Revisiting The Politics of Rich and Poor

As the 1980s drew to a close social critics across the political spectrum widely expressed expectations that the 1990s would redress the preceding decade's tilt in favor of business, wealth and free market pieties. Kevin Phillips, drawing on a theory about political cycles in American history which he had previously used to successfully predict the country's electoral realignment in the late '60s, certainly made that case in 1990's The Politics of Rich and Poor.

That theory identifies a pattern of twenty-eight to thirty-six year cycles in American history, each dominated by a particular party and its politics, which holds the White House and sets the tone for national politics through most of the period. Republican periods (1860-1896, 1896-1932, 1968-?) begin with the party taking a populist stance, typically against inflation and big government (as after the Civil War and World War I, and again by the late '60s), which gives way to a runaway enthusiasm for laissez-faire policy, attended by a worship of business and wealth, with a substantial element of Social Darwinism in the mix (as seen in the Gilded Age, the 1920s, the Reagan years). The less advantaged groups (typically those in rural areas, the interior, and primary industries, as well as labor and the poor generally) inevitably suffer, while the speculative excesses of an ever-more irresponsible financial sector lead to a general crisis. The result is a political backlash which comes to a head when the speculation brings on a crisis, leading to an era of more egalitarian attitudes and policies (the Progressive Era, the New Deal), and some downward redistribution of wealth.1

Of course, this last phase of the cycle never occurred in the '90s, or the 2000s, conservative policies continuing, with the expected effects: continuing deindustrialization and financialization, increasing speculation, debt, inequality. A possible explanation for this would seem that we ended up with two Republican cycles back to back again, just as we did between 1860 and 1932, but Phillips has not advanced such a theory in his later writings, and it is hard to see how he or anyone else could have. When this happened, it was the case that the Republicans were out of power when the crisis came to a head in 1893 (Democrat Grover Cleveland was President instead), permitting them to play the role of opposition, with the help of a more moderate line encompassing an element of economic populism (as with McKinley and Roosevelt). Nothing of the kind has been seen in the post-1968 cycle.

A more likely possibility is that Phillips may have been too quick to call the cycle over. After all, as of 1988, or even 1992, the Republican reign would have gone on only two decades, a rather shorter period than seen in the past - a run up to 2004 still plausible. One might imagine that the unusual circumstances of the War on Terror can account for the second Bush II administration. Yet, the Obama administration fell far short of a "New" New Deal, and might fairly be considered to have continued the cycle into an unprecedented fifth decade, even after the economic shock of 2008, while when running against Obama in 2012, the Republicans remained very much the party of Reagan, rather than taking a moderate line.

It seems quite plausible that if a pattern had indeed prevailed in American politics for the past two centuries, it has since been broken, with the proponents of conservative policies stronger than ever, and just as with the linearity evident in the differences among the Republican heydays, an entirely different analytical approach seems required to explain the fact.

Phillips' own analysis offers clues. One is in the pattern he has identified, which has Republicans and conservatives prevailing in three of the four last cycles. This electoral pattern hints that conservative Republicanism is the "default setting" of American politics, a reading reinforced by the limited extent to which the United States deviated from such policies at even the most liberal points in its history (by comparison with not just continental Western Europe, but even Britain and Canada). The backlashes against conservative policy frequently produced much more rhetoric than substantive change, the Progressive Era, notably, seeing very little action, and this generally in line with the interests of the country's economic elites, as Gabriel Kolko showed in his study of the period, The Triumph of Conservatism.2 One might, in fact, argue that the cycle was less about swings from left to right and vice-versa than swings within the right, from elitist right-wing politics to a somewhat more populist variant of the same (and that not usually for long), with the liberalism of the New Deal era exceptional rather than really representative of the dynamic, a function of the unusual circumstances of the Great Depression, World War II and the early Cold War.

The circumstances of the late twentieth century offered little reason to expect a repeat. Phillips did believe that declinist worry would be a significant source of pressure for reform. However, the stagnation of both Japan and (to a lesser extent) Western Europe, which removed that pressure, were a significant boost to American complacency in the '90s and after. At any rate, the fact remained that conservative policies were not confined to the United States, or even the English-speaking countries, but evident across the industrialized world - including Japan and West Germany. They were increasingly evident, too, in the old citadels of Communism, the Soviet Union and China, with the collapse of the one and the opening up of the other resulting in the whole world being swept up in the neoliberal wave. The extent to which neoliberal globalization actually limited the freedom of any one state to pursue heterodox economic policies may be debatable, but that it made them seem a much less viable path cannot be contested. Additionally, while, as Phillips notes, the late phases of conservative rule historically tend to see the Democrats swing rightward, it does seem to have been the case that American liberalism was in an especially poor position at the end of the twentieth century, considerably diminishing the pressure on the right to take a more populist position. The result is that meaningful redress of the issues raised by Phillips' book appears dismayingly unlikely nearly a quarter of a century later.

1. A fuller description of Phillips' theory can be found in my earlier review of the book.
2. In that book Kolko systematically examines the achievements of Progressive-era reformers to contend that these actually represented triumphs of business. The Pure Food and Drug Act and the Meat Inspection Act, for instance, were a matter of making American agricultural exports acceptable to European importers; national insurance regulation was a way of enabling national insurance companies to escape the state regulation which provided shelter to the smaller, local firms against which they competed; and the Federal Reserve was created to guarantee the availability of the liquidity business desired.

Review: The Politics of Rich and Poor: Wealth and the American Electorate in the Reagan Aftermath, by Kevin Phillips

New York: Random House, 1990, pp. 262.

Kevin Phillips, like Andrew Bacevich and John Dean, is a conservative critic of the country's movement to the right in recent decades, a subject on which he has written throughout his career. In The Politics of Rich and Poor he looked at the '80s as they were coming to a close through the lens of the reading of American history he developed earlier in The Emerging Republican Majority (a book in which he predicted the country's present political alignment as an enduring fact, and certainly one case when a forecaster got things right by rather more than coincidence). The most important portion of this is his identification of a pattern of twenty-eight to thirty-six year cycles in American history. Each of these is dominated by a particular party and its politics, which holds the White House and sets the tone for national politics through most of the period: the era of Democratic-Republican era rule between 1800 and 1828, the 1828-1860 dominance of the Democrats, the 1860-1896 and 1896-1932 periods of Republican rule, the Democrats' dominance between 1932 and 1968, and the last Republican cycle which began in 1968 with the election of Richard Nixon.

Within the Republican cycles there is a pattern which starts with the party taking a populist stance, typically against inflation and big government (as after the Civil War and World War I). Over time this gives way to a runaway enthusiasm for laissez-faire policy, attended by a worship of business and wealth, with a substantial element of Social Darwinism in the mix. Characteristic of government policy are reductions in taxes (specifically, the more progressive taxes), the avoidance or weakening of regulation of big business, and tight money policies which result in deflation or disinflation. The results typically include substantial restructuring of the economy which sees business consolidate in a wave of mergers and the advent of new types of large organization (the great corporations and trusts of the Gilded Age, the mergers of the '20s), debt pile up, and speculation become wilder (with new financial instruments often playing a role). The rich get richer, but the poor get poorer as wealth is redistributed not only between classes, but also economic sectors (with old sectors suffering and agricultural and the extractive businesses in particular taking a hit as new industries take off), and with them, regions (urban areas doing better than rural ones, the coast better than the interior). The result is a political backlash which comes to a head when the speculation brings on a crisis, leading to an era of more egalitarian attitudes and policies, and some downward redistribution of wealth.

The post-1968 Republican cycle was very much in line with this pattern, with Richard Nixon elected after a populist campaign and pursuing moderate policies (such that many a liberal commentator considers him to have been to the left of recent Demcorats), and the Ronald Reagan administration marking the shift to the "heyday" politics of hyper-capitalism. The redesign of the tax system in the Reagan years shifted much of the burden from the rich to the less well-off, while spending on programs which principally benefit the poor was reduced. The rising government accumulation of debt at the time also redistributed wealth via taxpayer money to the holders of government securities (in general, the affluent), as did increased defense spending (which favored military contractors, and the "knowledge sector" workers disproportionately associated with them), and taxpayer-funded bailouts of the riskier forms of the speculation unleashed by deregulation. Deregulation also gave "paper entrepreneurs" a freer hand with mergers and acquisitions, weakened the position of workers, and permitted companies in sectors like communications and transport to reduce service to less profitable (mostly rural) regions. Additionally, the deflationary policies of the early '80s (shorter-lived) harmed homeowners and commodity producers while favoring the holders of financial assets (also benefiting from the high rates of interest at which the Federal government borrowed).

The predictable result was that, just as happened at the same point in earlier cycles, the rich were richer, the poor poorer, with the winners and losers much the same before. Agriculture and resource-extracting industries took a sharp blow while finance boomed. Major coastal cities enjoyed a measure of prosperity as the interior languished - and the more vulnerable everywhere did badly, particularly young people, women, minorities, and workers who had a high school education or less. Nonetheless, a significant difference was that where the earlier heydays of the Gilded Age and the '20s were periods of industrial expansion, the '80s saw deindustrialization as sectors like steel, automobiles and textiles decayed, and the U.S's slipping as an economic power (evidenced in increasing foreign debt, and the purchase of American assets by increasingly influential foreign investors, to which he devotes a chapter).1

All the same, Phillips took the '80s for the '20s, and supposed that the trend had hit its high-water mark, with the shift to a more egalitarian pattern soon to follow, hints of which he found in the slimness of George Bush I's victory over Michael Dukakis in 1988; Bush's rhetoric about a "kinder, gentler America," suggesting a redress of '80s excesses; the worries of even conservatives like George F. Will and Ben Stein over the damage that inequality and its ill effects were doing to the country's social fabric; the emergence of declinist sentiment over the U.S.'s standing in the world (epitomized by the anxieties surrounding Japanese competition); and what he thought was the decreasing ability of Republicans to invoke overseas Communism and the culture wars in support of their position as the Cold War came to an end, and public opinion shifted in favor of the kind of cultural liberalism that had seemed radical in the '60s (like pro-choice sentiment). Even the diminished interest in nighttime soap operas about wealthy families like Dallas and Dynasty seemed to point in such a direction.

Of course, nothing of the kind happened, the policies of the '80s continuing through the '90s and 2000s, with additional upper-class tax cuts, reductions in social spending, deregulation (or lax enforcement of such regulations as remained on the books), despite the familiar results: continued deindustrialization, financialization and worsening inequality.2 Even where culture was concerned, the waning of enthusiasm for business and wealth was short-lived, as demonstrated by the subsequent hero worship of Bill Gates and Steve Jobs and less explicably, Donald Trump; the abundance of "reality" shows about how the other have lives; the revival of the nighttime soap; the popularity of Iron Man at the movies; the desperation of all and sundry to attach the label "entrepreneur" to themselves like some aristocratic title (however marginal their claim, and for that matter, however marginal entrepreneurship has become to economic life and the acquisition of wealth).

The difference between his expectations and the actuality through which we have been living points to the book's principal deficiency. While Phillips offers robust, lucid coverage of a significant part of its central issue, there are a great many key points which he acknowledges, but fails to give their proper due, like the full significance of the differences between the '80s and other Republican heydays. (The economic growth of the '80s was much more a matter of paper profits, and weaker, than in those earlier eras, for instance.) The result is that, even granting the validity of his theory of a cycle prevailing through American history for two centuries, the possibility that circumstances have disrupted that cycle is not even considered. Much as aspiring forecasters are warned against having overly linear expectations about what the future will bring, this certainly seems to have been one time when the projection of an existing trend considerably farther into the future was exactly what was called for.

1. Phillips was clear that this was a matter of the acceleration of American decline, rather than its cause, and also pointed to the U.S.'s heavy defense spending (especially in comparison with Japan) as another factor. American decline would become a major theme in Phillips writing, treated at length in such works as 2006's American Theocracy.
2. The Clinton administration certainly has to be seen in these terms, having given the country free trade in the form of NAFTA and GATT, welfare reform in the Personal Responsibility and Opportunity to Work Act (the name of which says much about the era's rhetoric), and deregulation in the Telecommunications Act of 1996 and the Gramm-Leach-Bliley Act, the former allowing greater consolidation in media, the latter the same in finance, while deficit reduction took priority over other economic and social goals (like the unrealized health care reform plan). It is worth remembering, too, that the Clinton administration sidelined its liberal economic advisers (Robert Reich, Joseph Stiglitz) after the first term in favor of conservatives in the second, while returning Randian banker Alan Greenspan to the Federal Reserve board chairmanship, where he helped feed not just the stock market bubble by flooding the market with cheap money, but responded to its bursting by doing the same, with the real estate bubble of the 2000s the result.