What BusinessWeek at the time dubbed the "deindustrialization of America" marked a decisive shift of American capital from productive forms of investment to purely speculative forms of wealth accumulation. It is highly noteworthy that the previous bourgeois offensive against the American working class that began after World War I and lasted into the first years of the Depression coincided with a continued expansion of US industry. That was during the rising arc of American capitalism. The new offensive took place within the context of an accelerating decline, and in the critical respect of America's industrial base took the opposite form.
The Reagan administration intensified both the assault on the working class and the turn to financial speculation. Reagan's firing of 13,000 PATCO air traffic controllers in August of 1981 was the signal for a wave of corporate union-busting and wage-cutting in every sector of the economy. This was accompanied by sweeping cuts in social spending and the gutting of legal restraints on corporate profit-making, including the weakening or lifting of banking regulations.
The decade of the 1980s saw the elimination of 10 million jobs, on the one side, and an explosion of new forms of financial speculation on the other. There was a marked increase in leveraged corporate buyouts. The phenomenon of junk bonds emerged, along with the beginnings of securitization, in which various forms of debt, including mortgage debt, were packaged as bonds and sold to banks, brokerage houses, pension funds, insurance companies and other big investors. The stock market assumed an ever more central role in determining the investment policies of corporations and banks, demanding immediate and high returns at the expense of research and development and long-term planning. The result was an ever-greater accumulation of paper values and debt, which provided the basis for the enrichment of the uppermost social layers at the expense of the vast majority of the population. To cite one statistic: In 1970, wages and salaries comprised 75.4 percent of national income. By 1986, that figure had fallen to 61 percent. The narrowing of economic disparities that had been under way for several decades was reversed.
All of this was given legitimacy by the media and academia, which hailed the emergence of the "post-industrial society" and the "Reagan Revolution." In reality, the 1980s saw a catastrophic decay in the foundations of American capitalism. Between 1981 and 1986, the US share of world exports slumped from over 20 percent to 13.8 percent. Between 1973 and 1983, US steel production fell 44 percent. The national debt more than doubled under the Reagan administration.
In October of 1987 Wall Street suffered its greatest ever single-day crash in percentage terms, as equities lost 23 percent of their value. The decade ended with the savings and loans collapse, in which more than 1,000 institutions failed and the government organized a bailout costing $160 billion. The sharp decline in the global position of American capitalism was summed up in the transformation of the US in the 1980s from a creditor nation, a status it had maintained since the end of World War I, to a net debtor.
The so-called financialization of American capitalism continued and accelerated in the Clinton and George W. Bush years. Amidst waves of corporate downsizing, financial speculation played an ever-greater role in economic life and assumed new and more parasitic forms. One speculative bubble succeeded another: the East Asian collapse was followed by the rise and fall of the dot.com bubble, and was quickly replaced by the subprime mortgage bubble. Securitization of debt became the new model of American banking, based on the conception that high-risk and high-yield investments, sustained by an exponential growth of debt, could continue to expand without limit, since the banks could offload much of the debt to other investors around the world.
The indices of the growth of financial speculation in the US economy are staggering: In 1982, the profits of US financial companies accounted for 5 percent of total after-tax corporate profits. In 2007, they made up 41 percent of corporate profits. Between 1983 and 2007, the share of the financial sector's profits in US gross domestic product rose six-fold. The United States, by far the world's largest debtor nation, with a current account deficit of nearly $800 billion, is today sustained by the importation of $1 trillion in foreign capital every year, or over $4 billion every working day.