American Experiment (386 page)

Since Keynesians were viewed as liberals ideologically, and monetarists as conservatives, Carter’s choice of Paul Volcker as head of the Federal Reserve Board in 1979 was seen as a decisive presidential shift to the right. Volcker promptly made clear that the Board would pursue monetarist policies. There followed a classic example of Herbert Spencer’s case of the murder of a beautiful theory by a brutal gang of facts. The money supply and especially money velocity fell quickly, interest rates mounted, and a short, sharp recession followed. Within three years the Fed had to abandon its monetarist experiment. The economy quickly improved, but it was far too late to save the Carter presidency.

The University of Chicago economists, popularly called the Chicago School despite their numerous internal differences, were countervailed at Harvard by a one-man school that displayed equal intellectual vigor and versatility. This school was called John Kenneth Galbraith. Canadian by birth, he had emerged from an Ontario farming community rent by social and political discord and managed to study and teach during the 1930s at a series of intellectually disputatious universities, including Berkeley, Harvard, and Cambridge. During World War II he helped run the Price Division of the Office of Price Administration, served as an editor on Henry
Luce’s
Fortune,
and directed the United States Strategic Bombing Survey. After writing a scholarly book on the theory of price control, which to his considerable indignation went almost unread, he resolved never again to “place myself at the mercy of the technical economists who had the enormous power to ignore what I had written.” He struck out for a broader readership, and he reached it in 1952 with his
American Capitalism.

Equipped with a gadfly’s wit, a plenitude of self-esteem, and a six-foot-eight frame, Galbraith sometimes looked like a towering farmer beating off a swarm of bees. And stinging bees there were aplenty, as critics reacted to the economist’s pokes at the pieties of the day. When his lucid work on American capitalism, recognizing its modernity and productivity, argued that consolidation was a healthy force in an economy held in balance by the “countervailing power” of corporations, unions, and other forces, he was assailed from the left for ignoring the plight of the consumer and minimizing the need for vigorous antitrust enforcement. When in
The Affluent Society
(1958) Galbraith urged that the nation’s enormous productive forces be shifted toward education, housing, mass transit, and other sectors that responded to people’s true needs rather than artificially contrived ones, he heard from the right about his improper imposition of his own values on consumer choices and from the left about his call for a national sales tax. When in
The New Industrial State
(1967) he described the technicians who ran the top 500 corporations as the nation’s de facto economic planners—and planning as much for their own status and self-esteem as for profit—he was variously assailed for overestimating the technological efficiency of the big corporation, for equating corporate or sectoral industrial planning with overall national economic planning, and again for minimizing the need for antitrust enforcement.

As the years passed and the dust settled a bit, critics had to acknowledge that, whatever the balance of Galbraith’s economic truths and errors, he had brilliantly succeeded in his original determination to reach outside the profession for popular attention and, in gaining it, to force economists publicly to question conventional wisdom. Galbraith, for his part, showed a willingness, unusual for academics, to admit error and correct it. Thus in the second edition of
The New Industrial State
he conceded that a critic had properly taxed him with a failure to make clear the great difference between planning that is within the framework of and responsive to the market and planning that “replaces the market.” His theory of countervailing power came to be seen as partly a reflection of the “equilibrium bias” that dominated social science thinking in the postwar years. If some of the topics he dealt with appeared to some far removed from the everyday concerns of working-class and poor people, few could doubt the abiding
concern with social reform and human betterment that lay behind the merciless dissections and the mordant wit.

Into the midst of the skirmishes among rival “bourgeois” economists, intellectual cannonballs were lofted from the far left. Marxist and neo-Marxist thought in America continued to be vigorous and contentious during the heyday of the monetarists and their counterattackers. Economists of such standing in the profession as Paul Baran, Paul Sweezy, and Samuel Bowles, and publications like the
Review of Radical Political Economy
and Sweezy’s
Monthly Review,
compelled American social scientists— though rarely American political leaders—to confront radical economic and political alternatives.

Marxism in the late twentieth century still to an extraordinary degree lived off the power and creativity of the master’s teachings of over a century before. There was the same emphasis on the mode of production as the driving rod of economic and social change, on the class system as the foundation of political power, on the contradictions implicit in the process of capitalist accumulation, on the inevitable conflict between a compact ruling class of capitalists and a working class divided and repressed but steadily gaining in proletarian consciousness, on the coming “doom” or “twilight” or “fall” of capitalism. Criticism of Marxism had a fixed quality too: its exaggeration of the causal role of economic forces; its simplistic view of class that ignored the rich findings of sociologists and political scientists about the nuances and subtleties of class attitudes and relationships; its overemphasis on the potential solidarity of the working class; its underestimation of the resilience and resourcefulness of the capitalist “rulers.”

The intellectual burden of the past that weighed most heavily on the Marxists was the haziness about alternative economic and political strategies. Just as Marx himself had been brilliant and prophetic in his analysis of capitalism but vague—perhaps deliberately so—about the process of revolutionary change that would finish it off, so the American Marxists of the 1970s and 1980s failed to match their penetrating critiques of modern capitalism with explicit analyses of possible political strategies and social transformations. To be sure, Marxists had scored one intellectual breakthrough. After decades of being mesmerized by the temptations of “nationalizing” industries and services and big administrative entities with undiscriminating zeal, they had learned the lesson that Adolf Berle had taught capitalists a half century before—technical ownership did not necessarily mean actual control. In nation after nation indiscriminate nationalization had not only failed economically but, alienating the voters, had hurt socialist regimes politically.

The failure of nationalization as a cure-all, however, left Marxists and other socialists without a weapon of change they had long depended on. Instead they were offering cloudy proposals for “democratic planning.” In fact, central economic planning was perhaps the most theoretically neglected and politically underestimated doctrine available to American liberals and radicals. But the Marxists gave little intellectual aid. This was partly because they were still intoxicated by dreams of some kind of public “ownership” rather than analytically challenged by the gritty but vital processes of effective public control. Even more, it was because they faced a dilemma. On the one hand, they saw the need for central planning and coordination of monetary, budgetary, resource, environmental, and other controls. On the other hand, they feared Stalinist tendencies toward despotic and rigid centralization—tendencies they truly hated. Instead they called for “democratic” planning, which often meant worker participation in management decisions, grass-roots control of economic decision making, delegation of policy making to state, community, and even neighborhood entities. How to find the proper mix of central economic direction and local, rank-and-file democracy evaded the theoretical grasp of the Marxists, as well as of conservative, libertarian, and liberal thinkers.

Still, that grasp was firm compared to the left’s intellectual grip on the question of how to achieve power. The radicals had no revolutionary plan, no street tactics, no political party strategy relevant to the peculiar American conditions of hazy ideologies, amorphous political parties, and fragmented government. Noting the leftist view that monopoly capitalism faced a continuing and intensifying state of economic crisis, Benjamin Ward wrote that “clearly there is an important immediate goal: building a movement capable of acting should a crisis opportunity emerge in the near future.” But the American left had not even begun to build the kind of political movement that had reshaped politics in European democracies. More than a century after Marx, more than half a century after Lenin, it lacked an intellectual leadership that could be compared to the master political economist in London, or a political leadership comparable to the brilliant strategist of Zurich and Petrograd. This would have been of some satisfaction to the American establishments, had they been aware of it.

While these debates among economists dragged on, so did acute poverty in the United States. If the economic controversy was conducted over the heads of the poor, the poor continued to go about their ways regardless of the economists, the sociologists, and the policy-makers. Some kind of war was being conducted on behalf of the poor, but like peasants and
townspeople hearing the confusing roar of battle over a distant darkling plain, many of the poor could hardly understand the marches and countermarches of the warriors against poverty.

It was not even clear when that war had been declared—perhaps when Kennedy witnessed firsthand the poverty of West Virginia during his presidential primary campaign there, or perhaps when he praised the Social Security Act later that year for undertaking a “war on poverty,” or perhaps when he repeatedly referred to poverty in his inaugural address and said, “If a free society cannot help the many who are poor, it cannot save the few who are rich.” The ambivalence of those inaugural words was reflected in Kennedy’s Administration. He and his brother Robert initiated numerous policies and projects for youth employment and remedial education, aid to depressed areas, accelerated public works, manpower development and training, and extension of aid to families with dependent children. But many of the programs were weakened by Congress, severely underfunded, and represented no significant redistribution of income from the rich to the poor.

Even meager programs carrying the Kennedy imprimatur, moreover, ran into vehement opposition. In the summer of 1961the city manager of Newburgh in the Hudson Valley ordered drastic restrictions in welfare policy, including the withholding of benefits to unwed mothers if they had another illegitimate child. “It is not moral,” he said, “to appropriate public funds to finance crime, illegitimacy, disease, and other social evils.” Ever since the Leopold-Loeb case, he added, “criminal lawyers and all the mushy rabble of do-gooders and bleeding hearts … have marched under the Freudian flag toward the omnipotent state of Karl Marx.”

Lyndon Johnson declared his war against poverty within a few weeks of taking office. In a few more weeks the Administration was pressing through Congress the Economic Opportunity Act, a program for a coordinated attack on the many causes of poverty—joblessness, illiteracy, poor education, meager public services. Congress authorized almost a billion dollars for an Office of Economic Opportunity, which would conduct separate programs—Job Corps, work-training, work-study, the Neighborhood Youth Corps, Volunteers in Service to America. OEO head Sargent Shriver charged into the poverty battle with energy and enthusiasm rivaling Harry Hopkins’s in New Deal days. But, oversold and underfunded, the program soon ran into opposition from radical leaders like community organizer Saul Alinsky who expected too much and from conservatives like Barry Goldwater who feared too much. As controversy arose about both the poverty programs and the Vietnam War, LBJ’s war against poverty flagged.

Like the Thirty Years’ War of the early seventeenth century, the wars against poverty began amid great huzzahs, picked up momentum, faltered, started up all over again—and took decades. Just as some LBJ warriors against poverty concluded that JFK’s efforts had been inadequate, so Richard Nixon resolved that he would do something about the “welfare mess” once and for all. Amid much fanfare he proposed a Family Assistance Plan to guarantee all families with children a minimum of $500 per adult and $300 per child every year. FAP would build a work incentive into the program by allowing a poor family to keep the first $60 per month of earned income without any reduction in government aid. The plan would help meet the needs especially of children under eighteen and of the poor in the South, where welfare payments were lower than in the West and North. A year later, urging its passage, Nixon called FAP the “most important piece of domestic legislation of the past 35 years, one of the dozen or half dozen such bills in the Nation’s history.”

The chief planner of Nixon’s FAP was a one-man brain trust, Daniel Patrick Moynihan. A former director of the Joint Center of Urban Studies at MIT and Harvard, Moynihan had helped draft early poverty legislation under Kennedy and Johnson. He had been acutely disillusioned by the 1964 Economic Opportunity Act provision that antipoverty programs be carried out with the “maximum feasible participation” locally of the poor. The result, in his eyes, had been neighborhood conflict, racial turmoil, editorial denunciation, and a stigma attached to the whole poverty effort. Now, under Nixon, he threw himself into the battle for FAP, with the plea that this new initiative—a shift from a services strategy to an income strategy—would “almost surely define the beginning of a new era in American social policy.” Soon Moynihan underwent another disillusion. After a long struggle among congressional factions, FAP was defeated by attrition, shriveled into just another disbursement to special categories of the poor. The great initiative was over before it was initiated.