The Making of Reaganism

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.

…the Japanese have proven that there is much productivity to be gained if the work force right down on the shop or office floor can be motivated to be interested in raising productivity. … The ability to motivate a work force interested in productivity gains … is exportable. … If American firms cannot get a work force that is as well motivated as the Japanese, they will in the end fail. [Emphasis added.]

This apparent inconsistency is, I think, explicable when we consider that at least until very recently, the manufacturing sector was not a primary source of the overall decline in productivity. But the continued slow increase in manufacturing productivity became insufficient when competitors, particularly the Japanese and certain third world countries like Taiwan and South Korea, began to achieve rates of growth two or three times our historic rate. Moreover, third world competitors in industries such as textiles and shoes, and even steel and cars, were operating with lower wage rates and were able to obtain technology comparable to ours as a consequence of the open trading system championed by the United States. And the Japanese in particular, through the close collaboration of government and business, were proving more aggressive and effective at marketing their products, particularly in the third world. In short, the American economic position seems bound to deteriorate even if we restore the historic productivity growth rate, a rate which no doubt reflects, among other things, the basic structure of labor relations and of relations between management and government.

Even a cursory examination of stagflation and productivity suggests the often complicated connections among the forces behind the political collapse of welfare capitalism. And the other factors aiding Reagan’s victory were similarly various and interlocked, including the rise of the black and other marginal groups, the shift in Jewish political opinion, the power of OPEC, the collapse of détente, third world turbulence, and the revolution in morals.

The emergence of the black community during the 1960s as an autonomous, articulate, and significant political force did more than simply increase the size of the claims for more money and benefits that the national government had to meet. As both an example and a threat to other self-conscious groups it helped to set in motion more competitive demands throughout the political system. While their claims increased, the various ethnic factions seeking government support reduced the ability of the system to meet those claims: by warring among themselves they thereby undermined the political power of the entire coalition that had previously backed social welfare. For assorted reasons including, paradoxically, the long-standing tradition of mutual support, the Jewish community was one of the groups that felt most threatened by the economic demands and political mobilization of blacks.

Jewish businessmen, organizations, and intellectuals had played a prominent part in the struggle for reform of capitalism and race relations. The Jewish population generally had supported reform politicians at the polls, and Jews still remain important in the battered legions of the old coalition. But growing friction between the black and Jewish communities helped to produce an overall shift of Jewish votes to the right,⁸ as Jews saw themselves menaced, even “betrayed,” by black demands.

By increasing inflation and reducing the size of the economic pie, OPEC also obviously undermined the political vitality of welfare capitalism; but it did so in more subtle ways as well, particularly for Jews. The evidence of Arab unity within OPEC and the West’s deferential response sharpened fears among American Jews about the tenacity of US support for Israel. The stronger their doubts about America’s long-term commitment in the face of Arab demands, the more powerful the temptation to embrace the cold war conception of US-Soviet relations never abandoned by the right wing of the Republican Party.

The view of the Soviet Union as an implacably hostile state whose ambitions can be deterred only by a relentless, militarized diplomacy had two seductive qualities for Jews. It precluded, a priori, the evolution of a cooperative, crisisdampening relationship between the superpowers which, if it existed, would tempt them to impose a Middle East settlement. Any settlement tolerable to the Russians would have to offer more to the Arabs—most particularly an independent Arab presence on the West Bank—than Israeli public opinion, and many American Jews, believe is consistent with Israeli interests. Secondly, an increasingly tough military approach to the Russians would supplement moral obligations to Israel with the hard currency of strategic interest. For if diplomacy toward the USSR becomes not a search for mutually acceptable accommodations but simply an effort to achieve intimidating power, then Israel’s superb military machine and its ties to the West make it a particularly impressive strategic asset. The US would hardly be inclined to impose on such an asset sanctions or solutions that might weaken its potential military contribution.

A shift toward the right within the Jewish community only added to the much larger causes of détente’s collapse: Russia’s invasion of Afghanistan and muscle-flexing elsewhere; the disappointment of US business with the commercial gains from détente (the Europeans, particularly the West Germans, got most of these); not to mention the huge residue of ideological hostility on both sides. And the death of détente in turn assured a transfer of national income to defense and thus reduced funds available to satisfy the mass constituency of welfare capitalism.

Business and financial leaders who were not inclined to fear a Soviet nuclear first strike on the continental United States or a blitzkrieg toward the Persian Gulf had other concerns that swung them into line with lobbies like the Committee for the Present Danger. The temptations of profit and the fountain of OPEC dollars had encouraged them to support enormous loans to the third world; but payments on debt are a frequent casualty of internal political convulsion. The Shah’s collapse must consequently have been as ominous a portent for bankers as it was for corporate leaders dependent on foreign arms sales and construction contracts and steady flows of oil, bauxite, copper, or other third world exports. A large increase in weapons and signs of the will to employ them therefore had appeal, not only as threats against Soviet meddling, but also as potential means for extinguishing entirely indigenous threats to order in the third world countries.

As anxieties over disintegration abroad strengthened elite sentiment in favor of more defense spending, anxieties over disintegration in the American moral order—crimes, divorce, abortion, pornography, open displays of homosexual and heterosexual freedom—gave new energy to traditional supporters of the Republican right. Combined with racial antagonism, these anxieties helped to promote defections among working- and middle-class Democrats.

The Hidden Election—for example, in the essay on social welfare by Ira Katznelson of the University of Chicago—amplifies the skeletal account I have given here and records how, in the final years of his term, Jimmy Carter found himself trying to hold together the splintered elements of his electoral coalition. His own inclinations, and perhaps necessity as well, dictated that he try to get a firm grip on the fragments tilting to the right. In foreign policy this meant the triumph of Brzezinski over Vance. The SALT negotiations were allowed to collapse; the China card came out of the sleeve; and Brzezinski out of the White House to the Khyber Pass. Essentially domestic conflicts in strategically trivial third world states again became tests of American will. Many more billions were assigned to defense.

In domestic affairs Carter chose a strategy of tolerating recession and promising “reindustrialization,” which amounted to reverse transfer payments to provide a safety net for business. As a result, during the campaign Reagan could present himself as the champion of economic buoyancy and security. Although Carter presciently described Reagan as itching to hack away at the entire social welfare system, Reagan easily deflected him by looking amiable, invoking Roosevelt, emphasizing tax cuts, and censoring himself. Stockman’s axe was, if anything, an unseen gleam in the candidate’s eye.

In The Hidden Election’s most important essay Walter Dean Burnham demonstrates why Carter had little choice. Burnham’s main theme is the same one that has fascinated every acute observer of American politics, namely the absence of a social democratic alternative in the US, either as an organized political movement in which the relatively poor would find coherent representation for their interests, or simply as a political idiom. Of the tens of millions of Americans who did not vote in this election, by far the largest number proportionately are from the lower classes, the cannon fodder of Reagan’s battle for economic renewal.⁹

Had it existed, a strong social democratic movement would have organized and mobilized them politically. It would also have influenced the language and thought patterns of the middle classes, making legitimate the issues of income distribution and the regulation of corporate power and thus permitting class coalitions. In the absence of these conditions, neither Carter nor any other Democrat could fashion a program even theoretically appealing to the poor and near-poor without enraging and terrifying everyone else.

Are deregulation and a further skewing of income and wealth and a freer market for labor likely to revitalize the economy? If part of the productivity of Japanese and German industry is attributable to worker security, how will increased worker insecurity enhance our ability to compete? If inequality is necessary to achieve the requisite incentives and savings, how do the Japanese manage with 50 percent less income inequality than we have today? If even in our years of untrammeled free enterprise we failed to achieve rates of investment even roughly comparable to those of Japan or West Germany, what basis is there for believing that now, under more adverse circumstances, we can do better?

As we try to escape from our economic impasse using means and ideas so “new” that they were familiar to Dickens, what will happen to the Reagan coalition?¹⁰

Republican officeholders have already been expressing worries about Reagan that suggest increasing disaffection among their middle-class supporters, who must be puzzling over Stockman’s confessions. Reagan’s congressional majority could begin to unravel before his economics has much discernible effect, even if one believes that it is not inherently flawed. The election of an opponent of welfare capitalism has not changed the basic character of our political system—its diffusion of power, its permeability, its carefully designed resistance to rapid political change. The poor can be crushed. But what of the more powerful elements in the economy that depend on subsidies, both open and concealed?

If the economy continues to stumble, Reagan and his fellow ideologues will presumably prescribe more budget cutting, including cuts in Social Security, and lash out at centers of resistance. The president’s call for a radical increase in his power over the budget and for renewed (even apparently expanded) CIA activities inside the US with correspondingly reduced congressional surveillance; his attorney general’s demagogic attack on the Supreme Court (despite its dominance by moderate-to-conservative justices); the administration’s announcement that it will board foreign-flag vessels on the high seas to turn back illegal immigrants even if this may be a violation of international law: these and other acts bespeak a low respect for the restraints and balances of the constitutional system and for law itself.

Economic failure could provide one temptation for authoritarianism. The angry ambitions of the Moral Majority element add another. In the past the political sophistication of Know-Nothing groups was as primitive as their appeals; their populist economic ideas as well as their style obstructed alliance with great moneyed interests. No longer—as Frances FitzGerald showed in her recent article in The New York Review.¹¹ The possible threat to American pluralism from a failure of economic policy and from “New Right” cultural resentment is multiplied by the dangers and frustrations of a foreign policy which has no clear consensus behind it and is being imposed on an increasingly tense and volatile situation abroad.

A much deeper recession, continuing inflation, and a major international crisis (particularly one involving sustained combat for US troops) could produce something very ugly in American politics. But any really effective authoritarian movement would have to overcome impressive obstacles. Foremost among them is the individualistic philosophy which lends a certain spiritual glamour to Reaganomics and coincidentally justifies the diffusion of power that a sour, frustrated conservatism might attempt to alter. Just as the absence of a respectable social democratic tradition restrains the rhetoric and programs of the left, the absence of a fascist tradition imposes serious constraints on the right.

The election of 1980 gave few reasons to doubt that the voting population continues to cluster near the center of the political spectrum. Thirty-eight percent of Ronald Reagan’s supporters gave as their chief reason for backing him that “it is time for a change,” while only 11 percent chose him mainly because “he’s a real conservative.” Moreover, as Burnham points out, “fully half of this ‘time-for-a-change’ group were unwilling to cite any other reason (whether party identification, leadership, judgment, experience, or ‘conservatism’) for their choice.” He concludes, rightly, I think, that at the grass roots the main impulse was to “throw the rascals out.”

While Burnham and his colleagues, equipped with all the paraphernalia of the social sciences, were busy X-raying the election, Elizabeth Drew was carefully describing for The New Yorker the day-to-day slogging of the candidates. Her collection of pieces is wonderfully free of the sententious prose that has flourished in Theodore White’s series of melodramas. Nor will you find any of White’s forelock-tugging before those in power or his glistening-eyed encomia to the “process.”

Drew neither makes claims to special insight, nor attempts to give a general analysis, and she writes with such unself-conscious grace that the election story, from the first primary to Reagan’s victory, seems almost to tell itself. Nevertheless, her Portrait contributes generously to our sense of what actually happens in the frantic comedy of contemporary political life.

On the question of the electorate’s ideology, she tends to confirm the hypothesis that the Republican candidate was well to the right of the views of a majority of voters. In his first memorandum, Richard Wirthlin, the Reagan pollster, tells his employers flatly:

Survey research conducted in the primary states shows that Ronald Reagan won not because his ideological positions were congruent with the electorate, but rather in spite of a rather substantial ideological gap between himself and the average Republican.

Drew’s account supports the view that Americans who vote tend to circle around one general ideological position to which all politicians with any real hope of success try to appeal. Ted Kennedy, who was designated by the press and television as the candidate of the “left,” gave a speech in Iowa that could as easily have been delivered by Reagan:

The people of Iowa, I believe, share with me a feeling that rampant inflation and soaring interest rates are not the inevitable history of the American economy. The people of Iowa share with me a sense that we can bring about a restoration of the sense of respect for our country overseas.

Meanwhile, Reagan went to Philadelphia, stood in front of the Museum of Art like an aged Sylvester Stallone playing Rocky, and indicted the Carter administration for planning to reduce Social Security payments.

Drew’s most revealing talks were not with the cautious candidates themselves but with their political managers. All the ones she talked to were convinced by their expensive, elaborate polling, as well as by their personal experience and intuition, that the voters would reject anything unfamiliar, anything disturbing their view of America and the world. So Ted Kennedy had to flounder when he tried to find a rationale for his campaign; he was no more inclined than any other serious candidate to talk about the distribution of income or wealth or power.

The electorate, as Drew’s many informants describe it, still tends to believe in classical free market values, is still committed to the view that selfimprovement can and will take place in the system of political economy which it has inherited. If the voters are cynical about politics, they nevertheless remain susceptible to a politics appealing to the dream of unending personal material progress. (Reagan’s promise of a tax cut seems to have been particularly effective.) Along the relatively narrow band defined by the American creed, they have moved right, in part because of undeniable failures in policy, in part because the national leaders who inevitably define the direction of change moved to the right before them. If Reagan’s economics fails at home and his ignorance and instincts lead him into conspicuous blunders abroad, the electorate could turn again to the left.

What will they find there? As matters now stand, a great many ambitious politicians with a very few, ill-assorted, half-finished ideas. What the Democratic Party or a new leading political figure should be offering is a coherent program for increasing the competitiveness of American industry without threatening basic constitutional values. Such a program would have to stand Reaganism virtually on its head. Instead of reducing the role of government in all parts of the economy unrelated to defense, it must increase that role. But the greater work of government should be measurable not so much by the amount of public resources consumed as by the ways private resources are being directed to a more effective place in a dynamic economy.

The necessary shift from traditional to high-technology industrial activity cannot be managed within a pluralistic political system unless the human costs of such a shift are cushioned. Only government can provide the cushion. The shift cannot be effected without a reasonably stable market for high technology products, particularly microchips.¹² Only the government can make that possible. Nor, I should add, can such a shift succeed if an extensive increase in defense procurement siphons off large numbers of scientists and skilled workers from high technology industries. Long-term strategic interests as well as the claims of social welfare require a much more modest and discriminating program for defense than this administration has been politically or psychologically able to contemplate.

As Lester Thurow has persuasively argued, greater productivity will also require more democracy, security, and equality in the work place—an American equivalent of what one finds in Japan. Without government incentives, the inertia and vested interests of our huge corporate bureaucracies may resist change until they are overwhelmed by foreign competition.

To be competitive, certainly to be competitive at high levels of employment, the US will also need a sharp increase in investment and a commensurate drop in consumption. And we shall have to invest billions in goods conceded by all except a few fanatics to be necessarily public: bridges, sewers, reservoirs, roads, airports, and seaports. As public goods and services decline, so too the political appeal of the taxlimitation movement begins to fade.¹³

If the middle classes can be freed from the anodyne belief that the resources that are needed to increase plant and equipment and to repair and expand our vital services can be squeezed out of the poor alone, then the electorate may become susceptible to frank talk about the distribution of income and wealth. A fairer distribution need not and probably should not come primarily through progressive taxation, though it is a necessary element, particularly in the case of wealth. If, as the Japanese experience—here as well as in Japan—suggests, greater equality in the work place improves productivity, then the simple refusal to subsidize corporations that cannot compete because they will not change can simultaneously encourage productivity and equality. The government may also find it useful to encourage direct worker participation in firm profits, for example by facilitating worker purchase of existing businesses in cases where the workers propose operating methods reasonably calculated to restore competitiveness.

Of course these ideas go against the grain of our peculiar brand of capitalism. So did the New Deal in its time. Liberal reform in this country has always been a struggle. It has succeeded in renewing our system of political economy in part because the fascist option has not been readily at hand, in part because charismatic leaders have often providentially appeared at critical moments, and in part because many of the ablest American capitalists have demonstrated a capacity for change that is the mark of a successful governing class. Whether they can do so again will be the underlying political question for the 1980s.