The following is the opinion and analysis of the writer:
David Gibbs
One of the most influential figures in U.S. history was the economist Milton Friedman, an advocate of free markets and deregulation, “neoliberalism” as it came to be known. His ideas became so central to policymaking that it is often said that the last half-century has been the Age of Friedman. Ironically, Friedman’s ideas were first implemented on a large scale by a Democratic president, Jimmy Carter.
As a historian, I have spent years studying the politics of the 1970s and concluded that Carter was a deeply conservative figure on economic policy, who sought to dismantle regulations begun during the New Deal. While it is widely believed that Ronald Reagan initiated America’s free market revolution, I have found that Reagan merely continued a process that was initiated by his Democratic predecessor.
The process of deregulation under Carter began with the appointment of economist Alfred Kahn to head the Civil Aeronautics Board, with the task of deregulating the airline industry. Though he publicly presented himself as a political progressive, Kahn held anti-regulatory views that were broadly consistent with those of Friedman. And in private, Kahn also held anti-labor views. In a later interview, he stated: “I’d love the Teamsters to be worse off. I’d love the automobile workers to be worse off.”
Working closely with Kahn, President Carter signed into law the Airline Deregulation Act of 1978, which opened the industry to greater competition, removing government restrictions, eventually phasing out the CAB altogether. The act was widely hailed in both liberal and conservative circles as one of President Carter’s signature achievements, one that was sure to lower ticket prices. The apparent success of airline deregulation led to further rounds of deregulation during the remainder of the Carter presidency, including rail travel, trucking, and finance, as well as additional rounds of deregulation in later presidential administrations. It was President Carter — not Reagan — who began this trend.
In the long run, airline deregulation proved a failure. Research by the Northwestern economist Robert Gordon found no significant reduction in ticket prices, following the 1978 act. Airline companies had consolidated and used monopoly power to raise profits, blocking any benefit to consumers. Such consolidation might have been prevented by vigorous anti-trust enforcement, but anti-trust had largely gone out of fashion after 1970, based on the Friedmanite notion that monopoly is not a problem in a free market economy. President Carter himself showed little interest in the problem of private sector monopoly power.
The main effect of Carter’s deregulation program was to lower wages and living standards in multiple sectors, especially trucking, which became “sweatshops on wheels.” Carter’s deregulation of finance helped propel the financialization of the whole economy, which accelerated deindustrialization and loss of high-paying, blue-collar jobs, while setting up the economy for later financial crises, followed by government bailouts.
Carter’s deregulation program was one of several areas that followed from Friedman’s teachings. Though Friedman never held any official position in the Carter presidency, his neoliberal ideas were becoming the dominant ones, influential in both parties. Accordingly, Carter reduced capital gains taxes for big business, while government spending on social programs to aid the indigent was cut (even as military spending increased). A 1979 bailout of the ailing Chrysler Corporation was conditioned on reductions of wages and benefits for workers.
In fighting inflation, Carter helped to engineer a devastating “double dip” recession that lasted from 1980-82, the worst downturn since the Great Depression. The recession was orchestrated by the Federal Reserve chair Paul Volcker, who had been appointed by Carter and then reappointed by Reagan. While Carter publicly distanced himself from Volcker’s policies, given their harshness, there is no doubt in retrospect that Volcker was doing exactly what the president wanted him to do.
Overall, Jimmy Carter must be remembered as a complex figure, with a very mixed legacy. While he had a productive post-presidency, with numerous humanitarian accomplishments, we should not ignore Carter’s role in lowering living standards for working people, to the benefit of the very wealthy; while laying groundwork for the enormous class divide that endures to the present day.
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