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Let’s start with the incomplete welfare state. All Western democracies emerged from the stresses of the Great Depression and World War II with some kind of welfare state. The extent of these welfare states varied, however. In Social Security the United States created a relatively generous public guarantee of retirement income, comparable to or better than that of other wealthy countries. On other matters, however, the U.S. welfare state was much less comprehensive than those of other countries. In particular, we’ve never had guaranteed health insurance.

Yet by the 1960s most Americans did have health insurance, many workers had disability insurance, a substantial number had generous unemployment benefits and retirement benefits—with none of these things provided by the government. Instead they were provided by private employers. As the political scientist Jacob Hacker has pointed out, postwar America evolved a welfare state that, measured in terms of social welfare spending as a share of the economy, was almost as big as those of Western Europe. But in the United States much of that spending came from private employers rather than the state.[8]

Why did the private employers provide all these benefits? In part because insurance was a good way to attract employees, especially during World War II, when wage controls prevented companies from competing for scarce labor by raising wages. Also, compensation that takes the form of benefits has the advantage of not being subject to income tax, so that a dollar given to an employee in the form of health benefits is worth more to the recipient than a dollar paid in straight salary. But after the war benefits became a prime target of union negotiations. In its explanation of why Reuther belonged in the top one hundred, Time wrote that

Reuther kept pressing for new and better benefits, and over time, the union won the things that employees today take for granted. Year by year, workers gained, among others, comprehensive health-care programs, tuition-refund programs, life insurance, profit sharing, severance pay, prepaid legal-service plans, bereavement pay, jury-duty pay—plus improvements in vacations, holidays and rest time.[9]

These demands didn’t place an unacceptable burden on auto companies and other large employers: In an age before widespread foreign competition they could pass on the higher costs to consumers. After all, each auto maker, each steel company, knew that its domestic competitors were negotiating the same deal.

However, from the point of view of the owner of a medium-size business—say, a department store—union demands didn’t look so tolerable. Such a business might not face international competition, but it faced competition from other businesses that might not be unionized, including ultrasmall businesses, mom-and-pop operations, that were too small to become union targets. For owners of medium-size businesses the growing demands of unions were infuriating, even threatening.

Barry Goldwater’s family owned a department store in Phoenix. As Rick Perlstein puts it in his remarkable book Before the Storm: Barry Goldwater and the Unmaking of the American Consensus, Goldwater was a “merchant prince”—a member of the class most likely to push back against the growing demands of the union movement. Perlstein points out that owners of medium-size, family-run businesses were the core constituency of the “Manionite” movement, one of the founding sources of movement conservatism. (Clarence Manion, the dean of the Notre Dame law school, was a pioneering direct-mailer who crusaded against the “Internationalists, One-Worlders, Socialists, and Communists” he believed infested the government.[10])

Goldwater also came from Arizona—a state where the “right to work,” a legal prohibition on contracts requiring that a company’s workers be union members, is embodied in the state constitution. This illustrates the second reason labor victories of the New Deal era hadn’t settled the role of unions in the American polity: Although unionization was securely established in the nation’s industrial heartland, unions were much less prevalent and powerful in what would eventually be known as the Sunbelt. In the fifties manufacturing workers in the South were only about half as likely to be unionized as those in the Midwest. As the nation’s industrial base and population shifted south and west, many influential people—particularly much of the existing power structure in the Sunbelt—wanted to make sure that the labor movement didn’t follow.

Strident antiunionism was what initially gave Goldwater national prominence. His remark about the menace of Walther Reuther was made during a Senate investigation of alleged union corruption. Despite the best efforts of the investigators, they couldn’t find any malfeasance on Reuther’s part: He was so scrupulous that he even paid his own dry-cleaning bills when traveling on union business. For real corruption, you had to look at Jimmy Hoffa’s Teamsters, one of the few unions that supported Republican candidates. Nonetheless Goldwater’s role in the investigation solidified his position as a leader of the emerging right wing of the Republican Party.

Antiunionism gave movement conservatism its first solid base in the business community. From the 1960s on, business owners who hated unions were a solid source of financial support. And this support was rewarded. As I’ll explain in chapter 8, in the seventies and eighties America’s political shift to the right empowered businesses to confront and, to a large extent, crush the union movement, with huge consequences for both wage inequality and the political balance of power.

Building an Intelligentsia

As movement conservatism was acquiring a popular base and a solid base in the business community, it was also acquiring what amounted to a party intelligentsia. To be sure, the original “new conservatives,” exemplified by Buckley and the National Review, were intellectuals—but they didn’t provide the kind of steady drumbeat of studies and articles, combining seemingly serious scholarship with relentless support for the right’s position, that nowadays always accompanies any debate on public policy. Movement conservatism’s intelligentsia didn’t really take shape until the “new conservatives” were joined by the neoconservatives, a quite different group, and both were given regular employment by a powerful institutional infrastructure.

The origins of neoconservatism can be traced largely to two groups: Chicago economists led by Milton Friedman, who led the pushback against Keynesian economics, and sociologists led by Irving Kristol and associated with the magazine The Public Interest, who rebelled against the Great Society.

The conservative economic intelligentsia emerged first, because the real truths of economics create a natural propensity in economists to go all the way to free-market fundamentalism. As Adam Smith saw, and many generations of economists have elaborated, markets often have a way of getting self-interest to serve the common good. Individuals seeking only gain for themselves are led, “as by an invisible hand,” to produce goods that other people need, when they need them. It’s a powerful and true insight. Even liberal economists have a healthy respect for the effectiveness of markets as a way of organizing economic activity.

On the other hand, sometimes markets don’t work. This point was driven home to economists, as well as everyone else, by the searing experience of the Great Depression. In the early years after World War II, with the memory of the depression still fresh, most economists believed that keeping the economy on track required an extensive role for the government. Mainstream economics rejected calls for a planned economy, but it did accept the need for government intervention to fight recessions, as well as a generally increased role of government in the economy as a whole.

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8.

Jacob Hacker, The Divided Welfare State, Cambridge University Press, 2002.

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9.

http://www.time.com/time/ time100/builder/profile/ reuther2.html.

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10.

Rick Perlstein, Before the Storm: Barry Goldwater and the Unmaking of the American Consensus (Hill & Wang, 2001), chap. 1.