Last December, at his home in Ithaca, New York, Alfred E Kahn died at 93. He was one of the most important economic policy reformers since the New Deal democrats went to Washington in the 1930s. Since his passing, his accomplishments have been widely noted, especially his leadership in deregulating American Airlines. The New York Times published one such positive summary.
“Mr. Kahn, a leading regulatory scholar who wielded his influence in both government and academia, helped spur a broad movement beginning in the mid-1970s toward freer markets in rail and automotive transportation, telecommunications, utilities and the securities markets. Before deregulation, the airlines were tightly controlled by the Civil Aeronautics Board, which approved routes and set fares that guaranteed airlines a 12 percent return on flights that were 55 percent full.
The changes Mr. Kahn orchestrated resulted in increased competition, lower fares and the rise of low-cost carriers like JetBlue and Southwest. But they also created severe financial problems for the industry, leading to bankruptcies and mergers.
‘I have to concede that the competition that deregulation brought certainly was terribly, terribly hard on the airlines and their unions, who had heretofore enjoyed the benefits of protection from competition under regulation,’ Mr. Kahn said decades later.”
His public career and public accomplishments cast an ironic light on contemporary American politics and the divisive clichés of our time.
The so-called “Reagan revolution,” the “neo-con” think tanks, and the “Washington consensus” that championed market-based economic reforms over most of the last three decades actually followed Alfred Kahn’s leadership. They didn’t add much intellectually; they tried to flesh out his vision. And, all the while, he was a liberal.
Alfred Kahn and President Carter weren’t bullied into radical regulatory reform by Republican intellectuals or vested interests. They didn’t have to “triangulate” with backlash conservatives.
Khan’s critique of the aging New Deal vision of government was more positive than President Clinton’s later concession that, yes, government can get too big. If Kahn was in Washington today, he would likely be called an economist with bipartisan tendencies. However, he was far more ambitious than that. He was motivated by a set of liberal market values that don’t merely stand between the extremes of left and right.
The liberal vision that once largely thrived at the center of US politics —that wherever possible governments should protect and nurture competition and rely on consumer choice to drive efficiency and innovation—was shouldered out by the catastrophes of the 1930s and the Cold War. However, by the 1970s, the federal government’s take-charge response to economic developments had become too reflexive and too often a generator of privilege rather than national progress. A liberal response to the unnecessary excesses of the interventionist state (that liberals had built) was awkward but inevitable.
The restoration of traditional liberalism (or what’s now called neo-liberalism) by reform Democrats, of course, was quickly interrupted by the election of Ronald Reagan in 1980. Nevertheless, Reagan didn’t change course. He made it look easier.
The free market bias of Alfred Kahn and the neo-liberals is intact; its agenda in energy, transportation, agriculture, trade, and education is unfinished and still controversial.
Those who insist on seeing history as one story after another like to identify “eras” with one dominant idea. From 1980 to the financial collapse of 2008, the free market ideologues were said to be in charge. And now they’re out. Well, nothing original started or was settled with Reagan—and it’s very unlikely that Alfred Kahn would say that for the last three decades markets consistently beat entrenched interests and those who still think only government can be trusted to deliver.
Instead of demonizing deregulation as a right-wing conspiracy, Democrats and Liberals elsewhere would be more useful and credible if they took up its essential liberal rationale.