Isegoria

The Watergate Babies — the young, idealistic liberals who had been swept into office on a promise to clean up government, end the war in Vietnam, and rid the nation’s capital of Nixon’s dirty politics — killed the populist soul of their party, Matt Stoller argues:

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. By 1975, liberalism meant, as Carr put it, “where you were on issues like civil rights and the war in Vietnam.” With the exception of a few new members, like Miller and Waxman, 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.

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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. The New Deal divided power, pitting faction against other faction, a classic Jefferson-Madison approach to controlling power (think Federalist Paper No. 10). Competition policy meant preserving democracy within the commercial sphere, by keeping markets open. Again, for New Deal populists like Brandeis and Patman, it was democracy or concentrated wealth — but not both.

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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.

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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.”

Stoller notes that “competition policy” was a powerful political strategy:

Democrats lost the U.S. House of Representatives just twice between 1930 and 1994. To get a sense of how rural Democrats used to relate to voters, one need only pick up an old flyer from the Patman archives in Texas: “Here Is What Our Democratic Party Has Given Us” was the title. There were no fancy slogans or focus-grouped logos. Each item listed is a solid thing that was relevant to the lives of conservative white Southern voters in rural Texas: Electricity. Telephone. Roads. Social Security. Soil conservation. Price supports. Foreclosure prevention.

The Watergate Babies “were the ’60s generation that didn’t drop out”:

The war in Vietnam shaped their generation in two profound ways. First, it disillusioned them toward the New Deal. It was, after all, many New Dealers, including union insiders, who nominated Hubert Humphrey in 1968 and who supported a war that killed millions, including 50,000 Americans their age. And second, higher education — the province of the affluent — exempted one from military service, which was an explicit distinction among classes.

In 1968, there was a great debate about the future of the Democratic Party. Robert F. Kennedy sought to win the primary with a “black-blue” coalition of black “have-nots” and working-class whites. He sought continuity in the policies of protecting independent farmers, shopkeepers, and workers, all of which formed the heart of the New Deal — yet he also wanted to end the war in Vietnam and expand racial justice.

But Kennedy’s strategy to merge these ideas disappeared when he was assassinated. When RFK died, Democrats nominated New Deal populist and Vietnam War supporter Humphrey, which split the party between the new-left youth activists and the labor-influenced party regulars — leading to the turbulent 1968 national convention. After Humphrey’s loss to Nixon, 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.

The intellectual journey:

On the right, a finance-friendly school of libertarian intellectuals known as the Chicago School targeted Brandeisian competition policy. Michael Jensen, a Milton Friedman-influenced financial economist, argued that “our form of political democracy” threatened the large corporation. Government rules, labor power, and antitrust policies were scaring businessmen into not investing. This type of thinking became known as the “capital shortage” argument: A lack of investment capital caused a lack of goods and services and, thus, inflation. Inflation then destroyed more capital, worsening the shortage. The corporation, to Jensen, was property — not FDR’s public trust — and inhibiting the use of that property by shareholder owners was the reason for economic malaise.

Another Chicago School libertarian, George Stigler, argued a theory of regulatory capture. It wasn’t Wall Street or corporate corruption that broke America’s transportation system, he said, it was the incompetence of New Deal regulators themselves, acting in the interests of the industries they were supposed to be regulating. The answer was to shield the corporation from inept regulators and deregulate. Essentially, Jensen and Stigler offered a restoration of the pre-FDR view of property rights.

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

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