The performance of the US economy in the seven full years of the Clinton Presidency is widely regarded as having been an extraordinary success. There is no doubt that dramatic departures from past US economic trends have occurred under Clinton. Three, in particular, stand out: the attainment of balance, and then a surplus, in the Federal budget; the simultaneous declines in unemployment and inflation, in direct contradiction to the predictions of mainstream economic theory; and the historically unprecedented stock market boom.footnote¹ The Clinton Administration and its supporters present these as the fruit of a new direction in economic policy—what Clinton himself terms a ‘Third Way’ between ‘those who said government was the enemy and those who said government was the solution’—an ‘information-age government’ that ‘must be smaller, must be less bureaucratic, must be fiscally disciplined, and focused on being a catalyst for new ideas.’footnote²

Clintonites are not, of course, the only political force to boast of the discovery of a ‘Third Way’ between the legacy of Reagan and Thatcher and that of traditional social democracy (or what used to be termed ‘liberalism’ in the United States). Over the past five years, regimes ranging from those of Blair in Britain to Cardoso in Brazil have invoked the same slogan. But if its main theoretical development has come from the UK, in the work of Anthony Giddens, it is the practical record of the US economy that is often held to offer the best evidence that there is substance to the claims for the Third Way. The reality of economic policies and performance under Clinton has been very different from this ideological image. In most respects, it has represented a conventional centre-right agenda, akin—as Clinton himself once put it—to an ‘Eisenhower Republican’ stance updated to the post-Cold War epoch.footnote³ Clinton’s Administration has essentially been defined by across-the-board reductions in government spending, virtually unqualified enthusiasm for free trade, deregulation of financial markets, and only tepid, inconsistent efforts to regulate labour markets.

The performance of the American economy under Clinton has also been far more mixed than is acknowledged by boosters of his ‘Third Way’. GDP growth and productivity gains have not exceeded the performance of previous presidential eras, even after official statisticians have revised national accounts upwards to reflect putative contributions to growth by computer technology, and genuine acceleration since 1996. Moreover, while unemployment and inflation have both fallen, the drop has been in large measure due to the declining ability of workers to secure wage increases even in persistently tight labour markets. Finally, the real economic gains of the period have rested on a fragile foundation—a stock market in which prices have exploded beyond any previous historical experience, inducing an enormous expansion of private expenditure on consumption. But because household incomes have not risen to anywhere near as far as financial asset values, the result has been unprecedented borrowing to pay for the spending spree. The springs of economic growth under Clinton have come from a levitating stock market setting off a debt-financed private consumption boom.

In referring thus far to the policies and agenda of the Clinton Administration, I have written as if these had emerged fully formed from the President’s head or the briefs of his advisors. In fact, of course, the initiatives implemented, or even merely floated, under Clinton were also shaped by Wall Street, Congress and a host of other forces that converge in the lobbying vortex at Washington. To use Margaret’s Thatcher’s terms, Clinton is an archetypal ‘consensus’ rather than ‘conviction’ politician. As such, the policies he has enacted reflect a general consensus inside the Washington Beltway more than particular convictions of his own, such as they may be, or of anyone else. But clearly, as head of the Executive, Clinton bears ultimate responsibility for them—one, of course, he eagerly claims as a ‘New Democrat’.

The Clinton Administration’s position on trade has been virtually identical to that of its Republican predecessors, proclaiming the universal virtues of free trade and pushing for Presidential authority to negotiate so-called ‘fast track’ agreements to further it, by-passing normal legislative scrutiny. Gestures towards labour or environmental concerns have been almost completely empty of content—the sound-bite sop to demonstrators at Seattle is a good example.footnote⁴ The regime’s actual position on trade is set out at length in the Economic Report of the President (ERP) for 1998, which under the rubric of ‘Benefits of Market Opening’, rehearses the standard neo-classical case for free trade—i.e. the Hecksher–Ohlin argument for efficiency gains through specialization, especially as economies of scale enhance productivity. Unsurprisingly, longstanding critiques of the assumptions behind the Hecksher–Ohlin model—in particular, its premisses of full employment and comparable technologies among trading partners—are ignored. Without these assumptions, it does not follow even from the orthodox model itself that all countries will necessarily benefit from trade opening, since liberalization can, for example, trigger a rise in unemployment.footnote⁵ However, even if one accepts the assumptions, it is still well-known that trade opening produces losers as well as gainers. The Hecksher–Ohlin model itself stipulates a tendency toward factor price equalization among new commercial partners, which implies that when trade opens between a high and low wage country (for example, the US and Mexico), downward wage pressure will be felt among the workers in the high-wage economy. Within this framework, it has therefore long been understood that for trade to be equitable as well as efficient, even by minimal Pareto standards, losers from liberalization need to be recognized and compensated for their losses.

If it is difficult to estimate the precise impact of NAFTA, or any other single trade agreement, on the work and wages of average workers in the US, another question can be dependably answered. Rhetorical flourishes aside, the Clinton Administration has offered virtually no compensation to workers whose incomes and/or job security have been hurt by its trade policies.footnote⁶ Rather, the 1998 ERP reiterates mainstream arguments that trade is not primarily responsible for either the long-run wage stagnation for most American workers or the increased differentials between high- and low-wage workers. Rising inequality in the labour-force it attributes, instead, to ‘skill-biased technological change’, as the introduction of new, computer-based processes creates wage premia for workers able to handle them while depressing the income of workers unable to do so. David Howell has demonstrated fundamental flaws in this view, showing that increased wage inequality is actually more a reflection of social and institutional, rather than technological, changes—in particular, the steady weakening of American trade unions and growing hostility of American labour laws to the concerns of working people.footnote⁷ It follows that even if the Clinton Administration has failed to address losses to US workers from its trade policies, it could still have compensated them with labour market policies and measures to redistribute income. What has been its record in these areas?

The short answer is that the Clinton Administration has done virtually nothing to advance the interests of organized labour or working people more generally. As longtime labour journalist David Moberg has commented, ‘Clinton has probably identified less with organized labour than any Democratic President this century.’footnote⁸ Of course, since the AFL–CIO is a permanent electoral prop of any Democratic candidate to the Presidency, its concerns cannot be completely disregarded in the Republican manner. Clinton thus supported a two-step rise in the minimum wage in 1996–97, from $4.25 to its current level of $5.15. But this modest increment has done little to reverse the precipitous fall in the real value of the minimum wage. In 1996 the real value of the $4.25 rate was more than 40 percent below its buying-power in 1968. At the new rate of $5.15, set in September 1997, the minimum wage is still over 30 percent below its real value in 1968, even though the economy has become 50 percent more productive over the past thirty years.footnote⁹