Close Enough to Socialism

Amity Shlaes on The Great Society

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Bob Zadek: This morning’s guest has written an important book that coincidentally covers the start of my voting and political life.

Amity Shlaes revisits one of the most dynamic, positive and negative periods in recent American history, a period that starts with the JFK administration and ends with the end of the first term of the Nixon administration. Her book, Great Society, A New History, revisits this. There has been so much scholarship or writing that purports to be scholarship covering this period, the good, the bad, and the ugly, as Clint Eastwood and others are fond of saying. Her book is replete with anecdotes, interesting insights into important figures, probably the most important of which is a wonderful story about a former President Ronald Reagan.

Amity, welcome to the show this morning and thank you so much for writing your book. Amity, the title is Great Society: A New History. What was the old history and give us an idea of what is new in history that corrects the eras of all of the old histories of Great Society?

Revisiting History: The “Great Society”

Amity Shlaes: Thank you. Glad to be here. The old history is kind of a collage. When you covered the 1960’s in school, one of the problems is that it has nothing to do with the substance. It’s the format and the narrative that falls apart. Usually authors go psychedelic, if you know what I mean. So you get napalm mixed in with Woodstock and then Charles Manson and civil rights and assassinations. It’s violent and hard to organize for the human mind and that is what the experience of the decade was as well. It was a tumultuous decade and it did involve drugs. When you go to a museum, it’s sort of like the art of the period. It goes abstract. It goes weird. It’s kind of entertaining. It’s definitely new, but it’s hard to remember.

I want to mention that even before you get to politics and philosophy. The second thing is we tend to think that Lyndon Johnson’s Great So-ciety was heroic with an emphasis on the incredible facility with which President Johnson pushed through legislation. In this book, I talk also about Presidents Kennedy and Nixon. President Johnson pushed through quite a bit of legislation. It was said he passed laws the way other people eat chocolate chip cookies.

So that facility is interesting and involved a technical master of the Senate, but it begs the question of whether the legislation worked and advanced the principles of the United States towards prosperity, well-being, and happiness of Americans. And the evidence is that most of that relation was overly ambitious, sometimes wrong minded, sometimes folly, and sometimes incredibly destructive. So that’s the second revision. I try to tell a narrative book, I try to point out the consequence of the laws rather than just emphasize the facility of the lawmakers. And third, I do include Richard Nixon in the Great Society. There’s far less difference between Johnson and Nixon than we assume. Both parties wrote exaggerated laws that hurt the economy and laws which decidedly depressed the decade of the 1970's.

Bob Zadek: Amity it is quite interesting. You have a wonderful and important anecdote about Ronald Reagan that of course I’m going to ask you to share with our audience.

Reagan has a walk-on role, an important role in the book, even though you don’t cover his presidency. You also mentioned LBJ, JFK and Nixon as the three administrations. When I think about a president or an important public figure, in trying to understand them, I ask myself what is it that drives them? What is the philosophical underpinnings of the President?

It helps me understand them. LBJ, of course, as you point out in your book was the acolyte of Franklin Delano Roosevelt. He was Roosevelt on steroids. JFK of course, didn’t really have a stated philosophical underpinning. His underpinnings were simply the best and the brightest of Harvard and all of the so-called intellectuals, maybe true intellectuals from Harvard staffed his administration. He gave them great power and had great faith in their intellect to do the right thing.

Nixon was guided by Nixon, nothing else. There’s no indication Nixon had any philosophical underpinnings.

LBJ and JFK of course were Democrats. LBJ, was a very liberal Democrat. JFK not so, he might even have qualified by his thinking as a Republican in many ways. Nixon was out there with no underpinnings.

Is that a fair summary of their governance?

Amity Shlaes: It is a fair summary, but it’s not the only summary. All these men had underpinnings and philosophies they believed in, but all men, whether in the oval office or not, are a collection of impulses and under pressure in the Presidency, some of the wrong impulses come out or some of the unexpected ones come out. I don’t think Richard Nixon believed he was put in office to expand governments. It just ended up that he did that because of other impulses in his personality. JFK was a little bit like a figure in the Roman Senate. He really did believe in representative government. He said that men need leaders to make decisions for them. That is not necessarily always wrong.

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I fault him for his lack of interest in economics. He basically didn’t take economics seriously. He had a little bit of the banker in him from his father. His father was the head of the FCC, the first early heads of the SEC attorneys and exchange commission. So JFK was concerned about the currency, probably rightly. He was concerned about the foreign challenges which came over him, the events that changed and shaped his Presidency. He wasn’t really interested in free markets but he was interested in individual.For all three of them, this was an idealistic era. Everyone who wanted a Great Society were idealistic to either the public sector or the private sector.

Most of the time we ended up choosing the public sector as our vehicle. JFK was a little bit reserved there. He liked the symbol such as the rocket to the moon or American greatness. He liked to win the cold war. He was not a Franklin Roosevelt child in the way LBJ was. His presidency didn’t get very far. Congress wasn’t with him. When LBJ came in after the tragic death of President Kennedy, LBJ had majorities in Congress and he had support from the sheer sympathy vote after the sudden death of a preceding president, so he had absolute mastery of the legislative process. Lyndon Johnson did a lot of things that JFK considered such as Medicare, Medicaid expansion of welfare. Massive funding for education which was supposed to lower the cost of college and did the reverse.

It’s a wonderful list. And in LBJ’s his own memoirs, he writes at the end of the books all the laws he helped pass. Those are his credentials and his pride. Of course there was civil rights legislation as well. LBJ had two shifts. I don’t think LBJ ever imagined everyone would be entitled to everything. He wanted equal opportunity for all Americans, including minorities at the beginning, but he also wanted civic responsibility. “Ask not what your country can do for you, ask what you can do for your country.” He shared that with JFK. Eventually though, since people are collections of impulses, LBJ broadened the mandate and he went from equality of opportunity to a mandate for equality of results.

That’s where I argue he went wrong. Thomas Sowell is a character in the book. I often quote him. He is the canary in the coal mine.

“People who have been trying for years to tell others that Negroes are basically no different from anybody else should not themselves lose sight of the fact that Negroes are just like everybody else in wanting something for nothing.” — Thomas Sowell

Nixon was driven by good sense, good judgments, good attorneys, but had an incredible desire from power as well. Once he got into the presidency, he wanted to stay there. Like LBJ, he had to contend with the Vietnam war. Both men took measures they might not have undertaken to keep tranquility at home in the tumultuous time. Nixon expanded food stamps, sustained the poverty office, which Republicans abhorred, and he sustained Johnson’s war on poverty, even though that was a kind of an absurd contract. Particularly for LBJ and Nixon it was all about power by the end.

The Creation of “Poverty”

Bob Zadek: LBJ, as I said, was inspired by Franklin Delano Roosevelt. He worked under and admired Roosevelt. When Roosevelt took office we were in the throws of the Great Depression, and that was the problem that he undertook to solve. LBJ takes power upon the sudden death of course, of JFK. We had a real problem, which was the problem of the lack of political and economic power for blacks in America. Clearly that was a problem that attention. LBJ’s focus, however, was on poverty. Was there a problem with poverty and economic growth at the time Johnson took office? Was there a poverty problem more so than in prior generations, much like there was the Great Depression when Roosevelt took office? Or, did Johnson just want to be another Roosevelt?

Amity Shlaes: There’s a huge distinction between the 1930s when Roosevelt brought the New Deal and the 60s when LBJ bought the Great Society. In the 1930s one in four men was unemployed and the stock market went down 90%. In the 1960s we were doing pretty well and indeed, poverty as it existed came down dramatically in the 1950s, so the question was whether poverty would fall on its own accord?

Perhaps it can never fall below a 15 or 10%.

Or, do we need to do something? And as you point out, Johnson thought we needed to do something and he created the war on poverty, in which he promised not to create a palliative or anything like that. He promised to cure poverty. He used that verb, to cure. And what happened with the Great Society is that poverty dropped though not more rapidly than it had been dropping before.

Then it settled with all our Great Society commitments around 10% where it is today. So we failed in some way. And it is important to remember that at the time, just about everyone thought curing poverty would be no problem. The great writer Norman Pohdhoretz, who had served overseas, and anyone who served particularly in Europe, could see major changes after the victories of the U.S. in WWII.

It is said that the great society was just a mopping up action. He said this would not be hard to cure poverty and said everything right. We had terrible discrete problems. We had lynchings. We had only one in ten blacks registered to vote in the state of Mississippi and so on. We had bad problems, whether we a national disaster, there’s no evidence for that. It was a bigger program than the nation needed written in the name of idealism.

Bob Zadek: Two observations. Poverty is a very slippery, almost sinister the word. What does it even mean? If poverty means “woe is us, some people have less than others.” Then you just say, “duh. Of course some people will have less than others. That’s not a problem. That’s simply life.”

Amity Shlaes: What you’re alluding to is an important question today.Today there is absolute poverty. Does this family have enough to eat? Does it have heat? May its children attend school, right? That definition of poverty is in slippage to defining poverty as relative to the wealth as another person. The second definition is not acceptable but it’s much more fun for policymakers because then there is always poverty, because poverty is always defined as relative to wealth. So, you can see that actually recently the White House has been fighting a rearguard action on that with the economic report of the president. I think it is chapter nine. Anyway, Kevin Hasset, who was the chief advisor to the president, noted that in terms of starving hungry, we have gotten rid of most of poverty, whether through economic success or through payments to poor people in benefits.

So it is an important term. What is interesting is that in the early 1960’s we didn’t talk much about poverty. If you go to the economic reports of the president of the 1950s, you don’t see that word “poverty” too often. You see want, assistance, need, orphans and so on. But it was only in the 60s when we declared the existence of poverty. Today, the book Hillbilly Elegy is often quoted as a meme about the poverty and stubbornness of trouble in Appalachia. In that time, there was a book called the other America by Michael Harrington, which looked originally at that same area and said that it is the poor America you don’t know about, which is poverty. And in Washington they generated a new metric, the poverty metric. Once we began to quantify it, then it was official. In fact, Martin Luther King said, “we didn’t know we were poor until you told us. We might be having hard times and have had mostly hard times in the past, but that doesn’t mean that poverty defines us until someone tells it.” You want to consider the destructiveness of that label.

Bob Zadek: Just a political observation. Declaring a war on poverty is political genius, it is like declaring war on drugs and a war on terror. There can never be victory. No one can ever say, I’ve come to work this morning and realized we have just killed our last terrorist. So let’s close it up guys. We won. The war on terror is intellectually incapable of ever ending, which means all of the abuses on our civil liberties and our freedom will never go away. They are not temporary. They are permanent.

The war on drugs can never be won. The war on poverty can never be won. So it is political genius because it assures the politicians will always have an excuse or rationalization to spend money. I think it’s absolutely brilliant to declare war on poverty because you’ve assured yourself reelection and unlimited funds to spend on a war that can never be won it.

Declaring a war on poverty is political genius, it is like declaring war on drugs and a war on terror. There can never be victory.

I think I can summarize what you’ve said by saying that the poverty was a war on a circumstance that never really existed any more in the 60s than anytime before or after it. Martin Luther King, who campaigned on political equality, political participation, and correcting all of the laws that were abusive and harmful to minorities. He didn’t spend much time that I can recall or that I read about complaining about poverty as such. Maybe that’s what you said a few minutes ago when you said many people didn’t realize they were poor until the government pointed it out to them.

Amity Shlaes: Martin Luther King had mission creep. The best part of the student movement and Martin Luther King’s movement was the work in the South where change needed to come. Change needed to come. Then that movement was translated to the North. I think some of the listeners will remember that Martin Luther King spent some time in Chicago trying to desegregate housing and trying to work with landlords to change neighborhoods that had cultures of covenants in Chicago even though the law had shifted. It was a less well-defined project for King. But he also marched against poverty. Leaders change. One of his allies was Walter Ruether, the man from the United Auto Workers, who helped to bail MLK out of the Birmingham jail.

The unions wanted this to be a bigger campaign, not just about voting rights in the South or an end to lynching in the South, but they wanted everything to be equal everywhere. And that was an important ally for Martin Luther King, so that was sort of where the whole movement was turning. These movements lost their focus when they did that because economic change generally is up to the individual, not to the government and usually isn’t brought about by a new law.

Socialism: Then versus Now

Bob Zadek: You use the word socialism in your book several times. You write that Johnson’s effort to build Great Society was “close enough to socialism” so as to cause an economic tragedy. Now we have Bernie Sanders and Elizabeth Warren in the news. Warren claims to be a capitalist to pick up a few votes. Sanders claims to be a socialist. Socialism is in the news every day, accurately or inaccurately. Tell us why Lyndon Johnson would never have self identified as a socialist and why there was little in his policies that were socialist as an economic concept. So tell take us into the word socialism in the Johnson administration and tell us about the relationship.

Amity Shlaes: In the cold war, we said over there are the communists, and the biggest socialists lived in Russia or Hanoi and they redistribute everything. We don’t have that. We have a little bit of comfort or social programs to sustain our capitalism. But we’re not traitors. We just add a little bit of government here.

We just add an extra blanket for a soldier to keep capitalism strong. We do that here and we do it in Western Europe. Social democracy in Western Europe was to protect against true socialism, to keep the Europeans happy and allow them to rediscover prosperity so they won’t go communist. That was the argument and it made it very hard to admit to concede the damage that even a little bit of socialization does.

You don’t have to report to Moscow to hurt the economy and hurt people. You just have to impose programs that make the economy uncompetitive, that make life too expensive for people and in the end killed jobs.

And that was the beginning of what happened in the 60s with social democratic measures. Because young people speak of socialism today, well we can speak of it too, and we can say that a little bit of socialism, social democracy does quite a bit of damage.

Since we are not all afraid that Russia is going to invade, we can be honest about that. So Johnson thought he was adding benefits here and there to keep Americans comfortable and sustain our democracy, solidity, loyalty, and our prosperity. But it turned out that he was adding and what Nixon added makes things too expensive, so we had high unemployment and high inflation in the 70s. I think the 70’s are the missing part of the story for younger listeners.

They don’t remember what it was like when you had two fewer bedrooms in your house because your interest rate was over 15%. They can’t imagine an interest rate that would be that high because right now we’re in a kind of Oxycontin of low interest rates and we can’t imagine that interest rates will ever go high. Well they sometimes do, particularly when a government overspends after a while.

So what I tried to show in the book was that even a little bit of socialism, causes a lot of damage and makes for a lot of sorrow. Today, more proximate for younger people perhaps, is that the social democratic programs to be introduced will be an incredible burden on them and prevent them from having a good old age because Medicare and Medicaid are too expensive and they will pay the tax through inflation by government or through simply higher statutory taxes.

There are a lot of consequences short and long term from expanding the government. I want to mention that the 60s were very interesting because there was a lot of serendipity and happiness in that period too. Everybody wanted the great society, even the private sector. And in the book I profiled three companies. One is what became Intel, which was Fairchild camera at the time. Their scientists and engineers, Bob Noyce, discovered that that science could work in the private sector and didn’t need to be part of the military industrial complex and could improve lives and give us the small electronics we now have in our hands. They thought these could improve everything in every way as idealistically and dramatically as any government program. I trace the evolution of Fairchild into Intel in the book and the importance of the individual and the ideas they came up with.

Government is a sort of Murphy’s law. Everything that can go wrong does go wrong, but there’s also Moore’s law, that we geometrically increase the quality and efficacy of little chips in our lives to in the end geometrically increase our own wellbeing.

Another company in the book is Toyota, which challenged Detroit and said, Detroit, Henry Ford, UAW, you’re too expensive. You are murdering your own city by pricing our American auto industry out of existence. So Toyota is the intruder in the book, the bad news messenger, and the third company in the book is General Electric.

The Story of General Electric and Ronald Reagan

Bob Zadek: It is fascinating. Your discussion and the points you raise follow precisely the outline I have in front of me. I don’t need my outline. You just know where I would love to go next. So of course, GE is exactly what I want to talk about, because in the background during LBJ and JFK and Nixon, is a B grade actor who becomes, of course, President Reagan.Tell us if you can briefly, but include all the juicy details, how General Electric, a fortune 500 company and one of the most trusted companies in America, if not the world. What in the world did they have to do with delivering President Reagan to us?

I mentioned earlier, LBJ was driven by and guided by Roosevelt. JFK was guided by to a substantial degree, the brain trust, the best and the brightest of Harvard. Nixon was guided by Nixon. And Reagan, as we will learn, was guided by Frederick Hayek, an Austrian economist. When he started he was a rock ribbed Democrat in the Franklin Delano Roosevelt mold. So tell us about GE and president Ronald Reagan. It’s a wonderful story.

Amity Shlaes: It starts with the company General Electric. Companies have souls. They’re like people, and G.E.’s soul was divided. GE on the one hand was kind of a bunch of mad men who were quite cynical and thought a lot about marketing and wanted to be cool and create slogans and have good distribution and make money and work with government very cynically. GE was a big provider and sold turbines to the Tennessee Valley authority, which is government from the new deal. On the other hand though, there’s the old GE, which was very individual. Thomas Edison, a man alone in a lab, comes up with an idea that changes the world. That man works better when he’s really all alone and he doesn’t think anything about who is going to buy the product.

Certainly not about the next government contract. And GE was concerned about unions actually. They were concerned that unions were pricing American innovation out of its own market. And there was a fellow named Lem Boulware who is completely forgotten. He was kind of a guru there. Anyone who gives money away anywhere might want to think about this because Boulware was making essentially an intellectual policy-philanthropic bet, which is that he needed to train people in the merits of free market capitalism in the history of GE, with Edison by reminding them where growth comes from.

It is like spending money on backing a capitalist history book. That was what he wanted. He created a propaganda mill at GE to teach the workers all about the benefits of capitalism. He would hand out pamphlets about Hayek and the free marketer and taught them all about how ideas come about. It seems like a silly effort to many.

Pages from G.E.’s propaganda mill.

One thing he did was hire an aging actor who was not very popular, a rock-ribbed Democrat at that time, Ronald Reagan, to be the spokesman for all these capitalist ideas. Reagan needed the job and he liked the job, but he wasn’t really sure about capitalism at first. He went around on the rubber chicken circuit and gave lectures to workers and in town halls about the merits of capitalism and the problem with socialism. Gradually Reagan, this actor who was nothing more than a PR man at this point, became convinced of the ideas.

One reason was he followed the stock of GE. He bought some stock for his son. At the beginning of the book, what happened is GE got caught up in its own divided soul. Executives at GE had been colluding illegally in violation of American antitrust law with Westinghouse and other companies in their industry to fix prices and charge too much to the TVA. GE was cheating the American taxpayer payer. So there was a bloody court case, actual GE executives went to jail, which was unusual in antitrust. The unions crowded with laughter at this slip up by GE, their stock went in the toilet, and Mr. Boulware and his department and his little propaganda mill fell apart.

Mr. Reagan was fired and his TV show GE theater was canceled. It all washed up. What’s interesting is Reagan remembered all this. He began to give speeches about markets and what was wrong with the socialization and medicine and so on and his ideas and his performance took hold. So, this long shot propaganda philosophy by Boulware paid off.

Sometimes you undertake a project of political or philosophical education and it does not pay off for 10 or 20 years. It doesn’t pay off till after your dead. But it doesn’t mean that the undertaking isn’t worth it. Boulware’s ideas of free market and Reagan paid off exponentially for those investors over quite a long period. I liked the way Reagan absorbed this blow. He had to lose his job, look around, think about politics. He did correspond with Boulware when he ran for governor, his first big political effort, which was a truly successful run in California. So that’s all in the book. Reagan starts out down, GE starts out down, but they do well later.

Bob Zadek: What’s fascinating is where Boulware had as his goal the education first of the workers, then with the GE theater, an early black and white television program during the 50s and early 60’s, his goal ended up being to educate the public. And not only did he educate the public, but he educated a president beyond his wildest dreams.

So I’m just reinforcing what you said about planting a seed with the gestation period being very lengthy, but sure enough up grows a Sequoia tree or a Redwood tree.

Talk about an accident of Boulware trying to educate workers on the merits of capitalism turning into a two term president who becomes president at exactly the right time, since we were in the economic pits when Reagan took office.

The teachings of the Austrian economists of Hayek. Their teachings is what guided Reagan through the 80s. We look at this arc of Johnson who damaged the economy with his guns and butter policy perhaps spending on the great society. Clearly it was a failure. It gave us the seventies. Nixon imposed wage and price controls and as you said, increased spending for Medicare. Nixon damaged the economy. Along comes Reagan and fixes everything in the glorious economic eighties. Now I’m asking you to go beyond the scope of the book. Why wouldn’t that have ended the argument? Why wouldn’t that show here we live through several decades and we tried one approach, it failed, and another approach and it succeeded. Why are we not still in the Reagan economic era? What happened to the country that caused to now forget that comparison between the 60s and 70s and the economic approach of the 80s.

Amity Shlaes: Amnesia. We are a casualty of our own success. We can’t remember how bad the 70’s were. Remember, the 70s was a period when people thought houses would have to become ever smaller, where we thought we could never turn the thermostat up to 70 again, because we didn’t have enough energy and we never would have. It was a period of scarcity and claustrophobia. We don’t remember that now.

People who are retiring now live mostly in a bull market. Just to give the listeners one measure. Today, we tend to think of an ever-rising stock market as our kind of birthright. You put the money in the plan and the child will have some money for university. The Dow Jones industrial average was flat, and I’m not even counting inflation, from the mid-sixties all the way into the 80s. It did not want to cross the thousand lines. it was a very different experience.

You can recommend the dividends if you want to get a slightly better number. But the average stayed below a thousand, and that’s nominal. When you include big inflation, it is much lower. We have forgotten that. Nothing is new it’s just forgotten. Socialism is not new and socialism’s failure or social democracy’s failures are not new, but we have forgotten about it. Many American’s haven’t served overseas and haven’t seen communism or its troubles. We haven’t lived in place where money doesn’t work. There are lots of those places. One of the things that I do, if you don’t mind me mentioning it, is that I work at the Calvin Coolidge Foundation. And what we do is try to remember the past, because Coolidge lived in a Reagan-like period, a period where we understood the importance of markets, where we understood the importance of federalism restraint of Government.

We like to praise Reagan but Government did grow under Reagan.

Under Coolidge, the government actually shrank.

And your listeners are sophisticated, so are they going to ask is that real or is that nominal? The government shrank in real terms. So how does the president shrink the government and not just nearly contain its growth? Quite an interesting thing.

Bob Zadek: We ought to mention your book on Coolidge. You wrote a New York Times best seller on Calvin Coolidge. It was one of four bestsellers that you wrote. If you don’t mind, I’d like to point out to our listeners that you have also written the bestseller, The Forgotten Man, A New History of the Great Depression. You’ve written a wonderful bio on Calvin Coolidge and you also wrote The Greedy Hand: How Taxes Drive American Americans Crazy.

One of the wonderful things is you introduced us to so many interesting, complex, quirky characters. You not only discussed in great and incredibly accurate detail the work the economic history and political history. But between Tom Hayden and Harrington and Boulware, make the book eminently readable. So not only is it a political history, and not only is it an economic history, it’s a wonderful book, chock full of anecdotes. Tell us about the Coolidge foundation and tell us if you have another project in mind so we can start to salivate uncontrollably.

Amity Shlaes: For the next book I’m taking suggestions. Please email.

For the next book I’m taking suggestions. Please email.

The Coolidge Foundation is dedicated to the memory of Calvin Coolidge and in Coolidge’s honor, the honor of the 30th president, we have a full ride scholarship for academic merit. It is a very expensive scholarship, but it’s worth it. And in addition to the winners who win a full ride where everything goes to college, we also have a program for the finalists. The top hundred kids are called Senators and we would like to support them too. This is about high school effort. So if you would like to support efforts by kids, please consider supporting the program.

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Bob Zadek

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http://bobzadek.com • host of The Bob Zadek Show on 860AM – The Answer.

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