FIFTY-NINE YEARS AGO, William Proxmire, of the now-Rust Belt state of Wisconsin, took the floor of the US Senate in support of a bill that would lower tariffs on imported goods. My then-boss had brought with him a few hundred of the many pro-free-trade letters that our office had received in support of the bill.
Every single letter was written by a member of the United Auto Workers. At the time, it was not difficult to find manufacturing workers who supported the liberal agenda of expanded world trade.
But that was then. I’d be willing to bet that many who wrote those letters urging Proxmire to support free trade, and their children, voted for Donald Trump in droves, helping him to carry Wisconsin, the first Republican presidential win there in a generation.
New research on the Brexit vote from the Centre for Economic Policy Research tells a similar story. Leave-voting districts tended to be once manufacturing centers where limited educational qualifications and inadequate public services made it, according to the authors’ view, “hard to deal with the challenges of economic and social change.”
Liberalism — and not just a reduction in trade barriers — is now in trouble. Initially a set of values that advanced individual rights and tolerance as a hallmark of a well-governed society, liberalism came to embrace a laissez-faire economic model that today places these values in jeopardy. In the process, liberalism has lost sight of the ends that once animated it. Xenophobic intolerance is a symptom, not a cause, of liberalism having lost its bearings, and of its lack of a convincing narrative of what went wrong.
Those ends included protecting religious minorities and defending the weak against the strong. Listen to William Pitt, a member of the British Parliament, in 1763 explaining the political meaning of private property: “The poorest man may in his cottage bid defiance to all the forces of the Crown. It may be frail — its roof may shake — the wind may enter – the rain may enter — but the king of England cannot enter — all his force dares not cross the threshold of the ruined tenement.”
John Maynard Keynes in 1926 explained how the fateful marriage of political and economic liberalism came about: “At the end of the 17th century the divine right of monarchs gave place to natural liberty . . . and the divine right of the church to the principle of toleration . . . the effect — through the new ethical significance attributed to contract — was to buttress property.”
The response to growing inequality in property – “socialism and democratic egalitarianism,” according to Keynes — was contained as a result of “a miraculous union” delivered by “economists, who spring to prominence just at the right moment [with] the idea of a divine harmony between private exchange and the public good.” And so, in the 19th century, liberalism took on board laissez-faire. Its effect would be to empower the rich against the poor and the market against community.
It was partly in response to the ongoing increase in disparities of wealth that, in the first half of the 20th century, liberalism came to embrace a modern conception of democracy. Under pressure from democratic socialist parties and the threat of communist revolution, economic and political elites conceded to the democratization of liberalism: Universal suffrage joined toleration, private property, and competitive markets as a liberal hallmark of good governance.
This extension of voting rights to women and people without property was followed by an expanded role of governments later in the 20th century. In most liberal societies, disparities in living standards fell and real wages rose, especially in the three-decades-long “golden age of capitalism,” following the end of World War II. But with the end of the golden age, in the mid-1970s, things started to go wrong.
In the United States, real wages stopped growing; workers stretched to sustain the living standards of their parents. Others resisted adjusting to unregulated market-driven shocks, refusing to abandon family and neighbors to seek work elsewhere, and watching their communities decay. Especially from the late 1970s onward, and accelerating after the fall of the Berlin Wall, parties on both sides of the aisle in many countries adopted policies to deregulate financial, labor, and other markets. Economic disparities exploded.
Into this combustible mix, the success of another liberal project — integrating the global economy, including migrations unprecedented since the late 19th century — sparked a backlash that has gathered force over the past decade: a xenophobic and parochial narrative blaming “others.”
To many, the story made sense of the boarded up windows on Main Street and of the former welder, now barely managing to get by. It is not convincing if facts matter. But in many countries, it has carried the day in the absence of a competing account, one that might have targeted instead those who had profited from the deregulation of markets.
Liberalism’s perfect storm was thus of its own making: Global laissez-faire provided ready-made scapegoats for growing economic disparities and the decline of once proud manufacturing communities that were the correlates of its domestic laissez-faire.
With universal suffrage, the fate of liberal values is now in the hands of a broad electorate, many of whom (or their ancestors) had been vociferous defenders of liberal freedoms in the past. The advance of democracy — including the extension of the vote to those without property — in the 19th and 20th centuries was driven by movements of workers, small farmers, and the urban poor. Today, the active support of the less well-off is again essential to the defense and deepening of liberal freedoms.
The marriage of liberalism to an economic model guaranteed to promote inequality now makes this unlikely. But rejecting “free trade” in favor of protectionism will only promote its parochial mindset.
Endangered liberal values would stand a better chance in a society committed to defending the weak and vulnerable, as did the early liberals, and to insuring people against the economic insecurities that inevitably accompany a technologically dynamic and cosmopolitan economy.Samuel Bowles is an economist at the Santa Fe Institute and the author of “The Moral Economy” and coauthor of “Democracy and Capitalism.”