Cowboy capitalism rides into sunset
October 21, 2008
This is the story of five presidential speeches - one pending - marking the
ends of political and economic super-cycles, and the beginnings of others.
Franklin D. Roosevelt's speech to the 1932 Democratic convention wasn't,
strictly speaking, presidential. Accepting his party's nomination for
president, FDR still had the office to win, but his victory was a lay-down
The Republican president Herbert Hoover presided over the crash of 1929 and
spiralling unemployment and poverty. In popular memory, Hoover often gets a raw
deal. He assumed power at the tail end of a boom, declaring at his
inauguration, "I have no fears for the future of our country. It is bright with
More culpable were his two Republican predecessors, who steered the country
into a "new era" of capitalism, marked by the retreat of government and a
consumer and equity boom.
Historians have noted how the inflated optimism of the 1920s produced theories
of permanent economic growth, a mania of real estate speculation, and a
turbo-charged sharemarket oblivious to early warning signs of trouble.
If all of this sounds familiar - sickeningly so - it should. It's time to get
reacquainted with the cyclical nature of capitalism - and emotions.
When FDR declared: "I pledge myself to a new deal for the American people," it
wasn't simply the devastation of the Depression he was promising to roll back,
but also the excesses of rampant market capitalism. Historians argue about the
effectiveness the New Deal, with conservatives suggesting it prolonged the
Depression and radicals lamenting a lost opportunity to knobble capitalism. But
its chief legacy was the return of government as a prime player in the
operation of the market and everyday life. Government was back.
The talk was of government as the "broker state" between competing interests
and the protection and advancement of society through welfare capitalism.
This compact remained in place for decades, accepted by both Democrats and
Republicans. Depression and war (hot and cold) cemented the notion of
democratic government as the final guarantor of security and freedom.
In many ways, the sequel to Roosevelt's New Deal came in 1964. Six months after
hastily assuming office on a jet in Dallas, President Lyndon Johnson outlined
his vision for America in an age of uneven affluence.
His Great Society speech proposed deploying government to ensure "abundance and
liberty for all. The Great Society demands an end to poverty and racial
injustice, to which we are fully committed in our time."
This was the apotheosis of big government in America and the conviction that
collective action could positively reshape individuals' lives and
opportunities. Historians have been more equivocal in their assessment.
On January 20, 1981 Ronald Reagan trashed tradition by holding his inauguration
on the west terrace of the US Capitol rather than the east. Greater visitor
capacity, apparently; Reagan always loved an audience. He also trashed the long
era of big government: "In this present crisis," Reagan intoned, "government is
not the solution to our problem; government is the problem." Barely beyond the
troubled '70s - a decade of oil shocks, persistent inflation, low growth,
mounting unemployment, and a conservative reaction to the ills of
permissiveness - Reagan's election marked the decisive turn of a political
cycle that had begun with Roosevelt's New Deal.
The notion that government was the problem, not the solution, became the
political aphorism of our age. "It's my intention to curb the size and
influence of the federal government," Reagan promised. The reality was a little
different, not least with ballooning government debt. Nevertheless, the
anti-government sentiment took hold.
Just as the Eisenhower interregnum of the '50s did not seriously disrupt
Roosevelt's compact, nor did the slippery triangulation of the Clinton years
undermine Reagan's dictum. Cowboy capitalism did not end when the Gipper
sauntered into seclusion at his Californian ranch.
Today, some commentators - including leading American election analysts - think
we are on the cusp of another turn of the cycle. "I believe the conservative
era in American politics that began with the election of Ronald Reagan in 1980
will come to an end in 2008, that this is a transforming election, not just a
change of parties," predicts Professor Allan Lichtman of the American
Nothing is certain, but let's speculate that a President Obama will be sworn
into office on January 20, 2009. No doubt his inauguration speech will be a
soaring piece of oratory, delivered with compelling cadence, and imagining a
new, more united America. But don't be surprised if there is a not so subtle
sub-text: government is back.
Dr Robert Reynolds is a senior research fellow in the faculty of arts and
social sciences at the University of NSW.