The years from the mid-1940s through the mid-1970s are now often romanticized. Although we have no term as widely accepted for these three decades as the French phrase les trentes glorieuses, political commentators often look back to the first two postwar decades as years of relative calm, even consensus. Beneath the surface, however, two powerful waves were building, and we live with their effects. The roots of the cultural upheavals of the 1960s lay in the Black freedom struggle, second-wave feminism, and the countercultural poets, writers, and artists of the 1950s, a little-known story beautifully told by Casey Nelson Blake, Daniel H. Borus, and Howard Brick in At the Center: American Thought and Culture in the Mid-Twentieth Century. Although often seen simply as an interregnum, the ’50s did not only mark the familiar story of how America became the world’s leading power and congratulated itself for preserving democracy and stability in the face of Hitler’s fascism and Stalin’s communism. At the same time, critics on the Left were revealing the exclusions and suppressions that made possible the appearance of consensus. In the next decade, those pressures exploded into open rebellion.
The origins of the New Right can be traced to the same decade, and that is the wave that has submerged social democracy for the past forty years. Wendy Wall’s superb study Inventing the American Way shows in detail the struggle between Left and Right to capture the postwar era. Against the efforts of insurgents and organized labor, groups such as the Chamber of Commerce and the National Association of Manufacturers succeeded in yoking Americanism to free enterprise, and defining “rights” not as FDR did in 1944 but instead as the rights of citizens (especially businessmen) to be protected from government. As Angus Burgin made clear in The Great Persuasion, conservative economists on both sides of the Atlantic were mobilizing to reestablish the gospel of laissez-faire. In the wake of wartime activist governments and the threat represented by triumphant social-democratic governments emerging across Europe, followers of Friedrich Hayek such as Frank Knight at the University of Chicago worked to spread their brand of neoclassical economics. When the murders at Kent State and the chaos that followed prompted the reaction that David Paul Kuhn recounts in The Hardhat Riot: Nixon, New York City, and the Dawn of the White Working-Class Revolution, both the Left and the Right had formed battle lines that have endured into the present.
A washed-up actor and television pitchman seized the moment. Speaking four years earlier, in support of Barry Goldwater’s 1964 presidential bid, Ronald Reagan marshaled conservatives’ simmering anger. His speech “A Time for Choosing” linked opposition to two threats to American freedom, Communism abroad and progressive initiatives at home. It also catapulted Reagan into national prominence. Reagan is now remembered, by both his fans and his critics, as the leading spokesman for Republicans’ crusade against government, the California governor who launched the war against taxes, the president who launched the war against unions, the man who gave us phrases such as “welfare queen” and “government is not the solution to our problem, government is the problem.” Yet as Dionne observes, compared with the rhetoric and the policies currently popular among Republicans, Reagan was a moderate. Dionne points to research showing that Republicans have moved 150 percent to the right in recent decades, while Democrats have moved only 33 percent further left. Why?
Evidence now points toward Newt Gingrich. A new book by Julian Zelizer, Burning Down the House, shows how Gingrich transformed American politics from the comparatively mild partisan fights of the 1980s into the inferno of hyperbolic charges and counter charges it has become. Years before the 1994 Contract for America cemented Republicans’ commitment to strategies of denunciation and recalcitrance, Gingrich honed his rhetorical knives by bringing down the deal-making Democratic Speaker of the House, Texan Jim Wright. Gingrich adopted the anti-corruption mantras of the post-Watergate years but rejected the norms of civility that had prevailed even during the investigation of the Nixon White House. Savvy about exploiting the emerging media landscape, skilled at character assassination, and shameless at self-promotion, Gingrich became the face of a new no-holds-barred politics. The seeds sown in the battles over the Clinton presidency, fertilized by the president’s own sleazy behavior, have blossomed into the bright lies now broadcast daily by Fox News, the alt-right, and President Donald Trump.
To their credit, both Dionne and Reich have seen it coming. In Dionne’s first book, Why Americans Hate Politics, he showed how both parties had veered away from the center, where most Americans located themselves, by fashioning a politics of false choices. Ever since the Democratic Party adopted new nominating procedures, designed to wrest power from insiders (correctly) deemed racist and sexist, and selected George McGovern to run against Richard Nixon in 1972, Democrats have moved away from the New Deal and concentrated increasingly on the previously ignored issues of gender, race, and ethnicity. That focus, long overdue, antagonized large segments of the previously Democratic electorate. At the same time, Republicans capitalized on appeals to law and order, free enterprise, family, and tradition that often masked darker biases propping up white male supremacy. As the parties moved away from problem solving and toward gestural politics, people inclined toward a politics of both/and rather than either/or found themselves marginalized from battles between the partisans at both ends of the political spectrum. Americans longed, as Dionne argued in his 2012 book Our Divided Political Heart, for both freedom and community, for self-reliance and generosity toward their struggling fellow citizens. Although elements of both parties’ programs resonated with most Americans, the strident appeals to the left and right poles of opinion meant that a majority felt unsatisfied with the choices being offered.
Clinton’s presidency played an outsize role in putting us in the mess we’re in now. Trying to recapture a majority by “triangulating,” or moving toward the center, Clinton capitulated to Republicans on crucial issues. Having failed to achieve universal health care for many reasons, including both substantive overreach and strategic blunders, Clinton raced to the right. It should not have been such a surprise. He had campaigned to “end welfare as we know it,” and he crowed that “the era of big government is over.” He agreed with Wall Street bankers about the need to deregulate the financial sector, which made possible the fancy new financial instruments, such as debt swaps and derivatives, that paved the way to the devastating collapse of 2008. His crime bill fueled the school-to-prison pipeline that has become one of the nation’s most serious problems. His secretary of labor during his first term, Robert Reich, who had known Clinton since they were together at Oxford, chafed under his boss’s retreat from the social-democratic principles and policies that Reich thought they shared. Reich had laid out his position in a string of widely read books and articles making the case for economic and social equality. In his angry and entertaining book, Locked in the Cabinet, Reich explained why he had withdrawn from the Clinton administration and issued a stinging indictment of Democrats’ appeasement of Gingrich’s now-never-satisfied Republicans. As indebted to big money as the Republicans, Democrats were no longer the party of the common man and woman. They had become the party of technocrats.
In several recent books, including Saving Capitalism and The Common Good, Reich has sounded chords that harmonize with some of the themes in Dionne’s work. Both of them call on both parties to attend to the genuine problems facing the 90 percent of Americans who have been running in place for four decades. Both insist that the economy is now run by, and for the benefit of, the other 10 percent, and neither party has shown a willingness to address that central fact of twenty-first-century American life. Invoking tired nostrums rather than undertaking reforms consistent with the longstanding American commitment to equality as well as freedom, and commitment to the common good or the “general welfare” clause of the Constitution rather than the self-interest of the wealthy, both parties have abandoned the people and adopted a politics of sloganeering instead of problem-solving. Their strategies play well with their party bases, but they never challenge the power of those in control.
What is to be done? This is where Reich’s The System diverges from Dionne’s Code Red. Reich presents considerable evidence sustaining the case he and others have been making for years now. Since the 1970s, when new economic theories displaced Keynesianism, champions of the so-called “free market” have claimed that regulation strangles innovation, taxes stifle initiative, and only by giving corporations free rein over their decision-making can America retain its position as the world’s most powerful economy. This new orthodoxy justified breaking unions, resisting environmental controls, and outsourcing manufacturing, all in service to the mantra of maximizing “shareholder value” instead of the previous commitment to “stakeholder value.” Reich shows that CEOs in the 1950s were concerned with the well-being of their workers and communities, and content with incomes a mere twenty times those of the average workers in their firms. Today CEOs earn more than three hundred times as much as their typical workers, and the portion of the nation’s wealth gobbled up by financial services has expanded from 2.5 to 8.3 percent. Reich singles out Jamie Dimon, CEO of JPMorgan Chase, for especially sharp criticism because he, and other members of the Business Roundtable, now claim to be committed to greater equality. But those words, Reich contends, ring hollow because CEOs have done nothing to put their pious claims into action.
Stampeding inequality did not begin recently. The ideological shift underlying it started in the 1970s. That’s when Michael Jensen and William Meckling offered an influential new “theory of the firm” that justified concentrating on shareholder rather than stakeholder value. In his book The Great Risk Shift, Jacob Hacker also showed the influence of an article on “moral hazard” by Mark Pauly and studies on the overarching need for “efficiency” by economists such as Martin Feldstein, who became an important member of Reagan’s Council of Economic Advisers. Armed with these new ideas, Republicans began arguing on a new basis for some of the same policies that conservatives had embraced since the 1920s. Now “personal responsibility” justified retrenchment of government, because welfare programs were said to offer incentives to laziness and economic regulations to hamstring individualism and entrepreneurship. Charles Murray and George Gilder popularized this new orthodoxy. In Murray’s words, “Any social transfer increases the net value of being in the condition that prompted the transfer.” So the government should stop its handouts. Businesses should become “lean.”
Any enterprise that failed to follow the new rules was vulnerable to corporate raiders like Carl Icahn, who used junk bonds to finance taking over companies and ripping them apart, workers and their communities be damned. The 1970s saw only 13 hostile takeovers; in the 1980s there were 150. Entrepreneurs and corporate executives could now be said to be contributing to the common good by enlarging their corporations’ wealth—and their own. “The easiest way to lift share value,” Reich writes, was “to hold down wages, roll back regulations, find ever-cheaper places around the world to produce products and services, fight unions, and secure giant tax cuts that result in less money for education, health care, and everything else most Americans need.” The Reagan administration smiled on the takeovers, which were characterized as necessary exercises in “cutting the fat.”
After Jensen had moved from the University of Rochester to Harvard Business School in 1984, he contended that the mushrooming takeovers disciplined “inefficient firms” that paid their workers too much and paid too much attention to their current locations. Opportunities for cost-cutting lay elsewhere. As Reich puts it, more value could be “extracted” from firms by “streamlining their operations, by which Jensen meant cutting payrolls and abandoning communities for new ones.” That added value, Reich points out, has gone to those at the top, while income and wealth have been subtracted from everyone else.
In the mid-1950s, more than a third of all private-sector workers in the United States were unionized. In 2020, just over 6 percent are. Today a higher portion of national income goes into profits, and a smaller portion into wages, than at any time since World War II. Americans have developed several coping strategies, Reich argues, to deal with the shrinking slices of the pie they have been offered since the 1970s. A majority of women, including those with young children, have left home to work primarily in the service sector rather than in higher-paid professions, in part because the lack of affordable top-quality childcare makes them want flexible hours. Workers overall are spending more time at work, especially compared with workers in other nations, and they increasingly work more than one job to make ends meet. Finally, household debt has exploded: the typical American household now owes almost 150 percent of its after-tax annual income.
Reich characterizes our current condition as oligarchy, and he argues that it rests, as oligarchies always have, on a legitimating myth. Earlier forms depended on fictions such as the divine right of kings. Ours rests on the fictions of market fundamentalism and meritocracy. Libertarian justifications for the dog-eat-dog economy, characterized as inescapable due to the pressures of globalization, are merely the latest in a long line of efforts, as John Kenneth Galbraith put it, to find “a superior moral justification for selfishness.” Americans with resources can now buy not only goods and services but also opportunities for their offspring, thereby facilitating the inheritance of wealth on a scale unknown since progressives enacted the estate tax in 1916. Yet thanks to the fiction of meritocracy, such advantages can be stylized as “merit” rather than privilege. How do oligarchs maintain their status in a democracy? They manufacture enemies, Reich concludes, and then stoke xenophobia and racism to distract the masses from the real source of their problems. Those to blame are not the perceived “line cutters” that Trump voters told Arlie Russell Hochschild had turned their animosities against minorities and immigrants. They are the oligarchs.
One of the most effective ways to blunt arguments for the inevitability of market fundamentalism and claims that automation and globalization are to blame for workers’ woes is to compare the United States to European nations. There unions and workers’ wages remain strong, in part because workers are represented on corporate boards. There they can push back against outsourcing and secure retraining programs when jobs disappear. There programs of social provision are so thoroughly entrenched that parties on the right have been forced to adopt them as their own, abandoning anti-social-democratic positions in favor of xenophobic and racist appeals to protect “our people” from “outsiders.” There corporations remain competitive on a global scale, and national economies are as robust as any despite the considerably larger share of income that goes to taxes that fund universal social programs. Nations such as Germany, Sweden, and Denmark are American conservatives’ nightmare because they demonstrate that prosperity can be widely shared. The gap between the top 1 percent and the bottom 20 percent need not be so great. CEOs and hedge-fund managers need not receive such lavish pay to remain productive or creative. Generous, universal provision of education, health care, job training, housing, old-age pensions, and the other benefits envisioned in FDR’s Second Bill of Rights need not prevent corporations from being so successful that they attract investors from other nations, including, increasingly, the United States.
Reich’s prescription for change is straightforward: “Forget left versus right. It’s democracy or oligarchy. The most powerful force in American politics today is anti-establishment fury at a rigged system. There are no longer moderates. There’s no longer a center. There’s either authoritarian populism (Trump) or democratic populism (represented in 2016 by Bernie’s ‘political revolution’).” A loyal member of Bernie’s insurgency and an adviser to his campaign, Reich contends that mainstream Democrats have sold out to Wall Street. For that reason neither Clinton nor Obama accomplished much (except Clinton’s Earned Income Tax Credit and Obama’s Affordable Care Act), even though both enjoyed majorities in the House and Senate during their first two years. Centrist Democrats’ reliance on big money also explains Trump’s victory. He succeeded in persuading millions of disaffected Americans, Reich argues, that he was an outsider, as fed up with a corrupt system as they were. Hillary Clinton, by contrast, was seen by many as the embodiment of the power structure that so many Americans either distrust or hate, for very good reasons.
After having painted such a grim picture, Reich concludes with a surprisingly upbeat final chapter, “Why Democracy Will Prevail.” If we can reactivate the movements that brought about change, from the progressives and New Dealers through the Civil Rights movement and the successful campaign for LGBTQ rights, then we the people can retake control from the oligarchy. To do so, though, we will need a new party, a third party free from Wall Street’s domination. We will also need a widespread return to sustained civic engagement, as Reich has been arguing for years. Readers persuaded by the first thirteen chapters of The System, and who know that Joe Biden and and Kamala Harris, not Bernie Sanders and Elizabeth Warren, will do battle with Donald Trump in November, might be mystified by Reich’s apparent hopefulness that democracy, against all odds and facing an all-powerful oligarchy, can indeed prevail. For such readers, Dionne’s Code Red presents an alternative worth considering.