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political versions, the free market myth entails another crucial false assumption: that the consumer/voter has full, costless access to information about rival products/policies. In practice, Ferguson and Rogers’s “investment theory” implies that they should’ be able to redescribe American political history in terms of the rise and fall of investor blocs. And so they do, beginning with the New Deal. According to the conventional wisdom, the Democratic party is now in crisis because of the collapse of the New Deal coalition, which dominated American politics for several decades. That coalition included organized labor, urban immigrants, southern and midwestern farmers, blacks, and liberal professionals. The New Deal, in this view, expressed a wide popular consensus for state intervention to mitigate poverty and inequality, regulate business, and encourage popular participation in government and trade unions. But in the last two decades, this argument continues, the coalition’s member groups have drifted away from the Democratic party, propelled partly by the growing influence within the party of blacks, Hispanics, women, gays, and pacifists, and partly by the perceived failure of federal efforts’ at redistribution and regulation. A historic realignment has taken place: the electorate has moved to the right. The trouble with this argument is that the electorate has not moved to the right. Ferguson and Rogers reproduce a vast array of polling data showing that popular support for New Deal liberalism has remained essentially constant throughout the last several decades. Nor have voters turned rightward because of the “social issues” feminism, abortion, race, religion, affirmative action, civil liberties; by and large, movement has been toward greater liberalism on these issues. And in foreign policy, except for brief periods following intense propagandizing by elites, popular support for intervention and more military spending has not increased. All this may sound like wishful thinking, but Ferguson and Rogers have the figures. But if that’s true, then why has the electorate overwhelmingly voted Republican in the last two presidential elections? Once again, it has not. On both occasions, the electorate abstained in large numbers nearly half of all eligible voters did not vote. Ferguson and Rogers point out that among nonvoters \(a category that includes most Democrats outnumber potential Republicans 2 to 1. When those percentages are added, to the actual vote totals, the Republican majority vanishes. Even more striking: on issue after issue, exit polls showed that many or most of those who voted for Reagan disagreed with his policies and hoped they wouldn’t be implemented. So much for the Reagan “mandate.” Like most other recent presidential elections, those of 1980 and 1984 were basically referendums, on the economy. Carter engineered a slowdown just before the 1980 election; Reagan engineered a, boom in 1984; in both cases, the predictable result ensued. There has undoubtedly been a turn to the right in American political life: not, however, in popular attitudes, but in public policy and in the positions of the two major parties. Mainstream political science, which assumes a causal connection between popular preferences and government policy, cannot explain this development, but Ferguson and Rogers’s “investment theory” can. The real New Deal coalition, they argue, was an alliance of capital-intensive industries, investment banks, and internationally active commercial banks \(including General Electric, IBM, Pan Am, R.J. Reynolds, Standard Oil of New Jersey, Standard Oil of California, Cities Service, Shell, Bank of America, Chase National Bank, Brown Brothers Harriman, Goldman Sachs, Lehman bers of this bloc had two things in common, both of which set them in opposition to the labor-intensive, domestic manufacturers that form the core investor bloc of the Republican party. Being capitalintensive, they could afford a tactical alliance with organized labor and were not nearly so threatened by the new social welfare programs, such as unemployment insurance, which reduced the insecurity and passivity of the work force. Being major actors in the world economy, they were vitally interested in low tariffs, global free trade, and an active U.S. diplomacy. From these two characteristics of Roosevelt’s ‘allies were derived the broad outlines of the New Deal: liberalism in domestic policy, internationalism in foreign policy . foreign policy. LIKE ALL real-world phenomena of any magnitude or importance, this New Deal coalition was not a cut-andl dried affair. The interests of Democratic investors did not all cohere perfectly: there were plenty of internal conflicts, mainly over the shape and extent of government intervention in the economy, and there were defections at the, margins. Nevertheless, from the mid-1930s through Richard Nixon’s first term, the coalition held. Beginning in the 1960s, however, the United States simultaneously became less competitive in and more integrated into the world economy. The 1973-75 recession, by far the most serious \(up brought this development home even to Democratic business elites. For several complex, intertwined reasons, this recession and the long-term economic decline responsible for it produced a rightward shift among business Democrats. First of all, decreased growth and profits generated pressure for wage restraint, which meant an assault on organized labor. Part of this anti-labor campaign was an attack on social welfare programs, which were vulnerable for another reason as well: taxes could not be raised to pay for social spending, since during a severe recession companies could not pass along those taxes to already hard-hit consumers in the form of higher prices. And there was yet another reason for cutting social programs: resources had to be diverted to military spending to enhance America’s capacity for intervention in the Third World. This capacity assumed new importance after 1973-75. The rise of OPEC had produced a vast influx of petrodollars into American international banks; and since these banks had to find somewhere to invest this money, they turned to the Third World. But by the 1970s, Third World nationalism was on the rise, so American military power was needed to guarantee the “stability” in which American investments could flourish. The international banks, formerly concerned mainly with Europe, had been charter members of the New THE TEXAS OBSERVER 9