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The Making of Reaganism

Portrait of an Election: The 1980 Presidential Campaign

by Elizabeth Drew
Simon and Schuster, 459 pp., $14.95

The election of 1980 and the first year of the Reagan administration have filled liberal reformers (among others) with gloom and foreboding. Dennis Wrong, a politically moderate sociologist, captured the prevailing mood when he wrote recently in Dissent:1 “I do not recall a time when the prospects for the left in America have looked quite so dim”—or, he later hints, the prospect for a native fascism so real, albeit still distant and faint. The concluding lines of Walter Dean Burnham’s essay in The Hidden Election imply a similar anxiety about the future not simply of reform but of the values and institutions which have made reform possible.

There are grounds for viewing the election from a rather less apocalyptic perspective. Start with an incumbent with the charisma of a prune, who had scraped into office on a paper-thin majority. Add, in the final two years of his term, a frightening rate of inflation, levels of unemployment rivaling or exceeding the worst postwar years, and something approaching a 5 percent decline in the real income of the blue-collar class, the class on which his party depends. Compound this with the hostage negotiations, a drama of national impotence and humiliation conducted against a background of shrill comment on the decline of America’s power and the rise of the Soviet Union’s. Take all that and you have a sure-fire recipe for defeat, almost without reference to the opposition candidate. For whatever his limitations, as long as he avoids making a really grotesque spectacle of himself, he will have the overwhelming advantage of being someone other than Jimmy Carter.

Liberals might also ease the gloom by considering the election within the cyclical theory of American history advocated by the Schlesingers, father and son, the theory of an inevitable oscillation between liberal and conservative moods. Oscillation does not halt the lurching progress of reform. Liberals push it forward. Then, their means and energy exhausted by conservative resistance, they temporarily yield to the opposition who succeed only in consolidating a new status quo before liberals regroup and jerk the polity forward once again. Under the Schlesingers’ hypothesis, a sustained period of conservative rule was long overdue. It had been heralded by Nixon’s election and anomalously interrupted by Watergate.

The Hidden Election, a collection of essays by left-of-center scholars determined to expose the deeper political forces that swept Carter from office, ravaged the Senate’s liberal wing, and brought to power and popularity a figure long abandoned on the fringe of political respectability, carries a less buoyant message.

The shape of American politics emerging from this book, supplemented with one or two bits of my own, looks roughly as follows. We begin with a country unique among Western democracies in being the only one where the ideology of individualistic capitalism2 has established an unchallenged dominance. European-style social democracy with its frank recognition of class relations, its labor or socialist parties mobilizing most of the working class, and its appeal to communitarian interests has failed to take hold in the public consciousness as a morally acceptable value system, much less a guide to political action. The peculiarly American system of “welfare capitalism”3 has never quite transcended its image as a suspect deviation from the true, free enterprise faith. It may have been useful in coping with certain practical problems, such as what to do with the very poor and the retired, but was always vulnerable to attack by economic fundamentalists and was never able, by the power of its moral vision, to summon passionate enthusiasts for its defense.4

But as the dull dictate of prudence, welfare capitalism enjoyed during the two decades following the Second World War the support of an elite coalition. This was formed, on the one hand, by the financiers, lawyers, and industrialists associated with burgeoning multinational enterprise and, on the other, by university-trained liberal intellectuals and bureaucrats, swept clean of Marxists and socialists. This elite shared power in the Democratic Party with a purged, tamed, and increasingly cooperative labor leadership, and it dominated the so-called Eastern, “liberal” or “moderate” wing of the Republican one. Throughout the Fifties and well into the Sixties it presided over an everbroadening social consensus which seemed even to an observer as acute as Daniel Bell to herald a permanent end to ideological struggle and a reduction of social issues to technical questions of efficiency.

Domestic tranquillity rested partly on a foundation of steady economic growth, partly on government transfer payments. Growing hugely both in absolute terms and as a percentage of the national budget (moving from one-third in 1950 to two-thirds twenty years later), these payments vastly enhanced working- and middle-class security, while in some degree softening the tendency of private corporate activity to aggravate income inequality.5 The effective exclusion of poor and silent marginal groups, above all blacks, from the political process also contributed to the atmosphere of social peace. As long as no one asked for more than a little security and a little more income each year, the political system could respond without changing its basic structures of power and authority.

The silence and impotence of the lowest classes and the relative satisfaction of the working and lower-middle ones contributed in two ways to the interests of the great corporations. Questions of income distribution and corporate control were kept off the list of urgent intellectual, as well as political, issues (in sharp contrast to the situation in Western Europe). And there was little opposition to the intensifying transfer abroad of capital and technology in search of new markets and higher profits. In other words, the coalition for welfare capitalism was equally a coalition in defense of US participation in an open global trading system—indeed of America’s incontestable leadership of that system.

What disturbed this political Elysium? “A half decade of stagflation” is the conventional first response of several writers in The Hidden Election, notably Gerald Epstein of Williams College. This response leaves many questions unanswered, while obscuring the continued, indeed impressive, growth of the economy, coincident with inflation and relatively high unemployment figures, from 1974 to 1978. During that four-year period real per capita income increased 16 percent, only 1 percent less than in the four best years of the comparatively healthy Sixties. Yet the welfare-capitalist coalition was obviously under strain throughout the decade. Disintegration began well before growth stopped in 1979.

By analyzing the impact of inflation on different groups, Epstein’s turgidly written but often perceptive essay helps to clarify this anomaly. High and unpredictable rates of inflation play havoc with the bond market, discourage new bond offerings to finance corporate growth, and are therefore anathema in financial circles. Inflation need not, on the other hand, gouge corporate profits if two conditions are met: prices must rise faster than wages and the dollar must be allowed to float down in value so that exports remain competitive. The first condition leads to more virulent relations between management and labor. The second is hard to satisfy for several reasons. The dollar continues to be used as the standard currency in international trade. And the high interest rates that are one response to demands for control of inflation are driven still higher by the borrowing requirements of the national government as it strains to satisfy the demands of welfare and defense. So during the Seventies, the second condition was not met.

Among other things this explanation reveals one of the ways in which the international trading system, established and maintained by the corporate and financial elements in the American welfare-capitalist coalition, could hamper the ability of its managers to defend it. Inhibiting the dollar’s free float abroad was a minor effect compared to the impact of high-priced dollars and high interest rates—and progressively more efficient foreign producers encountering progressively lower tariff barriers—on employment and profits across a broad spectrum of the American manufacturing establishment: first American shoes and textiles and shipbuilding were priced out of international competition; then a stunning range of other industries failed as well, including, finally, the traditional centerpiece of our economy, the automobile industry with all its appendages.

As an explanation of our economic malaise and the related fragmentation of the political coalition behind welfare capitalism, this declining competitiveness, equated with a supposed decline in productivity, is often cited in the same breath as stagflation. Are we in fact less competitive simply because we are less productive? The overall rate of per capita growth in productivity has indeed been declining in recent years. Lester Thurow states that the persistent historic rate of 3 percent a year began to fall in 1965. In 1978 it finally became negative (0.3 percent per year).6 Negative it has remained. But as we shall see, the common assumption that this decline largely explains the deteriorating ability of US manufacturers to compete will not hold up.

Businessmen and conservative ideologues attribute the decline both in productivity and in the quality of US products to assembly-line indiscipline resulting from excessive security (i.e., too much union power and too high and long unemployment compensation) and the permissive, self-indulgent society. But the decline might equally well result from design and engineering standards that neglect quality; from the habits of the easy, competition-free days of the 1940s and 1950s; from feudal labor-management relations on the factory floor; from worker insecurity and from our bad and poorly financed system of public education.

In addition, to the extent that the decline in quality is a cultural phenomenon—a loss of discipline and respect for productive activity—the most plausible culprit is the passion for consumption promoted and financed by capitalist enterprise rather than by liberal defenders of individual rights. Since no decisive evidence is available, you can take your choice among all these reasons. Naturally businessmen have been inclined to those that do not challenge their power as managers of capital or their income as taxpayers. By attacking union power and income “security nets” and regulations protecting workers and consumers, they became, particularly in the Carter years, more active opponents of welfare capitalism.

Thurow, one of our most perceptive students of the decline in productivity, sometimes seems to disparage all of the above explanations. Both in The Zero-Sum Society and in his recent piece in these pages7 he attributed most of the overall per capita decline to the depletion of traditional sources of productivity growth: for example, the enhanced cost of extracting oil and gas and the end of the migration from low-productivity jobs in agriculture to high-productivity ones in industry. He also invokes the need for a much higher rate of investment in plant and equipment in order to equip the expanding number of new workers resulting from the postwar baby boom. However, while that explains the overall decline in productivity, it does not explain why plants with constant numbers of employees are losing out to foreign competition. Thurow disparages the effort to link the fall in productivity to the attitudes of workers when he writes that “attitudes may have changed but productivity is down for some very good reasons that have nothing to do with how people feel about work.” Yet when he turns to prescriptions for improving productivity, Thurow has much to say about attitudes.

  1. 1

    Fall, 1981.

  2. 2

    Called “conservatism” by most of its current friends and enemies.

  3. 3

    By the welfare state I mean a capitalist economy still dominated by the interplay of private property and corporate owners, but in which economic policy is to some extent publicly controlled and the freedom of property owners to dispose of their wealth is politically limited. The state performs at least two functions here. It steps in to modulate the excesses of the economy, helping to create rationality and order, and thereby to save capitalism from its own tendency to destruction. And it steps in to provide humanizing reforms, as a response to insurgent groups and communities.” Irving Howe, The New Republic September 9, 1978, p. 14.

  4. 4

    A nation whose politics revolves around such issues as day-care centers or school lunches or the ‘proper’ cost of false teeth,” Irving Kristol declares, “is a nation whose politics is squalid.” J.P. Morgan, Bismarck, and Napoleon would doubtless have agreed.

  5. 5

    In 1974, according to the census bureau, the poorest fifth of American families received 5.4 percent of national income while the top fifth received 41 percent. Despite transfer payments, these figures were virtually the same as those of 1947.

  6. 6

    See Lester Thurow, The Zero-Sum Society (Penguin, 1981), pp. 86-88.

  7. 7

    Death by a Thousand Cuts,” NYR, December 17, 1981.

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