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# U.S.

2026-08-11·x-repost-20260811-164536

U.S.

Stocks in 1983: Financial Liberalization and the Star Wars Program ## “Supply-Side Reform” 40 Years Ago Reaganomics is generally viewed as a form of “supply-side reform.” Since the heyday of Keynesianism, governments had generally managed the economy by stimulating demand to absorb supply—in other words, through “consumer-side reform.” Reagan’s tax cuts could still be seen as closely tied to the consumer side.

But deregulation—and especially the privatization of state-owned assets—clearly began on the supply side, directly changing property-rights incentives at the most fundamental level. This differed somewhat from China’s experience over the past two decades.

During that period, China’s supply-side reform largely involved direct efforts to reduce excess capacity and inventories, deleverage, lower costs, and improve efficiency. More precisely, Reagan sought to change the foundations of property rights and let the market complete this process.

Today, our management system is more advanced and allows us to target individual industries—and even key state-owned enterprises—with greater precision, directly carrying out supply-side transformation on the enterprise side.

## Finance Had Been Increasingly Regulated Since the Great Depression The clearer shift toward “moving away from the physical economy and toward the financial economy” during the Reagan era was inseparable from the financial liberalization pursued under his administration.

Just as the wave of privatization in the 1980s was rooted in the growing government control and economic planning of the preceding decades, financial liberalization in the 1980s originated in the policies adopted during the Great Depression, when the Roosevelt administration rebuilt and regulated the financial system.

For example, the Banking Act of 1933, also known as the Glass-Steagall Act, required commercial banking and investment banking to be separated, establishing a system of distinct business lines. The stagflation of the 1970s also triggered Nixon’s “New Economic Policy,” which included a number of restrictions involving financial price controls.

## Reagan’s Deregulation of Finance In 1980, Reagan signed the Depository Institutions Deregulation and Monetary Control Act, beginning the gradual abolition of limits on deposit interest rates for commercial banks. In 1982, he signed the Garn–St.

Germain Depository Institutions Act, allowing lower-tier financial institutions—including savings and loan associations and credit unions—to begin making commercial loans, invest in commercial real estate, and even invest in junk bonds. The act also reduced capital-adequacy requirements for financial institutions as a whole.

Reagan’s financial liberalization measures removed restrictions on price competition—particularly interest-rate competition—and on the scope of business that financial institutions could conduct. The system shifted from prioritizing financial safety to prioritizing market competition and efficiency. This greatly stimulated the growth of the U.S.

financial industry during the 1980s. It was also one of the reasons behind the 16-year period from 1982 to 2000, during which the stock market generated returns as high as 16 times. After savings institutions gained access to higher-risk businesses, they lacked the corresponding risk-management capabilities.

Financial risks therefore continued to accumulate, ultimately laying the groundwork for the savings and loan crisis of the late 1980s. The U.S. stock market—and eventually global stock markets as well—would also face a terrifying “Black Monday.” These historical developments had a profound and substantive impact on China’s own financial-system reforms.

## The Star Wars Program In confronting the Soviet Union up to its eventual collapse, the Reagan era did not engage in direct military conflict, but it arguably went further—and acted with fewer reservations—than any other period in ideological opposition to the Soviet Union.

The name “Star Wars” came from the film *Star Wars*, which became a nationwide cultural phenomenon after its blockbuster release in 1977. Ordinary Americans used the title to refer to the enormous outer-space program. Its official name, however, was the Strategic Defense Initiative, or SDI.

In the early 1980s, the Soviet Union was at the height of its imperial expansion, supported by high oil prices. Before Reagan took office, the United States had generally been on the defensive and in retreat.

Throughout the 1960s and 1970s, if you had traveled back in time and asked an ordinary American what concerned them most, they would have said Soviet nuclear weapons. By the early 1980s, the United States and the Soviet Union had reached rough nuclear parity, and the two sides had entered a strategic stalemate.

Before the Soviet Union began suffering heavy losses in Afghanistan, it may even have held a slight advantage. A team led by Daniel Graham, the former director of the Defense Intelligence Agency, proposed the theory of “high frontier”...

It argued that the United States should use its technological advantages to seize the strategic high ground in space—viewed as the “high frontier”—and build a defensive system. The concept won the support of Ronald Reagan, who was consistently anti-Soviet.

On March 23, 1983, Reagan delivered a nationally televised address in which he formally introduced the Strategic Defense Initiative, declaring that its goal was to “render nuclear weapons impotent and obsolete” and ultimately “eliminate the threat posed by strategic missiles.” The United States was not seeking a balance of power.

It wanted “absolute security.” In 1985, the Strategic Defense Initiative, formally described as a strategic plan for an antiballistic missile defense system, entered the development phase, with full deployment planned for 1994. The program aimed to establish a multilayered, multisystem space-based missile defense network.

Put simply, the United States was extending its borders into space: not only intercepting missiles within the atmosphere, but also conducting missile defense from space. According to theoretical calculations, once completed, the system might have been capable of intercepting as much as 99 percent of the Soviet Union’s nuclear missiles.

Allies including the United Kingdom, Italy, West Germany, Israel, and Japan were asked to participate to varying degrees. This involved extensive research and development in space-based infrastructure and technology. The costs of developing and testing those technologies represented another enormous expense requiring a nationwide effort.

## It Shaped the Direction of Technology for the Next Forty Years When the program was unveiled, the Soviet Union was thrown into a state of anxiety. In addition to strongly condemning the initiative, it repeatedly declared that it would take corresponding measures.

Soviet leaders responded actively to the “Star Wars” program and even attempted to overtake the United States. The United States initially budgeted $1 trillion for the program—keep in mind that this was $1 trillion at the time—and ultimately spent between $60 billion and $100 billion.

The Soviet Union, operating on a comparable basis, spent more than $100 billion. Regardless of whether the “Star Wars” program was a strategic deception on a national scale, it ultimately achieved its objective of putting pressure on the Soviet Union.

Including the military costs associated with the invasion of Afghanistan, the Soviet Union’s military spending accounted for nearly half of its fiscal expenditures during much of the 1980s. The burden eventually helped drag the country down during a decade of low oil prices. Although U.S.

military spending also surged during the Reagan years—causing the administration’s goal of fiscal restraint to fail and leaving behind an even larger budget deficit—the program served as a technological catalyst.

The massive investment in technology drove major advances in a wide range of frontier fields in the United States and around the world, including lasers, sensors, semiconductors, supercomputing, advanced aerospace materials, and software integration, particularly C4ISR systems.

Even the success of Elon Musk’s SpaceX four decades later can be traced back to this foundation. The continued development of these technologies helped lay the groundwork for today’s industries, including smartphones, the Internet of Things, artificial intelligence, autonomous driving, commercial spaceflight, and high-performance computing.

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# U.S.

# U.S. Stocks in 1983: Financial Liberalization and the Star Wars Program ## “Supply-Side Reform” 40 Years Ago Reaganomics is generally viewed as a form of “supply-side reform.” Since the heyday of Keynesianism, governments had generally managed the economy by stimulating demand to absorb supply—in other words, through “consumer-side reform.” Reagan’s tax cuts could still be seen as closely tied to the consumer side. But deregulation—and especially the privatization of state-owned assets—clearly began on the supply side, directly changing property-rights incentives at the most fundamental level. This differed somewhat from China’s experience over the past two decades. During that period, China’s supply-side reform largely involved direct efforts to reduce excess capacity and inventories, deleverage, lower costs, and improve efficiency. More precisely, Reagan sought to change the foundations of property rights and let the market complete this process. Today, our management system is more advanced and allows us to target individual industries—and even key state-owned enterprises—with greater precision, directly carrying out supply-side transformation on the enterprise side. ## Finance Had Been Increasingly Regulated Since the Great Depression The clearer shift toward “moving away from the physical economy and toward the financial economy” during the Reagan era was inseparable from the financial liberalization pursued under his administration. Just as the wave of privatization in the 1980s was rooted in the growing government control and economic planning of the preceding decades, financial liberalization in the 1980s originated in the policies adopted during the Great Depression, when the Roosevelt administration rebuilt and regulated the financial system. For example, the Banking Act of 1933, also known as the Glass-Steagall Act, required commercial banking and investment banking to be separated, establishing a system of distinct business lines. The stagflation of the 1970s also triggered Nixon’s “New Economic Policy,” which included a number of restrictions involving financial price controls. ## Reagan’s Deregulation of Finance In 1980, Reagan signed the Depository Institutions Deregulation and Monetary Control Act, beginning the gradual abolition of limits on deposit interest rates for commercial banks. In 1982, he signed the Garn–St. Germain Depository Institutions Act, allowing lower-tier financial institutions—including savings and loan associations and credit unions—to begin making commercial loans, invest in commercial real estate, and even invest in junk bonds. The act also reduced capital-adequacy requirements for financial institutions as a whole. Reagan’s financial liberalization measures removed restrictions on price competition—particularly interest-rate competition—and on the scope of business that financial institutions could conduct. The system shifted from prioritizing financial safety to prioritizing market competition and efficiency. This greatly stimulated the growth of the U.S. financial industry during the 1980s. It was also one of the reasons behind the 16-year period from 1982 to 2000, during which the stock market generated returns as high as 16 times. After savings institutions gained access to higher-risk businesses, they lacked the corresponding risk-management capabilities. Financial risks therefore continued to accumulate, ultimately laying the groundwork for the savings and loan crisis of the late 1980s. The U.S. stock market—and eventually global stock markets as well—would also face a terrifying “Black Monday.” These historical developments had a profound and substantive impact on China’s own financial-system reforms. ## The Star Wars Program In confronting the Soviet Union up to its eventual collapse, the Reagan era did not engage in direct military conflict, but it arguably went further—and acted with fewer reservations—than any other period in ideological opposition to the Soviet Union. The name “Star Wars” came from the film *Star Wars*, which became a nationwide cultural phenomenon after its blockbuster release in 1977. Ordinary Americans used the title to refer to the enormous outer-space program. Its official name, however, was the Strategic Defense Initiative, or SDI. In the early 1980s, the Soviet Union was at the height of its imperial expansion, supported by high oil prices. Before Reagan took office, the United States had generally been on the defensive and in retreat. Throughout the 1960s and 1970s, if you had traveled back in time and asked an ordinary American what concerned them most, they would have said Soviet nuclear weapons. By the early 1980s, the United States and the Soviet Union had reached rough nuclear parity, and the two sides had entered a strategic stalemate. Before the Soviet Union began suffering heavy losses in Afghanistan, it may even have held a slight advantage. A team led by Daniel Graham, the former director of the Defense Intelligence Agency, proposed the theory of “high frontier”... It argued that the United States should use its technological advantages to seize the strategic high ground in space—viewed as the “high frontier”—and build a defensive system. The concept won the support of Ronald Reagan, who was consistently anti-Soviet. On March 23, 1983, Reagan delivered a nationally televised address in which he formally introduced the Strategic Defense Initiative, declaring that its goal was to “render nuclear weapons impotent and obsolete” and ultimately “eliminate the threat posed by strategic missiles.” The United States was not seeking a balance of power. It wanted “absolute security.” In 1985, the Strategic Defense Initiative, formally described as a strategic plan for an antiballistic missile defense system, entered the development phase, with full deployment planned for 1994. The program aimed to establish a multilayered, multisystem space-based missile defense network. Put simply, the United States was extending its borders into space: not only intercepting missiles within the atmosphere, but also conducting missile defense from space. According to theoretical calculations, once completed, the system might have been capable of intercepting as much as 99 percent of the Soviet Union’s nuclear missiles. Allies including the United Kingdom, Italy, West Germany, Israel, and Japan were asked to participate to varying degrees. This involved extensive research and development in space-based infrastructure and technology. The costs of developing and testing those technologies represented another enormous expense requiring a nationwide effort. ## It Shaped the Direction of Technology for the Next Forty Years When the program was unveiled, the Soviet Union was thrown into a state of anxiety. In addition to strongly condemning the initiative, it repeatedly declared that it would take corresponding measures. Soviet leaders responded actively to the “Star Wars” program and even attempted to overtake the United States. The United States initially budgeted $1 trillion for the program—keep in mind that this was $1 trillion at the time—and ultimately spent between $60 billion and $100 billion. The Soviet Union, operating on a comparable basis, spent more than $100 billion. Regardless of whether the “Star Wars” program was a strategic deception on a national scale, it ultimately achieved its objective of putting pressure on the Soviet Union. Including the military costs associated with the invasion of Afghanistan, the Soviet Union’s military spending accounted for nearly half of its fiscal expenditures during much of the 1980s. The burden eventually helped drag the country down during a decade of low oil prices. Although U.S. military spending also surged during the Reagan years—causing the administration’s goal of fiscal restraint to fail and leaving behind an even larger budget deficit—the program served as a technological catalyst. The massive investment in technology drove major advances in a wide range of frontier fields in the United States and around the world, including lasers, sensors, semiconductors, supercomputing, advanced aerospace materials, and software integration, particularly C4ISR systems. Even the success of Elon Musk’s SpaceX four decades later can be traced back to this foundation. The continued development of these technologies helped lay the groundwork for today’s industries, including smartphones, the Internet of Things, artificial intelligence, autonomous driving, commercial spaceflight, and high-performance computing.

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