Copping to corporatism.

• Author: Bresler, Robert J.
• Position: STATE of the NATION

MUCH OF PRES. FRANKLIN D. ROOSEVELT'S liberalism in the 1930s was unleashed against the so-called "economic royalists" and the "unscrupulous money changers." His wealth tax, regulation of prices and wages through the National Recovery Administration, and promotion of unionism through the Wagner Act made much of the business community fearful of him and thus reluctant to invest in what they thought was a hostile economic climate. With the coming of World War II, all that changed. Roosevelt made business a partner in the war effort with large cost-plus defense contracts and suspension of antibusiness rhetoric. In the post World War II environment, liberals made their peace with corporate capitalism as corporations made theirs with unions and a modest welfare state. Union demands could be paid for by burgeoning profits and the welfare state out of an expanding economy. American industry--autos, steel, oil, electronics, and textiles--dominated both world and domestic markets after World War II had ravaged every major economy except that of the U.S. Without serious global competition, these corporations could produce automatic profits; the government could collect ample tax revenues; and the unions could negotiate generous wage and benefit packages.

This comfortable consensus continued through the Eisenhower years and into the 1960s. Lyndon Johnson's Great Society involved no frontal attack on American corporations. Aid to education, Medicare, civil rights, and urban assistance all could be financed out of an expanding economy. Big government, big business, and big unions could continue their modus viviendi.

With the recovery of the Western European, Japanese, and Korean economies in the 1970s, American dominance in automobiles, steel, textiles, and electronics came to end, along with the U.S.'s role as an oil exporter. Foreign competition decimated those industries, which were highly unionized, and oil prices helped to send waves of inflation through our economy. The result was the stagflation of the 1970s.

America responded with an era of economic reform and renewal. Autos, steel, oil, textiles, and electronics no longer would be the center of our economic strength. Industries such as airlines, trucking, and telecommunications were deregulated, opening up opportunities for new companies and offering lower prices for consumers. Marginal income tax rates were reduced dramatically, as were capital gains taxes. Neither Pres. Ronald Reagan, George...