The Volcker Shock


From Tim Barker at n+1:

IF SOMEONE WERE TO MAKE a movie about neoliberalism, there would need to be a starring role for the character of Paul Volcker. As chair of the Federal Reserve from 1979 to 1987, Volcker was the most powerful central banker in the world. These were the years when the industrial workers movement was defeated in the United States and United Kingdom, and third world debt crises exploded. Both of these owe something to Volcker. On October 6, 1979, after an unscheduled meeting of the Fed’s Open Market Committee, Volcker announced that he would start limiting the growth of the nation’s money supply…

The experiment—known as the Volcker Shock—lasted until 1982, inducing what remains the worst unemployment since the Great Depression and finally ending the inflation that had troubled the world economy since the late 1960s. To catalog all the results of the Volcker Shock—shuttered factories, broken unions, dizzying financialization—is to describe the whirlwind we are still reaping in 2019…

Ninety percent of job losses occurred in mining, construction, and manufacturing…

To establish its credibility, the Federal Reserve had to demonstrate its willingness to spill blood, lots of blood, other people’s blood…

The logic here is plain: there need to be millions of unemployed workers for the economy to work as it should…

The interest rate shock was the trigger for a worldwide recession…

The tremolo of debt crises across Mexico, Brazil, Zambia, and other countries—and the lost decade that followed—was the overture for IMF structural adjustment, subsequently introduced across the Global South…

In replacing Federal Reserve Board Chairman G. William Miller with Paul Volcker, President Carter had finally caved to Wall Street’s demands for an aggressive attack on inflation without regard for the social costs…

There is no force on earth,” he writes today, “that can stand up effectively, year after year, against the thousands of individuals and hundreds of millions of dollars in the Washington swamp aimed at influencing the legislative and electoral process…

Savings from other countries (above all, Japan) funded Reagan’s government deficits as well as the ballooning balance sheets of Wall Street banks along with a vast expansion in consumer credit…

The troubles of the 1970s simply mutated, like so many other maladies of capitalism, into new forms…

In 2019, the immediate problem is stimulating demand, not stopping inflation…

Debates about job guarantees, Green New Deals, and co-determination make clear a dominant question of our time: the renewal of political economy after decades of depoliticization.  

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1 Response to The Volcker Shock

  1. johnT says:

    I worked as a maintenance technician in manufacturing plants throughout this period, never laid off but hopped jobs and locales as necessary.
    Interest rates were high but if you didn’t finance, no problem. Piss on the bankers to the best of your ability.

    Liked by 1 person

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