States around the programs and ideas that would eventually shape the New Deal, and in 1940 the nation was sharply divided between interventionists who wanted to assist Great Britain in the European war and isolationists who wanted no part of any such entanglement. Yet by 1950 a bipartisan consensus had been hammered into shape, one that assigned the national government responsibility for maintaining full employment and for policing the world in the interests of democracy, trade, and national security. It was a signal political achievement in view of the resistance that had been built up through the nineteenth century against large government establishments and American involvement in foreign disputes. Moreover, there have been continuous efforts coming from both left and right to alter, redefine, or undermine the consensus.
John Maynard Keynes was the theoretical architect of America’s postwar political economy, as elaborated in Part I. Keynes argued in several important works published in the 1920s and 1930s that the old order of nineteenth-century capitalism had been destroyed both by the Great War of 1914–1918 and by the evolution of capitalism from a system organized around small producers and local markets to one increasingly dominated by large corporations and labor unions. In The Economic Consequences of the Peace, his controversial attack on the Treaty of Versailles, he first broached the idea that the capitalist order needed to be placed on new political and intellectual foundations. Later, during the Great Depression, he worked out the theoretical argument for government to take a leading role in stabilizing the market economy with the aims of full employment and maximum output. His General Theory of Employment, Interest, and Money, with its policy prescriptions for a managed economy, is probably the most influential work of economics published in the twentieth century, at least in the Anglo-American world.
The Keynesian system involved a significant revision in the relationship between the state and the market, as the state assumed a steering function over the economy never envisioned by the eighteenth-century founders of the liberal order. A state that commands sufficient resources to stabilize consumer demand and investor behavior stands in sharp contrast to the classical liberal state that preceded it. This new kind of state is an elemental part of the postwar regime, a point whose implications are examined in the chapter titled “The Keynesian Revolution in Political Economy,” which also argues that the Keynesian era itself is now approaching an end.
The unfolding of the postwar era has entailed various surprises, perhaps chief among them the revival of nineteenth-century free-market ideas in the 1980s and beyond as a challenge to the Keynesian order. It would be wrong to suggest that the “age of Keynes” ended in the 1980s. The consensus surrounding the Keynesian regime has been badly weakened but not broken, and the financial crisis of 2008 provided a new occasion for the application of Keynesian policies.
Thomas Piketty’s recent work, Capital in the Twenty-First Century, has called attention to the surprising return of inequality in European and North American countries. While Piketty argues that inequality is somehow intrinsic to the capitalist order, the chapter titled “American Capitalism and the Inequality Crisis” suggests that it is linked more closely to specific elements of the postwar regime, especially in the expansion of global markets and the explosion of asset prices. From 1980 to 2012, the value of world stock markets increased from $2 trillion to more than $50 trillion, an unprecedented development that was bound to produce more inequality as one of its side effects. Even if one thinks inequality is a bad thing, the stock market boom has had beneficial consequences in the areas of innovation and productivity that far outweigh this particular downside. When the stock market contracts again, as it inevitably will, the inequality “crisis” is likely to deflate along with it.
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The evolution of the postwar regime has found expression in various aspects of national life—for example, in assumptions about capitalism, the American economy, and the role of government in the marketplace; in the development of the major political parties; in the changing definitions of liberalism and conservatism; in the interpretation of pivotal events and the assessment of influential personalities; and in the life and operation of important professions and institutions, such as law, philanthropy, book and magazine publishing, and higher education.
After nearly every national election, there is a new debate as to whether one of the dominant ideologies in American life is expiring. During the 1980s and 1990s, some conservative pundits asserted that “liberalism is dead!” Following the election of 2008, several loud voices on the left proclaimed the “death of conservatism.” These were mostly ill-informed forecasts, as argued in Part II, primarily because liberalism and conservatism are woven into the postwar regime as two sides of the contest over the role of the state in the marketplace. Each side has built up a vast infrastructure of supporting institutions, interest groups, think tanks, television networks, newspapers and magazines. Meanwhile, the nation has divided into more and more polarized doctrinal groups—into a conservative nation and a liberal nation. It is true that one or both of these doctrines could disappear, but only as part of a process that involves the collapse of the postwar regime itself, in much the same way that the secession movement disappeared with the Civil War, and laissez-faire capitalism with the Great Depression.
This polarization is also apparent in other institutions of American life—for example, in philanthropy, a field that is usually thought to be purely charitable in nature and thus nonpolitical. The chapter “Investing in Conservative Ideas” describes how liberal philanthropy first evolved in the United States in the 1960s under the leadership of the Ford Foundation and several other large New York institutions. These foundations invented the concept of “advocacy” philanthropy, through which they funded groups in different fields that lobbied, filed lawsuits, and staged protests in behalf of liberal policies. This strategy proved so effective that several conservative foundations followed suit in the 1970s to fund their own mix of advocacy groups, magazines, and university programs. Though the liberal foundations have had far more money at their disposal, the conservative philanthropies have fought them to a draw in promoting their particular philosophy of government and economics.
A somewhat different iteration of this process has played out in higher education, where the liberal-left has seized nearly total control, to the point that conservatives are hard to find on major college faculties. As I argue in “The Left University,” the American university evolved roughly in tandem with American liberalism. In the early decades of the twentieth century, Progressives invented a public or political purpose for higher education when they argued that professors and university-trained researchers could staff government bureaus and regulatory bodies as neutral experts to act in the public interest. The university, it was argued, would stand above and outside politics, in contrast to economic groups like corporations and labor unions. Liberals in this way gradually took control of higher education under the conceit that their research agenda was neutral or objective in matters of politics and policy. Later, in response to the activism of the 1960s, university faculties embraced the new doctrines of feminism, environmentalism, group rights, diversity, and cultural change, at exactly the same moment as liberals outside the academy began to embrace them. It was not long thereafter when liberals came to dominate the Democratic Party. By the late 1970s, the politics of the American university looked very much like those of the national Democratic Party.
Naturally, conservatives and Republicans are about as welcome in that academic setting as they would be at a Democratic national convention. In response, they set up their own intellectual institutions to provide an outlet for their views and to counter the influence of the academy. Here, as in other areas of national life, the opposing sides in the national debate have retreated into their respective subcultures.
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Shattered Consensus outlines the lineaments of the postwar consensus and the gradual process by which it has come apart. It does not endeavor to specify when or how the current regime will fall or what will replace it. Rather, it only suggests that a certain degree of consensus is required in order for a polity to meet its major challenges and argues that such a consensus no longer exists in the United States. That being so, the problems will mount to a point of crisis where either they will be addressed through a “fourth revolution” or the polity will begin to disintegrate for lack of fundamental agreement.
This forecast of a “fourth revolution” in the years ahead does not mean