Interestingly, John Connolly, the Nixon-installed Treasury Secretary who did not have formal economics training, later declared personal bankruptcy. Yet these unusually bad economic times were preceded by a period in which the economy boomed, or appeared to boom. Many Americans were awed by the temporarily low unemployment and strong growth numbers of Therefore, they overwhelmingly re-elected their republican president, Richard Nixon, and their democratic Congress, in ; Nixon, the Congress, and the Federal Reserve failed them.
Congress, despite some protests, went along with Nixon and continued to fund the war and increased social welfare spending. In , for example, both Congress and Nixon agreed to a big expansion of Social Security, just in time for the elections. Nixon came to office as a supposed fiscal conservative. Still, one of his advisors would later classify Nixonomics as "conservative men with liberal ideas," Stein, Nixon ran budget deficits, supported an incomes policy and eventually announced that he was a Keynesian.
John Maynard Keynes was an influential British economist of the s and s. He had advocated revolutionary measures: governments should use countercyclical policies in hard times, running deficits in recessions and depressions. Nixon's other economic about-face was imposing wage and price controls in Again, they seemed to work during the following election year. Later on, however, they would fuel the fires of double-digit inflation.
Once they were removed, individuals and business tried to make up for lost ground. Nixon's deficits were also making dollar-holders abroad nervous. There was a run on the dollar, which many foreigners and Americans thought was overvalued. Soon they were proved right. In , Nixon broke the last link to gold, turning the American dollar into a fiat currency. The dollar was devalued, and millions of foreigners holding dollars, including Arab oil barons with tens of millions of petrodollars , saw the value of dollars slashed.
Still, President Nixon's primary concern was not dollar holders or deficits or even inflation. He feared another recession. He and others that were running for re-election wanted the economy to boom. The way to do that, Nixon reasoned, was to pressure the Fed for low interest rates.
Neoliberalism: Political Success, Economic Failure
Although the Fed is supposed to be solely dedicated to money creation policies that promote growth without excessive inflation, Burns was quickly taught the political facts of life. Nixon wanted cheap money : low-interest rates that would promote growth in the short-term and make the economy seem strong as voters were casting ballots. In public and private Nixon turned the pressure on Burns. Burns, and the Fed's Open Market Committee which decided on money creation policies, soon provided cheap money. It worked in the short term. Nixon carried 49 out of 50 states in the election.
Democrats easily held Congress. Inflation was in the low single digits, but there was a price to pay in higher inflation after all the election year champagne was guzzled. In the winters of and , Burns began to worry about inflation. In , inflation more than doubled to 8. Was the United States about to become a Weimar Republic? Postelection analyses show that concerns about immigration largely drove the Brexit referendum, the U. In government, the media, and major metropolitan areas, technological change has spurred the growth and consolidation of an education-based meritocracy, giving rise to new class divisions.
For citizens with less formal education, particularly those in rural areas and smaller towns, the dominance of this new elite has led to feelings of marginalization. Too often, individuals who have prospered in this meritocracy are seen as harboring a sense of superiority to their fellow citizens. Denying the equal dignity and worth of others is self-defeating: Insult does even more than injury to fuel resentment, one of the most dangerous of all political passions.
With these developments, divisions among citizens based on geography, formal-education levels, and value systems are growing sharper. Supporters of dynamism and diversity increasingly clash with proponents of stability and homogeneity, beneficiaries of technological change with those harmed by the resulting economic shifts. The combination of economic dislocation, demographic change, and challenges to traditional values has left many less educated citizens feeling that their lives are outside their control.
The national and international governing institutions they thought would step in to help seemed frozen or indifferent. In the United States, partisan polarization gridlocked the system, preventing progress on critical issues. In Europe, the opposite phenomenon—a duopoly of the center-left and center-right that kept important issues off the public agenda—had much the same effect. In light of this apparent inability to address mounting problems, governments across the West face growing public ire. Many citizens, their confidence in the future shaken, long instead for an imagined past that insurgent politicians have promised to restore.
The door seems to be opening for a return to forms of authoritarianism written off by many as relics of the past. To clarify what these developments may mean for liberal democracy, it is helpful to distinguish among four concepts—the republican principle, democracy, constitutionalism, and liberalism. The people, this principle holds, are the sole source of legitimacy, and only they can rightly authorize forms of government. Democracy , at the most basic level, requires both the equality of all citizens and broadly inclusive citizenship.
A society in which all citizens are equal but only 10 percent of all adults are citizens would not, today, count as a democracy. Together with equal and inclusive citizenship, the other key pillar of democratic governance is majority rule. This means, first, that public decisions are made by popular majorities of citizens whose votes all count equally; and second, that democratic decision making extends to a maximally wide range of public matters. Majoritarianism is limited only by the imperative of preserving the liberties and powers—freedom of speech, assembly, and the press, among others—that citizens need to influence public decisions.
In this conception of democracy unmodified by any adjective, there is nothing essentially undemocratic about majoritarian decisions that systematically disadvantage specific individuals and groups or invade privacy rights. If it wishes, a democratic public may embrace the maxim that it is better for ten guilty individuals to go free than for one innocent individual to be found guilty—but it is no less democratic if it adopts the opposite view.
Nor is it undemocratic per se to conduct judicial proceedings in the same manner as legislative affairs.
The Decline and Fall of the U.S. Economy: How Liberals and Conservatives Both Got It Wrong
The Athenian assembly that condemned Socrates may have been wrong, but it was fully democratic. These limits need not constrain public power in the aggregate. The sheer size of modern political communities, however, makes this impossible, even for those communities founded on republican principles. One might conclude, then, that the liberty of the moderns consists in the selection of representatives through free and fair elections in which all may participate on equal terms.
But this is only part of the story. We have now reached the core idea of liberalism: recognizing and protecting a sphere beyond the rightful reach of government in which individuals can enjoy independence and privacy. In this spirit, the U.
Declaration of Independence not only invokes but also limits the republican principle. We can now venture a more precise characterization of liberal democracy. This type of political order rests on the republican principle, takes constitutional form, and incorporates the civic egalitarianism and majoritarian principles of democracy.
What Americans Think About Poverty, Wealth, and Work | Cato Institute
At the same time, it accepts and enforces the liberal principle that the legitimate scope of public power is limited, which entails some constraints on or divergences from majoritarian decision making. These distinctions also shed light on the populist challenge to liberal democracy. Populism is not merely, as some observers have suggested, an emotion-laden expression of disappointment over frustrated economic expectations, resentment against rigged rules and special interests, and fear of threats to physical and cultural security.
Of our four key concepts, populism accepts the principles of popular sovereignty and democracy, understood in straightforward fashion as the exercise of majoritarian power. It is skeptical, however, about constitutionalism, insofar as formal, bounded institutions and procedures impede majorities from working their will. It takes an even dimmer view of liberal protections for individuals and minority groups. From this perspective, populism is a threat not to democracy per se but rather to the dominant liberal variant of democracy. These observers argue that elites, by taking important issues such as economic, monetary, and regulatory policies off the public agenda and assigning them to institutions insulated from public scrutiny and influence, have invited precisely the popular revolt that now threatens to overwhelm them.
But to stop here would be to leave half the story untold—the more important half, in my view. Because populism embraces the republican principle of popular sovereignty, it faces the question inherent in this principle: Who are the people? The people is an ensemble of individuals who enjoy a common civic status.
During the founding period of the United States, however, a thicker understanding prevailed. Historically, right-leaning populists have emphasized shared ethnicity and common descent, while left-leaning populists have often defined the people in class terms, excluding those with wealth and power. Recently, a third definition has entered public debate—the people as opposed to cultural elites. In its U. The people have one set of interests and values, the elite has another, and these two sets are not only different but fundamentally opposed.
The divisions are moral as well as empirical.
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Populism understands the elite as hopelessly corrupt, the people as uniformly virtuous—meaning that there is no reason why the people should not govern themselves and their society without institutional restraints. And populist leaders claim that they alone represent the people, the only legitimate force in society.
This approach raises some obvious difficulties. First, it is divisive by definition. Individuals outside the charmed circle of the people may therefore be excluded from equal citizenship, violating the principle of inclusion that is essential to democracy.
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Second, the populist definition of the people is inherently counter-factual. In circumstances of even partial liberty, different social groups will have different interests, values, and origins. Plurality, not homogeneity, characterizes most peoples, most of the time. Populism is the enemy of pluralism, and thus of modern democracy. Equally counterfactual is the proposition that the people are uniformly virtuous.
They are not, of course.