The real watershed of the modern era

1979 is the year people point to as the critical date when the certainties of the immediate post-war period ended – with the election of Margaret Thatcher (and her ally Ronald Reagan a year later); and the overthrow of the Iranian Shah and arrival of theocracy…But it was, arguably, a few years earlier that the tectonic plates moved when Nixon (in 1971) renounced dollar convertibility; and when (in 1973) the oil crisis shook the developed world   

The significance of my last post is the story it tells of a world collapsing in the mid 1970s and the arrival in Washington in 1975 of a new generation of politicians – “the Watergate Babes”….who considered those who had borne the Democrat’s flag for the previous decades as “old-fogies” who no longer deserved a place in power…..

I was part of that same generation – my first taste of power was indeed 1968 (as a town councillor and very soon a committee chairman) – although I was also holding down a position as an academic (until 1985) which gave me the opportunity to absorb the new thinking about political economy and public economics which was then being articulated in the States. Social science was still new then – and economists still few in number. We had, sadly, a certain arrogance about the new tools at our disposal and toward our elders…….Tony Crosland had been my hero - "The Future of Socialism" which followed James Burnham in arguing that management rather then ownership was the issue had been published in 1956....... 
I vividly remember the words which came from my mouth at my inaugural meeting as Chairman in 1971 with an experienced Director – suggesting I could bring to our partnership a managerial experience which was at that stage entirely theoretical!!! 

The Atlantic article gives a wonderful sense of the intellectual mood which was around then - it starts with the newly-elected young Democrats targeting in 1975/76 one of the great stalwarts of the Democrat part,. Wright Patman, who represented the proud tradition of American populism- 

In 1974, young liberals did not perceive financial power as a threat, having grown up in a world where banks and big business were largely kept under control. It was the government—through Vietnam, Nixon, and executive power—that organized the political spectrum. …. suspicion of finance as a part of liberalism had vanished.

Over the next 40 years, this Democratic generation fundamentally altered American politics. They restructured “campaign finance, party nominations, government transparency, and congressional organization.” They took on domestic violence, homophobia, discrimination against the disabled, and sexual harassment. They jettisoned many racially and culturally authoritarian traditions. They produced Bill Clinton’s presidency directly, and in many ways, they shaped President Barack Obama’s.                   
 The result today is a paradox. At the same time that the nation has achieved perhaps the most tolerant culture in U.S. history, the destruction of the anti-monopoly and anti-bank tradition in the Democratic Party has also cleared the way for the greatest concentration of economic power in a century. This is not what the Watergate Babies intended when they dethroned Patman as chairman of the Banking Committee. But it helped lead them down that path.

The story of Patman’s ousting is part of the larger story of how the Democratic Party helped to create today’s shockingly disillusioned and sullen public, a large chunk of whom is now marching for Donald Trump……….
 In 1936, Wright Patman authored the Robinson-Patman Act, a pricing and antitrust law that prohibited price discrimination and manipulation, and that finally constrained the A&P chain store—the Walmart of its day—from gobbling up the retail industry. He would go on to write the Bank Secrecy Act, which stops money-laundering; defend Glass-Steagall, which separates banks from securities dealers; write the Employment Act of 1946, which created the Council of Economic Advisors; and initiate the first investigation into the Nixon administration over Watergate.

Far from being the longwinded octogenarian the Watergate Babies saw, Patman’s career reads as downright passionate, often marked by a vitality you might see today in an Elizabeth Warren—as when, for example, he asked Fed Chairman Arthur Burns, “Can you give me any reason why you should not be in the penitentiary?” 

……..Patman was also the beneficiary of the acumen of one of the most influential American lawyers of the 20th century, Supreme Court Justice Louis Brandeis. In the 1930s, when Patman first arrived in Washington, he and Brandeis became friends. While on the Court, Brandeis even secretly wrote legislation about chain stores for Patman. Chain stores, like most attempts at monopoly, could concentrate wealth and power, block equality of opportunity, destroy smaller cities and towns, and turn “independent tradesmen into clerks.”

In 1933, Brandeis wrote that Americans should use their democracy to keep that power in check. Patman was the workers’ and farmers’ legislative hero; Brandeis, their judicial champion. ….Brandeis did for many New Dealers what he did for Patman, drafting legislation and essentially formalizing the populist social sentiment of the late 19th century into a rigorous set of legally actionable ideas. This philosophy then guided the 20th-century Democratic Party. Brandeis’s basic contention, built up over a lifetime of lawyering from the Gilded Age onward, was that big business and democracy were rivals. “We may have democracy, or we may have wealth concentrated in the hands of a few,” he said, “but we can’t have both.” Economics, identity, and politics could not be divorced, because financial power—bankers and monopolists—threatened local communities and self-government.

This use of legal tools to constrain big business and protect democracy is known as anti-monopoly or pro-competition policy.…..

J.P. Morgan’s and John D. Rockefeller’s encroaching industrial monopolies were part of the Gilded Age elite that extorted farmers with sky-high interest rates, crushed workers seeking decent working conditions and good pay, and threatened small-business independence—which sparked a populist uprising of farmers, and, in parallel, sparked protest from miners and workers confronting newfound industrial behemoths. 

In the 20th century, Woodrow Wilson authored the Federal Trade Commission Act, the Federal Reserve Act, and the anti-merger Clayton Act, and, just before World War I intervened, he put Brandeis on the Supreme Court. Franklin Delano Roosevelt completed what Wilson could not, restructuring the banking system and launching antitrust investigations into “housing, construction, tire, newsprint, steel, potash, sulphur, retail, fertilizer, tobacco, shoe, and various agricultural industries.”

Modern liberals tend to confuse a broad social-welfare state and redistribution of resources in the form of tax-and-spend policies with the New Deal. In fact, the central tenet of New Deal competition policy was not big or small government; it was distrust of concentrations of power and conflicts of interest in the economy.

…….Underpinning the political transformation of the New Deal was an intellectual revolution, a new understanding of property rights. In a 1932 campaign speech known as the Commonwealth Club Address, FDR defined private property as the savings of a family, a Jeffersonian yeoman-farmer notion updated for the 20th century.

By contrast, the corporation was not property. Concentrated private economic power was “a public trust,” with public obligations, and the continued “enjoyment of that power by any individual or group must depend upon the fulfillment of that trust.” The titans of the day were not businessmen but “princes of property,” and they had to accept responsibility for their power or be restrained by democratic forces. The corporation had to be fit into the constitutional order. ….

New Deal fears of bigness and private concentrations of power were given further ideological ammunition later in the 1930s by fascists abroad. As Roosevelt put it to Congress when announcing a far-reaching assault on monopolies in 1938: “The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it becomes stronger than their democratic state itself. That, in its essence, is fascism.” In 1947, Patman even commissioned experts to publish a book titled Fascism in Action, noting that fascism as a political system was the combination of extreme nationalism and monopoly power, a “dictatorship of big business.”

This basic understanding of property formed the industrial structure of mid-20th-century America and then, through its trading arrangements, much of the rest of the world. Using this framework, the Democrats broke the power of bankers over America’s great industrial commons.

To constrain big business and protect democracy, Democrats used a raft of anti-monopoly, or pro-competition, policy to great effect, leading to vast changes: The Securities and Exchange Commission was created, the stock exchanges were regulated, the big banks were broken up, the giant utility holding companies were broken up, farmers gained government support for stable agricultural prices free from speculation, and the chain stores were restrained by laws that blocked them from using predatory pricing to undermine local competition (including, for instance, competition from a local camera store in San Francisco run by a shopkeeper named Harvey Milk).

The Democrats then extended this globally, through the International Monetary Fund, World Bank, and NATO—even as the United Stated simultaneously used that decentralization to mobilize local communities around the world against the Soviet threat. For example, when General Douglas MacArthur led the Allied occupation of Japan at the end of World War II, key parts of his economic plan included importing the Glass-Steagall Act and antitrust laws into Japan. Back home, Democrats poured government financing into science, and they forced AT&T, RCA, and DuPont to license their treasure troves of patents so that small businesses could compete and so that the scientific discoveries of the corporate world couldn’t be locked away. Eventually, strong competition policy gained a bipartisan consensus, and the idea that anyone would allow concentrations of private power to dominate U.S. politics seemed utterly foolish.

I will continue the summary tomorrow - 
in the meantime, the photo is one taken at the glorious exhibition here in Sofia about the "Russian Impressionists" - "Gust of Wind" (1960ss) by Grishchenko