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Master of Science in INTERNATIONAL COOPERATION, FINANCE AND DEVELOPMENT Lesson 1:

Dott. / Prof. Daniel Pommier Vincelli Slide2

2The Eighties: the crisis of liberalism and the new conservatism

INTERNATIONAL COOPERATION, FINANCE AND DEVELOPMENT Slide3

The Eighties: the crisis of liberalism and the new conservatism

The political changes in UK and USA paved the way to an evolution of world politics and economic transformations. The liberalism entered a systematic crisis and a new conservatism prevailed in European and Western politics. Above all, the hallmark of the new Conservatism is a new (in post-war terms) and healthy humility about the scope for Government action to improve the economy. The distinctive feature of our medium-term financial strategy, which differentiates it from the so-called national plans of other times and other places, is that it is confined to charting a course for those variables—notably the quantity of money—which are and must be within the power of government to control. By contrast, governments cannot create economic growth. All the instruments which were supposed to do this have succeeded only in damaging the economy and have ultimately broken in the hands of the governments that sought to use them. All we can do is something more modest: to try and prevent the occurrence of conditions inimical to growth—and the most inimical of all, as well as being an evil in itself, is inflation. When governments have tried to do more than this they have ended up achieving far less than this. (Margaret Thatcher, 1980)

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A conservative decade? For many people in the United States, the late 1970s were a troubled and troubling time. The radical and countercultural movements of the 1960s and early 1970s, the Watergate scandal, the Vietnam War, uncertainty in the Middle East and economic crisis at home had undermined Americans’ confidence in their fellow citizens and in their government. By the end of Jimmy Carter’s presidency, the idealistic dreams of the 1960s were worn down by inflation, foreign policy turmoil and rising crime. In response, many Americans embraced a new conservatism in social, economic and political life during the 1980s, characterized by the policies of President Ronald Reagan. Often remembered for its materialism and consumerism, the decade also saw the rise of the “yuppie,” an explosion of blockbuster movies and the emergence of cable networks like MTV, which introduced the music video and launched the careers of many iconic artists. THE 1980S: RISE OF THE NEW RIGHT The populist conservative movement known as the New Right enjoyed unprecedented growth in the late 1970s and early 1980s. It appealed to a diverse assortment of Americans, including evangelical Christians; anti-tax crusaders; advocates of deregulation and smaller markets; advocates of a more powerful American presence abroad; disaffected white liberals; and defenders of an unrestricted free market.

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Social basis of conservatism Historians link the rise of this New Right in part to the growth of the so-called Sunbelt, a mostly suburban and rural region of the Southeast, Southwest and California, where the population began to expand after World War II and exploded during the 1970s. This demographic shift had important consequences. Many of the new Sunbelters had migrated from the older industrial cities of the North and Midwest (the “Rust Belt”). They did so because they had grown tired of the seemingly insurmountable problems facing aging cities, such as overcrowding, pollution and crime. Perhaps most of all, they were tired of paying high taxes for social programs they did not consider effective and were worried about the stagnating economy. Many were also frustrated by what they saw as the federal government’s constant, costly and inappropriate interference. The movement resonated with many citizens who had once supported more liberal policies but who no longer believed the Democratic Party represented their interests.

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Reagan During and after the 1980 presidential election, these disaffected liberals came to be known as “Reagan Democrats.” They provided millions of crucial votes for the Republican candidate, the personable and engaging former governor of California, Ronald Reagan (1911-2004), in his victory over the incumbent Democratic president, Jimmy Carter (1924-). Reagan won 51 percent of the vote and carried all but five states and the District of Columbia. Once a Hollywood actor, his outwardly reassuring disposition and optimistic style appealed to many Americans. Reagan was affectionately nicknamed “the Gipper” for his 1940 film role as a Notre Dame football player named George Gipp. Reagan’s campaign cast a wide net, appealing to conservatives of all stripes with promises of big tax cuts and smaller government. Once he took office, he set about making good on his promises to get the federal government out of Americans’ lives and pocketbooks. He advocated for industrial deregulation, reductions in government spending and tax cuts for both individuals and corporations, as part of an economic plan he and his advisors referred to as “supply-side economics.” Rewarding success and allowing people with money to keep more of it, the thinking went, would encourage them to buy more goods and invest in businesses. The resulting economic growth would “trickle down” to everyone.

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Second Cold War Like many other American leaders during the Cold War, President Reagan believed that the spread of communism anywhere threatened freedom everywhere. As a result, his administration was eager to provide financial and military aid to anticommunist governments and insurgencies around the world. This policy, applied in nations including Grenada, El Salvador and Nicaragua, was known as the Reagan Doctrine. In November 1986, it emerged that the White House had secretly sold arms to Iran in an effort to win the freedom of U.S. hostages in Lebanon, and then diverted money from the sales to Nicaraguan rebels known as the Contras. The Iran-Contra affair, as it became known, resulted in the convictions–later reversed–of Reagan’s national security adviser, John Poindexter (1936-), and Marine Lt. Col. Oliver North (1943-), a member of the National Security Council.

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Reagan and Gorbaciov But Reagan didn't trust the Soviet Union. In 1983 he had labeled the Soviet Union "the evil empire." Two years later, at the first arms summit in Geneva, Gorbachev put a human face on the enemy for the President. That November, Reagan said of Gorbachev, "There was warmth in his face and his style, not the coldness bordering on hatred I'd seen in most senior Soviet officials I'd met until then." He sensed then "the moral dimension in Gorbachev." Gorbachev, in turn, called Reagan a great American and a great leader. In the three years and four summits that followed, Gorbachev and Reagan worked toward ending the Cold War, and developed a warm relationship. But there would be setbacks. When a nuclear reactor at Chernobyl exploded on April 26, 1986, the Soviet Union did not provide a full account of the accident until May 14. Gorbachev's commitment to glasnost was questioned when he failed to apologize for the disaster in his long-overdue address. In the 1985 Geneva summit, progress on arms control had foundered over Gorbachev's insistence on scrapping SDI, and Reagan's commitment to its development. The October 1986 summit between Reagan and Gorbachev, in Reykjavik, Iceland, also ended in a stalemate.

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Towards the end of Cold War At this second summit, Reagan still refused to budge on SDI, and Gorbachev refused to make further concessions without compromise. But at the third summit, in Washington, DC, in December 1987, Gorbachev yielded to Reagan's terms. The USSR was in dire economic straits, and Gorbachev needed a respite from the arms race. When Reagan and Gorbachev signed the INF Treaty in Washington, in 1987, the first treaty to reduce the number of nuclear weapons, the United States and Western Europe rejoiced. Later when they called each other “friend” in Moscow, many saw it as “the ratification of their mutual desire for peace”. For the Soviet Union, however, the end of the Cold War triggered new problems. Gorbachev's economic reforms were failing, and the far-flung Soviet republics were using glasnost to demand independence.

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INTERNATIONAL COOPERATION, FINANCE AND DEVELOPMENT Slide10

Supply-side On the domestic front, Reagan’s economic policies initially proved less successful than its partisans had hoped, particularly when it came to a key tenet of the plan: balancing the budget. Huge increases in military spending (during the Reagan administration, Pentagon spending would reach $34 million an hour) were not offset by spending cuts or tax increases elsewhere. By early 1982, the United States was experiencing its worst recession since the Great Depression. Nine million people were unemployed in November of that year. Businesses closed, families lost their homes and farmers lost their land. The economy slowly righted itself, however, and “Reaganomics” grew popular again. Even the stock market crash of October 1987 did little to undermine the confidence of middle-class and wealthy Americans in the president’s economic agenda. Many also overlooked the fact that Reagan’s policies created record budget deficits: In his eight years in office, the federal government accumulated more debt than it had in its entire history. Despite its mixed track record, a majority of Americans still believed in the conservative agenda by the late 1980s. When Ronald Reagan left office in 1989, he had the highest approval rating of any president since Franklin Roosevelt. In 1988, Reagan’s vice president, George H.W. Bush, soundly defeated Massachusetts Governor Michael Dukakis in the presidential election.

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INTERNATIONAL COOPERATION, FINANCE AND DEVELOPMENT