CoverStory

Mad Tea Party

America's dramatic economic slowdown during the 1970s set the scene for today's bitter, divisive and cynical mood.

By Richard M. Abrams

For the past 30 years, Americans have been experiencing an increasingly ugly political and social scene featuring a lot of anger and hate. There are ample reasons for Americans from all parts of the political spectrum to be angry, perhaps not least that during the first nine years of the 21st century median family income dropped by nearly 5 per cent while the government has appeared to facilitate the growth in income of the already obscenely wealthy.

But what stands out is that much of the anger has been exploited by the Republican Party and its activist partisans in the media, supported by important sectors of the business community angered by the increase in federal regulation of industrial and financial practices. The party was taken over by its right wing in the 1970s. Like most right wings, it waved the flag, laid exclusive claim to patriotism and religious piety, revelled in military imagery and posturing, encouraged private use of guns, demanded lock-step loyalty within its ranks, and treated opposition as unpatriotic, un-American, endangering national security, and a dire threat to traditional standards of morality. The election of Ronald Reagan to the presidency in 1980 solidified its power after decades of galling defeats within the party by more liberal Republicans. It also marked the onset of a new political culture in which uncompromising confrontation became a calculated political tool.

When, as president, Reagan broke with longstanding tradition to subject candidates for federal judgeships to specific ideological tests, it set the country well on the road to the polarisation that would afflict American society for the next 30 years. One historian (not meaning to be sarcastic) noted that packing the courts with likeminded partisans was Reagan's most important and lasting domestic achievement. Americans historically have counted on the judiciary to make non-political, carefully reasoned decisions grounded in constitutional law. Because the dramatic social changes in post-war America raised highly charged issues close to the edge of moral judgment, the partisan fix installed in the courts accentuated the country's divisions.

But there were other serious consequences of Reagan's presidency. From the accounts of his biographers as well as many of his associates, we know that president Reagan had chronic difficulty separating fact from fiction. Whether it was conscious and deliberate remains unclear, but because of his endearing public image his often outrageously false statements evoked more mirth than reproof. On the other hand, his political handlers and their successors learnt well what one of them called "the power of the outrageous". They would advance the tactic to new lows over the course of the next 30 years—from the repeated calumny that president Bill Clinton had his aide, Vincent Foster, murdered, to the antics of the 'Swift Boaters' whose blatantly false stories spread by partisan media about Senator John Kerry's war record ruined his presidential campaign in 2004, and now the current campaigns to destroy Barack Obama.

The 'power of the outrageous' shows up in the polls that indicate that a large minority of Americans confidently believe that Obama is a secret Muslim, that he was not born a citizen in the United States (and therefore cannot legitimately serve as President), that he sought to create 'death panels' that would decide on withholding care for elderly patients insured by the government's medical plan, and that he is conspiring to take the country socialist.

In contemplating the anger that such beliefs arouse, one cannot avoid the obvious: that Barack Obama is the son of a black Kenyan, and has made a black woman the nation's First Lady. Beneath the clamour of the so-called Tea Party mobs and Republican Party leaders to "take the country back", one hears the distress over the fact that the president of the United States is black.

Keep in mind that this irritant comes on top of the sweeping changes in Americans' social attitudes over the past half century—including the revolutions in racial and gender relations, and in sexual attitudes and behaviour—for which traditionalists blame liberals and the Democratic Party. Keep in mind, too, that before the changes of the 1960s, racial segregation, the subordination of women, and the criminalisation of homosexuality ranked high among Americans' traditions. Finally, consider the resentment among the traditionalists over the condescension with which liberals have regarded them.

In the midst of the sour disposition of the traditionalists and their partisan allies, the new generation of Americans that came of age in the stagflationary 1970s would offer little sweetening. Having grown up, most of them, in families that enjoyed unprecedented prosperity, the nation's young professionals and business people ran head-on into a prolonged economic slowdown and a much constricted job market, leading them to feel impelled to turn their attention single-mindedly 
to looking after their own short-term interests. Nor were many of those only recently emancipated from malignant discrimination inclined to be diverted from their own new access to 'the main chance'. Thus were set the conditions for our current ugly scene.

The past 70 years of United States history can be divided almost exactly down the middle. The mood and direction of American society during the first half of the period contrasted starkly with what followed during the second half. There were many reasons for this. But probably most important was the dramatic slowdown in economic growth during the 1970s coming precisely at the onset of a sharp demographic and generational shift in the country. Beginning midway through 1946 (as 12 million men returned from military service) Americans began having babies at an annual rate more than double that of the previous 15 years. It peaked in 1950 when more than 3 million were born, more than in any year since 1910 at the height of foreign immigration. The 3 million represented more than a 2 per cent increase over 1949. The 'baby boom', as pundits quickly dubbed the phenomenon, lasted for another 15 years.

It was in the seventies that the mass of baby boomers began flooding into the job market, the business system, and the political arena. A society that had been enjoying widespread affluence and a significant liberation from the bane of racism, gender discrimination, and poverty, among other humane achievements, suddenly began experiencing an increasingly bitter, divisive, and often cynical scrambling for relatively scarce resources and opportunities.

The experience of the baby boomers, the children of the generations of adults that had experienced the Depression and one or both world wars, was a world apart from that of their parents. They grew up in what historians one day may call America's 'golden age'. The ages-old domination of scarcity had given way to an age of abundance. In fact, the 30 years after the US entered the Second World War featured the greatest increase in per capita growth perhaps in all of history. What had been median family income in 1950 would barely reach the level of the lowest 20 per cent of real family earnings in 1975. By that year, the percentage of American families in the top earnings level (more than $25,000 per annum in 1947 dollars) amounted to more than six times the percentage 25 years earlier, including more than one-third of all American families. The percentage of Americans living in poverty dropped from nearly 50 per cent throughout the 1930s to about 11 per cent by the early 1970s.

The broad spread and rapidly rising affluence of the period accompanied, and in an important way inspired, some of the most progressive social and economic developments in American history. Whereas the great reforms of the New Deal era arose from responses to economic and financial crises, post-war developments came in an environment of unprecedented prosperity. Most of the New Deal measures were aimed at restoring business profitability by stimulating consumer demand while controlling producer output. Post-war reforms aimed at overcoming some of the ugliest features of American life, including racism, sexism, religious and ethnic bigotry, poverty, environmental waste and destruction, unscrupulous business behaviour, and often abysmal working conditions. Affluence encouraged a non-zero-sum mentality, whereby the gains made by others would not be seen as subtracting from one's own. It permitted a spirit of generosity that could break through the normal defences of self-interest.

President Lyndon Johnson's 'war against poverty', legislation and judicial decisions on behalf of civil rights for racial and ethnic minorities, for women, for the elderly, and for the disabled, as well as government regulations to provide protection of consumers' interests, workplace safety, and the environment, all were among the gems of progressive achievements during the first 30 years of post-war America. Americans also celebrated a mostly successful foreign policy, beginning of course with the decisive defeat of the Axis powers in 1945, the economic regeneration and liberalisation of the country's post-war allies in Western Europe and Japan, and the mostly peaceful containment of Soviet power. In light of its successes, most Americans had confidence in the benign uses of the nation's ample resources for humanitarian and political purposes abroad.

And then things turned sour. The year 1973 appears most clearly as the pivot year of a dramatic change in Americans' fortunes and mood.

In January of that year, a ceasefire agreement between the US and the North Vietnamese confirmed the brutal failure of US policy in Indochina and raised profound questions about the country's interventions elsewhere in the world, notably Chile, Guatemala, the Dominican Republic and Iran. Paradoxically, it energised right-wing forces, unhappy with the stigma of defeat, to promote more vigorous uses of the military as a tool of foreign policy. With the ending of conscription that same year, the military thereafter would consist of professionals and semi-professionals, patriotic volunteers and needy mercenaries, a distinctly un-traditional standing army of Americans differing sharply in outlook from that of mainstream civilians. They would become ready instruments of policymakers less constrained by political fallout from uses of the military that would put thousands of Americans in mortal danger. As president Bush confessed 30 years later, his invasion of Iraq in 2003 would have been politically impossible with a military made up of draftees.

That same January, the US Supreme Court (in Roe v Wade) declared unconstitutional all laws that denied a woman's right to terminate a pregnancy within the first trimester and in some cases later, thereby setting in motion a passionate political reaction among religious conservatives. What most liberals viewed as a liberating coup for women, and for families generally, to gain better control over their own bodies and their own lives, conservatives viewed as fundamentally immoral, about which there could be no compromise. That attitude would be exploited by partisan Republicans determined to bring down the Democratic Party by diverting attention from economic policies to the abortion controversy, joining with corporate interests unhappy with new regulations designed to combat dishonest and dangerous business behaviour.

Anti-abortion became a test for Republican candidates for office and for appointments to the judiciary. Televangelists—fundamentalists who exploited changed rules about religious broadcasting to build up millions of followers—preached inflammatory denunciations of the liberal changes in social attitudes and practices. Access to television also encouraged demagogues to build up massive viewing audiences by making extravagant claims typical of macho locker-room posturing. That some individuals came to feel justified in bombing abortion clinics and murdering abortion doctors could not have been unforeseen. The anti-abortion insurgency would provide continuing energy for a right-wing shift in American politics for the next 35 years.

In the spring of that same year, the Watergate scandal broke wide open with the forced resignations of the attorney-general and Nixon's closest White House advisers. Watergate, which a year later led to the unprecedented resignation of a US president because of his complicity in several felonies, had the effect of heightening Americans' distrust not of the antics of a conservative administration but of government generally, weakening support for new federal programs on behalf of liberal reform. That October, vice-president Spiro Agnew's separately forced resignation to avoid indictment for corruption, together with new revelations (in the so-called Pentagon Papers) of dishonesty at the highest government level in the conduct of the Vietnam War, further undermined Americans' respect for governmental authority.

About the same time, the government began issuing guidelines for enforcing 'affirmative action' towards redressing the traditional disadvantages that had for so long afflicted women as well as specified minorities. These developments reduced the age-old advantages that Euro-American males had had in economic, business, educational and political opportunities. In the affluent, non-zero-sum environment of the sixties when president Johnson's executive orders created the program, affirmative action appeared mostly benign. But by the stressful seventies, those ethnic groups that were formally excluded from the benefits—from Irish-, Italian- and Jewish-Americans to the traditional 'WASP' (White Anglo-Saxon Protestant) majority—began protesting the injustice of what they called 'affirmative discrimination'.

Nothing illustrates more clearly the stark reversal of American attitudes than the sudden turn away from the success of the anti-poverty measures of the 1960s towards what some would call a 'war against the poor'. Over the next 35 years, a series of congressional acts together with similar measures at the state and local levels drastically cut the assistance offered by government to those who, for various reasons, could not maintain a subsistence family income. The focus of political rhetoric turned away from the humanitarian as well as economic benefits of alleviating the conditions of the poor, emphasising instead the fiscal costs and the 'dependency' effect of government assistance. Religious and other conservatives claimed that anti-poverty measures undermined people's responsibility to look after themselves. It became fashionable (as in the 19th century) to blame poverty on the improvident and even immoral life styles of the poor. By the end of the eighties, the poverty rate had risen to 15 per cent, nearly a 40 per cent increase over that in 1975.

Meanwhile, a week after vice-president Agnew's resignation in 1973, the Organisation of Petroleum Exporting Countries (OPEC) cut off close to 30 per cent of Americans' oil requirements, and nearly quadrupled the price of petrol—when it was possible to buy it at all. The long queues of increasingly irate car drivers at petrol stations graphically symbolised the end of an era of 'abundance' and the return of 'scarcity' as the underlying feature of the political economy. The situation lent support to the oil industry's claim that government regulations and "high taxes" impeded exploration and contributed to American dependence on foreign oil. Amid the growing distrust of government generally, a deregulation campaign moved into high gear, spreading into transportation, communications, public utilities, public health and finance.

It was in this environment that the mass of the baby boomers began coming into the job market, very many of them after college and professional schools, and very many of them of the ethnic groups excluded from affirmative action benefits. There they met the challenge not only from the slowed economic growth but 
from competition by the officially-designated minorities and women who so recently had been emancipated by the progressive achievements of the previous era. Having grown up in an era of seemingly unlimited opportunity for easy living, the boomers now faced the need to focus on their own interests in an environment 
of dwindling opportunities.

The previous era's non-zero-sum mentality died. Thereafter, there would 
be an aggressive scramble for resources, opportunities, and material rewards, and the blossoming of a new social mentality that inspired the naming of the seventies 'the me decade'.

'Do your own thing', the tradition-challenging motto of many of the Baby Boomers in the 1960s, morphed readily into 'looking out for number one'. It may not be typical of the 1960s radicals but suggestive nonetheless that the founder of the super-radical Yippies in the sixties (Jerry Rubin) became a securities broker in the seventies.

By 1973, the country had already been beset by economic turmoil. Inflation was rising beyond control. The country's current account had turned negative. Its policies designed to rehabilitate the economies of Western Europe and friendly East Asian countries had succeeded all too well. Their products were aggressively competing with American products not only globally but in the United States itself.

Unemployment, especially in the manufacturing sector, was soaring. In December 1971, in an effort to stimulate exports and to protect its dwindling store of gold, the US had already agreed to devalue the dollar. A 'hegemonic power' does not devalue its own currency. In ending its promise to support the price of gold at $35 per ounce, the US effectively conceded a sharp reduction in what had been its acknowledged leadership in the international economy.

At the same time, the American business system was undergoing a radical restructuring, generated by unrestrained cross-industry mergers and the rise to dominance of giant conglomerates, most of them multinationals. Remarkable advances in technology, especially in communications and transportation, enabled swift globalised business transactions. But cultural and political changes played an important role as well. Together, they set the stage for transforming the focus of the economy from production to financial speculation.

Little of the restructuring would have been possible except for the invention of novel business entities and new forms of debit contracts designed by hundreds of lawyers and accountants. Most of them were young, baby boomers, a great many of them second-generation Americans or identified with ethnic minority groups that only recently had benefited from the decline of bigotry in the affluent post-war environment. They constituted virtually an entirely new class of entrepreneurs.

Recently out of elite law and business schools, their strategies challenged prevailing business conventions. Their new techniques permitted them to turn business firms into almost infinitely divisible and readily marketable parcels. Gone was any loyalty or pride in one's own company. The newcomers sought the age-old goal of accumulating wealth, but their style was more aggressive than had become commonplace within the old business establishment. It was reminiscent of the upstart capitalists of the late 19th century, the so-called Robber Barons who had fashioned the Corporation Revolution, the country's previous transformation of its business system.

Propelled by the innovative financial instruments, the stock market—once mainly an indicator and facilitator of business progress—rose to become itself the principal arena for the most lucrative business activity. There it was that securities brokers, investment bankers, hedge-fund managers, and other financial intermediaries found amazing profits, mostly by trading in various kinds of new and arcane financial paper ('credit-default swaps' and other 'derivatives'). Profit opportunities in the US economy increasingly beckoned only secondarily from the efficient production and distribution of goods and services. The young 'number crunching' geniuses discovered that faster profits could be netted by pushing prices up through securities transactions and then reaping capital gains—which, not coincidentally, enjoyed special advantages in the tax code.

Their strategies were aided by the fact that by 1980, a handful of pension fund and money market managers controlled 55 to 60 per cent of all publicly listed securities. Their investments were made not with an eye to returns from a firm's profitable operations but from speculation in capital gains in what seemed an ever-rising stock market. Many of the managers found it profitable to 'work with' the brokers and bankers who engineered the financial deals, as investigations following periodic stock-market declines revealed.

'Greed is good', or something like that, was the message of Ivan Boesky, one of the new securities manipulators, to an audience in the UC-Berkeley School of Business Management in 1986. His conviction and imprisonment shortly afterwards for illegal insider trading exposed a common feature of the new economy. Numerous convictions of the same sort followed over the next two decades, but securities fraud is difficult to stop or to punish—even after it contributes to catastrophes like those triggered by the likes of Enron in 2001 and American International Group (AIG) in 2008.

At the same time that the new financial operators were crossing traditional boundaries in ethical business practices, a new cohort of economists and political scientists were busy challenging their mentors' wisdom regarding sound economic theory. John Maynard Keynes was declared 'passé'. 'Laissez faire' made a comeback (although for some among the new scholars it may have seemed brand new). According to the new/old thinking, using government investments to combat escalating unemployment 'distorted' the market, which had to be left to make its own 'natural' adjustments. Liberate business enterprise from the costs of regulations, according to the new wisdom, and all would be well again.

Giving expression to such thinking, the seventies featured not only the deregulation movement, but a spreading tax revolt. In fact, on a per capita basis, Americans pay the lowest taxes of people in any of the major industrial nations. But they complain the most. Continuing through the next few decades, personal and corporate income taxes declined steeply (although distinctly regressive payroll taxes—that is for Social Security and Medicare—that affected primarily lower incomes rose almost as sharply). Overall levies actually did not decline; they merely shifted downwards towards the lower percentiles of family incomes.

In place of adequate personal, property, and business taxes for maintaining public goods, Americans increasingly resorted to use taxes. Implicitly, Americans simply were rebelling against having 'their' taxes support things that they personally did not use or want. Vanishing was the notion of commonweal. So, for example, some communities with ageing populations and few young children voted down bond issues designed to pay for improvements in the local public schools. The governor of one state even proposed giving rebates to taxpayers without school-age children. Bereft of revenue, states and local communities resorted to raising charges for access to parks, zoos, museums, public transport, bridges, and the like. To make up for dwindling funds for road maintenance, a few communities began charging tolls for access to 'express lanes' on freeways during rush hours. Support for public schools, for performing arts, for libraries declined. Tuition-free colleges and universities disappeared. Some states privatised many of their prisons, and some cities even began 'outsourcing' their police and fire departments. Reversing Americans' reputation for puritanical attitudes, state after state began encouraging gambling by licensing private casinos so as to gain revenues from earnings and winnings. At the same time, low-income people could pay to enter into the new state-run lotteries, so that they might join in the kind of long-shot speculations that the wheelers and dealers of Wall Street enjoy.

On the whole, long-term vision disappeared from the political agenda, with serious consequences for (among other things) the condition of the country's infrastructure—bridges, highways, water systems, urban roadways, transit systems, and school buildings. Over the last three decades of the 20th century and beyond the US came increasingly to resemble what Americans derisively used to call a Third World country.

The baby boom generation was succeeded by one facing similarly challenging conditions and difficulties, and with similarly self-focused attitudes. After the seventies, families hoping only as much as to maintain the standard of living they had grown accustomed to or aspired to required at least two earners. Even so, median family income barely nudged upwards. Things only grew worse after the turn of the millennium.

Now, given the awful human cost of the financial disaster and the recession that it caused—a national average of 10 per cent unemployed, 20 per cent underemployed, millions losing their homes to the banks, and their medical insurance along with their jobs—there is ample reason for people to be discontented, even enraged. But the anger so far is unfocused, except in so far as it has apparently targeted government in general. The greatest anger seems to come, not from those who have lost the most, but—as suggested by polls of those who have joined in the Tea Party clamour—from those who continue to do well but fear losing whatever it is that they have scrambled to achieve in the harsher post-sixties environment.

That would include the new billionaires, some of whom have been funding the Tea Party agitation and who chafe over the possibility that government will place constraints on their financial practices, or worst of all, raise their taxes. The Obama administration appropriated nearly $800 billion in an effort to stimulate new jobs in industry as well as to save hundreds of thousands of public service jobs that financially hamstrung states have been or will be forced to discharge, but somehow the word 'stimulus' has become politically toxic. The American Recovery and Reinvestment Act has been one of the targets of the present rage.

In short, those associated with the remarkable current agitation appear to be relatively well off, but worry that any government activism, especially that designed to assist the unemployed, provide medical insurance to the 50 million Americans without any, and stimulate job growth, might cost them something.

The message to government appears to be: don't do anything. Or as one (maybe more than one) Tea Party protester put it, "I want government to keep its hands off my Social Security."