The COVID-19 pandemic has already brought with it an economic crisis which promises to last long after new infections have ceased – only the most recent of a series of economic crashes that are features of the capitalist system. The “Black Monday” crash of 1987 was one of these periodical downturns that caused panic for the markets that fall. This piece in the Fall 1987 Democratic Socialist (as our newsletter was known at the time) by David Gibbs draws parallels between that year’s crash and much more significant one of 1929 and offers predictions of how it might affect U.S. politics going forward. When assessing the accuracy of the forecasts, one might look at 1992, not 1988, as the year the Republicans finally met their (temporary) reckoning for embracing neoliberal capitalism and a militaristic foreign policy. As for the article’s concluding paragraph: Do “objective” conditions for fundamental change exist today in 2020?
This article was first published in print in the Democratic Socialist, publication of the DC/MD and Northern Virginia Democratic Socialists of America, in Fall 1987. The article was written by David Gibbs and printed under the title “Crash Now, Burn Later.”
One of the most interesting parallels between the recent crash and the one of 1929 is the way commentators view events. In 1929, the experts all asserted that the economic outlook remained rosy and that depression was an impossibility. The Harvard Economic Society continued to issue favorable predictions until 1931 – when the Society itself went out of business.
No one, it seemed, could believe that markets really do fail. And so today. We hear that the economy remains sound and that, at worst, an ordinary recession will result. Some commentators even call the crash a “healthy” corrective for the economy’s problems. We will hear more of these Panglossian predictions over the next several months and anyone who believes them is out of his or her mind. The real issue now is not whether we will have an economic downturn – a downturn is certain – but how severe it will be. The obvious question is this: Will the Crash of ’87 lead to a depression? At present, no one knows the answer, and we will not know for at least several months. However, the bottom has just fallen out of the stock market. That has not happened in a very long time, and the last time that it did happen, the bottom also fell out of the economy.
Optimists point out that the current economy is different from 1929’s, and that these differences will avert a collapse. They note that Social Security and welfare programs, which did not exist in the ‘20s, will cushion against the coming deflation. It is not clear, however, that these cushions will be enough to prevent a depression. It is also worth noting that the recent crash was almost twice as severe as the one in 1929. The outcome is simply unknown. A New York investment analyst, writing shortly before the new crash, offered this assessment:
On television, before Congressional committees, and in expensive financial newsletters, the economic seers confidently predict the future. But, in reality, they are like dart throwers in the dark. It is by now a cliché to say that the world economy is traveling on uncharted waters, but it is no less true for that. One thing, at least, is certain: Given the legacy . . . that Reagan will bequeath us, it’s going to be a wild ride.
Recent events certainly bear out that last prediction.
The crash spells the end of an era. Whatever the outcome, the Reagan Revolution is history. Only a few years from now people will express astonishment that he was ever elected president – at least for more than one term. The press will finally begin to tell of the moral and economic rot that was Reaganism. The nature of public debate will change. People will strain to remember what the word contra referred to, or why the U.S. government really cared so much about Central America. Future historians will disparage the raw vulgarity of the Reagan era, the Rambos, “Dallas” or Madonna’s material girl. ‘Investment banker” will become a generic insult. And no political campaign will ever again use the slogan “It’s morning in America.”
More immediately, the Republican Party will be discredited. Shortly after the crash, Richard Nixon opined that the Democrats could nominate a jackass and win in 1988. Public support for the Republicans, which was overrated to begin with, will now evaporate. If public opinion polls show anything, they show that there is nothing that infuriates voters more than a sour economy. The electorate might have forgiven the Republicans for their scandals, their ill-advised (not to mention murderous) foreign adventures or even their nomination of Robert Bork. But they will not forgive Republicans for the crash. Rightly or wrongly (probably rightly) the GOP will be blamed for the crisis. The Republican ascendancy is finished.
And much more is finished. The crash will discredit the anticommunism, war-mongering, environmental degradation and racism that were so closely associated with Reagan’s economic policies. The myth of the marketplace will never hold the same credibility. People will realize that markets can, and do, fail. National economic planning, long considered passé in economics, will enjoy a revival. The crash might even revive people’s doubts about capitalism as a whole.
Unfortunately, the Democratic party does not seem to offer much of an alternative. The Democratic candidates, excepting Jesse Jackson, have largely evaded such crucial issues as wealth concentration, multinational capital flight or our ridiculously high “defense” budget. The Democratic candidates’ reaction to the crash has been discouraging. All of them (Jackson included) called for spending cuts, tax increases, or both, even though such deflationary measures would intensify the effects of the crash and increase the danger of depression.
The next president, whover he is, might be another FDR and prove an immensely skillful leader. It is more likely, however, that he will be unable to manage the crisis. If the Democrats fail, both parties would be discredited and a vacuum would emerge. Above all, the left should take no pleasure in these developments. An economic collapse would be a terrible thing, and a huge number of people would suffer. Many of us would be affected directly. Antisemitism – “It was the Jews who engineered this crisis” – may be another by-product. Nevertheless, a depression, if it comes, will offer unprecedented opportunities for the left. A fundamental reordering of politics may, for the first time since the 1930s, be a real possibility. No outcome (perhaps a third party?) can be totally ruled out.
It is often said, to use the jargon, that political change requires a conjuncture of both objective and subjective factors. People must be organized for political action, but it is always necessary to have some spark, some crisis, to undermine the old political order. The objective conditions for change may now exist. We face a completely new political situation. In the coming months progressives should think very hard about how to respond.