Even before his passing, Jimmy Carter had garnered much praise for his unprecedented post-presidency contribution to the common good here and abroad. In fact, his presidency itself did not lack accomplishments either, notwithstanding the hostage crisis after the Iranian Revolution. There is one particular, albeit less mentioned, area where the Carter presidency played an important role in the transition between two economic orders. In this respect, the Carter presidency shares something common with the presidencies of Donald Trump and Joe Biden.
Carter was elected at a time when the luster of Keynesian economics was fading and the appeal of the progressive ideals embedded in the New Deal and the Great Society was dimming. Thus, the Carter presidency occupied the transitional phase between the progressive economic and social policies of FDR and Lyndon Johnson and the “government is the problem” politics of Ronald Reagan and the ushering in of neoliberalism. Similarly, Donald Trump was first elected by capitalizing on the discontents of the neoliberal order that had unsettled ordinary Americans. His assault on free trade and his support of America-first economic policies shook the foundations of neoliberalism. His successor, president Joseph Biden, further bolstered the notion that national interests rise over those of free markets, thus extending the distance of the American economy from the neoliberal economic model.
The Carter presidency became consequential for the transition from progressiveness to neoliberalism by the force of several factors. First, the opponents of the New Deal had started to built considerable intellectual capital. Their center was the Mont Pelerin Society founded by the Austrian economist and enthusiast of unfettered markets Friedrich Hayek in the late 1940’s. It soon became the hub of advocates of laissez-faire capitalism, the most prominent of them being Milton Friedman. A second factor was the influence of Ralph Nader who although not a neoliberal, disdained the power of big corporations over consumers. The solution to this problem was to curtail corporate power by either enhancing competition or imposing consumer protection regulations. The result was a re-centering of the government’s attention from workers to consumers. Finally, Carter surrounded himself with an economic team that was more open to free market ideas. Thus, the New Dealers found themselves outside the centers of power.
The cumulative result of these forces was a push for deregulation that included the airline, trucking, and railroad industries. At the same time, new legislation aggressively supported by the Business Roundtable started to erode the power of labor unions. The oil price shock caused by the Iranian Revolution and the inflation that followed led to the appointment at the helm of the Federal Reserve Board of Paul Volcker who was determined to fight inflation at all costs. In the closing years of the Carter administration and during Reagan’s first term, the anti-inflation fight led to a severe recession that raised unemployment, weakened labor unions, and drove wages down. Labor unions and wages never recovered from this retreat.
It is not certain whether Carter intended to change the structure of the American economy or just tinker at the edges. However, he was less attuned than previous Democratic presidents to the idea that the state was an important force for positive change. Emblematic of this sense is the following quote from his 1978 State of the Union: “Government cannot eliminate poverty, or provide a bountiful economy, or reduce inflation, or save our cities, or cure illiteracy, or provide energy.” According to Gary Gerstle (The Rise and Fall of the Neoliberal Order”) this was a shocking rupture from the core principle of progressive economics that government can do good. *
This brief account shows that Jimmy Carter by his own decisions and by the influence of the surrounding intellectual and political forces opened the door to a new economic model, one more fully articulated and put in place by Ronald Reagan. This, of course, was the neoliberal model, which matured and survived through the presidencies of two Republicans (George H. W. Bush and George W. Bush) and two Democrats (Bill Clinton and Barack Obama).
The new order, especially through its openness to international trade and business, turned out to be disastrous for working class Americans who lost jobs to cheaper labor countries. The lack of an adequate safety net to absorb the shock of lost jobs or a systematic plan to retool American workers for the new global economic order can account, among other reasons, for the general sense of disenchantment and populism that brought Donald Trump twice to the presidency.
While the neoliberal order is on the way out crushed by the weight of its severe crises and undelivered promises, no one can know what will follow it. The expectation that the pendulum could again swing toward an era of progressive economic policies cannot be justified as a historical necessity. For one reason, the progressive forces within the Democratic party have yet to gain dominance. Although the legislative victories of the Biden Administration have had elements of a progressive agenda in the areas of fighting climate change, promoting green energy, and improving access to health care and social services, the essential pillars of a progressive agenda were not put in place.
Such an agenda would start with first restoring the ideal of the common good. It would also include: rebalancing the influence of capital and labor so that working people can claim their fair share of economic rewards; return competitiveness to markets so that new firms can survive and continue to innovate before they are taken up by huge corporations; bring democracy into corporate governance so that single individuals do not run enormous and highly influential enterprises all by themselves; and admit the state as a partner in the production of goods, like education, health, housing, and basic research, where private markets are not as efficient.
As things stands now, the neoliberal order has degenerated into a plutocratic and oligarchic capitalism that fails the tests of market competitiveness and social mobility. It is unclear how the incoming Trump administration plans to reverse this state of affairs. If anything, we seem to be headed into an oligarchic, feudal economic order where super-rich and super-powerful actors (like the barons and counts of past centuries) challenge the state in order to extract more economic benefits for themselves.
My sense is that only after we have experienced enough of this corruptive version of capitalism, we may master the will to design a new sustainable and hopefully fairer economic order.
* Besides Gary Gerstle, my other source was Zachary Carter’s The Price of Peace.
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