Jimmy Carter was a much better President than he’s given credit for. He was the first genuinely neoliberal President. He was, by a long shot, a stronger candidate than the Democrats chronologically around him (McGovern, Mondale, and Dukakis), and he set the ideological stage not just for Reagan but also for Clinton and Obama. Many of the political economy instincts that Reagan gets credit for actually started under Carter. That isn’t typically acknowledged because parts of both parties find it inconvenient. Many Republicans, at least pre-Trump, quite liked that deregulation and didn’t want Carter getting credit for that. For their part, some Democrats never liked the turn away from New Deal populism and toward neoliberalism. That perspective though is wrong in a lot of ways. As I’ve argued previously,
“There are few words in political economy with more muddled meanings than ‘neoliberalism.’ As Paul Starr, editor of the American Prospect once quipped, “it’s an attempt to win an argument with an epithet.” But why is it an epithet at all? And why does it seem to have such a slippery definition? I think the answer to those two questions are linked: the term ‘neoliberalism’ conflates a wide variety of concepts that leftists dislike so, though that conflation irritates political economists who would rather be conceptually precise, it serves as a handy catch-all for leftists’ critiques of centrist liberals. The thing is though that the centrist liberals are correct and the leftists are wrong. Even the neoliberalism of the 1980s got much right, and today’s Neoliberal Project is better still. In short, neoliberalism is good and those of us who believe in a pro-market progressivism shouldn’t shy away from the label.”
Carter is where a lot of this neoliberalism started and those aspects of Carter’s presidency that were the most neoliberal were the ones that were the most successful. To be sure, there were some aspects of his Presidency that did not go well. The Iranian hostage crisis was a national humiliation for example and, as a candidate, he said some things about race and busing that are simply indefensible, but there’s a number of reasons to think highly of Jimmy Carter, and not just him as a person and his post-Presidency humanitarian work, but of his neoliberal Presidency.
By the mid 1970s, Democrats were four decades into being based on the political coalition and economic policy orientation of the New Deal. The problem for them was that that political coalition was breaking apart and the economic policies it recommended were not appropriate for the economic challenges the country faced during Carter’s presidency. The New Deal political coalition had three legs: Northern liberals, black voters, and conservative Southern segregationists. In the 1930s, the obvious contradictions in such a coalition could be spackled over. By the 1970s, they could not.
Even as far back as the 30s, skepticism toward unions and greater government involvement in the economy was strong among those more conservative Southern Democrats as well as to some Northern Democrats and this had the effect of holding back some of the party’s more assertively dirigiste instincts. While the public liked specific New Deal and Great Society programs such as Social Security and Medicare, they were not as a general principle clamoring for yet more expansions of government. By the 1970s, Southern conservatives were ready to bolt from the party over race and social liberalism. Carter could get around this somewhat, but only somewhat, because he was himself a culturally conservative Southerner and squeaky clean in the aftermath of Nixon and Watergate. That, not anything to do with economic policy, was temporarily keeping those voters within the Democratic fold.
Meanwhile, the main economic problem the country was facing was not 1930s-style unemployment but double-digit inflation. The economic micromanagement that New Deal-thinking would recommend had no credible argument for what to do about that and in fact often made the problem worse. Cost of living was voters’ top concern every single year from 1973 to 1981. So, if we think about where the Democratic Party was when Carter become President in January 1977, it couldn’t go further into big government programs and those wouldn’t have helped fix the main economic problem facing the country anyway.
In this context, it made a lot of sense for President Carter to break with that New Deal style of thinking and embrace deregulation. It is vital to understand that he was not alone among Democrats in thinking that over-regulation was hurting the economy and squeezing consumers. Even people usually associated with the left flank of the party like Ralph Nader and Ted Kennedy held similar views. New Deal regulations had effectively cartelized a number of industries, stifling innovation and driving prices upward. Carter understood that that the nation’s intellectual mood and its economic challenges required moving against this, saying in his 1978 State of Union address, “I know that the American people are still sick and tired of federal paperwork and red tape… Bit by bit, we are chopping down the thicket of unnecessary federal regulations by which government too often interferes in our personal lives and our personal business.”
Not long there after, we got the Airline Deregulation Act of 1978. Prior to this act, routes, market entry, and prices were set up by the government. That limited competition, kept airfares high, and meant that flying was only for the elite. Deregulation lead to the creation of new airlines, the more efficient hub-and-spoke system we see today, and generally much lower prices over time. By 1983, “air fares in the new, deregulated environment had fallen by 67 percent compared to the levels the old regulated regime would have imposed.” The benefits of deregulation kept compounding. In 1990, the average base fare in the U.S. (in 2021 dollars) was $597.97; by 2021, it was $291.67. Granted, sometimes the airline industry today has service breakdowns that frustrate customers but even there, the answer to is further deregulate cabotage rules so that international airlines like Ryanair can compete in the U.S. market, not to try to go back to hyper-regulation of the New Deal Era.
A few years later, the Motor Carrier Act of 1980 deregulated the trucking industry and the Staggers Act of 1980 deregulated the railroad industry with similar benefits for consumers. As the Penn Program on Regulation notes “after 1980, the actual results of surface freight deregulation exceeded economists’ expectations. Between 1981 and 1996, real rail revenue per ton-mile fell by nearly 50 percent. At least one-third of this rate reduction can be attributed to the Staggers Act. Deregulated rates saved shippers up to $7 billion annually in 1987.” Additionally, Carter deregulated telecommunications, signed Executive Order 12044 designed to stem the growth of new burdensome regulations by creating new procedures to analyze their compliance cost impact, and signed the Paperwork Reduction Act that created the Office of Information and Regulatory Affairs. President Carter also deregulated homebrewing which lead to today’s cornucopia of microbreweries. This chart shows the explosion of brewers after deregulation.
All of this was part of a new approach to political economy that took consumers’ interests seriously. Workers matter of course but ‘worker’ is not the only economic identity that matters. As importantly, every worker is a consumer. Hopefully, people derive some amount of meaning and joy from their work but let’s be real for a second, the main reason people go to work is to earn money so that they can purchase goods and services. Carter understood that. Though a lot of people associate the consumer welfare standard with conservatives and the Chicago School; as I argued in a previous essay, there is a strong progressive case to be made for it, and it was under Carter that this consumer welfare standard gained prominence. Another major thing that Carter did that helped consumers was appoint Paul Volcker as chair of the Federal Reserve. It was Volcker’s interest rate hikes that finally whipped inflation. Respecting central bank independence seems obvious today but it wasn’t at the time. Nixon had famously interfered with the Fed on numerous occasions. Those actions were an important component in the inflation problems of the 1970s. It was Carter’s decision to appoint Volcker and respect the Federal Reserve’s political independence that really helped turn the Federal Reserve into what it is today: arguably the most effective single institution in the whole of the United States government.
Meanwhile, Carter withstood significant pressure to impose protectionist policies that would hurt American auto consumers. Japanese firms had invented new lean production methods that were much more efficient. In Japanese plants at the time, it took 17 worker-hours to produce a car versus 25 hours in U.S. plants and 36 in European plants.[1] As I wrote in my 2021 book Competitiveness and Death: Trade and Politics in Cars, Beef, and Drugs, “Japanese cars used less gasoline, were produced more efficiently (which meant they were cheaper), and had fewer defects (which meant they lasted longer and needed fewer repairs).”[2] Consumers loved these cars. Not only that, and here I got into this for multiple pages in my book, it was the competitive pressure from these Japanese firms that led automakers to pursue regional integration and become major supporters of NAFTA. NAFTA greatly helped those companies maintain their global competitiveness. So, in at least one important respect, Carter helped set the stage for NAFTA as well and, contrary to what populists would have you believe, NAFTA has had much larger benefits than drawbacks.
The growth of Japanese auto sales also lead to Japanese investment in auto production facilities across the American South. My uncle helped build the Honda plant in Lincoln, Alabama. Today, Honda, Toyota, and Mazda, along with Hyundai and Mercedes-Benz, have large production facilities in the state and the auto industry, which was basically nonexistent in Alabama 30 years ago, now supports almost 40,000 jobs in the state.
Resisting calls for protectionism that would have hurt American car buyers was not the only furtherance of trade liberalization during Carter’s presidency. In 1979, the Tokyo Round of GATT negotiations that further liberalized trade were completed. Those were the first GATT negotiations to really tackle non-tariff barriers and they laid the groundwork for the momentous Uruguay Round negotiations that would create the World Trade Organization.
That internationalism can be seen as well in other aspects of Carter’s record as President including the Camp David Accords, promoting human rights as a major commitment in American foreign policy, and in his post-Presidency human rights work. That work has been monumentally successful; among other victories, The Carter Center lead the fight to effectively eradicate guinea worm, a devastating parasitic infection that affected as many as 3.6 million people in 1986.
His legacy also includes his impact on future presidents. Not only did he get the ball rolling on many of Reagan’s successful policies, in many ways, Carter’s center-left, market friendly, globalization enthusiastic way of being a Democrat created a template that Bill Clinton and Barack Obama would later follow with such success. If you liked those Presidents, understand that in a lot of ways they were walking in Jimmy Carter’s footsteps. If you like this combination of being socially progressive with being market friendly, you should understand that Jimmy Carter did a lot to make that a real, living, breathing political vision. That vision has done a lot to make America the prosperous place that it is today. We owe him a lot. So, the next time you’re at your favorite microbrewery, raise a glass to Jimmy Carter!
[1] James Rubenstein. Making and Selling Cares: Innovation
[2] To back up these claims, I cited evidence from pages 75 to 97 of James Womack, Daniel Jones, and Daniel Roos’ book The Machine That Changed the World: The Story of Lean Production.