Racism Killed the New Deal (and Gave Us Neoliberalism)
Understanding the racial roots of colorblind “free market” capitalism will help us transition to a better future for everyone.
Image credit: Mary Parsons
This article was first published on Medium on September 15, 2021
Introduction
The United States is clearly a capitalist country. But its version of capitalism — its political economy — has looked different at various points in American history, changing when a confluence of three factors collide: an economic crisis — or crises — occurs that reveals the flaws or deterioration of the previous economic system; expanded public support for a changing role for government in the economy; and a victorious political coalition that supports the change.
For the past 40 or so years, America’s political economy has been largely based on a free-market ideology promoted by economist Milton Friedman. Central to this ideology is the economic principle that markets of all kinds are self-correcting, so much so that the government should not play a role in regulating the market or provide a social safety net for those whose needs are not met by the market. Much of these ideas were based on late 19th century liberal economic thought, which is why Friedman’s free-market capitalism is sometimes called “neoliberal” capitalism. Politically, free-market capitalism became ascendant with the conservative coalition brought together by Ronald Reagan in 1980 after the economic crises of the 1970s.
Prior to the rise of neoliberalism in the late 1970s-early 1980s, America’s system of capitalism was based on the economic theories of John Maynard Keynes. Keynesian economics supports a role for government in the economy, including deficit spending, to stabilize the overall economy, prevent recessions, and support full employment. It was the primary approach of the federal government under the New Deal regime ushered in by Franklin Delano Roosevelt and his political coalition, first as a response to the Great Depression but then especially so after the United States entered World War II.
Both are systems of capitalism, yet each is based on very different approaches for the role of government in the economy and for whom the economy should work. The difference in economic outcomes for Americans is telling: During the New Deal era the federal government established Social Security, minimum wages, and jobs and housing programs to financially support people at the lower income levels. After World War II, the GI Bill helped build a solid middle class, and taxation policies and support for unionized labor helped ensure that a broad swath of Americans benefited from the steady growth of the economic pie. This era — 1945–1973 — is often called the Golden Age of Capitalism for its economic prosperity alongside high and sustained levels of productivity growth.
The shared prosperity that was seen in the three decades following World War II is long gone. Wages started to stagnate in 1973, even as productivity continued to increase. But the gap in income and wealth between the top and bottom deciles began to grow rapidly after 1980 when Reagan’s new political coalition took office. Based on the theory of “trickle-down” economics that posited that money in the hands of wealthy people would lead to increased investments, which would then lead to more jobs for people on the lower-income rungs, a new political economy was established. As a result, over the past four decades, the before-tax incomes of the top 1 percent of America’s households have increased nearly seven times faster than the bottom 20 percent. Now the United States sees the greatest concentration of wealth since the Gilded Age, as an estimated 40 percent of Americans are poor or low-income.
The racial wealth gap is also stunning. White families hold an average of 10 times more wealth than Black families. The homeownership rate — the main source of family wealth in America — is nearly 30 percent higher for White families than for Black ones. And the gap between the two is bigger today than it was in 1960 when discriminatory housing and banking practices were still legal.
The social, economic, and political upheaval of 2020 accentuated the pain of the Friedman paradigm for many people and instigated a growing awareness among White people of the persistent racial inequality ingrained in our economy. The calls for more shared prosperity helped Joe Biden win the Presidency, with the support of a strong multiracial coalition. Together with congressional Democrats, Biden is pushing for broad investments in America and Americans. Indeed, investments will be the largest since the New Deal programs of the 1930s and the Interstate Highway Act of the 1950s — both times when a majority of Americans supported an activist role for government in the economy. It appears that the three factors required for a change in America’s political economy are in place. Could we be on the cusp of a new chapter for American capitalism?
As the country looks to rebuild the American economy in the post-pandemic era, it’s important to understand how America came to accept four decades of neoliberal, free-market capitalism that did not work for a lot of people for a long time. What changed in Americans’ attitudes around the role of government in the economy that led Americans to support it, even with its uneven economic outcomes, especially for Black and brown Americans? Considering that the last political and economic realignment happened in the wake of the civil rights era, what role did race play in ushering in and maintaining America’s neoliberal political economy? Understanding the role of race in the transition from Keynesian New Deal capitalism to neoliberal free-market capitalism can inform how America can now more successfully transition to a more shared prosperity model.
FDR Builds A Tenuous Multiracial Coalition
The 1932 election was a watershed moment for America. Twelve years of conservative Republican rule, including laissez-faire economic policies, led to the disastrous stock market crash in October 1929 that triggered the Great Depression. President Herbert Hoover’s tone-deaf calls for “rugged individualism” at a time when Americans were looking to the federal government to find some relief for their economic woes led to a dramatic political shift towards the Democrats. Many folks who voted Republican throughout the “Roaring 20s” joined the traditional Democratic voting base of urban northerners and Southern segregationists to give Democrat Franklin Delano Roosevelt the White House — and with it a mandate to tackle the troubled economy.
FDR did not disappoint. As soon as he was inaugurated in March of 1933, he kicked off an activist approach to governing that helped build a regulated economy with a social safety net that put guardrails on American capitalism. Social Security, unemployment insurance, the abolition of child labor, minimum wage and the 40-hour workweek, the right to join a union, were all established, alongside market and banking regulations, housing programs, infrastructure investments, and jobs programs. Through institutions, regulations, and new economic relief programs, FDR’s policies established a new social contract with the American people, a New Deal that established a role for the government that redirected American capitalism towards a shared prosperity model.
Roosevelt’s policies were also drawing Black voters to his coalition from their historic home in the Republican Party. Ever since the end of the Civil War, most Black voters were aligned with Republicans as the party of Lincoln, the Great Emancipator. Indeed, in 1932 between 2/3rds and 3/4ths of the Black vote in northern urban cities went to Republican Herbert Hoover.
Two main factors drove a pronounced shift in Black Americans’ political party affiliation after FDR instigated the New Deal. First, the Republican Party consistently refused to pursue civil rights for Blacks, especially during the 1920s when Republicans courted wealthy industrialists. Second, as more African Americans fled the white supremacy of the segregated South to northern industrial cities, they had access to the vote in their new homes. Finding greater opportunities in areas dominated by Northern Democrats fueled many Blacks to switch parties. By 1936, the shift was complete, with Blacks squarely in FDR’s New Deal coalition, even as New Deal programs extending economic relief to struggling Americans reached disproportionately fewer Blacks than Whites.
For the next 30 years, the unlikely coalition that FDR forged under the banner of the Democratic Party proved formidable. Its main components were lower-income groups in the great cities — African Americans, union members, and ethnic and religious minorities, many from recent immigrant groups — and the traditional source of Democratic strength, White segregationists in “the Solid South.” What kept these seemingly oppositional groups together was an economic platform that allowed for regional peculiarities (read: local implementation of programs that didn’t challenge Southern Jim Crow segregation). But as the movement for civil rights grew, tensions within the New Deal coalition grew, eventually delivering it a fatal blow by 1968, ushering in a new political and economic order that shredded the commitment to shared prosperity.
The Post WW II Civil Rights Movement and the Dixiecrat Revolt of 1948
When war came to America in December 1941, millions of Americans enlisted, including 1.2 million Black men and women. Black Americans were motivated to sign up for many of the same reasons that compelled Whites: to fight for democracy abroad, even as they were subjected to racial segregation at home. Once the war was over, Black soldiers returned to the United States and found themselves still treated as second-class citizens at home. Some Black GIs were even advised to not wear their armed forces uniforms in public in order to avoid being the victims of violence by Whites who targeted them. This blatant hypocrisy kicked off a new civil rights movement wherein many Blacks demanded equal access to the rights and privileges of American citizenship.
Civil rights advocates led campaigns to end discrimination in housing and employment, among other issues. The movement achieved several victories in 1948. In May of that year, the U.S. Supreme Court ruled in Shelley v. Kraemer that racially restrictive housing covenants could not be enforced by the government. In July, President Harry Truman issued an Executive Order directing the desegregation of the armed forces. Within that same week — at the Democratic National Convention where Truman would receive the official nomination for re-election — the Democratic Mayor of Minneapolis Hubert H. Humphrey and other Northern Democrats pushed for the Democratic Party to adopt a civil rights platform, calling on members to “get out of the shadow of states’ rights and walk forthrightly into the bright sunshine of human rights.” The narrow adoption of the civil rights platform by convention delegates outraged Southern Democrats, leading delegates from Mississippi and Alabama to walk out and establish their own pro-segregation Dixiecrat Party. The Dixiecrats went on to nominate South Carolina Senator Strom Thurmond for President as an alternative to Truman.
The Dixiecrat Revolt drew the longstanding tensions within the New Deal coalition between the Northern liberals and Southern segregationists into the open. Generally, Southern Democrats had long believed that FDR’s Democratic coalition was their only path to be a part of a national majority party. But they also had a shaky relationship with the New Deal. They were able to protect the white supremacist social order in the South as the federal government passed national New Deal programs by demanding that many of the programs be implemented locally. This allowed them to extensively limit access to many New Deal benefits to Whites only, or implement them in racially segregated ways. Still, many of them were worried about the expansion of federal power at this time, concerned that an expanded federal government could lead to a loosening of their one-party rule over the political, social, and economic order in the South. Especially their racial system of Jim Crow segregation and white supremacy.
Protecting the existing Southern racial hierarchy and white power was at the heart of the revolt. The Dixiecrat’s eight-point platform affirmed their support for “segregation of the races and the racial integrity of each race” and their opposition to “the elimination of segregation, [and] the repeal of miscegenation statutes.” Their agenda also included support for anti-labor union “private employment” arrangements over intrusion by the federal government and other conservative economic principles.
Dixiecrats (and other Southern Democrats who supported their ideology but not the strategy) began to realize their cause would be strengthened if they shifted from explicitly racial language to using more race-neutral tones. “The South’s fight is not being waged on the theory of white supremacy,” Thurmond insisted, “but on the theory of State sovereignty.” It was a lesson that many white racially conservative Americans would learn as the civil rights movement advanced.
Despite the tumult within the Democratic coalition in 1948, Truman famously won reelection with the narrowest margin. In the end, Truman owed his victory to two of the New Deal coalition’s staunchest members: Southern Democrats who stayed with him despite the Dixiecrats’ efforts (the Dixiecrats received only 20 percent of the popular vote in the Southern states where they were on the ballot), and northern urban African Americans who voted for him in increased numbers in parts of Chicago and Cleveland, giving Truman narrow victories in Illinois and Ohio.
Brown v. Board of Education and Setting the Stage for the Nationalization of the Massive Resistance
One of the most impactful civil rights movement’s victories came on May 17, 1954, with the U.S. Supreme Court’s ruling in Brown v. Board of Education of Topeka, Kansas. The ruling declared unconstitutional the legal doctrine of “separate but equal” that had until then defended the Jim Crow system of racial segregation. Most notably, the ruling called for the desegregation of America’s public schools.
Reaction in the former Confederate states was considerable, leading the white supremacist U.S. Senator from Virginia Harry Byrd to coin the term “massive resistance” to describe the reactions by Southern Whites. Several Southern states passed bills outlawing desegregation and conforming to the court order. Local communities across the South resisted orders to racially integrate their public schools by disbanding their public school systems and selling their properties to newly formed Whites-only private schools. Over 250,000 Whites joined local White Citizens Councils (WCCs) to fight school integration and integration of other public facilities in their local communities such as public pools and libraries through political, economic, and social intimidation.
The civil rights movement was increasingly successful at toppling Southern segregationist policies and practices. As a result of its success, it spurred a nationalization of the White backlash that would go on to undermine the movement’s goal of racial equality. It did so in two important ways: reframing the defense of legal racial segregation as a race-neutral issue of constitutional “states’ rights”, and bringing the fear of integration to de facto segregated communities in the North.
First, while some massive resisters used explicitly racial language in their defense of racial segregation and the white supremacist racial order, other anti-integrationists began to amplify their defense through the use of race-neutral language. “Home rule,” “local control,” “states’ rights,” and even the newfound constitutional right of states’ “interposition” became race-neutral rationales for stopping the implementation of desegregation orders. As some Southern Democrats and their allies became more and more concerned with the increasing power of the federal government working to “end their way of life,” they began to build relationships with Northern conservatives to amplify the defense of Southern segregation using race-neutral language. In 1957, the conservative New York-based National Review wrote in defense of the Southern racial hierarchy as being about “whether a central or local authority should make [the] decision” about educating their children, not the federal government, even calling a decision to deny Blacks equal rights as “enlightened” if a majority of voters supported it.
The seeds were being planted for a future political realignment marrying traditionally Republican Northern economic conservatives with traditionally Democratic Southern racial conservatives, using race-neutral language in defense of policies that directly supported a racial social hierarchy.
Second, even though Northern communities didn’t have the explicitly white supremacist Jim Crow laws and social order of the South, they did have their own forms of legal and racial discrimination that kept Whites and Blacks separate and unequal. Much of the North’s racial segregation was established in response to the Great Migration when Blacks began to move North seeking economic opportunity and an escape from racial segregation and violence. As Blacks were arriving in Northern cities starting in the early 1900s, local zoning laws, racially restrictive covenants attached to residential properties, and significant anti-Black violence by Whites limited where housing was available to Black families. New Deal federal housing programs refused government-backed mortgages to redlined communities where Blacks could live. Then post-war programs for returning GIs supported suburban homeownership for White families but denied it to Black ones. Further, the federal interstate highway system was being built to assist the transport of suburban residents to downtown jobs, often through disinvested Black neighborhoods. The impact of these policies was to segregate cities by design, with Blacks living in aging urban areas with extremely limited opportunities to build wealth through homeownership, while Whites moved to new suburban communities with the support of the federal government.
As legal segregation was being dismantled in the South through court orders, and Blacks were winning more legal rights and access to public facilities, White communities in the North became fertile ground for racial anxiety.
Race-Neutral Anti-Civil Rights Defenses Marries Free Market Anti-Government Views
The shifting political rhetoric of Southern opponents to Black civil rights — initially from explicit support for white supremacy to racially neutral calls for “local control,” and “states’ rights” — matured to center and prioritize individual economic rights. In this way, the movement for a continuation of a racial order that advantaged Whites intertwined with the neoliberal movement for a free market political economy that sought to remove the government from economic policies that supported middle-class Americans.
As the civil rights movement continued to advance, U.S. Senator Barry Goldwater from Arizona emerged as a critical national voice of the white supremacist message wrapped in an emerging neoliberal economic rhetoric. Before becoming the 1964 Republican Presidential candidate, Goldwater published his book, Conscience of a Conservative in 1960. Ghost-written by a Republican Party activist who was seeking to bring together Northern businessmen with Southern segregationists in a new conservative movement, the book was both a commercial and messaging success. It included not only defenses of school segregation (“the Constitution does not permit interference whatsoever by the federal government in the field of education”), but also presented a values-based argument for “economic freedom”, including arguing that economic freedom and political freedom were “inextricably entwined.” Until this reframing, many Americans still associated economic conservatism with the soulless corporations that caused the Great Depression.
Goldwater himself was more of an economic conservative than a racial conservative. He personally supported many desegregation efforts. But as the Republican Party’s candidate for President, Goldwater found that he won more support through the party’s increasingly stronger stance against civil rights than its conservative, anti-government economic platform. His campaign marked an important step in the development of the modern conservative movement that combined conservative free-market economic beliefs with being against equal rights for Blacks.
Alabama Governor George Wallace was another political figure who practically perfected the use of race-neutral “racial coding” rhetoric of racial resentment on the campaign trail, expanding the messages of White grievance beyond his Southern state into Northern communities. Running as a Democrat in the 1964 Presidential primary in Wisconsin, Wallace carefully avoided explicitly racial matters, instead of attacking the government itself for its “overreach” and other aspects of the impending civil rights legislation. He warned middle-class suburbanites and White working-class ethnic voters of attacks on private property rights, federal encroachments on individual market freedoms, union job protections, their children’s schools, and other ways President Lyndon Johnson’s racial liberalism would threaten their safety and economic status. While Wallace didn’t win, he made a surprisingly strong showing in what the Harvard Crimson called “The White Revolt.” He earned one-third of the votes cast in the primary, reflecting that his racially coded anti-government messages were tapping into white voters’ increased racial anxiety as Congress was on the verge of passing the Civil Rights Act of 1964.
President Johnson still won the 1964 Presidential election — indeed, by a landslide — proving the staying strength of the New Deal coalition and the Keynesian economic model that government can increase prosperity by playing a role in the economy. But the ties between the Democratic Party and its traditional voters were loosening, including support for its economic platform. An electoral shake-up was coming, one that was driven by the transition in the country’s racial order from Jim Crow segregation to “color blind” legal equality. This transition to a new post-civil rights racial order would buttress the new economic order based on the free-market principles advocated by Goldwater and Wallace in 1964.
One Step Forward, Two Steps Back: Civil Rights Advance, Triggering a Decline In Support of Government and the Rise of A New Colorblind Racial Order
A new racial order that continued to preference Whites even after the civil rights advances of the 1950s and 1960s was able to form because racial conservatives were able to hijack two key pillars of the civil rights movement, shift their meaning, and use them to build a new racial order with Whites still at the top. One was the civil rights movements’ campaigns for equal access to public facilities, which triggered a retreat from an active government that provided public goods and economic support for middle-class Americans. The second was the fight for an end to racial discrimination in housing, education, employment, and before the law, which led to a “colorblind” approach to implementing policies, programs, and laws that denies the impacts of past and present racial discrimination and disparate impacts unless explicit references to race are present. In this way, the civil rights laws that were intended to dismantle racism provided the seeds that gave birth to a new form of America’s racial social order: colorblindness.
Decline In Support For Public Goods Turned Into Decline In Support For Activist Government
In addition to declaring racial segregation in public schools unconstitutional, Brown v. Board of Education also overturned the U.S. Supreme Court’s 1896 Plessy v. Ferguson decision that allowed “separate but equal” public accommodations. In the wake of Brown, the civil rights movement sought equal access to other racially segregated public spaces as well, such as public swimming pools, parks, and famously with the Montgomery, Alabama bus boycott in 1955–56, public transportation.
As the courts began to require communities to allow Blacks access to previously segregated public facilities, White-controlled city councils began closing, underfunding, or privatizing their public pools, community centers, parks, and other spaces rather than integrating them. Simply, just as Black Americans were winning rights to access to public goods and services long enjoyed and supported by Whites, Whites began to turn against those very benefits. This included government programs that helped a generation of Whites achieve the middle class, including federal housing programs and support for unionized workplaces.
As Heather McGhee writes in The Sum of Us: What Racism Costs Everyone and How We Can Prosper Together, “In the 1950s, the majority of white Americans believed in an activist government role in people’s economic lives.” Yet, that support “cratered” by 1964 — on the eve of the passage of the Civil Rights Act of 1964 — and has stayed low ever since. White Americans were less interested in government support for public goods when those public goods were now available to all Americans. They especially didn’t want to see an activist government support economic advancement for Blacks that would allow Blacks access to spaces that had been exclusively White, such as government-funded suburbs, public schools, and workplaces.
The focus of modern American neoliberal capitalism was becoming clarified: smaller government, fiscal austerity, privatization of public goods and public spaces, and cutting of the social safety net.
Race-Neutral Colorblind Policies Hide Racism and Racially Disparate Impacts
The goal that Blacks should be treated without regard to race or color was central to the early civil rights movement. Arguing to the U.S. Supreme Court in the Brown case, NAACP lawyer Thurgood Marshall proffered that the “Constitution is color blind.” Related, when the Dr. Rev. Martin Luther King declared in his speech at the Lincoln Memorial at the 1963 March on Washington for Jobs and Freedom that his dream was that his children “will one day live in a nation where they will not be judged by the color of their skin but by the content of their character,” he too was calling for a colorblind America. Marshall and King used the concept of colorblindness to seek a reversal of the explicitly racially discriminatory laws that denied Blacks full rights of American citizenship, disadvantaged them economically, and blocked equal opportunities to succeed. Yet they and other civil rights leaders recognized that “equality of opportunity” would not lead to “equality of results” without race-conscious policies to undo the past disadvantages that racists policies had wrought.
Following the passage of the 1964 Civil Rights Act, however, White opponents had to abandon explicitly racial defenses of segregation and white supremacy. In their place, race-neutral colorblind reasoning emerged. As Whites continued to resent the government and court-ordered attempts to level the playing field, they soon learned that they could make the same arguments against color-conscious remedies to past inequalities to protect their racial advantage, arguing that these actions “infringed upon their personal liberties” and in fact, “discriminated” against them.
This move to embrace a colorblind lens was especially the case in America’s judicial system. In the years following the most impactful civil rights victories, the courts moved to embrace colorblindness in a way that allowed for the continuation of racial discrimination. The very day that the Civil Rights Act went into effect in 1964, Duke Power in North Carolina began requiring IQ tests and high school diplomas to be hired. This colorblind race-neutral approach had the same effect as Duke’s pre-Civil Rights Act segregationist policies: Whites were hired over Blacks. Black plaintiffs took the case against Duke all the way to the U.S. Supreme Court, and in 1971, the Court released its Griggs v. Duke Power Co. ruling. In a victory for the plaintiffs, the Court ruled that race-neutral hiring practices could be inferred to be discriminatory if there were obvious disparate impacts on a racial group.
But as the 1970s advanced, the Court began to change, and more conservative appointees began to define discrimination in narrower terms. Compare, for example, the 1971 Court issued a pro-busing ruling (Swann v. Charlotte-Mecklenberg Board of Education), and by 1974 the Court had changed enough to issue an anti-busing ruling (Miliken v. Bradley). By 1978, the U.S. Supreme Court ruled in Regents of the University of California v. Bakke that affirmative action in college admissions was unconstitutional.
Marshall, now on the U.S. Supreme Court himself, noted the irony of the Court’s embrace of colorblindness, writing that “after several hundred years of class-based discrimination against Negroes, the Court is unwilling to hold that a class-based remedy for that discrimination is possible.”
The Trouble With Colorblindness
The impact of these reactions to civil rights advances has had the effect of building a new racial order in America after Black Americans won expansions of their civil rights. The story that America tells itself about the civil rights movement is that laws were passed in the 1960s and Blacks won legal equality and the U.S. is now a country of equal opportunity.
Yet inequalities continue to exist, and many studies show that one’s life chances can be determined by which area code they live in. By not addressing the harms of pre-civil rights era race-conscious discrimination against Blacks using equally race-conscious solutions, the economic advantages received by Whites over Blacks in the pre-civil rights era are preserved. A colorblind lens that fails to recognize past conditions allows the advantages to continue. In this way, America simply swapped out one form of racial hierarchy — one based on explicit racial preference for whiteness — for another that pretends that past racial disadvantages not only didn’t happen but doesn’t have impacts for today.
Another impact of this colorblind lens is that it suggests that the racial gaps in our country — in income, wealth, education, health, etc — are the result of individual choices and “culture,” ignoring the historic and ongoing discrimination being done in the name of “colorblindness.”
The Final Fall of the New Deal Political Coalition in Favor of the Racially Conservative “Silent Majority”
The racialized political rhetoric used by Barry Goldwater and George Wallace in 1964 did not rupture Lyndon Johnson’s hold on the Democrat’s New Deal coalition. But by 1968 the Republican candidate for President Richard Nixon did.
Nixon’s victory in 1968 was in part a result of the deep conflicts within the ruling Democratic coalition itself, due to four years of increasing tensions over civil rights and Great Society advances and the Vietnam War. More so, it was due to the Nixon campaign’s (in)famous “Southern Strategy” in which his campaign explicitly targeted Americans with racially coded messages to pull previous New Deal Democrats to their side.
On the campaign trail, Nixon criticized Johnson’s Great Society programs that aimed to end poverty for causing “the riots that have torn … cities apart … throughout this country.” Instead, Nixon vowed to restore “law and order.” While Nixon denied “law and order” was coded racism, Republican campaign strategists advised him that attracting conservative Democrats to the Nixon/Agnew ticket would turn on “the law and order/Negro socio-economic revolution syndrome,” and that Nixon should “continue to emphasize crime, decentralization of federal social programming, and law and order.”
Nixon’s coded language also exacerbated divisions in American society with his rhetoric, creating an “us” versus “them” battle. On his side were the “patriotic non-shouters,” who were “morally upright, self-supporting, and law-abiding.” His opponents were anti-war protestors, traitors, welfare recipients, criminals, rioters, and drug dealers — all codes for liberal college Whites and Black activists.
The strategy of talking to racists without sounding racist themselves was confirmed later by former Nixon advisors. Aide H.R. Haldeman fessed up: “Nixon emphasized that you have to face the fact that the whole problem is really the Blacks. The key is to devise a system that recognizes this while not appearing to.” In a 1981 interview, Nixon campaign strategist Lee Atwater was even more explicit: “You start out in 1954 by saying, “N*****, n*****, n*****…. By 1968 you can’t say ‘[that]’ — that hurts you, backfires. So you say stuff like, ‘forced busing’, ‘states’ rights,’ and all that stuff.”
Dubbed the “Silent Majority” (or, as Nixon preferred to call it, the “New Majority”), Nixon’s new coalition brought three new voting blocks to his Republican Party: economically conservative previous Goldwater enthusiasts (who by 1968 wanted to back a candidate who could actually win); Strom Thurmond’s Southern Democrats (who by 1968 were ready to accept at least some level of legal desegregation); and White Northern blue-collar Democrats (“who were increasingly willing to trade their New Deal economic protections for a check on the Black freedom movement,” as Joseph E. Lowndes put it in From the New Deal to the New Right: Race and the Southern Origins of Modern Conservatism). Together, the Republicans’ new coalition solidified its position as the racially conservative party for Whites.
The growing opposition to big government and a commitment to decentralize federal government programs were the other key beliefs that held the New Majority together. The New Deal era’s widespread support for an activist government that had a role to play in the economic health of everyday Americans was ending.
Two components of an economic realignment for American capitalism were in place: a new political coalition had been forged and with it growing support for a decreased role for government in the economy. Yet Nixon, at least in the early years of his Presidency, still showed a willingness to accept certain liberal commitments to civil rights and the welfare state. A full-fledged repudiation of the Keynesian approach to government support for the American economy would not come at least while the country’s and the world’s economy was holding together.
But change was soon to come.
The 1970s: Capitalists Fight Back
The decade of the 1970s saw a dramatic change in the institutional framework of the American economy. At its start, the federal government’s economic policies were solidly Keynesian, with the main goal of full employment and government spending when needed to keep the economy humming. It embraced regulation to help achieve those goals. (Indeed, even in the early years of the Nixon Administration, the regulating powers of the federal government grew with the passages of the Clean Water Act, the Clean Air Act, and the establishment of the Environmental Protection Agency.) But by the decade’s end, the country’s political class was on the verge of a full-throated embrace of free-market capitalism, with a pronounced attack on government itself.
As the decade opened, legal civil rights for Blacks became normalized. It was increasingly unacceptable to use explicitly racist language in public, as Whites began to support equal rights for Blacks (at least in public). Yet many Whites were growing less supportive of government supports for social welfare programs. White flight from city neighborhoods to suburban communities exploded, as White families sought to insulate themselves from fair housing programs that would allow Blacks to move into their neighborhoods and from busing that would desegregate their children’s public schools. Judicial remedies for enforcing civil rights directives for school desegregation and fair housing also stalled as the U.S. Supreme Court took a turn to the right, led by Nixon’s four early appointments who embraced the doctrine of colorblindness.
The Conservative Mobilization
Also early in the decade, another front on the war against the New Deal political economy opened. America’s big businesses began organizing themselves in response to what they saw as a generational attack on American capitalism. The anti-war activism that targeted military suppliers, Ralph Nader’s “Nader’s Raiders” that drew attention to unsafe automobiles, environmental issues at DuPont and other companies, and the expansion of the regulatory role of the federal government were all troubling to them.
In 1971, the U.S. Chamber of Commerce commissioned a strategy report, officially titled “Attack on the American Free Enterprise System,” but more widely known as the “Powell Memo” after its author Lewis Powell. The memo laid out a plan for how American capitalism could be “saved” and led directly to increased investments into a conservative policy universe in three main areas: conservative think tanks, political lobbying, and political contributions to conservative politicians who supported free-market economic ideas.
The business mobilization that Powell’s memo instigated was stunningly successful. The conservative think-tank the Heritage Foundation, founded by Coors beer magnate Joseph Coors and conservative religious activist Paul Weyrich; the American Legislative Exchange Council (ALEC); and the libertarian Cato Institute, founded by Charles Koch, were all established at this time.
Businesses also invested in lobbying: To better position themselves to impact federal laws, the powerful National Association of Manufacturers moved their headquarters from New York City — the center of American finance — to Washington, D.C. — the center of American politics. The now-powerful Business Roundtable was created in 1972, and membership in the U.S. Chamber of Commerce exploded. Corporations also began to use an ideological lens in their political giving, moving from donating to powerful incumbents to directing their political contributions to conservative challengers who agreed with their policy agenda.
As Kim Phillips-Fein wrote in Invisible Hands: The Making of the Conservative Movement From the New Deal to Reagan, through this work the business community “buil[t] a bridge between the social backlash against the civil rights, gay rights, feminist, and antiwar movements, and the business backlash against regulation and the welfare state.”
Then the multi-dimensional economic crises hit and the economic structure that the United States had lived under since the end of World War II was upended.
Starting in the late 1960s, economic productivity and profitability in the U.S. started to decline. By 1971, rising trade deficits from the international competition were putting pressure on the post-war global monetary system based on U.S. gold holdings (known as the Bretton Woods Accord). This led Nixon to pull the U.S. out of the system, creating instability in the currency markets. “Stagflation” (high inflation plus high unemployment) followed. On top of that, oil-producing countries placed an embargo on oil to the United States after it supported Israel in the 1973 Arab-Israeli War, causing a spike in energy prices and shortages in supplies.
These economic crises raised questions about the infallibility of the governing Keynesian economic model, leaving political and economic leaders to look for other solutions. One key alternative political economy framework was being touted by Milton Friedman and his colleagues at the University of Chicago’s school of economics.
Friedman’s anti-New Deal Keynesianism free-market economic ideology first entered the popular arena with his 1962 book Capitalism and Freedom. In 1964, he helped promote Goldwater’s conservative views on civil rights and the economy in a widely circulated article in The New York Times Magazine on “The Goldwater View of Economics.” In it he paired opposition to civil rights for Blacks with free-market principles, calling the newly passed Civil Rights Act “coercive” and in violation of the liberties of those Whites who opposed it. He urged Americans to rely on “free-market principles” and “individual responsibility.” From there, Friedman began writing a regular column for Newsweek magazine, making the case for conservative free-market economics to a national audience for the next two decades.
By the end of the 1960s, Friedman was one of the most prominent conservative public intellectuals in the country, winning the Nobel Prize for economics in 1976. By that time, the Chicago School’s ideas on political economy were so ascendant that even some long-time liberal Keynesians, including Democratic President Jimmy Carter, were publicly receptive to their economic focus on free-market, anti-government regulation, and anti-union messages.
Supported by the new, realigned, economically and racially conservative political coalition, a batch of “New Right” Powell-inspired think tank-educated Republicans won seats in Congress in 1978. But the big victory came in 1980, with Ronald Reagan’s win in the presidential election.
The marriage between the Silent Majority voting coalition with neoliberal conservative economics had commenced finalizing the move from the New Deal economic and racial order to the post-civil rights, colorblind neoliberal one.
The Reagan Revolution: Reaganomics and the Colorblind Neoliberal Political Economy
Ronald Reagan was a Hollywood Democrat in the 1930s, but after serving as President of the Screen Actors Guild during the anti-communist House Un-American Activities Committee (HUAC) hearings and as a spokesperson for the ideologically, economically conservative General Electric, he emerged in the early 1960s as a leading conservative spokesperson against government’s role in the economy. After declaring that it was not he that left the Democratic Party, but the Democratic Party that left him, he quit GE, changed his registration to Republican, and entered politics.
Reagan soon gained national attention through his effective political rhetoric. In a video for the American Medical Association’s campaign against the proposal to establish Medicare, he warned that it would “end freedom in America.” Stumping for Goldwater’s 1964 Presidential campaign, Reagan gave his attention-grabbing “Time for Choosing” speech, in which he equated government involvement in the economy to totalitarianism. The speech was so effective that California Republicans ran him for Governor in 1966 on a campaign platform to send “the welfare bums back to work” and, in reference to burgeoning anti-war and anti-establishment student protests at the University of California, Berkeley, “to clean up the mess at Berkeley.”
By the time he ran for President in 1980, Reagan, “the Great Communicator,” had perfected the rhetoric of the new post-civil rights colorblind racial order and anti-government sentiment. Starting on the very first day of his campaign, he hailed “state’s rights” at a rally in Philadelphia, Mississippi, the same town where three young civil rights workers were murdered in 1964, sending a very clear message that he would be the President for Southern Whites.
Reagan’s anti-government themes of keeping the government out of the economy, privatization of public services, demonizing users of public services as being unworthy “welfare queens,” and the need for “law and order” to combat “urban crime and drugs” made it clear to the New Majority’s White voter base that he was there to free them from any responsibility to support their fellow Black citizens or those less fortunate.
But in true new colorblind order, if anyone raised the racial animus behind the rhetoric or policy proposal, they would be deemed racist. As Michelle Alexander explains in The New Jim Crow: Mass Incarceration in the Age of Colorblindness, Reagan was an expert at “echo[ing] white frustration in race-neutral terms through implicit racial appeals. His ‘colorblind’ rhetoric on crime, welfare, taxes, and states’ rights were clearly understood by white (and black) voters as having a racial dimension.” Yet,
“the absence of explicitly racist rhetoric afforded the racial nature of his coded appeals a certain plausible deniability…. forcing liberals into a position that would soon become familiar — arguing that something is racist but finding it impossible to prove in the absence of explicitly racist language.”
As Nixon’s campaign did a decade earlier, Reagan’s campaign sought to go after the coalition that supported Democrats in the New Deal days: “Southern White Protestants, blue-collar workers in the industrial states, urban ethnics, and rural voters.” This included the emerging conservative Christian movement, led by Jerry Falwell Sr.’s Moral Majority. The movement was attracted to the “traditional family values” rhetoric, including opposition to women’s rights, and rights for gays and lesbians. Falwell’s sermons intertwined culturally conservative family values themes with economically conservative messages about the importance of free markets to America’s freedom and liberty.
Reagan’s success with this voting block was a sign that White voters were motivated by social issues more than economic ones, so much so that they were willing to join a coalition that was about to undermine their economic well-being in order to have a president that reflected their cultural values.
Even though Reagan earned just a bare majority of American votes that year (51% to Jimmy Carter’s 41%; Independent Party candidate John Anderson took 7%), Reagan’s Electoral College victory was a blowout 489 to 49.
Once in office, Reagan began an economic and social revolution. He opened his inaugural address with a commitment to confront the “economic affliction” that was “distort[ing] our economic decisions”: inflation, unemployment, tax burdens, government spending. “In this present crisis, the government is not the solution to our problem; government is the problem.”
The conservative corporate think tank network was ready to provide policy solutions. The Heritage Foundation prepared a 1,077-page road map for Reagan’s policy agenda, called Mandate for Leadership: Policy Management in a Conservative Administration. Reagan was so enamored with the document that he gave each member of his new cabinet a copy of their very own at their first meeting.
Reagan’s political economy framework was known by many names, including “supply-side,” “trickle-down,” laissez-faire, free market, Reaganomics, and more recently, neoliberal. Whatever it’s called, the framework — supported by Friedman’s Chicago School allies — shifted government economic policy from the New Deal framework that centered on the middle class to one that promoted power and wealth flowing upward with the outside chance that some economic benefits would reach those on the lower rungs of the economic ladder. Specifically, it included four main pillars: cut taxes on higher-income individuals and corporations; cut regulations on industries; tighten the money supply to reduce inflation, and cut government spending.
In his first year alone, Reagan implemented some of the policies behind Friedman’s theories. He pushed a large marginal rate tax cut on individuals and corporations through Congress; cut domestic spending, especially to social safety net programs that supported the poor and near-poor; broke the air-traffic controllers union by firing over 11,000 striking employees; and expanded Nixon’s “War on Drugs” campaign, eventually leading to the adoption of excessively punitive sentencing guidelines. The Federal Reserve under the Carter-appointed Paul Volker also instituted harsh monetary policies that limited the money supply, which addressed investors’ concerns about inflation.
The dramatic shift in the role of government in the economy from supporting middle-class working families to helping those on the upper levels of income and wealth immediately began to lead to an increasing income gap in the United States. By the end of Reagan’s presidency, some economists were already drawing attention to the growing divide. In 1992, the Center on Budget and Policy Priorities found that the gap separating the most affluent Americans from the poor and middle class grew wider during the 1980s in 43 states, citing core Reaganomics policies as the source.
But it was too late. The new American post-New Deal order political economy and its companion colorblind racial order was being institutionalized, supported by a realigned electorate that voted their cultural interests over their economic ones.
So what?
Over the past 40 years, the United States has lived under a colorblind neoliberal political economy that has allowed wealth to be concentrated at the top and has distorted the market system of incentives and rewards. The dominant free-market philosophy behind America’s version of capitalism is rooted in a racial hierarchy that justifies its unequal outcomes that have benefitted White Americans over Black, indigenous and other people of color. While the system benefits White people over others, it has also harmed Americans of all races as it rewards wealth over work and corporations over small businesses.
Many of our country’s sources of income and wealth inequality are perpetuated by modern colorblind neoliberal capitalism: the racial gap in educational outcomes; the gap in homeownership rates and people who experience homelessness; a criminal justice system that has led to mass incarceration in which Black Americans are many times more likely than Whites to be arrested and imprisoned; and a stagnant minimum wage for workers who are disproportionately Black and other people of color.
Even before the COVID 19 pandemic and the racial justice movement of 2020 shone a light on America’s economic inequalities, the political will to do something about the negative impacts of America’s version of capitalism was growing.
As we look towards a new economic and racial deal for the American people, one that will deliver fairer and more equal outcomes for all segments of our society, it’s imperative to understand the racial motivations that gave us the current system and identify the advantages to Whites that permeate so many of our current government policies and social institutions.
In the elections of Nixon in 1968 and 1972, and Reagan in 1980, the racial meanings behind their campaign’s coded messages were very much understood by both white and Black voters at the time. By now the language of colorblind neoliberalism has become so normalized that a whole generation of Americans of all races has been born into this regime without understanding its racial impacts. This includes even the most sincere White people who support racial equality.
So what? So as Biden and his allies in Congress attempt to grab this moment in which the three factors needed to transition America’s political economy from neoliberalism to a new thing are extant, they should be aware of the history that brought us here. Specifically, they should include some race-conscious policies that aim to mitigate the racial economic gap that was created — and exacerbated — by government policies that advantage Whites over Blacks. At the same time, they should require that new policies and programs be reviewed through a racial equity impact lens to make sure they don’t continue to contribute to the inequality that exists today. Only then will America be able to establish a new, truly colorblind version of American capitalism that provides prosperity for all.
