In economic and social affairs we value controversy and take it for granted; it is the essence of politics, its principal attraction as a modern spectator sport. This regularly keeps us from seeing how substantial, on occasion, can be the agreement on a broad range of ideas and policies within which the political debate proceeds.
Such has been the case with economic and social policy in the industrial countries since World War II. There has been a broad consensus in the United States extending to most Republicans and most Democrats. Similarly as between Christian Democrats and Social Democrats in Germany and Austria, the Labour and Tory parties in Britain, Liberals and Progressive Conservatives in Canada. Policies in France, Italy, Switzerland, and Scandinavia have generally conformed. The rhetoric in all countries has been diverse. The practical action has been similar.
There have been three points of convergence. All governments in all of the industrial countries, although differing in individual emphasis, have agreed that:
—There must be macroeconomic management of the economy to minimize unemployment and inflation. This, at least in the English-speaking countries, was the legacy of Keynes.
—There must be action by governments to provide those services which by their nature are not available from the private sector or on which, like moderate-cost housing, health care, and urban transportation, the private economy defaults.
—There must be measures—unemployment insurance, welfare payments, old-age pensions, medical insurance, environmental protection, job safety and product safety regulation—to protect the individual from circumstances with which he or she cannot, as an individual, contend. Much of this last has been thought of as smoothing and softening the harsh edges of capitalism.
No accepted term exists for the consensus which these policies comprise. Keynesian policy refers too narrowly to macroeconomic action; liberal or social democratic policy has too strong a political connotation for what has been embraced in practice by Dwight D. Eisenhower and Gerald Ford, Charles de Gaulle, Edward Heath, and Konrad Adenauer. I will not try to devise a new term; instead I will refer to the broad macroeconomic, public-service, and social-welfare commitment as the economic and social consensus or just the consensus. It is the present attack on this consensus—notably by Mrs. Thatcher’s government in Britain and by numerous of Ronald Reagan’s supporters in the United States—that I wish to examine.
The ideas supporting the economic and social consensus have never been without challenge. Keynesian macroeconomic management of the economy, the first pillar of the consensus, was powerfully conservative in intent. It sought only to correct the most self-destructive feature of capitalism, the one Marx thought decisive: its tendency to recurrent and progressively more severe crisis or depression. It left the role of the market, current income distribution, and property rights unchallenged. But numerous conservatives, especially in the United States, long equated Keynesian economics with subversion. There was some conservative discomfort when, thirty years after Keynes’s General Theory was published and the policy it prescribed was tending visibly …