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Just as the Reagan Revolution Began Under Carter….

…attempts by the British government to curtail the failing welfare state of the 1970s actually began under Margaret Thatcher’s predecessor, a Labour prime minister, as Norman Barry [1] relates:

Although Mrs. Thatcher’s election victory in 1979 is thought to be the first direct political expression of the new anti-consensus ideas, it should be stressed as a matter of historical fact that the Callaghan Labour Government, albeit under pressure from the International Monetary Fund, made the firs tentative moves towards the breakup of the old economic and social order. Towards the end of the 1970s the growth in public spending was restrained and the dangers of inflation recognised. Indeed, it was James Callaghan (in 1976) who first publicly pronounced the death of the crude Keynesianism that had been practised throughout the previous decades, with his admission that governments could no longer (if they ever could) spend their way out of depressions.

That’s from Barry’s book The New Right [2]. He was one of Britain’s leading libertarian scholars, and one of a rather Rothbardian bent [3]. That predisposed him not to accept easy characterizations of Thatcher’s Conservatives as straightforward classical liberals. Of the Conservative Party that emerged from the 1970s, he wrote:

The policy that was formulated in this period, and which to a small extent was carried out in Mrs. Thatcher’s administrations, bore a resemblance to classical liberalism only in certain aspects of economic management and in its general utilitarianism. There was less concern with personal liberty or with the dangers of group privilege (except in the case of trade unions) that has pre-occupied much anti-statist political thinking.

change_me

For those wondering about how Carter kicked off the Reagan revolution—it was by appointing Paul Volcker as chairman of the Federal Reserve and by deregulating airlines and trucking [4] and a few other sectors. The point here isn’t that Carter really had the same economic philosophy as Reagan, or that Callaghan had the same as Thatcher—plainly that wasn’t so—but rather that the catastrophe of the late 1970s economy was plain enough that even before conservative/neoliberal leaders came to power in the U.S. and UK, governments were moving in the direction of liberalization.

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12 Comments To "Just as the Reagan Revolution Began Under Carter…."

#1 Comment By Richard W. Bray On April 9, 2013 @ 2:18 pm

This is a very important point that is often ignored by liberals who would worship Saint Jimmy. Carter’s tight money shock treatment lowered inflation by raising unemployment. And it quite possibly spurred the Reagan recovery as much as anything Reagan actually did.

It’s always a mistake to worship human beings. St. Jimmy, whose human rights record is admirable in many ways, although cozied up to the execrable Ceaușescus.

#2 Comment By Scott Lahti On April 9, 2013 @ 3:58 pm

“Carter’s tight money shock treatment lowered inflation by raising unemployment”

[5]

Table of Historical Inflation Rates by Month and Year

1977 5.2 5.9 6.4 7.0 6.7 6.9 6.8 6.6 6.6 6.4 6.7 6.7 [6.5]

1978 6.8 6.4 6.6 6.5 7.0 7.4 7.7 7.8 8.3 8.9 8.9 9.0 [7.6]

1979 9.3 9.9 10.1 10.5 10.9 10.9 11.3 11.8 12.2 12.1 12.6 13.3 [11.3]

1980 13.9 14.2 14.8 14.7 14.4 14.4 13.1 12.9 12.6 12.8 12.6 12.5 [13.5]

1981 11.8

#3 Comment By Richard W. Bray On April 9, 2013 @ 4:56 pm

@ Scott Lahti

The numbers you cite show that inflation began to decline steadily in 1982. Thus, some would argue, Reagan benefits from Carter’s painful policies.

#4 Comment By EngineerScotty On April 10, 2013 @ 2:12 am

A lot of 1970s inflation had to do with oil prices, and the strong bargaining power of unions, moreso than changes in the money supply.

#5 Comment By William Burns On April 10, 2013 @ 6:17 am

Not a lot of liberals worship Saint Jimmy–he’s actually more treated as something of an embarassment.

The continuity between Carter and Reagan is also underrated on foreign policy–the arms buildup and aid to the Contras and Muhajideen both began under Carter, and the more confrontational attitude to the Soviets arguably began with Carter’s Olympic boycott.

#6 Comment By Thomas Sm On April 10, 2013 @ 7:33 am

Partly true, insofar as when reforms/”revolutions” began.

Untrue, however, in stating that they were inevitable because somehow the economy was all bottled up and not functioning. No statistics back this up.

The world took a turn for the worse in the Mid-70s. The exact cause is not for me to say, though the failure of Breton Woods and Nixon’s lead for the world to drop gold and take up the US dollar and floating exchange rates is a likely start. This seems to have been set up to encourage coordinated financial speculation which almost immediately hit the British pound.

It is a particularly destabilising bout of speculation on the pound that pushed Labour to seek an IMF loan to prop up its currency. The IMF, as it always does, imposes certain restrictions on government spending and activity, though in the 70s they were milder than today. Nonetheless, it destroyed Labour’s more socialist projects and forced it into austerity and wage controls, splitting the party (Tony Benn disapproved) and alienating its base.

Note, Thatcher always said “There is no alternative” (TINA). TINA could be seen as pure rhetorical fluster or the implication that Britain cannot maintain the economy it had, not because it was failing per se, but because of nascent globalisation and thus growing control of the world economy by concentrated finance capital. Because of forces larger than Britain, because it already had little sovereignty, she only sped-up the process of de-industrialisation.

Likewise, in the US we had Volcker push interest rates so high it killed much industry …. and our usury laws. Again, this took place not because it was absolutely necessary but because we were already entering the period of finance-centred globalisation and America (like Britain) was to be a centre of finance, not industry.

#7 Comment By FL Transplant On April 10, 2013 @ 9:28 am

President Carter also deregulated the telephone industry, moving us from a single nation-wide provider who would lend you any phone you wanted (as long as it was a black, rotary-dial handset model that sat on a table) to today’s world of hyper-competitive telecom providers with multiple hardware and business options.

#8 Comment By EngineerScotty On April 10, 2013 @ 10:29 am

President Carter also deregulated the telephone industry, moving us from a single nation-wide provider who would lend you any phone you wanted (as long as it was a black, rotary-dial handset model that sat on a table) to today’s world of hyper-competitive telecom providers with multiple hardware and business options.

That, it seems, was more a function of the breakup of Ma Bell. The antitrust action may have begun during the Carter Administration (the DOJ had long had dealings with AT&T), but the actual breakup did not occur until 1984 or so, well into the Reagan Administration.

#9 Comment By collin On April 10, 2013 @ 12:27 pm

The antitrust action may have begun during the Carter Administration (the DOJ had long had dealings with AT&T), but the actual breakup did not occur until 1984 or so, well into the Reagan Administration.

The case against Ma Bell started in the Nixon Administration, accelerated under Carter and ended with Reagan. The key point on Carter is he hired Judge Greene who was notoriously against monopolies. Reagan had generally followed Judge Greene opinions in 1982 and there is some debate how the Reagan administration may have done the case differently. However, the breakup of Ma Bell does show the US government can function over administrations.

Add to the glory of the Peanut President,is he signed legislation of the deregulation of sale of beer equipment across state lines which probably accelerated the boom of micro-breweries in the US. (There is debate on this significance and really was not considered major legislation at the time.) Anyway many liberals think of Jimmy Carter as a great man but the job of Presidency was over his level of competency.

#10 Comment By Paul Emmons On April 10, 2013 @ 12:38 pm

>That, it seems, was more a function of the breakup of Ma Bell. The antitrust action may have begun during the Carter Administration.

Good for Carter, then. We need antitrust actions just as much today. In these parts, two technologically co-dependent conglomerates have a stranglehold not only on land-line telephone service but on television and internet services to boot. Rates for cable TV have risen faster than inflation for two decades because we addicted couch potatoes consider it a necessity rather than a luxury of increasingly dubious value. Municipal service could be provided at a fraction of the prices we must pay, but of course these monopolists are dead-set against the idea.

#11 Comment By Anderson On April 10, 2013 @ 12:43 pm

Why does Carter’s statue look like he’s showing his palms to Doubting Thomas?

#12 Comment By Geoff Guth On April 11, 2013 @ 4:35 pm

Incidentally, deregulation might have had a lot of good effects, but [6] (PDF) that it led to a pretty severe decrease in wages for drivers, 12.5% (that’s 1/8 of your total salary) was cut from drivers’ wages by deregulation.

If you want to look at why income inequality has increased over the course of the last 30-40 years, it’s not just taxes, it’s also economic liberalization.