Before getting to the deep historical basis, it seemed worthwhile to summarize the political backdrop of why it is important to see political economy through a new lens, namely the reality of the political exhaustion of the dominant neo-conservative ideology of the last 30 years. We have emerged outside of a political realignment, which has not yet found its dominant ideology. Just as 1848 represented a nascent realignment that would only later bear fruit, and 1912 did as well, 1992 should be seen as the political realignment moment which is only now finding an ideological realignment.

Realigning moments are not always clear at the time. Nixon's victory in 1968 became a realignment in 1972. Dukakis' defeat of 1988 was actually the seeds of a realignment, which was confirmed by Clinton's 1992 victory. While much was made of Clinton being a Southerner, the Democrats did not win southern states in 2000 and 2004, but they held on to the other realignment that Clinton augered in. Since 1992 New England and the Pacific West have been reliable members of the Democratic political coalition. This is important because California had been the epicenter of Republicanism's rise post-war, giving them two Vice-Presidential nominees, Warren and Nixon, and four of their terms in the White House. Eisenhower won California twice, Nixon three times, Reagan twice, Ford once, George Herbert Walker Bush once. In all after 1948, the Democrats would carry California only once, in Johnson's 1964 landslide, until Clinton in 1992.

The Pacwest is now a firm part of the Democratic coalition at the presidential level. The narrow Bush elections were still within the context of this Clinton Coalition tricoastal voters: Pacific, North-east Atlantic, Great Lakes, against Southern and interior votes. The attempt of Rove and company was to solidify the interior and break into the North-East with a war on terror. The failure of the attempt to break the Clinton Coalition is signature: realignments are visible in close defeats as well as victories.

The nature of this realignment underscores how the Republican Party's nomination of John McCain represents a greater fin de la regime: a rear guard action of the era of the larger attempt for a Reagan Realignment. Despite the continued domination of the White House by Republicans since 1980, the reality is that 1988 represented the first cracks in the Nixon realignment. It is useful to then look at the two layers of the Clinton coalition. The useful check points are the close elections: 1948, 1960, 1968,1976, 2000&2004.

The Truman coalition represented the revolt of the North-east against the Democratic coalition, despite it having been born there, where as a 12 years later, it had realigned. So the first layer of the Democratic realignment was the birth of the power of the metropolitanism of the North-east. This coalition, what was dubbed the Boston-Austin axis, of the South plus the North-east rested on manufacturing as the core activity. The South was peeled off by the expedient of pitting northern, largely unionized, workers in civilian dominated industries, with less unionized workers in the South, who had a greater percentage of their jobs in defense as a share of the total. For all of the hand wringing about the loss of the Democratic south, the loss of the Republican north-east has represented an almost equivalent gain in electoral votes. The reason for the hand wringing is that for a long time the sun belt was growing, while the water belt was shrinking.

The Kennedy and Carter elections contrast with the five elections from 1992-2008 sharply: Clinton won 58 Southern votes, but his shift of northern New England, California and solidification of the Great lakes was worth 84. As we saw in 2000,2004, and are likely to see again in 2008, the Democratic Party can capture the White House without a single Southern State, so long as they can take Ohio, which has been the key to every Republican Presidential victory since the party's creation. In short for the Republicans, even given almost the worst case in a competitive election in the South, a popular southern governor, their losses in the coasts are worse than their potential losses in the South. The Republicans need the south to be solid, as a counter to the power of the coasts.

The second layer, the Clinton layer, of the Clinton coalition then rests in the shift of the Pacific West to having its own metropolitan core. This has turned the pacwest states into a kind of politics that favors the current Democratic Party: a large metropolitan base against a large, but much sparser, out city region. Called "upstate/downstate" in New York, with down state meaning New York City, and the reverse in Illinois, this politics powers the dynamics of Massachusetts, Michigan, Minnesota, Oregon, Washington in it's single city form, and California and Pennsylvania in its dual city form.

This Clinton Coalition has been competitive in all four elections since it's establishment, winning 3 - yes 2000 was stolen, get used to it political science buffs - and coming within a whisper in 2004 against an incumbent, wartime, President. It is persistent, as Thomas Schaller has pointed out, because it is the echo of the most successful Presidential coalition in history, the post-Civil War Republican coalition, particularly in the form that established itself after 1888. Were someone to post the election of 1900 as 2008, the only states that Republican McKinley carried that would look out of place for Barak Obama would be Utah, Wyoming, the great plains states, and West Virginia. A smaller difference than between 2008 and 1976, or even 1992.

While the Clinton political dynasty is probably over, the Clinton coalition is precisely the one that Obama inherits, even though he took the nomination by running against it. Obama will have to win the states he lost to win the Presidency. The Clinton Coalition then represents the final collapse of Progressive Western Republicanism, allowing the Democratic Party to add the West and the rest of the Great Lakes states to the "Kennedy Core" of the north east.

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Now the question that has been pushed around is what this means. The answers are many and complex, since many of the demographic groups which drive the Clinton Coalition did not exist in 1888. Therefore, despite the parallels in geography, the parallels in demographics are more limited. African Americans make up the clearest switch, but in many cases the old Republican coalition at the state level was not the the same group as the new Democratic one. New York State being a clear example. At the turn of the 20th century, the Mayoral races in New York were extremely competitive, and Republican governors often had their roots upstate , in for example, Troy or Glenns Falls.

Demographics is similarly murky, while some identifiable demographic groups switched sides, such as African-Americans and Farmers, many did not. The petit-bourgeoise of smaller cities has remained Republican, for example. Ideology provides some clues, segregation minded Dixiecrats are now Republicans, government minded progressives are now Democrats. What is more useful is to argue that the Clinton coalition represents a "Kennedification" of other areas. Areas which which have become more like the Kennedy core, that area of the country that Democrats won if they won almost anything between 1960 and 1988, have gone to the Democratic coalition at the Presidential level. The natural evolution of a politics is a period of "boomburg" Republicanism, followed by a move to democratic politics of large urban areas. As the sun-belt has had more and more large metropolitan regions, it has become more and more competitive for the Democratic party. Colorado, Nevada, New Mexico, and Arizona are going through this transition now. Even Utah and Idaho, though unlikely to shift in the forseeable future, see this pressure.

The pattern then is in two parts: the shift of cities to being more solidly Democratic, and the shift of more states to having dominant metropolitan areas is the major thrust of the change. Large cities out grow the point where automobiles alone can provide the growth engine. As soon as urban infrastructure consists of more than building more off ramps, Republicanism wanes. This can be seen in Virginia's shift from corrosively reactionary Republican bastion, to a state where conservative Democrats such at Tim Kaine and Jack Webb can win.

However the second part of this change is visible, first in the defeat of Michael Dukakis, and then in the dance of congressional elections after the Gingrich landslide of 1994. Gingrich's year included the defeat of Mario Cuomo, only three years removed from being seen as a potential presidential nominee, and Republican victories in northern districts. Over the course of the next decade, even as the Republicans maintained this majority, they lost virtually all of these seats and instead concentrated on winning the south. As a result, the congresional delegation of New England is now almost entirely Democratic, with another Republican senator, John Sununu, being arguable this year's most embattled Republican. This shift cannot be explained by the Kennedy core expanding, but instead by the dissolution of Reagan's suburban base.

This dissolution is at the heart of the paradox that the current Democratic Congress is wildly unpopular, and is cruising to racking up crushing margins in both House and Senate races. In a sense, 2008 represents the losses that the Republicans should have suffered in the 2002 mid terms, were it not for the fog of fear, propaganda, and probable chicanery, that prevailed in that confused year. While Franks asked "What's the matter with Kansas?" a more important question is "What's the matter with Westchester?" Why did suburbanites vote against their economic interests for so long?

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The surburbanite anti-Democratic vote preceded Carter's fall, and was the core of the Nixon in roads into the Kennedy core. It was also the source of the narrative of the late 1960's as being an era of chaos, a narrative that Barak Obama is only too happy to repeat. However, it is with Reagan that these voters began identifying voting Republican at the Presidential level with their personal politics, and so they are called "Reagan Democrats." The Reagan Democrats have left the Republican Party, and while they have not reattached to the Democratic Party, the great debate is how to do so.

Barak Obama, Steny Hoyer, Rahm Emmanuel and Chuck Schumer represent one proposed answer. That answer is to adopt the Reaganite narrative of the 1960's and fall of liberalism: a failure to have free market law and order with correct subsidies for the middle class over the undeserving urban classes. These liberal Reaganites are not as much of a political paradox as might be thought at first, dominant political coalitions often remake their opposition as much as they remake themselves. Even as Roosevelt was winning landslide presidential victories, his former state of New York became held by Republican governors, one of whom would come within a few tens of thousands of well placed votes of the Presidency, namely Thomas E. Dewey. Even as the Democratic Party was rising in the Northeast, Nelson Rockefeller would win four consecutive four year terms. Even as the New Deal catapaulted New York to the capital of the world, it's electorate would vote Republican governors all but once between 1942 and 1974.

This answer is not popular with the country at large, it has produced a Congress which allowed a 30% President to have his way with controversial judges and legislation, failed to block his spending programs, or even force him to accept widely popular measures that he opposed. The result can be seen in a simple number. George W. Bush averages in the high twenties for approval, the Democratic majority, dominated by a liberal Reaganite leadership, averages in the low twenties. It is a fall from grace worthy of Newton Leroy Gingrich, or Richard Milhouse Nixon.

It's substance is a generation of non-reactionary politicians shell shocked by the inability of liberalism and socialism to deal with the crisis point of 1967-1981. The argument is that liberalism failed, that the world moved to the right, things got better, and therefore the conclusion is that 1968 and afterwards marked the failure of the left, and the proof that the right, particularly the political libertarian right, was correct. This argument is post-ergo hoc, however, when examined. It rests on the subsiding of social chaos, the ending of the inflationary cycles of the 1970's, and the relative peace from the collapse of the Soviet Union.

However, each of these factors, when looked at, had little to do with the policies of Nixon, Reagan, Thatcher or any other conservative world leader of the time period. Instead, subsiding of inflation can be attributed to Paul Volcker's disinflationary scenario, which as Prof. Paul Krugman correctly points out is a perfectly Keynesian response to inflation, and which was propped up, as Prof. Milton Friedman correctly pointed out, by "crude Keynesian" economic stimulus of keeping expenditures the same and lowering tax revenues. The resurgence of the American economy during the long Reagan expansion breaks down when one considers the stealth recession of 1986 in its context, and the sliding into the Bright Depression by Japan in 1987. Instead much more of the drop in commodity prices can be attributed to new methods of oil extraction which came on line and allowed the same fields to produce more oil. The drop in urban crime has more to do with the passing of a peak wave of young men into the population than a handful of executions.

Most crucially, if free market shock therapy were so good, then why did it produce a massive depression in Russia when tried, and why are the two fast rising economies of Russia and China a plutocratic resource economy in the first case, and a controlled mercantile economy in the second case. The neo-liberal economies of Ireland and Spain in Europe both hit brick walls recently, and the states which have adopted pet policies such as the flat tax are also high tax high social service states.

In short, other than the chronology, the narrative that Hayek saved civilization is not very strong.

It gets weaker in the light of the events of the last decade. If failure to deal with Iran was perhaps the failure which destroyed Carter's Presidency, then Iraq represents the same strategic error. While the Israel-Palestine conflict gets the press, from the perspective of geo-economics, it is a side show. Oil is where the action is, and the Persian Gulf is where the oil is. George W. Bush's catastrophic blunder of invading Iraq represents a continuation of the long running American failure to understand Gulf dynamics, dating back the the CIA of Dulles in the late 1950's. Over and over again the United States has chosen to back, do business with, and finally come to resemble, a series of undemocratic states.

The result is that the supposed tough minded free market policies which were to be the salvation of the world economy are, at every turn, the source of both long term and short term instability.

The list is impressive.

• The rise of radical Islamic terrorism. By funding the Mujahadeen, and allowing Wahabism to grow up in Saudi Arabia, and allowing Saudi Arabia to export the money that drives terrorism, the neo-conservative policies of use of unconventional dirty politics created al-Qaeda.

• The adherence to reducing wages of labor as the means to keep down inflation drove offshoring as labor arbitrage, which has dramatically reduced the breadth of American manufacturing.

• This same offshoring as labor arbitrage process has driven the spike in global demand for oil which has driven inflationary pressures. Even Greenspan admitted that the wins from labor arbitrage in inflation fighting are over. That's like the Democrats losing the District of Columbia in a Presidential election.

• The free market shock tactics produced Putin's rise in Russia, and the failed state in Iraq. They lead to collapses of neo-liberalism in South America, creating a neo-peronist/neo-socialist wave in Argentina, Brazil, Bolivia, Peru and Venezuela.

• The supposed free market tax policies have lead to a large and ballooning federal budget deficit, when the war in Iraq is figured in. This is pre-bail out, which leads us to...

• The creation of the housing bubble, which was explicitly social engineering to create a conservative suburbanite class which would reliably vote for anti-tax Republicans and against infrastructure and rental minded Democrats in cities.

• The need for a multi-trillion dollar bail out of same. This means that the Federal Budget Deficit really needs to be looked at as being comparable in this deficit cycle to 1988, before the S&L bailout.

• The catastrophically failed war in Iraq itself to grab the oil that was needed to fuel the housing bubble.

• A brief period of massive investment, not just in the US, but globally, in infrastructure which is oil dependent, making shifting from the demand spike driven by labor arbitrage and housing bubble, very difficult. This can be seen by the paltry drop in US gasoline consumption even in the face of prices that executed a near ballistic climb in the inflation spike of earlier this year...

• Which was created by the use of monetary policy to buffer the economy pouring gasoline on the fire of the underlying inflationary dynamics. This preference for monetary policy over fiscal policy lead to Bernanke's running the printing presses, consuming the small global surplus in oil production that the US phased ending of operations in Iraq afforded.

• And made yet worse by an inflationary tax rebate, passed by Democratic Congress, in preference to more sensible remedies.

• The rise in global warming from this profligate period of oil consumption, at the same time leaving a dearth of successor technologies. I prefer the term successor to alternative, because oil will not long be viable in its current economic role.

In short, if tough minded free marketism were such a wonderful ideology, we would not be where we are now.

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It is for this reason that the liberal Reaganite narrative which Obama and others of his wing of the Democratic Part have adopted is a dead end in terms of policy and politics. While the trauma of the 1970's produced a generation of Democrats who are terrified of being associated with not being tough enough or free market enough, they embrace it just at the moment when as a political ideology, it is producing its own traumatic moment which will generate a new generation of leadership that will, in time, replace it.

The liberal Reaganite narrative is essentially that people fled chaos, and that the suburbs are the heart of the American wealth generation engine. This point, as the previous posts outlined, is incorrect. The housing bubble was a pyramid scheme, and it has run out. More over, the shock of the social policies past has worn out. It is now legal for same sex couples to marry in more states than when George W. Bush took office, and the fundamentalist base is tired of voting for mandating abortion as murder, and getting abortion is a road trip.

The liberal Reaganite narrative, further is a political failure because it is as corrupt as the Republicanism it replaces. At the very moment when bridges to nowhere are out of fashion, Barak Obama wants us to put more ethanol in the SUVs that are to drive over them.

Instead a better analysis focuses in on 1986 as the crucial year where neo-conservative ideology, then seeming in its heyday, began to unravel. The cascading downward of gasoline prices allowed a short housing boom, followed by a housing bust. This short boom produced a reaction against Reagan which took the Senate away from him. The Liberal Reaganites of the Democratic Party were then, children of the suburban boom, which, while it had not soured on Reaganism or neo-conservatism, was back in play politically, when they had been seen as the base of the new Republicanism. They became, and remain, the swing voters that decide control of Congress. If 1968 was the end of the old left, then 1986 was really the crack in the New Right.

If then tough minded free marketism is a failure, both historically in that it does not explain the failures of the order it replaced politically, nor has it managed to meet it's objective burdens, nor has it produced a politically popular wave that is to crest into power, but a politically unpopular ebb which is about to back into power, then it remains to argue a very different narrative which leads, not through Obama's haunts of the University of Chicago, but through very different ideas.

In this context it is better to begin explaining the long historical logic of this different narrative.