Commentary Magazine


That 70′s Show

Director Jonathan Demme’s documentary on Jimmy Carter—Jimmy Carter Man from Plains—has been drawing dozens of the former President’s devotees to the theaters. The film couldn’t be better timed. What with the shock of skyrocketing oil prices, a feeling of political malaise, the renewed threat of Iranian extremism, and an economy that no longer conforms to tried and true assumptions, it’s starting to seem like the Carter years all over again. (As it did then, it feels now like we’re in a kidney stone of a period that will pass only with great difficulty.)

If you let your memory roam a bit during last Tuesday’s Democratic Party debate, you could, listening to Barack Obama (who is nearly as unctuous as Carter) speak of how only he could deal “honestly with the American people,” hear further echoes of the Carter era. Evidently, such honest dealings require the good will of the Iranian leadership. Carter reached out to Khomeini as “one man of God to another.” Obama, holding out the promise of membership for the Persian state in the World Trade Organization, says he too wants to “engage in aggressive personal diplomacy” with Iran.

But it was John Edwards, like Carter a Southern liberal, who took the most Carter-like approach. President Carter spoke of the need to put aside “our inordinate fear of Communism.” A would-be President Edwards similarly complained that we have been “governed by fear” of terrorism; he promised to put an end to the “politics of fear.” Carter and his spokesmen, such as UN Ambassador Andrew Young, spoke insistently and repeatedly of the need to “restore America’s reputation.” Edwards also speaks about “restoring our good name” in the world.

Both then and now, seemingly paradoxical developments in the economy shredded the old certainties. The Democrats had, since the late 1930’s, organized their economic policy around the requirements of Keynesian demand management. Government spending was their means to avoid economic downturns and ensure a robust economy. This approach was summarized by what was known as the Phillips curve, which described how x percentage of inflation brought y percentage in unemployment reduction. But by the late 1970’s, as business had become accustomed to the Keynesian game and oil prices ramified through the economy, government spending produced the combination of stagnation and inflation known as stagflation. Stagflation ended the Keynesian era and left the Democrats economically rudderless.

Republicans, notes economist Joel Kotkin, face something similar now. There is no doubt that global trade has expanded our GDP. The aggregates, as Larry Kudlow points out, are looking very good. But people don’t live in the aggregate economy. Paradoxically, a sharp increase in inequality, as middle-class incomes grow slowly at best, has accompanied the increase in overall prosperity (the economy grew at a very strong 3.9 percent rate in the last quarter). As former Treasury Secretary Larry Summers explains, “If the distribution of income in the U.S. today were the same as it was in 1979, and the U.S. had enjoyed the same growth, the bottom 80 percent would have about $670 billion more, or about $8,000 per family a year. The top 1 percent would have about $670 billion less, or about $500,000 a family.”

One response to this seeming paradox has been an increasingly critical attitude towards global trade, as if there were an alternative. Politically, this represents a huge opening for the Democrats—much as stagflation helped make Reagan’s election possible.