These were the years of Watergate and Studio 54, the OPEC oil embargo, double digit inflation and soaring interest rates, urban blight and the emergence of the rustbelt, punk rock music and the explosion of graffiti. The decade began with days of rage about the Vietnam War and ended with a national humiliation over embassy hostages in Iran.  When it was all over, voters spoke with great force to repudiate “turn on, tune in, drop out” to usher in the Reagan “revolution”.  

The 1960’s spawned the anti-war, civil rights and nascent feminist movements to challenge political authority and cultural norms.  The 1980’s featured the demise of New Deal politics, the collapse of the Berlin Wall and the implosion of the Soviet Union and its satellite republics to mark the end of the cold war.

But what about those intervening years?  For some, the seventies represented a cynical retreat from the idealism of the previous decade, for others it signaled the rise of hedonism run amuck.  But make no mistake, these were turbulent times.  If the sixties generation questioned the authority of governments across the globe, from Washington to Paris to Prague, a dire economic crisis during the 1970’s posed an existential threat to liberal democracies that set the stage for the conservative tilt of the 1980’s. 

Does anyone recall America’s palpable fear of the Japanese during the seventies?  They were going to do to us in the global economic marketplace what they could not achieve on the battlefield a few decades earlier.  The American economy was going to be owned lock, stock and barrel by Japan, Inc., as these disciplined Asian capitalists gobbled up prime real estate and rendered wide swaths of corporate America as economic road kill.  Michael Crichton’s Rising Sun, a manifestation of American xenophobia, expressed the defensive zeitgeist.  But why did we imagine ourselves vulnerable to the Japanese?

During the 1960’s, the Johnson administration engaged in an ambitious “war on poverty” while pursuing a ruinous and tragic war in Vietnam.  Now on the heels of this massive deficit spending and the establishment of the OPEC oil embargo and the subsequent extraordinary rise in oil prices, macroeconomic growth came to a screeching halt.  Moreover, wages and worker productivity began to stagnate during these years.  It seemed that the American century begun with a decisive military victory in World War II was ending after twenty-five years.  And these unprecedented economic developments had important political consequences.  

There is an intimate relationship between stable and effective government and robust levels of macroeconomic growth.  Diminished growth threatens the ability of government to function.  Without growth, wages and employment levels stagnate that, in turn, result in less tax revenue.  When there is less money to collect, there is less to spend on vital government programs.  And when there is less to spend, budgets are either frozen or cut.  And diminished public spending threatens the livelihood of working and non-working poor and middle-class individuals, families and communities across the country.  In the 1970’s, Americans experienced, as a celebrated Marxist account framed it, a “fiscal crisis of the state”, generating the notorious bankruptcy of New York City and the infamous tabloid headline describing Gerald Ford’s political response: “Ford to City:  Drop Dead.” 

But let us remember that spending on social programs, built up over a period of several decades to establish what we used to call the “welfare state”, was not a function of noblesse oblige, but represented a way of lashing together the interests of the economic elite, what we currently refer to as the 1%, to those at the bottom and the middle, or the 99%.  In effect, the establishment of the welfare state in capitalist societies enabled those at the bottom to feel that their economic interests were served by the existing political order.  And this diminished the threat of more extreme challenges to the “system”.  On the other hand, if public sector budgets were frozen or cut, then government’s ability to lash the interests of rich and poor together would be threatened.  In effect, the fiscal crisis of the state represented a clear danger to the political stability of Western democracies.  And this grim prognosis was offered by leading thinkers both left and right in the 1970’s. 

On the left, one of the most influential academic books of the decade, “Legitimation Crisis”, authored by a renowned German philosopher, Jurgen Habermas, argued that the state’s ability to finance its “legitimation” function, the state’s capacity to inspire loyalty from all strata of society, was imperiled because of the emerging fiscal crisis.  And prominent neo-conservative academics, notably Samuel Huntington, a Harvard political scientist, and Daniel Bell, a Harvard sociologist, came to similar conclusions, although couched in very different language.  Huntington wrote an influential essay about America’s “Democratic Distemper”.  He observed that political demands on the state increased, due to what he referred to as a “welfare shift”, while confidence in government and other institutions declined.  He concluded darkly that democracy was not “optimized” when it was “maximized”, conjuring ideas expressed by political theorists of the early 20^thcentury associated with Italy’s fascism.  Bell wrote an essay on the “Public Household” that became the final chapter of his seminal work entitled “The Cultural Contradictions of Capitalism”. He warned that a “revolution of rising entitlements” greatly increased political demands on the state that threatened both economic and political stability.  In effect, a remarkable intellectual consensus about the diminished governability of Western democracies emerged that transcended political ideology. 

The menacing economic developments during the seventies also produced an intellectual and policy crisis in the field of economics. The reigning paradigm was established by John Maynard Keynes. He provided a rationale for the public sector to stimulate aggregate demand when the private sector collapsed during the Great Depression.  If an economy was in recession, prices and wages faced downward pressure, which required government to prime the pump and engage in deficit spending to ignite demand.  Putting more money in the hands of more people by running large government deficits was a way to get the economy moving again.  He believed that balancing budgets during a recession or depression would be counterproductive and dangerous.  Keynes offered his prescriptions as a way to save capitalism from itself.  And they worked like a charm.  Even Richard Nixon announced that he was a Keynesian.  However, most fail to remember that Keynes also believed it was wise to curtail government spending when the economy recovered to alleviate any inflationary pressure.  The basic idea was this:  recessionary and inflationary pressures were mutually exclusive.  Keynes believed you could not have high rates of inflation during a recession.

However, developments during the 1970’s baffled Keynesian economists.  While the economy entered into a recession and interest rates soared to almost 20% at its height, it also suffered from double digit inflation. Things cost much more at a time when more people had less to spend.  It was the worst of all possible economic outcomes and mainstream economists were unable to alleviate the crisis.  Enter the Reagan revolution and its widely touted supply side ideas that featured the infamous Laffer curve.  Economist Arthur Laffer proposed that significant tax cuts would generate more, not less, government revenue by spurring higher rates of macroeconomic growth.  In Laffer’s world, tax cuts would reduce and not increase government deficits and benefits would accrue to everyone.  Of course, this would prove to be little more than conservative fantasy.  But Reagan’s rhetoric, spinning a marvelous story about a shining city on the hill, claiming America’s best moments were still to come, enabled many to believe help was on the way.  

Reagan provided a stark contrast to his rival Jimmy Carter, who tried to level with the public by asking them to sacrifice, to turn down thermostats in the winter for instance. Carter insinuated, but never stated, there was a cultural malaise sweeping the country, as Christopher Lasch suggested in his popular book on the “Culture of Narcissism”.  Voters rejected Carter’s narrative as many wanted to believe that shuttered factories and rising unemployment, soaring gas prices and interest rates and stagnant economic growth, coupled with the ineffectiveness of traditional Keynesian solutions, could be swept away by a conservative pipe dream.  Never mind that deficits would actually increase during Reagan’s presidency or that supply- side ideas contributed to greater inequality, leading many to derisively refer to the doctrine as a “trickle-down” theory, or what Bush the elder later referred to as “voodoo economics”.  

While Reagan appeared to offer an end to the financial and political crisis, his presidency established a new Gilded Age.  Those at the very top became extraordinarily rich while wages and income for those in the middle and at the bottom stagnated.  Meanwhile, none of the problems brought to national attention in the 1970’s was seriously addressed.  

Accordingly, significant portions of the country still wrestle with the same issues:  declining manufacturing jobs, endangered economic growth, stagnant wages and productivity.  At the end of the 1970’s, considerable fear, panic and hardship established a receptive audience for Reagan’s audacious conservative message.  More recently, it provided fertile soil for Trump’s repugnant populism.  But what happens when people realize Trump offers no solutions to vexing economic problems, that the emperor has no clothes?  If the two major political parties continue to ignore the suffering and anger of so many in the 2020 election, what new unsettling political response will emerge and could it threaten the fragile texture of our democracy? 

Neal Aponte, Ph.D.                                                                                          

Editor of Delano