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The Price of Prosperity: Inflation and the Limits of the New Deal Order

  • Author(s): Sonti, Samir
  • Advisor(s): Lichtenstein, Nelson
  • et al.

This dissertation examines the politics of price inflation in the United States from the 1930s through the onset of the crisis of stagflation in the 1970s. During this period, which encompassed the rise and fall of what historians have called the “New Deal Order,” inflation stood as one of the most contentious economic issues, affecting agricultural, industrial, and financial policymaking. While much scholarly attention has been directed at the resolution of the crisis of stagflation in the late 1970s, few have explored how political struggles over the issue shaped the contours of liberalism in the United States in the preceding decades. By placing inflation at the center of the debate over the character of the New Deal Order, this study seeks to enrich our understanding of the structural tensions that beset that reform effort from the outset.

In particular, the dissertation traces the career of a tradition that emerged out of the left of the New Deal and which offered an analysis of inflation that emphasized the importance of corporate power over the investment and price-making functions. Blending older insights from institutional economics with theoretical innovations associated with Keynes, this tradition can be called Institutional Keynesianism. Institutional Keynesianism was born in the early New Deal Department of Agriculture, and its adherents went on to play significant roles elsewhere in the federal government and in the industrial union movement. In contrast to the “commercial Keynesians” who have loomed large in the historiography on twentieth-century U.S. history, the Institutional Keynesians sought to equip macroeconomic theory with empirically sound micro-economic foundations. This attentiveness to economic structure enabled the Institutional Keynesians to identify fundamental contradictions in corporate capitalism, including its tendency towards both price inflation and economic stagnation, and led them to propose broad social democratic reforms. Recovering this forgotten left-liberal tradition can add texture to our understanding of the fate of the New Deal Order, as well as the origins of what displaced it.

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