9/27/2018 Peter Durantine

Van Dyck Lecturer: What Went Wrong with Liberal Capitalism?

In 1989, the Berlin Wall came down, communism in Eastern Europe collapsed, and western government and business leaders hailed a new era of liberal democracy and market economics – liberal capitalism.

Twenty-seven years later, things have not turned out as expected, said Robert Kuttner, an economics journalist and writer who delivered Franklin & Marshall College’s annual Wayne K. Van Dyck Lecture Sept. 25 in the Roschel Theatre at the Roschel Performing Arts Center.

Instead, autocrats took power in countries such as Russia, a plutocracy where wealthy business owners are beholden to leader Vladimir Putin. And American democracy is overshadowed by the authoritarian and kleptocratic tendencies under President Donald Trump, Kuttner said. 

“We see concentrated and corrupted capitalism in league with autocracy in several other nations,” Kuttner said. “What went wrong since 1989?” 

  • Kuttner is the Ida and Meyer Kirsten Chair at Brandeis University, where he teaches about globalization and democracy, and about the political economy of the welfare state in America. Kuttner is the Ida and Meyer Kirsten Chair at Brandeis University, where he teaches about globalization and democracy, and about the political economy of the welfare state in America. Image Credit: Deb Grove

Kuttner, co-editor of The American Prospect and the author of 11 books, lectured on the topic, “Democracy and Capitalism: Allies or Adversaries?” He described an evolution in 20th-century American history in which the government harnessed capitalism to serve the public at large and not a wealthy few through the New Deal, federal policies created in the 1930s.

“What did the New Deal do?” he said to the large audience in attendance. “It housebroke capitalism. It constrained capitalism’s more unsavory tendencies so that we would presumably never have another great crash and never have another Great Depression.” 

Under President Franklin Roosevelt, the government regulated the nation’s finance sector to avoid the speculations that led to 1929’s stock market crash, enacted labor laws that allowed workers to bargain for higher wages, and created a safety net with the 1935 Social Security Act.

World War II expanded the economy with immense government spending that dramatically increased workers’ wages while a manpower shortage provided job opportunities to women and minorities that until then were unavailable to them, Kuttner said.

“For 30 years after World War II, the economy grew at a more rapid rate than it had ever grown, but it also became more equal,” he said. “Living standards of people in the bottom half and the bottom quarter of the income distribution actually rose more rapidly than did living standards for the people at the top.”

“We had harnessed capitalism in the public interest. When you regulate capitalism in the public interest, it actually thrives. Businesses did very well in that period. Ordinary people had money in their pockets to spend. You could live on one income, even as a working-class person.”

However, political power shifted in the late 1970s from liberal to conservative. Government policymakers believed in unfettered capitalism, Kuttner said. “The new view was ‘Hey, markets are efficient after all, so let’s deregulate them.’ What happens is living standards for regular people start going down the drain.” 

“Today, in country after country where there are democracies, would-be tyrants and actual tyrants are not only taking over, but also getting to power with the support of 45 to 50 percent of the citizenry,” Kuttner said. “Why did people lose faith in democracy to the point where they started electing tyrants? I think the answer is pretty simple—the economy let them down.” 

With symbolism and rhetoric, “Trump can at least simulate the idea that he cares about people like them,” he said. “Unless the opposition to Trump can do that in a way that has greater realism than Trump’s version, the risk is that the demagogic version, the autocratic version gains traction.”

To achieve an economic fairness where student debt is forgiven, the minimum wage is $15 and government spends on job-creating programs to rebuild America’s infrastructure will take farsightedness and courage, Kuttner said.

“It could be another period like the New Deal where government actually helps regular people and regular people start having restored faith in government,” he said. “And you start having a balance between the capitalist part of the system and the democratic part of the system.”

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