, health care, and managed trade is most illuminating for the ways it shows the challenges of academic technocrats trying to translate untested ideas into policy. The chapter on Reich’s quixotic attempt to develop a new program of labor-management cooperation that would empower workers and boost productivity is particularly instructive in this respect, as it crashed on the shoals of a corporate world that by the mid-1990s had become fully financialized and globalized. It would lead Reich and several others to retreat back to academia by the end of Clinton’s first term.
These interpretative differences aside, A Fabulous Failure provides a reconsideration of not only the Clinton years, but also of presidential history more broadly. Lichtenstein and Stein highlight the benefits of looking beyond the rhetoric and personality traits of presidents and instead focusing on the larger context, and in particular on other figures in administrations and how they and their ideas come to shape policy and statecraft. The lack of attention they pay to the Lewinsky scandal and Bill and Hillary’s enigmatic marriage is especially refreshing. With the exception of the chapters on health care, Hillary Clinton plays a notably minor role throughout the book, intimating that she was not a central player in crafting policies related to political economy.
The emphasis on policy and not politics offers a valuable model for analyzing not just presidencies of the past, but the contemporary ones as well. Joe Biden’s presidency is perhaps the best proof of all of the need to look less at the ideology and the personality of a president and instead examine the larger context, both inside the administration and outside of it. In many ways, Biden’s administration has followed the opposite trajectory as Clinton. One of his most surprising moves has been the resurrection of the ideas of industrial policy through the infrastructure bills, the CHIPS and Science Act, and the Inflation Reduction Act, with a focus on manufacturing that was often absent from the Clinton-era proposals.
One of the key takeaways from the Clinton years is that the best way to keep industrial policy and other economic initiatives equitable is to ensure that the labor movement has a voice and a seat in key policy decisions, and that progressive and left policymakers and ideas remain integral to the process. Bearing these lessons in mind is but one way to ensure that the Biden years are not yet another “fabulous failure.”
