Ninety percent of job losses occurred in mining, construction, and manufacturing. The nation’s industrial belt was the hardest hit. In absolute terms, twelve million Americans were unemployed that month, plus another thirteen million “discouraged” and underemployed. In December 1982, unemployment was at 10.8 percent - closer to 20 percent if you include workers who wanted jobs but had stopped looking and underemployed workers who could not find steady full-time work. The exorbitant cost of borrowing put tens of thousands of firms out of business and led overall to twenty-two months of negative growth. 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.Īt the height (or nadir) of the Volcker shock, prime interest rates were over 20 percent - and worse if you had bad credit.

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. Though the interest rates were a result of Fed policy, the money-supply target let Volcker avoid the politically explosive appearance of directly raising rates himself. As money became more scarce, banks would raise interest rates, limiting the amount of liquidity available in the overall economy. This would be accomplished by limiting the growth of bank reserves, which the Fed influenced by buying and selling government securities to member banks. 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. These were the years when the industrial workers’ movement was defeated in the United States and the United Kingdom, and third-world debt crises exploded. As chair of the Federal Reserve from 1979 to 1987, Volcker was the most powerful central banker in the world. If someone were to make a movie about neoliberalism, there would need to be a starring role for the character of Paul Volcker.

Keeping at it volcker