Most of the material I come across about political economy is pretty abstract – individuals rarely figure (except those such as Thatcher, Reagan and Hayek) – rather forces…(such as neo-liberalism or globalisation).The material lacks what the literature has taken to calling “agency” ie actors who cause things to happen; or a narrative about how exactly these individuals achieved the changes being described.
I am serialising an edited version of the article about the “Watergate Babes” simply because it restores “agency” to the narrative. It shows that things are not pre-determined but come from human choices……. I remember the Johnson Presidency – the literature on the “War on Poverty” (particularly Dilemmas of Social Reform by Peter Marris and Martin Rein; “Blaming the Victim” by W Ryan; Rules for Radicals by Saul Alinsky) and was duly influenced by such writings of JK Galbraith as The New Industrial State..
This next part of the edited article reminds us of this context in which the new elements in the Democrat Party changed focus all of 40 years ago; and the intellectual sources they drew on in a changed narrative….
How the thinking changed……After Humphrey’s loss to Nixon in 1968, Democrats formed the Commission on Party Structure and Delegate Selection, also known as the McGovern-Fraser Commission, which sought to heal and restructure the party. With the help of strategist Fred Dutton, Democrats forged a new coalition. By quietly cutting back the influence of unions, Dutton sought to eject the white working class from the Democratic Party, which he saw as “a major redoubt of traditional Americanism and of the antinegro, antiyouth vote.”
The future, he argued, lay in a coalition of African Americans, feminists, and affluent, young, college-educated whites. In 1972, George McGovern would win the Democratic nomination with this very coalition, and many of the Watergate Babies entering office just three years later gleaned their first experiences in politics on his campaign.
……Meanwhile, by 1970, both civil society and large American institutions seemed out of control. The National Guard shot antiwar protesters at Kent State, showing that the fissures over Vietnam were only getting worse. The Penn Central railroad had collapsed in the largest bankruptcy in U.S. history. Corrupt corporate executives mismanaged the nation’s train system under an outdated regulatory system. Inflation was spiraling upward, and the ongoing corporate problems of important institutions—such as Pan Am and Chrysler—were becoming more and more evident. Plus, Japanese imports began displacing American jobs.
But the new political class didn’t pin the blame for social and economic problems solely on Wall Street or corporate management—as populists like Patman did—but on a broader malaise. In 1974, Charlie Peters, the publisher of the hot new magazine The Washington Monthly, wrote: “Yesterday, Penn Central. Today, Pan Am. Tomorrow? The American system is in trouble and we all know it.” Inflation and a wave of corporate problems intermingled, indistinguishable from the claims of the counterculture. “We’ve grown fat and sloppy,” Peters continued. “General Motors and the Post Office each have over 700,000 employees. One turns out lemons. The other loses packages … The old organizations—public or private—simply aren’t doing the job.”
A key influence………And the most important architect of this intellectual counterrevolution, the one who engaged in a direct assault on traditional anti-monopoly policy, was the libertarian legal scholar Robert Bork. His book The Antitrust Paradox undermined the idea of competition as the purpose of the antitrust laws. Monopolies, Bork believed, were generally good, as long as they delivered low prices. A monopoly would only persist if it were more efficient than its competitors. If there were a company making super-charged monopoly profits, bankers would naturally invest in a competitor, thus addressing the monopoly problem without government intervention. Government intervention, in fact, could only hurt, damaging efficient monopolies with pointless competition and redundancy. In an era of high prices, a theory focused on price seemed reasonable……….
On the Democratic Party’s left, a series of thinkers agreed with key elements of the arguments made by Jensen, Stigler, and Bork. The prominent left-wing economist John Kenneth Galbraith argued that big business—or “the planning system” as he called it—could in fact be a form of virtuous socialism. Their view of political economics was exactly the opposite of Patman’s and the other populists. Rather than distribute power, they actively sought to concentrate it. Galbraith for instance cited the A&P chain store, which, rather than the political threat Patman had decried, Galbraith declared should be recognized as a vehicle for consumer rights and lower prices. His theory was called “countervailing power.” Big business was balanced by those subject to it: big government and big labor. Inserting democracy into the commercial arena itself through competitive markets was “a charade” and “the last eruption of the exhausted mind.” Anti-monopoly measures had never worked; they were a “cul-de-sac” for reformist energy, leading away from the real solution of public ownership of industry.
For younger Democrats, the key vector for these ideas was an economist named Lester Thurow, who organized the ideas of Galbraith, Stigler, Friedman, Bork, and Jensen into one progressive-sounding package. In an influential book, The Zero-Sum Society, Thurow proposed that all government and business activities were simply zero-sum contests over resources and incomes, ignoring the arguments of New Dealers that concentration was a political problem and led to tyranny. In his analysis, anti-monopoly policy, especially in the face of corporate problems was anachronistic and harmful. Thurow essentially reframed Bork’s ideas for a Democratic audience.
…….Henceforth, the economic leadership of the two parties would increasingly argue not over whether concentrations of wealth were threats to democracy or to the economy, but over whether concentrations of wealth would be centrally directed through the public sector or managed through the private sector—a big-government redistributionist party versus a small-government libertarian party. Democrats and Republicans disagreed on the purpose of concentrated power, but everyone agreed on its inevitability. By the late 1970s, the populist Brandeisian anti-monopoly tradition—protecting communities by breaking up concentrations of power—had been air-brushed out of the debate. And in doing so, America’s fundamental political vision transformed: from protecting citizen sovereignty to maximizing consumer welfare.
Early spotting of neoliberalism in the Democrats’ society………..In 1982, journalist Randall Rothenberg noted the emergence of this new statist viewpoint of economic power within the Democratic Party with an Esquire cover story, “The Neoliberal Club.” In that article, which later became a book, Rothenberg profiled up-and-coming Thurow disciples like Gary Hart, Bill Bradley, Bill Clinton, Bruce Babbitt, Richard Gephardt, Michael Dukakis, Al Gore, Paul Tsongas, and Tim Wirth, as well as thinkers like Robert Reich and writers like Michael Kinsley. These were all essentially representatives of the Watergate Baby generation. It was a prescient article: Most Democratic presidential candidates for the next 25 years came from this pool of leaders. Not all Watergate Babies became neoliberals, of course. There were populists of the generation, like Waxman and Miller, but they operated in an intellectual environment where the libertarian and statist thinkers who rejected Brandeis shaped the political economy.
……..In their first five years, the 1975 class of Democrats categorically realigned American politics, ridding their party of its traditional commitments. They released monopoly power by relaxing antitrust laws, eliminating rules against financial concentration, and lifting price regulations.
The Watergate babies accepted Reagan’s demolition of controls; When Reagan came into office, one of his most extreme acts was to eliminate the New Deal anti-monopoly framework. He continued Carter’s deregulation of finance, but Reagan also stopped a major antitrust case against IBM and adopted Bork’s view of antitrust as policy. The result was a massive merger boom and massive concentration in the private sector. The success of the Watergate Baby worldview over the old populists can be seen in what did not happen in response to this quiet yet extraordinarily radical revolution:
There was no fight to block Reagan’s antitrust restructuring. He reversed the single most important New Deal policy to constrain concentrations of economic and political power, and… nothing. Antitrust was forgotten, because no one was left to fight for it. ….. And in response to the end of the Cold War, the administration restructured the defense industry, shrinking the number of prime defense contractors from 107 to five. The new defense-industrial base, now concentrated in the hands of a few executives, stopped subsidizing key industries. The electronics industry was soon offshored…….
A West Wing generation learned only Watergate Baby politics, never realizing an earlier progressive economic tradition had even existed.