chapter  8
Democratic Socialism in retreat
Pages 21

In January 1981 the personable Ronald Reagan was inaugurated as president of the United States. He remained president until 1989. With only 53 per cent of the electorate voting, the Republican Reagan had beaten the Democrat incumbent, Jimmy Carter. Reagan, vigorous and charming despite his 69 years, had risen via Hollywood to be governor of California. He had been elected on a right-wing agenda of cutting the federal administration and reducing taxes with the money saved. This it was claimed would put more money in people’s pockets so they could spend more and invest more, thus creating more jobs. Reagan targeted welfare spending. On the other hand, he immediately embarked on a defence build-up. Under Reagan defence expenditure increased in real terms by 40 per cent.1 The arms industry became the leading growth industry. However, cuts in non-defence expenditure fell well short of target. Following the tax cuts the federal deficit soared. Under Reagan the USA became a net debtor for the first time since 1914. On 19 October 1987, ‘Black Monday’, a fall on Wall Street led to worldwide panic. Overnight share prices fell dramatically. The immediate cause had been a set of disappointing US trade figures. The crash brought into focus underlying concerns about the persistent US trade and budget deficits, which Reagan had made worse.2