How Political Orders Rise and Fall: Lessons from America's Century-Long Economic Transformation

Gary Gerstle reveals how political orders transcend election cycles to shape decades of American history, from New Deal capitalism to neoliberal dominance and beyond.

Key Takeaways

• Political orders extend far beyond election cycles, creating dominant ideologies that shape decades of American history
• The New Deal order redefined liberalism from freedom from government to freedom through government regulation of capitalism
• Communist threat moderated American capitalism by forcing elites to compromise with workers and support civil rights
• CEO-to-worker pay ratios compressed from potential extremes to 20:1 during the Cold War, then exploded to 300:1 after communism's fall
• Neoliberal ideas remained marginalized for decades before economic crisis created opportunity for mainstream adoption
• The 1970s economic crisis marked the end of American industrial dominance and cheap energy that sustained the New Deal order
• Political orders collapse when their core economic assumptions fail to address new realities
• Current moment represents another transition period where previously marginal ideas may flow into mainstream politics
• Understanding long-term political time helps explain changes that cannot be grasped through short-term election analysis

Timeline Overview

• 00:00–05:00 — Introduction: Gary Gerstle's background as historian at Cambridge University and motivation for writing about Trump and Brexit as connected phenomena challenging established order
• 05:00–15:00 — Defining Political Orders: Concept of political formations that extend beyond election cycles, using New Deal and neoliberal examples to show how dominant ideologies compel opposition party acquiescence
• 15:00–25:00 — New Deal Moral Framework: Roosevelt's redefinition of liberalism from classical freedom-from-government to modern freedom-through-government regulation of capitalism for public welfare
• 25:00–35:00 — Private Power Concentration: How Progressive era anger at corporate monopolies informed New Deal policies, with Roosevelt using revolutionary war language against "economic tyranny"
• 35:00–45:00 — Communist Influence on American Capitalism: The 1917 Bolshevik Revolution as "most important event of 20th century" creating existential threat that forced American elites to compromise with workers
• 45:00–55:00 — Cold War Compromise: How fear of communist appeal, especially among people of color, moderated American capitalism and supported civil rights movement through elite willingness to share wealth
• 55:00–End — Neoliberal Origins: Austrian economists' decades-long marginalization before 1970s economic crisis created opportunity for free-market ideas to rush from periphery to mainstream power

The Architecture of Political Dominance

• Gary Gerstle introduces the concept of "political orders" as formations that transcend traditional election cycles, creating dominant ideological frameworks that shape American politics for decades rather than mere presidential terms. These orders represent more than party victories—they establish fundamental approaches to political economy that become so dominant they compel acquiescence from opposition parties.
• The true test of a political order occurs when the opposition party wins power but chooses to preserve rather than dismantle the previous party's core economic principles. Eisenhower's 1952 election marked this moment for the New Deal, as the first Republican president in 20 years maintained rather than reversed Roosevelt's welfare state, Social Security, and 91% marginal tax rates on highest earners.
• Political orders emerge during moments of crisis when existing frameworks fail to address new realities, creating opportunities for previously marginal ideas to flow into mainstream politics. The Great Depression provided this opening for New Deal ideas, while the economic crises of the 1970s created space for neoliberal concepts that had languished on the margins for decades.
• These long-term political formations help explain developments that cannot be understood within short-term election cycles, particularly regarding core ideas about building successful economies and managing the relationship between capitalism and democracy. Understanding political time in these longer arcs reveals patterns invisible to analysis focused solely on immediate electoral competition.
• The concept emerged from recognizing that American politics operates on multiple timescales simultaneously—the immediate drama of campaigns and elections, but also deeper currents of ideological change that reshape the fundamental terms of political debate over much longer periods.
• Gerstle's framework helps explain how seemingly impossible events like Brexit and Trump's election became not just imaginable but inevitable, as underlying political orders reached points of exhaustion and breakdown that created space for previously unthinkable alternatives.

The New Deal's Moral Revolution

• Franklin Roosevelt fundamentally redefined American liberalism during the Great Depression, transforming it from the 18th-century Adam Smith conception of freedom from government constraints into a 20th-century vision of freedom through government action to regulate capitalism in the public interest.
• The Great Depression created conditions where 20-25% of the workforce faced unemployment, one-third lacked adequate housing, and farmers destroyed livestock rather than sell at market because transportation costs exceeded revenues. This apparent irrationality of capitalism—hungry people in cities while farmers killed animals—demanded institutional intervention to restore sanity to economic systems.
• Roosevelt's moral argument centered on the inadequacy of "counterfeit liberty" for those lacking basic security. True liberty required economic security, educational opportunity, workplace power to negotiate decent wages, and freedom from worry about meals, housing, and retirement. Only government regulation of capitalism could create conditions where genuine liberty flourished for broader populations.
• The New Deal preserved capitalism while rejecting socialism, but insisted that capitalism required management by a strong federal state to survive. This represented neither pure free enterprise nor state ownership, but regulated capitalism designed to redistribute wealth and power sufficiently to maintain system legitimacy among broader populations.
• New Deal liberalism became synonymous with using federal government power to provide security and opportunity that positioned Americans to cultivate their individuality. This moral framework justified unprecedented expansion of federal authority as necessary for protecting rather than constraining human freedom.
• The depth of this ideological transformation appears in Roosevelt's patriotic language—calling wealthy opponents "malefactors of great wealth" and "Tories," comparing economic tyranny to British colonial oppression, and positioning New Deal reforms as completion of the American Revolution's promise of eliminating tyranny from American life.

Communism as Capitalism's Unlikely Moderator

• The 1917 Bolshevik Revolution represented an existential challenge to American capitalism, promoting global revolution to eliminate private enterprise entirely and replace it with state-controlled economic systems theoretically managed by the people but practically controlled by vanguard Communist parties.
• Communist ideology gained appeal during the Depression and postwar periods because capitalism appeared to generate excessive inequality and misery while failing to redistribute sufficient wealth to sustain popular support. The communist critique that capitalism could never be successfully reformed resonated with Americans experiencing economic catastrophe.
• The Cold War competition between the United States and Soviet Union became a battle between ideologies where each system's global appeal depended partly on its ability to deliver prosperity and freedom to its own population. Communist criticism of American racial practices provided powerful ammunition for winning allegiance of newly independent nations in Africa and Asia.
• American elites' fear of communist triumph both domestically and internationally created incentives for compromise with domestic antagonists that would not otherwise have existed. Corporate leaders agreed to share greater portions of profits with workers, support social welfare expansion, and accept civil rights reforms to demonstrate capitalism's superiority to communist alternatives.
• The wage compression evident during the Cold War era—CEO-to-worker ratios of approximately 20:1 in 1960 compared to 300:1 by 2000—reflects this moderating influence of communist competition. American elites felt compelled to demonstrate that capitalism could deliver broad prosperity rather than extreme inequality.
• The collapse of communist competition removed external pressure for elite compromise, contributing to the explosion of inequality that characterized the neoliberal period. Without credible alternatives to capitalism, American elites felt less obligation to share wealth or power with broader populations.

The Long Marginalization and Sudden Triumph of Free Market Ideas

• Neoliberal economists like Friedrich Hayek and Ludwig von Mises developed their free-market ideology as early as the 1920s in Vienna, spending decades in exile building institutional support through organizations like the Mont Pelerin Society while remaining utterly without political influence during the New Deal era's dominance.
• These Austrian economists maintained their commitment to freeing capitalism from government constraints throughout the 1950s and 1960s despite having no purchase on American politics. Their persistence through decades of marginalization demonstrates how ideological movements can maintain coherence and organization while waiting for crisis moments that create opportunities for mainstream influence.
• Milton Friedman and the Chicago School of economics exemplified this patient development of alternative frameworks, building intellectual infrastructure and training disciples while remaining largely irrelevant to actual policy making during the height of New Deal order dominance.
• The economic crisis of the 1970s provided the opening for neoliberal ideas to rush from margins to mainstream. The reemergence of serious industrial competition from rebuilt Germany and Japan, combined with OPEC's successful manipulation of oil prices, shattered assumptions underlying New Deal economic management.
• Keynesian tools that had successfully managed the economy during the postwar boom proved inadequate for addressing stagflation—the simultaneous rise of inflation and unemployment that economists claimed was impossible. This failure of established expertise created space for previously discredited alternatives to gain credibility.
• Jimmy Carter's ambivalent exploration of neoliberal ideas during his presidency reflected the transitional moment when established frameworks had clearly failed but new alternatives remained uncertain. Ronald Reagan's confident embrace of free-market principles provided the political vehicle for neoliberal ascendance after decades of intellectual preparation.

The End of American Economic Hegemony

• The 1970s marked the end of America's unique position as the world's only intact industrial economy, a dominance that had persisted since World War II when European and Japanese competitors lay in ruins. The rebuilding of these economies through American assistance ultimately created the competition that undermined American economic supremacy.
• The emergence of serious industrial rivals in automobiles, electronics, and steel manufacturing caught American corporations unprepared for global competition. Decades of operating without significant competitors had created complacency about technological advancement and production efficiency that proved fatal when facing more energetic and innovative foreign rivals.
• The transformation of global energy markets through OPEC's successful intervention represented a fundamental shift from Western control of oil resources to producer-nation sovereignty over pricing and supply. The 1973 Arab oil embargo and 1978 Iranian Revolution demonstrated how energy dependence could become a weapon against American economic interests.
• The quadrupling of oil prices overnight during the Yom Kippur War shock revealed the fragility of the cheap energy economy that had underwritten American prosperity since World War II. Previous assumptions about endless supplies of inexpensive energy became untenable when geopolitical events could suddenly multiply core input costs.
• These twin challenges from global North competition and global South resource control created sustained economic crisis that existing policy tools could not address. The failure of Keynesian demand management to handle stagflation represented more than technical inadequacy—it signaled the obsolescence of the entire intellectual framework underlying New Deal economic policy.
• The prolonged recession and policy confusion of the 1970s created the crisis conditions necessary for previously marginal neoliberal ideas to gain mainstream acceptance, demonstrating how external shocks can rapidly transform domestic political possibilities.

Conclusion

The collapse of the New Deal order reveals how even seemingly permanent political arrangements remain vulnerable to changed circumstances that render their core assumptions obsolete. America's current moment of political upheaval suggests another such transition may be underway, creating opportunities for previously unimaginable alternatives to reshape the terms of economic and political debate for decades to come.

Practical Predictions for America's Next Political Order

• Industrial policy will replace pure free-market ideology as both parties embrace government intervention to rebuild domestic manufacturing capacity and reduce dependence on foreign supply chains
• Labor-capital compromise will resurface under pressure from growing inequality and political instability, potentially leading to new forms of worker representation and profit-sharing arrangements
• Regional economic blocs will emerge as America seeks to reduce economic integration with strategic competitors while deepening ties with democratic allies
• Climate policy will drive massive federal investment comparable to New Deal infrastructure programs, creating new constituencies for government-directed economic transformation
• Technology regulation will expand dramatically as concerns about monopoly power and foreign influence override previous free-market assumptions about platform governance
• Financial system oversight will intensify following recognition that deregulated markets created systemic risks that threaten democratic stability
• Immigration policy will emphasize economic integration rather than cultural assimilation, with both parties recognizing demographic necessity for continued growth
• Federal spending will remain permanently elevated as defense, infrastructure, and climate imperatives overwhelm previous constraints on government size and scope
• Constitutional reforms may become necessary to address democratic representation and federal system strains that current institutions cannot accommodate
• New forms of international cooperation will develop as traditional institutions prove inadequate for managing technological competition and climate challenges