Dividends of a Just Economy

Ever since the early twentieth century, advocates of taming capitalism in the public interest have assumed that energized citizens and activist government could counter the power of concentrated wealth. The Progressive Era, in which legislation was enacted to constrain the robber barons of the time, was cut short by World War I. But after World War II a combination of government regulation, direct public investment, progressive taxation, social insurance, and a vigorous labor movement led to broad prosperity. America’s citizenry reciprocated with a trust in democratic government.

In recent decades, that virtuous circle has turned vicious. Rapacious capitalism has resurged, and with it inequality and insecurity. Government has not only been unable to counter these trends; partisan blockage has undermined even basic tasks of governing such as assuring the integrity of elections. Not surprisingly, government has lost public confidence.

Roadblocks to activist government in the US were designed by the nation’s founders, who equated protection of the rights of the people with limited government. They built into their Constitution all manner of checks and balances as obstacles to legislation, and the Supreme Court, beginning in 1803 with Marbury v. Madison, asserted the prerogative to declare laws unconstitutional.

In addition, the filibuster, which requires a supermajority to end debate and pass legislation, has been a Senate rule since 1917.¹ Thus it requires unusual circumstances—the kind of national emergencies and large legislative majorities associated with Franklin Roosevelt or Lyndon Johnson—for the US government to take broad progressive action.

Government activism in the US has been further hobbled by racism. Even FDR, our most progressive president, excluded Black citizens from most of his programs in order to win approval of the racist southern Democrats who controlled important congressional committees. Public housing was segregated. Occupations in which most African-Americans worked were deliberately denied the benefits of Social Security and of the Wagner Act, which guaranteed workers the right to join labor unions and to bargain collectively. FDR’s New Deal was largely for whites.

The filibuster under Republican Senate leader Mitch McConnell has metastasized from a special maneuver to block civil rights laws into an all-purpose strategy for obstruction. Still, Joe Biden, with only slim Democratic majorities in Congress, is attempting to govern as progressively as Roosevelt. He so far has benefited from a combination of luck, unity, and resolve. Though Republicans balked at his $1.9 trillion relief package, government emergency aid enjoys broad public support. Biden’s big rescue plan used the tactic of budget reconciliation, which requires only a simple majority of Senate votes, rather than the 60 percent needed to force a vote on standard legislation. However, reconciliation is available only once every fiscal year, and Biden faces tougher going with regular legislation.

Yet while the US has this unique structural bias against activist government, since the 1990s the countries of the West, despite markedly different constitutional systems and political histories, have experienced similar patterns of democratic deterioration. Economic circumstances have turned against ordinary people, mainstream leaders have failed to provide a remedy, and voters have increasingly looked to ultranationalists, even to aspiring dictators. This is the case in nations with presidential systems or parliamentary systems, in those friendly to immigration or hostile to it, in ones with social democratic traditions or more conservative histories, and with and without legacies of slavery. There is some common dynamic at work.

Jonathan Hopkin, a political scientist at the London School of Economics, captures this downward spiral in Anti-System Politics: The Crisis of Market Liberalism in Rich Democracies, using history, comparative analysis, and telling detail. Hopkin’s insight is that the same antidemocratic syndrome afflicts the entire West because the Western democracies all turned away from the social compact that characterized the postwar boom. That bargain ended in the 1970s with the resurgent power of financial elites and the resurrection of free-market ideology and policy, known as neoliberalism. Economic insecurity increased in the 1980s under conservative governments. But these trends intensified when “Third Way” center-left parties came to power in the 1990s, notably under Bill Clinton in the US, Tony Blair in the UK, and Gerhard Schröder in Germany. All supported greater reliance on market forces, buffered by only modest social spending. By the collapse of 2008, which was caused by deregulation, voters had increasingly lost faith in what Hopkin terms the “cartel” of the center-left and center-right. In the Great Recession that followed, priority in Europe and the US went to bailing out the bankers and reassuring financial markets with deficit reduction.

Hopkin includes left-wing protest parties in his account, but the intensified backlash mainly went right. The few leftist “anti-system” leaders are not anti-system in the same sense as those on the authoritarian right. Bernie Sanders, a socialist, is committed to strengthening democratic institutions. Nicola Sturgeon, the popular first minister of Scotland, is anti-system in considering Scottish secession a remedy for Brexit, but her policies are those of a mainstream social democrat. In Greece the left-wing Syriza government played by parliamentary rules.

Brexit, to Hopkin’s eyes, was an anti-system spasm reflecting the failure of British mainstream politics to address the deepening insecurity wrought by neoliberal policies. He argues that anti-immigrant sentiment was not the primary factor in its passage. The economically depressed parts of Britain that cast the strongest Brexit vote had few immigrants because they had few jobs to offer. By contrast, prosperous greater London, a magnet for foreign workers, voted heavily against Brexit. One can quibble that the increased presence of immigrants in the country did take on symbolic importance among downwardly mobile Brits. Educated elites liked cosmopolitanism, while the working class was threatened both economically and culturally. As Hopkin points out, only 26 percent of those with university degrees voted for Brexit, compared to 78 percent of those without higher education. The deeper driver of Brexit, he aptly writes, was “the very real economic distress that these voters had faced since the financial crisis.”

Throughout the West, social classes ended up inverting their partisan allegiances, to the advantage of the far right. Center-left parties such as the Democratic Party in the US, Labour in Britain, the Socialist Party in France, and the Social Democratic Party of Germany embraced liberal immigration, free trade, LGBT rights, and environmentalism. They ended up with the support of affluent, educated bien pensants, while losing much of an increasingly desperate working class they no longer served. This inversion marks a long descent from the era of FDR’s New Deal in the US or Clement Attlee’s postwar Labour government that created Britain’s welfare state.

The European Union plays a perverse antidemocratic part in this saga. The original Common Market of 1957 was a customs union of strong nation-states. They were free to decide, democratically, to pursue highly interventionist policies, including public ownership, regulation of capital and labor, and industrial subsidies. But the Maastricht Treaty that founded the European Union in 1993 gave primacy to the free movement of capital, goods, services, and persons, and it promoted deregulation and privatization. These rules superseded the ability of member states to have strong national policies to regulate capitalism. In addition, the Germans, as a condition of giving up the deutsche mark in favor of the euro, insisted on stringent limits on public deficits, even in the face of disasters such as the Greek collapse.

As a weak federation of as many as twenty-eight states, the EU epitomized a hamstrung polity with multiple opportunities for member governments or Brussels bureaucrats to block decisive action. It proved just strong enough to enforce austerity, but too weak to insist that member states such as Poland and Hungary respect democratic rules and norms. The unaccountable market, with EU technocrats as minders, trumped the democratic state.

Unlike many students of antidemocratic trends, Hopkin is careful not to brand the anti-system right and left parties with the misleading common label “populist.” The word, he writes, “has inescapably acquired a heavily pejorative connotation, undermining serious and systematic analysis.”

According to Thomas Frank, the conflation of right-wing and left-wing “populism” is more than semantic sloppiness. It’s the latest reflection of a long-standing effort by elites to demonize demands for a democratic economy. Frank, a historian who cofounded The Baffler magazine, calls this “the Democracy Scare.” His new book, The People, No, combines a history of populism with a witty and thorough account of how ideologically opposite movements came to be branded by the same dismissive word: a 2017 report by Human Rights Watch is titled “The Dangerous Rise of Populism”; a New York Times essay by Tony Blair is headlined “How to Stop Populism’s Carnage”; the Global Populisms Project at Stanford declares on its website, “Populist parties are a threat to liberal democracy.”

As Frank demonstrates, the original People’s Party of the 1880s and 1890s, widely known as the Populists, had nothing in common with the Western European far right of today, much less with such antidemocratic figures as Hungary’s Viktor Orbán, Turkey’s Recep Tayyip Erdoğan, or Donald Trump. It was a Jeffersonian, racially liberal, deeply democratic protest movement against economic concentration and corruption, and a demand for political reform. Far from being know-nothing in the mode of Trumpists, the movement was committed to popular education. The Populist Alliances set up lending libraries and encouraged their members to learn about economics. Coin’s Financial School, a populist best seller in 1894, Frank recounts, “was packed with tables and numbers: its point was not to discredit learning but to challenge conventional wisdom—to encourage people to figure out their predicament for themselves.”

In the anti-populist rhetoric of the Gilded Age, Frank finds a telling continuity with the anti-Roosevelt screeds of the 1930s and the broad-brush disparagement of populism today. He quotes a Supreme Court ruling from 1895 striking down an early income tax law that had been enacted by a coalition of Populists and Democrats, which sounds as contemporary as a Wall Street Journal editorial. “The present assault on capital is just the beginning,” wrote Justice Stephen J. Field. “It will be but the stepping-stone to others…a war of the poor against the rich.”

The ideas of the People’s Party were radical, but most eventually became mainstream, and several became law. Its demands for the breakup of monopolies were partly realized with the enactment of (poorly enforced) antitrust laws in 1890 and 1914. Other populist demands that later became law were direct election of senators, the progressive income tax, regulation of railroads (the Populists wanted nationalization), and price supports for farmers. Contrary to the nativist stereotype, the original Populists favored open immigration. The Populist idea that replacing the gold standard with “fiat money,” backed only by the credit of the government, could provide the cure for panics and recessions was decried by the experts as lunatic-fringe and inflationary—in 1913 it became law with the creation of the Federal Reserve. “In the most consequential Democracy Scare of them all,” Frank writes, “the cranks turned out to be right and the experts to be wrong.”

Many historians treat the Populist revolt as a crackpot movement that fell by the wayside. But as Frank observes, progressive populism reached its full flower in the administration of Franklin Roosevelt, who was not shy about condemning economic elites and using his office to rein in their abuses and to empower workers. The voters reciprocated. “Populism is what strengthened the unions and built a middle-class democracy,” Frank writes. “Populism, rightly understood, is what allowed Roosevelt to win four presidential elections” and gave Democrats a six-decade majority in Congress.

Frank is the authoritative chronicler of how downwardly mobile voters turned against their own economic interests. His first book, What’s the Matter with Kansas (2004), suggested that the culprit was the seductive appeal of social issues. White working-class voters tended to be cultural conservatives, and the trio of guns, God, and gays, plus the fear that racial integration would threaten their status, proved more salient than the practical economic benefits championed by liberal Democrats. But in two subsequent books, Listen, Liberal (2016) and now The People, No, Frank has explored how his Kansas thesis told only half the story.

It wasn’t just that Democrats were annoyingly liberal on social issues. They also stopped delivering on economic issues, as wages stagnated, corporations destroyed unions, and new concerns, such as the stresses on the working family, arose but were ignored by government. By the time the Tea Party appeared in 2010—and more emphatically with the victory of Trump in 2016—many white working-class voters had given up on both mainstream parties. To read Frank together with Hopkin is to appreciate that technocratic, elite neoliberalism is as antidemocratic as explicit right-wing authoritarianism—and more insidious. The two forms of antidemocracy feed on each other. Conversely, shifting the allegiance of even 10 percent of Trump voters, the sort who were also attracted to Sanders, could be the beginning of the marginalization of the far right.

Is there a plausible path back to effective government, anchored in strong democracy and a just economy? Paradoxically, though the US has had the closest brush with tyranny of any large Western democracy, it has the best chance of reversing the vicious circle of people deserting democratic government. Despite checks and balances, when a US president has a working majority in Congress and broad public support, it is possible to govern. In Europe, even assuming away the antidemocratic constraints of the EU, there is no progressive head of government with a stable majority in any national parliament, and none on the near horizon.

But absent reform drastic enough to improve prospects for most people, the allure of the white-nationalist right will keep undermining the progressive alternative. This undertow is reflected in the stubborn loyalty of about 40 percent of the US electorate to Trump, who offered nothing to improve their lot other than psychic gratification. It’s one thing to enact some legislation; it’s another to win back the people.

Racism, in Gunnar Myrdal’s phrase, remains the American dilemma²—and a special dilemma for Democrats. For a progressive majority to be built on common economic issues, it must be multiracial. There have been two great moments of American biracial coalition. They were separated by a century, and both ended badly. Lincoln’s was halted by his assassination; his intended legacy of racial inclusion was short-circuited by the ending of Reconstruction in 1876. Lyndon Johnson’s comment that passing the 1964 Civil Rights Act would destroy the Democratic Party in the South understated what followed. Republicans, repeating the tactics of the postbellum planter class and the anti-populists of the 1890s, have used race to destroy any solidarity between poor whites and blacks.

Heather McGhee’s The Sum of Us is a powerful call for racial alliance. More than a moral appeal, McGhee’s book provides a practical manual on how to bring it about. McGhee, a former president of the progressive think tank Demos, argues that the most effective form of antiracism is to embrace both race and class. Racism hurts Blacks disproportionately, but it also hurts whites who could benefit from activist policies precluded by the politics of racial division. “Black people and other people of color certainly lost out when we weren’t able to invest more in the aftermath of the Great Recession,” she writes. “But did white people win? No, for the most part they lost right along with the rest of us.” McGhee is out to challenge what she terms the “zero-sum paradigm”: the premise that if Blacks gain, it must be at the expense of whites, and vice versa.

McGhee quotes Hinton Helper, a white southerner who wrote a book in 1857 tallying all the ways that the planter class that governed the South shortchanged ordinary whites. Pennsylvania, Helper reported, had 393 public libraries; South Carolina 26. New Hampshire had 2,381 public schools; Mississippi 782. Plantation owners had a captive labor force. They didn’t need or want educated whites. As McGhee notes, the pattern carries on to this day. In 1959 the government of Montgomery, Alabama, paved over the city’s swimming pools, closed its parks, and even eliminated the zoo rather than see these public facilities integrated. Whites suffered along with Blacks. The states with the poorest and least educated populations and those with the most threadbare public services are still those in the South.

McGhee documents these realities with care: white people who can’t get affordable health insurance; white people bilked by mortgage fraudsters; white people no longer able to attend free public universities; employers who defeat union organizing by dividing workers by race. Each example reflects the absence of better policies for all, a possibility precluded by racial animus. McGhee is unsparing in describing how this version of America is harder still on Blacks. But the challenge is to make this story persuasive to white voters attracted by the likes of Trump, so that they shift their allegiance from racism to progressive economics.

From her reporting across America, McGhee points to case after case of cross-racial organizing for common betterment: the welcoming of refugees in Lewiston, Maine, as a way of repopulating empty storefronts and bringing new economic energy to a depressed town; a new wave of common efforts around the fight for a $15-per-hour minimum wage; union organizing of service workers, even in the Deep South. A transracial alliance, she writes, would produce a “solidarity dividend” of greater social protections for all races, the kind just demonstrated by Biden’s enactment of a universal child allowance using refundable tax credits. Playing off the story of Montgomery draining its public pools, McGhee calls for refilling “the pool of public goods.” Because of the greater legacy of Black poverty, public provision helps Blacks disproportionately, but aids whites as well, and cumulatively builds transracial affinity and alliance.

McGhee credits and builds on the work of Ian Haney López, whose most recent book, Merge Left, is a complementary call for racial coalition. Like McGhee, he is both nuanced and unflinching. “I had assumed that the main stumbling block to urging cross-racial solidarity would be convincing a majority of whites,” he writes. “Equally formidable, it turned out, was enlisting support from people directly focused on racial justice, overwhelmingly activists of color.”

Haney López is a law professor at Berkeley. His earlier scholarly work on race included pioneering research on how even the Supreme Court got pulled into determining who was white, because immigration in the nineteenth century was limited to whites, and “white” had to be defined.³ His 2014 book, Dog Whistle Politics, is the definitive study of the use of language in veiled racist appeals going back to Richard Nixon.

In his latest book, Haney López uses his academic expertise in the service of his work as an organizer. He recounts his extensive meetings with groups ranging from white trade unionists fed up with the charge of racial insensitivity to Black militants who insist that antiracism must take precedence over making common cause with dubious allies. This work is as difficult as it is urgent. One white, who professes sympathy for the civil rights cause, says that Black talk about slavery is “a horrible crutch to not trying, not working, not fixing yourself.”

Haney López’s mission is to persuade both groups that they need each other, and to fashion language to further that political goal. “Many of the Right’s most debilitating stories about working people—including white working families,” he writes, citing the best-seller Hillbilly Elegy by J.D. Vance, “are recycled stereotypes about African Americans.”

One concrete result of his leadership is called the Race-Class Narrative Project, initiated in 2017 with the participation of pollsters, linguists, and diverse progressive activists including McGhee. It rigorously tested language in focus groups and larger meetings. These included both open-ended discussions of racially fraught issues and more explicit testing of different messages. The data confirmed Haney López’s intuition. Researchers found that presenting issues in combined appeals to race and class was more convincing to voters than “the dog whistle racial fear message,” and that race-class approaches that acknowledged the special challenges of race “were more convincing than colorblind economic populism.” Three quarters of respondents in a multiracial group agreed with this statement:

Instead of delivering for working people, politicians hand kickbacks to their donors who send jobs overseas. Then they turn around and blame new immigrants or people of color, to divide and distract us from the real source of our problems.

Haney López is mindful of the tightrope act, and he is resolute in his conclusion: we can’t duck race, but we need to talk about it in a way that builds transracial unity: “For centuries, our greatest heroes—radicals like W.E.B. Du Bois, Martin Luther King Jr., and César Chavez—have insisted that American salvation requires cross-racial alliances.”

Recent events affirm these arguments. Only because of the razor-thin electoral success of Democrats in Georgia, which turned two Senate seats, has Biden been able to get legislation through Congress and progressive officials confirmed. Some leaders grasped the power of the “race-class narrative” before it had a name. The success in Georgia was built on ten years of organizing led by Stacey Abrams, who has been a touchstone for Black mobilization but succeeded in building a deliberately multiracial movement. If Biden and Congress can block the latest round of outright racial voter suppression efforts, Georgia could prove a hopeful harbinger of what America can be.