The Rise of Economism in the US: The Business Side

I recently posted about Daniel Stedman Jones’s book, Masters of the Universe, a history of the rise of economism (which he terms neoliberalism) in the US and the UK since the 1940s. Stedman Jones has a bit of a burr under his saddle about Marxism, and he appears to interpret any historical account that stresses how the wealthy supported economism-type policies out of their own self-interest as a Marxist account. So he stresses the growth of economism as a set of ideas, promulgated by think tanks. He has to admit that these think tanks relied upon the financial support of sympathetic capitalists, but as far as he is concerned, that’s more of a footnote.

In connection with other research, I had my attention directed to the book by historian Kim Phillips-Fein, Invisible Hands: The Businessmen’s Crusade Against the New Deal (New York: Norton, 2009). It seems to me that this volume makes a nice bookend with Stedman Jones. Phillips-Fein is most interested in why the US business community (she does not address the UK) found it in its interests to support conservative counterattacks against the New Deal from the 1930s up to the eventual triumph of conservatism (and economism) with the election of Reagan in 1980. Where Stedman Jones focuses on the ideas and the think tanks, Phillips-Fein focuses on the organizing and proselytizing among the businessmen to raise the money to support these ideological and political movements. I would suggest that between them they provide a more thorough history of the US part of this story than either volume would by itself. (Phillips-Fein talks about Hayek, von Mises, Friedman, and the Mont Pelerin Society, but does not mention the terms ‘neoliberalism’ or ‘economism’—just another clue as to how the terminology issue continues to vex.)

In reading Phillips-Fein’s narrative, two themes especially struck me. First, if one looks at the later years of the conservative movement, one can find among the grievances of the business leaders specific instances of overreaching among labor unions and government regulators, for which the businessmen might be forgiven for thinking that the free enterprise system was under serious attack. However, in the very early years, before either unions or government had amassed that much power, we still see a core of conservative capitalists viewing the New Deal as an unmitigated disaster. As Phillips-Fein analyzes their thinking and quotes from some of their letters and speeches, what emerges appears to be a very basic sense of entitlement to rule. These white male business leaders seemed to think that they were, in fact, those chosen to run America, and they expected to be deferred to. The very idea that anyone else should demand an equal right to be heard, much less to guide public policy, was treated by them as a fundamental affront to their status. While various other segments of the population came along and joined the conservative bandwagon as it picked up steam in the 1960s and 1970s, these capitalists were at the center of it from the start.

Second, Phillips-Fein obviously exercised a lot of control over the quotes that she selected, but a rather surprising number of the quotes from these conservative capitalists, again reaching well back into the 1930s, are frankly racist. In keeping with the idea that they are the natural leaders and deserve deference on all sides was the further idea that minority groups had better stay in their place. As the conservative movement started to make headway, and as more politically-minded business leaders realized the need to form strategic alliances, the main groups this core of business leaders reached out to along the way were those that in various ways were opposed to integration and civil rights. Here Phillips-Fein’s poster child is the late Sen. Jesse Helms of North Carolina. To a person like me, raised in the North as a self-ascribed liberal, Helms was nothing but a racist demagogue, pure and simple. Phillips-Fein shows that in fact Helms was much more clever and original than that. He was actually a master at reframing Southern segregation into the language of freedom and free enterprise. For example, he agreed that to the extent that a lunch counter was a public service, blacks had just as much right as whites to sit down and be served. The only problem, he was quick to point out, was that a lunch counter was not properly viewed as a public service at all; a person owned the lunch counter and it was his private property. To demand that he serve black customers in the South was to demand that the Federal government could come in and dictate to private property owners what they could do with their property. Helms was shrewd about avoiding attacks against blacks and always changing the subject to freedom and opposition to Federal government power over local communities and private individuals.

In short, the political success of the conservative movement that ultimately enshrined economism as the common-sense political discourse of the US would never have succeeded had the movement not been willing to ally itself at every step with racism and segregation, while at the same time denying that it was racist and segregationist.

In one other passage, Phillips-Fein contributes to our list of logical inconsistencies within economism by going back to the core ideas of Friedrich Hayek and Ludwig von Mises. She notes the irony of their views of the free market and their need to protect it from any outside interference and efforts at regulation. On the one hand they were in awe of the power of the marketplace, “the spontaneity of the economy, a complex system that came into existence without forethought or planning.” Yet at the same time they saw the market as “a terribly fragile entity” which could be destroyed by even a little bit of government interference or regulation. As she notes, they never confronted or admitted, let alone explained, just how the marketplace could be so robust and all-powerful on the one hand and so delicate and vulnerable on the other.