A new book explains how the rich organised to get their way.
In 1979, Margaret Thatcher became prime minister in Britain, heralding a shift to right-wing politics. One of her notorious accomplishments was taking on the trade unions. In an extended struggle, workers’ organisations were crushed, along with the workers. In 1980, Ronald Reagan was elected US president and set about a similar path, taking on the airline pilots and winning. These administrations are normally seen as exemplars of a new approach called neoliberalism, hollowing out government regulation and unleashing corporate power.
That’s the story I’ve heard for a long time, taking it for granted — until reading a new book by David Gibbs, Revolt of the Rich. Gibbs, an historian at the University of Arizona, studied vast numbers of primary documents, including manuscript collections, online archives, document collections, and memoirs. He arrived at a different assessment about the politics of this period.
Gibbs focused on the 1970s, a turbulent period in US history, and concluded that the most significant changes occurred during the administrations of Richard Nixon (1969–1974), Gerald Ford (1974-1977) and especially Jimmy Carter (1977–1981). Including Carter seems almost sacrilegious. Normally, Republicans are seen as the party of business. Carter was a Democrat, the party of the workers, or at least of unions, and subsequent to his single term as president, he supported a range of progressive causes. However, Gibbs targets Carter as a key figure in the “revolt of the rich.”
Jimmy Carter
Background
Let’s go back a few decades, to the 1930s. This was the time of the Great Depression, and in 1932 Franklin D. Roosevelt was elected US president. Under his four administrations, and as a result of popular pressure, the government took responsibility for promoting full employment, regulating the economy, and introducing a universal pension scheme (called Social Security). This was called the New Deal.
Gibbs calls the arrangements set in place in the 1930s the “class compromise.” It was a compromise between the interests of employers and workers, so that each received a “fair” return from their contributions to economic productivity. Corporate elites mostly went along with this. Although their power was somewhat curtailed, the US economy began growing steadily, guaranteeing regular profits. It seemed like a win-win arrangement, and many corporate leaders were committed to it.
This all came unstuck in the 1970s. Profits declined, and inflation devalued assets held by the wealthy. Behind the scenes, some businesses supported a campaign to reduce government controls on business, aided by a group of free-market economists linked to the Mont Pèlerin Society.
Finally, Nixon was committed to a conservative economic agenda. Gerald Ford continued it and, perhaps surprisingly, so did Carter. Gibbs takes special aim at Carter for completing the unravelling of the US class compromise. In its place, the rich took control.
Since then, the rich have taken an increasing percentage of the economic pie. In 1970, the richest 1% received less than 10% of national income. In the next few decades, this increased to more than 20%, while the wages of ordinary workers stagnated.
Gibbs provides a careful and detailed analysis of how this happened. Along the way, he offers quite a few observations that require a rethinking of conventional wisdom.
In the usual way of economic thinking, then and now, inflation is seen as a significant problem, and central banks see it as a priority to bring down inflation when it’s too high. Gibbs says high inflation is a special threat to the wealthy, because it devalues their assets. In contrast, most ordinary workers are not so greatly affected, because typically wage rises compensate for increased costs. Gibbs’ analysis has changed how I think about the continual obsession with controlling inflation.
In 1973, the cartel of international oil producers called OPEC, led by Saudi Arabia, dramatically raised the price of oil, causing massive economic disruption in oil-importing countries, including the US.
The “oil shock” is usually seen as completely out of the control of the importers, but Gibbs provides evidence that the US government was complicit in it. The Saudi government signalled to the Nixon administration a willingness to limit OPEC price increases, but this initiative was spurned. The reason? The Shah of Iran was a special US ally, and US corporations benefited from the Shah’s purchases of weapons. Also, oil company profits increased.
A planned revolt
According to Gibbs, the shift to the right initiated in the 1970s was not a natural consequence of economic challenges for which there was no alternative. Instead, there was a strong push for the changes, mostly out of sight. It included economists, notably Milton Friedman, who provided a rationale for “freeing the economy” from government control. It included expanded funding for thinktanks that tried to influence policy and the media. It included efforts to change public opinion. Corporate leaders still committed to the class compromise gradually came on board.
Milton Friedman
An important part of the operation was forging a coalition. Right-wing operatives sought to bring new constituencies into their orbit. One of them was evangelical Christians, who became a new power bloc. There was no automatic connection between Christian doctrine and economic policy; building links was a political task and achievement.
The shift to the right also involved foreign policy. The 1970s were during the Cold War, when the Soviet Union was seen as the main military and political rival to the US. During the 1970s, businesses pushed for arms expenditures and anti-Communist intellectuals argued to end the policy of détente — mutual accommodation between the US and Soviet governments — and replace it with confrontation.
The Soviet invasion of Afghanistan in 1979 provided a rationale for this switch though, according to Gibbs, Afghanistan had little strategic significance. In the process of militarisation of US foreign policy, the arms business and anti-Communist intellectuals were brought into the conservative movement.
At various times during the 1970s, making changes that benefited the rich seemed necessary to stabilise the economy, prevent recession or otherwise stave off disaster. Gibbs argues that there were alternatives. These included taxing the wealthy, cutting military expenditure, and letting moderate levels of inflation continue. None of these were seriously considered.
Social movements
In most thinking about the 1960s in the US, the focus of attention is the rise of new social movements: students, feminists, environmentalists and others. These were movements challenging systems of power, and challenging them from below.
Gibbs redirects attention to a very different sort of social movement, one serving the rich, backed by wealthy interests, and operating not in the streets but mainly behind the scenes. According to Gibbs, this right-wing movement was crucially important in permanently changing the distribution of wealth and political power in the country, yet it was and remains far less well known. He calls it “one of the most orchestrated, carefully planned, and well-financed political campaigns in history” (p. 78).
There were several reasons why this right-wing mobilisation was so effective. It was backed by wealthy interests and used a process called fusionism to bring together diverse groups, including businesses, politicians, intellectuals, arms manufacturers and evangelical Christians. The leaders of right-wing movement were good at strategy: they learned from their mistakes. And it was met with little resistance.
The US left at the time was fractured, focused on several different issues, and not organised to defend collective interests. From the point of view of power-holders, this sounds like the old method of divide and rule, largely self-inflicted.
“The most noteworthy characteristic of social movements during the 1970s was the lack of strategic vision or long-term planning or any recognition that these things were even important. While the New Right and its corporate/evangelical allies were pursuing fusion in their quest to undermine the class compromise, their opponents on the left were moving in the opposite direction, dividing themselves into multiple factions that were unable to present a common front in defense of their collective interests.” (p. 97)
Whether or not you agree with Gibbs’ assessment of US politics in the 1970s, his analysis shows the value of re-examining the past and questioning conventional ideas. The rise of the right in the US is commonly attributed to the administration of President Ronald Reagan, who took office in 1981, succeeding Carter.
Ronald Reagan
Yet Gibbs suggests Reagan received most of the credit for the rightward shift due to his political style, and that Reagan cemented what Carter had started. Gibbs sums up:
“The United States experienced an extended episode of social, economic, and international crises in the 1970s, which were finally resolved during the presidency of Jimmy Carter. The end result of these crises was a redistribution of wealth and income favoring the wealthy classes, combined with renewed use of military power projection overseas. The decade produced a fundamental shift away from the regulated capitalism associated with the New Deal toward a new order of laissez-faire.” (p. 198)
David N. Gibbs
Brian Martin
bmartin@uow.edu.au
Thanks to Anu Bissoonauth-Bedford and Suzzanne Gray for helpful comments.