Brooklyn was closed because of neglect. America’s cities looked old and fragile due to a decade of accumulated neglect. In the 1980s, a lot of infrastructure in the United States and the United Kingdom had been privatized. While previous generations sacrificed labor and capital to expand public infrastructure, built bridges, schools, and hospitals, Western countries started to shift spending from investment to consumption. Labor shifted from construction and manufacturing to banks, shops, and other services. The share of investment in America’s GDP had dropped from 25 percent in 1980 to 19 percent in 1990. The situation was similar in the United Kingdom. “Historians will come to doubt our national sanity,” a British politician alerted.8 The situation was a little better on the European continent, with France investing in high-speed trains, the Netherlands spending on flood defenses, and new ports and airports being opened throughout the region.9 Experts worried about a tendency to harvest the benefits from investments made by previous generations without making sufficient new investments to secure prosperity for the next generations.
Besides underinvestment in public infrastructure, economists questioned whether there was sufficient investment in manufacturing. Since the late 1980s, manufacturing growth in the United Kingdom and the United States had stalled. Growth of investment in factories had dropped significantly compared to earlier decades. This all happened at a moment when the consumption of manufactured goods increased. Strong national currencies benefited consumers of goods, because they made imports cheaper, but came as a challenge to local producers of goods. Optimist economists stated that the shift toward services made the economy competitive and that growth of information technology kept the West ahead of its rivals. They also stated that the reduction of manufacturing in places like Detroit need not be a problem, as long as new jobs were created in services elsewhere. Growth would continue, but in different sectors and in different regions.
Critics, however, suggested that an economy could not survive on services alone: “A service economy is a balanced one where all sectors – agricultural, manufacturing and services – are viable even though the great majority of people may work in one area.”10 Another concern was the abandoning of so-called basic industries, like steel and assembling. Instead of making factories more efficient and environmentally sustainable, the production of such goods was outsourced to countries with laxer social and environmental standards.11 It was an immense contradiction that the same economists who declared their faith in a free market that propelled efficiency gains accepted that rich governments forced polluting companies to close and that poor governments encouraged polluting companies to invest. It was a contradiction also that those who repeated their trust in progress found it normal that even in the twentieth century poor countries needed to pass through a stage of economic and environmental exploitation first. New services, like real estate and finance, were embraced with the same ease in the West as so-called sunset industries were demoted, disregarding the fact that Western citizens could still not imagine a life without basic goods like cotton, polymers, or aluminum.
A critical part of Western society that also suffered from low investment was education. In the 1980s, President Ronald Reagan had wanted to abolish the federal education department altogether, leaving schools to be managed by local governments and dependent on private financing. Neoliberal puritans posited that free education would be better. From a more opportunistic viewpoint, privatization and decentralization were meant to reduce costs. In the United States and the United Kingdom, privatization added to polarization. While schools had once been considered a social blender, they now contributed to segregation.12 With good education reserved for a small group of rich students, experts warned of a tide of mediocrity. Civic education, crucial for democracies to show that they were truly superior to communist societies, had fallen into disarray.13 Robust civics instruction, usually organized into three mandatory high-school courses, had been left to atrophy. Large groups of children were left behind, children getting second-rate education in third-rate schools.14 Child labor returned to parts of the United States.15 Ten subway stops from the lavish apartments around Central Park, New York, poor school pupils were seen doing worse than their parents: “Bleeding gums, impacted teeth, and rotting teeth are routine matters for the children in the South Bronx. Children get used to feeling constant pain. They go to sleep with it.”16
For many Western countries, the 1980s were a period of decreasing investment, dwindling saving rates, and increasing household consumption. One of the comments of liberal economists about the Soviet planned economy was that it misallocated capital to sectors that did not make the country more productive. Now it could be questioned whether capitalism was not leading to the misallocation of capital in the West. How could it be that giant shopping malls were erected, yet there was no money to build schools and maintain bridges? How could it be that the rich were spending lavishly on yachts and penthouses, yet millions of poor children were ignored, hardly received quality education, and, hence, would not in any way help the economy to grow stronger? A berth for a yacht in New York could cost as much as US$2 million a year, enough to pay for about 500 children at elementary school. When asked about his single apartment worth US$12 million in downtown Manhattan, the property owner, a future American president, said: “While I cannot honestly say I need an 80-foot-long living room, I do get a kick out of having one.”17 How could it be that privatization in the 1980s had made the average American or British citizen spend more on healthcare and other public services, yet with their quality being in decline? Should it really be taken for granted that capitalism was superior?
The growing consumption in several Western countries coincided with growing external debt. As they imported more than they exported, some of the imports had to be pre-financed. But President Ronald Reagan had explained this as a sign of strength. After all, he argued, it implied that countries like the United States were creditworthy enough for foreigners to advance money.18 You can only borrow large quantities of money if you are strong. Many economists agreed, but suggested some conditions.19 America and other deficit countries could use the foreign money and cheap imported consumer goods as an opportunity to invest in innovative industries, education, and infrastructure. If not, some experts warned, growing debt combined with a weakened economy would mean repayment problems in the future. Even the position of the United States as the leading economy and the American dollar as the leading currency could be at risk.20 Why, after all, would one accept American dollars to build financial reserves if the American economy was set to weaken in the long run? One economist referred to the dilemma as the morning-after problem.21
A first source of uncertainty about the ability of the West to preserve its power and its position at the center of world politics concerned, thus, the downside of neoliberalism. The retreat of the state, advocated by politicians like Ronald Reagan and Margaret Thatcher, had affected the vital tissue of American and British society. The shopping malls erected against the backdrop of decaying public infrastructure, manufacturing, and schools also exemplified how much this neoliberalism strayed from the Enlightenment beliefs that lay at the origins of liberal thought. Whereas the original liberal thinkers emphasized the need for the emancipation of the mind and civilization, this neoliberalism was about the creation and satisfaction of new material needs. Statesmen in the past stressed the importance of active citizenship and of education. “Patriotism, virtue and wisdom,” one reads in the Federalist Papers.22 Neoliberalism reduced citizens to consumers. It did not set them free, nor empower them, as some neoliberal intellectuals maintained. Instead, it left them to the influence of corporate Leviathans, their advertisements, their role models, and the banality of their media channels.
Previous generations of leaders called for frugality. But now, families and nations spent beyond their means. In previous times, also, leaders warned against the sort of capitalism that bred large inequality and ignored the objective of a strong society. “It is a bad thing for a nation to admire the false standard of success and there can be no falser standard than that set by the deification of material wealth,” President Theodore Roosevelt had warned.23 Was Western society even that free? Soviet citizens lived in a dictatorship that denied them fundamental freedoms, including the freedom to choose how to live their lives. While these freedoms were guaranteed in the West, Westerners had come to face some serious
