This post is part of a symposium on Beth Popp Berman’s Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy. Read the rests of the posts here.

In Thinking Like an Economist, Elizabeth Popp Berman traces the emergence and diffusion across government agencies and policy domains of an “economic style of reasoning” that prioritized efficiency at the expense of values such as “rights, universalism, equity, and limiting corporate power.” In contrast to studies of neoliberalism’s ascendance that have emphasized the power of the right, Berman’s account focuses on the center-left. “Over and over again,” she writes, “the economic style was introduced to policymaking by technocrats associated with the Democratic Party who wanted to use government to solve social problems.”

Reading this book as a historian, I was struck above all by the extent to which the enduring impact of Red scare politics on U.S. social policy continues to be underestimated. We cannot properly make sense of the embrace of the “economic style of reasoning” by Democrats in the 1960s without attending to the political fallout of earlier decades. In the 1960s, allegations of being “soft on communism” remained a powerful tool for discrediting advocates of liberal policies. And for policy experts in government service, the scars of disloyalty charges still burned. In one field after another—national health insurance, labor and civil rights, consumer protection, public assistance, public power, public housing—disloyalty allegations continued to hinder social democratic policies by constraining government advocates from addressing the tensions between capitalism and democracy, or even acknowledging that such tensions existed. Embracing efficiency-oriented, “rational” and “objective” arguments offered an antidote to right-wing representations of liberalism as un-American.

While Berman locates the rise of a new breed of government economists in the 1960s, she briefly charts the foundation laid by earlier cohorts. The institutional economists, who favored “progressive-to-socialist reforms, with a strong role for the state,” established footholds in government agencies in the 1920s and 1930s and were among FDR’s closest advisers. Then Keynesian macroeconomics took center stage in the discipline and in some policy domains. Early appointees to the Council of Economic Advisors (created in 1946) “tended toward institutionalism” but soon “the CEA became defined by ‘growthmanship’”— raising living standards through economic growth, thereby avoiding the political challenges of redistribution and regulation. In Berman’s telling, macroeconomists’ division over the vexing problem of inflation eventually weakened their influence, creating space for the microeconomic approaches that would become entrenched across government bureaucracy and have constrained policy options ever since.

But the institutional economists and social Keynesians did not just fall out of academic fashion or become irrelevant to the problems at hand. Many were forced out of government or toward the political center by charges of disloyalty to the U.S. government, sometimes in the headlines but more often behind closed doors under the auspices of the federal employee loyalty program. That program had its roots in the late New Deal years, when Congressional conservatives charged that Communists and “crackpot, radical bureaucrats” were running the National Labor Relations Board, the Office of Price Administration, and other agencies that were challenging corporate prerogatives. Investigation by the Civil Service Commission and FBI initially discredited charges of Communist influence, but as conflict with the Soviet Union intensified, similar accusations got more traction.  

After the “Communists in government” issue produced huge Republican gains in the 1946 midterm elections, Truman formalized the loyalty program through Executive Order 9835, which required executive agencies to create loyalty boards to evaluate derogatory information about employees or job applicants. Employees for whom “reasonable grounds for belief in disloyalty” could be established were dismissed. Federal employees were required to fill out forms listing organizations to which they belonged and explaining any association with groups on the newly public Attorney General’s List of Subversive Organizations; meanwhile their loyalty boards requested name checks and sometimes “full field investigation” by the FBI. The definition of “derogatory information” was vague, and much of it came from anonymous informants and the files of the House Un-American Activities Committee.