In the United States, think tanks played their due part in the Republican realignment of 1980. In Washington, two Catholic conservatives, Edwin Feulner and Paul Weyrich, started the Heritage Foundation (1973), and the following year Murray Rothbard, a libertarian thinker, founded with friends the Cato Institute. Both institutions struck political Washington to begin with as a rest home for aging cranks. Political Washington had soon to think again. Under Ronald Reagan, libertarian economics and conservative moralism entered the pamphlets and speeches of Republicans. Soon libertarians, antigovernment campaigners, and moralizers became the party’s mainstream, pushing moderate Republicans to its fringe or out of the party altogether.

Thatcher attacked the state while using its power to free that of the market. Reagan similarly ran against government so as to run government with like purpose. Whereas Thatcher made government sound selfish or naughty, Reagan made it sound comical. “The nine most terrifying words in the English language,” he used to say, “are, ‘I’m from the government and I’m here to help.’” The differences ran deeper. In Britain the arguments of the 1970s and 1980s were among liberals. It was a rerun of the old inner-liberal argument, met many times in this liberal story, between more government and less government. Thatcher was right-wing and for all her talk of freedom was overfond of power, but she was still liberal. Despite her party label, Thatcher passed Hayek’s checklist for not being conservative with relative ease. In the United States, matters were more complicated. For the American right had liberal and nonliberal streams.

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Politically speaking, in the 1950s Democrats and Republicans converged at the liberal center. The liberal historian Hartz and the liberal student of politics Lipset were not alone in treating the United States as if it in fact was as John Rawls thought it ought to be: a country of manageable disagreements framed by overarching liberal concord. American politicians had always wrapped themselves in the flag of liberty. Equally they had claimed to stand for America above party. At midcentury, to left and right, it was possible to believe in an opportune pairing of liberalism and Americanism, that mix of civic pride, national loyalty, and provident superiority that had served as an image of unity in a period of rapid immigration before 1914 and in two world wars.

By the 1970s, the pairing of liberalism and Americanism was more contested than believed. Each element was under challenge. To the left, identity politics helped split the old Roosevelt-Truman Democratic coalition. The party began to caucus less by state and city than by color, ethnic group, and gender. To the right, moral politics began to harden and narrow the Republican Party, making a once minority wing into a dominant, illiberal core. Crudely, you no longer needed to be all-American to be a good Democrat. To be a good Republican, you no longer needed to be all-American. You simply needed to be good, which meant upright, God-fearing, and, in a partisan shift of meaning, liberal-loathing. Whether as the description of a historic achievement, the delineation of a social ideal or as a partisan political label, the word “liberal” in American politics became a flag of war.

As the postwar American right recovered its intellectual self-regard, four groups stood out. One, mentioned earlier, was represented by market economists and old critics of the New Deal. A second group included anticommunists, smoking out collectivists in an anticollectivist society. A third group were traditional conservatives, disturbed by cultural democracy, permissiveness, and a loss of “civility.” William Buckley, a quick-witted Catholic controversialist, united and modernized the anticommunists and the traditionalists. Buckley started the National Review (1955), which played a similar part in the right’s revival as the New Republic had played in the liberal tide forty years earlier. Buckley had a talk show, Firing Line—again, on public television—in which bien pensants leftist guests were sometimes surprised to meet a well-informed, dialectically formidable adversary. Buckley’s achievement was to weed out the crackpots and make the ideas of the intellectual right count again. A fourth group were the New York neoconservatives. Many were ex-Marxists, and all were liberals, though liberals who had been “mugged by reality,” in the words of one of their luminaries, Irving Kristol. The neoconservatives cohabited with Nixon and Reagan, but mostly abandoned the Republicans when the Republicans abandoned the center.

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Among Republican activists, the “antigovernment” movement had cross-cutting streams. One was a libertarian, almost anarchist right, with roots in the American past, in antifederalism and localism. Another was a diverse crowd of resentful conservatives, who had not accepted modern American society, either for its multiracialism or its permissive secularism. Suspicion of elites, dislike of the “coasts” and a discourse of states’ rights or local community linked the two first groups. A larger stream than either was accounted for by disappointed liberals. Such voters had expected government to protect them from the ups and downs of capitalism. They had expected the United States not only to win its wars but to be loved by the world for doing so. Unlike libertarians, the disappointed did not want a political scrap. They did not telephone talk radio to bellow about big government and elite conspiracies. Politics, if anything, bored the disappointed. Many were independents, without durable party loyalty. Sometimes they had voted Republican, sometimes Democrat. They were the center of gravity in American elections, its broad, pragmatically conservative middle ground that was generally needed to win national elections. Unlike libertarians and resenters, the disappointed were at home with modern government in modern society. Their parents or grandparents had voted for Roosevelt-Truman Democrats. The disappointed, in the large sense, not the partisan sense, were liberals. In 1972, disappointed liberals voted for Nixon and twelve years later for Reagan. Though the term jars given present-day American usage, inclusion of the disappointed as liberals better describes the actual political ground. A fourth element in the “antigovernment” mood of the 1970s must not be forgotten. It came from Democratic liberals who exposed the warfare state’s misuse of spies and the political abuse of power, mostly visibly in the Watergate scandal that led to Nixon’s resignation in 1975. Those liberals had not meant it, but their campaigns of investigation and exposure, then as now, also encouraged disenchantment with government.

Reagan understood those many “antigovernment” streams. As an old Roosevelt Democrat and former head of Hollywood’s actors union he was himself one of the disappointed. Though a divorced, nonchurchgoer, he took the Bible literally, it seems, and could tell a fundamentalist Christian audience in sincerity that there was “sin and evil” and that everyone was “enjoined by scripture and the Lord Jesus to oppose it” with all their might. He knew, as Lincoln had known, how to sneak behind the proprieties and appeal to white prejudice. He rocked audiences with jibes at big government’s expense so skillfully that they forgot in their glee that big government was what Reagan was asking them to let him run.

Reagan was courteous, relaxed, fun at dinner for his guests, impatient with detail and ruthless with colleagues. It was said he made Americans feel better about themselves but was indifferent to how many of them lived. He seized rather than made his opportunities. He inherited a defense buildup started by his predecessor. He inherited a burst of high-tech creativity that buildup had kick-started. He inherited a chairman of the federal reserve, Paul Volcker, who had pushed interest rates to 11.5 percent a year before Reagan took office, a brutal step which by early in the new presidency had cut double-digit inflation to 3.5 percent, so smoothing a path to the long economic boom that lasted into the new century. Reagan inherited a superpower rivalry that the United States was on course to win as its Soviet rival, mired in its own failures and shadowed by a rising China, began to implode. With practiced grace and skill, Reagan made the most of those opportunities. He knew when to push at an open door, calling dramatically in Berlin in June 1987, “Mr. Gorbachev, tear down this wall.”

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Reagan told his barber, Milton Pitts, that he had come to office with five aims: restoring morale, lowering tax rates, increasing spending on defense, facing down the Soviet Union, and scaling back government. He had done all but the last, he said. If so skilled a politician as Reagan, who was dealt such a good hand and who had such a popular following, was unable with all the powers of office to complete his fifth task, perhaps the answer was that America’s disappointed majority did not really want it to be completed. Perhaps they did not want less government but better government, and government they could again place their confidence in.

Reagan was remarkable in combining in one body several political beings. He appealed to two wings of American liberalism, New Deal Democrats and tight-money big business Republicans. He knew how to appeal, too, to illiberal Bible Belt Christians and to beyond-the-liberal-fringe libertarians. After Reagan, the Republican Party fell into the hands of the religious right and antigovernment fundamentalists. A once liberal party shrank into something at or beyond the edges of liberalism. In the decades after 1980, the share of American voters calling themselves Republican halved. A coin-toss win of the presidency in 2000 and the gerrymandering of congressional districts disguised large and growing Republican weaknesses. Nationally at any rate, Republicans were becoming a minority party. They were again becoming a “stupid” party in the sense that Mill and Keynes had meant when calling British Conservatives stupid: a party that turned its face from the facts and refused to recognize change.

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Excerpted from "Liberalism: The Life of an Idea" by Edmund Fawcett. Published by Princeton University Press. Copyright 2014 by Edmund Fawcett. Reprinted with permission of the publisher. All rights reserved.