Abstract: From Keynesianism to Market Fundamentalism: The 1970s in the United States

Judith Stein


Both the 1960s and the 1980s have left strong imprints on the popular imagination. The first, the decade of the social movements, the second the years of Ronald Reagan. Insofar as the 1970s has an historical image, it is of its popular culture disco, garish clothes, the therapeutic culture of TM and Esalen, etc. However, academics find that what is most significant is the end of postwar affluence, what the historian E. J. Hobsbawm has called "the golden age of capitalism," 1945-73. The demise of the Bretton Woods fixed currency regime, caused by the relative decline of American economic power, and the ending of cheap oil, in the wake of the quadrupling of oil prices in 1973 and 1974 were system-shaking events. They quickly ended the 1960s talk that capitalist questions had been resolved and that economic wisdom had ended the business cycle. Yet altering political discourse was neither immediate, nor simple. By examining the response of key political, economic, and social groups to the economic changes of the 1970s, I propose to explain why the Keynesian recipes for progress in the "golden age" were discarded and replaced by market fundamentalism. This question has not been systematically tackled in the literature. Journalists, progressive Democrats, and "New Democrats" subscribe to the argument made by Tom and Mary Edsall (<i>Chain Reaction</i>) that racial tensions and/or white backlash did in Keynesian solutions, which opened the way for Reagan's victory and the new market ideology. I argue that it was Jimmy Carter's economic policies that produced the opportunity for market ideology to triumph. The 1980 election was a negative judgment. Conversion took place afterwards. This conclusion speaks to the way economic ideas triumph. The paper is based upon records of Presidents Nixon, Ford, and Carter, the Trilateral Commission, and the business press, the papers of the AFL-CIO, National Association for the Advancement of Colored People (NAACP), National Urban League, and other significant oppositional groups.