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.
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.