Fragile Victory by James E. Cronin;

Author:James E. Cronin;
Language: eng
Format: epub
ISBN: 9780300247855
Publisher: Yale University Press

The American Embrace of the Market

The United States opted for pro-market policies with the election of Ronald Reagan in November 1980, just eighteen months after Margaret Thatcher won her first election. Of course, Americans knew as little about what this meant as did those who voted for Thatcher. What voters in both countries knew was that current and recent policies, and the politicians trying to make them work, were failing. The Carter administration inherited problems it did not know how to solve, and then they got worse. Inflation and a slowing economy greeted Carter when he took office in 1977; in 1978, the second oil shock reversed whatever progress his administration had achieved on inflation. That was accompanied by, and was largely caused by, the revolution in Iran that toppled the Shah. The Shah had long been seen as a creature of the United States, and when he was admitted to the US for medical treatment in October 1979—at the urging of old friends like Henry Kissinger—students in Teheran broke into the US embassy and seized sixty-six hostages. The United States tried desperately to negotiate their release, but there was nobody with whom to strike a bargain in Iran. The new Islamist leader, Ayatollah Ruhallah Khomeini, was still in the process of consolidating power. Increasingly frustrated, the Carter administration mounted a rescue operation on April 24, 1980, but it failed disastrously. Eventually a deal was made, but the fifty-two remaining hostages would not be released until January 20, 1981, the day Reagan was inaugurated president. Meanwhile, oil prices continued to rise, pushing up the price of everything else, and the economy tipped into recession.

In the context it was somewhat surprising that the election of 1980 was close until very near the end of the campaign. Even then, Reagan’s margin of victory was modest. He received a narrow majority of votes cast, 50.8 percent, though he won handily in the Electoral College. It would seem that Reagan’s preference for market-based solutions, and his hostility to the activist state, were as yet not widely shared views. Over time, they would gain wider acceptance and anchor a new governing consensus, but during the late 1970s and into 1980 there was little agreement on how to deal with the problems that Carter faced. There was nevertheless a widespread view that what had worked before was no longer effective. The lack of consensus was fitting testimony to the scale of the difficulties that the United States confronted during the 1970s, but answers remained elusive.

The term invented to describe the economic problems of the ’70s, stagflation, was itself an admission of the inability of policy makers and economists to figure out just what was wrong and needed fixing. Inflation made the headlines, and taming it came to dominate political debate, but the Nixon, Ford, and Carter administrations were also aware of rising unemployment.9 Policy under Nixon, as might be expected, was eclectic and unorthodox, dominated by Nixon’s desire for reelection. Jettisoning the constraints of Bretton Woods

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